as a providerof social
infrastructure

Leopalace21

Integrated Report 2021
For the fiscal year ended March 31, 2021

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

Creating
New Value
Our Purpose

Create new value andprovide better living solutions
based on the themeof housing

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.

Editorial Policy
This report is published as an integrated report. The purpose of this report is to enable management to communicate its message to all our stakeholders. We seek to present ourmanagement strategy, priority measures, an overview of business conditions, etc. as well as inform readers about our sustainability initiatives. This report covers the fiscal year from
April 1, 2020 through March 31, 2021 (fiscal year 2020). The scope is Leopalace21 Corporation (the “Company”) and its consolidated subsidiaries in Japan and overseas. Our aim is to
publish to the extent possible the latest information available as of the publication date. With the aim of promoting deeper reader comprehension, the report includes macro-economic
data relating to our businesses, and the “Data Compilation” section enables readers to understand trends to date. We take care to explain what we present in ways that are readily
understandable so that the report serves as an effective communication tool that reaches our many stakeholders.
In this report, we focus on explaining how we are working to swiftly resolve the construction defects problem, enhance our purpose (significance of existence) as a company thatprovides social infrastructure with 570,000 apartments around Japan, and create value. We hope this report helps readers gain a better understanding of the Company.

Long-Term Vision

Action Guidelines“10 Promises” of
Leopalace21 Group

Ensure competitive advantage
in our business, with theprovision of rental housing associal infrastructure at its core,
and achieve sustainable growthalong with stakeholders

1. We will broadly contribute to society through continuous reform and the creationof new value.
2. We will aim to be a reliable and admired company with emphasis on equal
opportunities and fair business practices.
3. We will prioritize serving our customers, and listen closely to what they have to
say and identify their needs.
4. We will continue to provide valuable products and services in a timely manner,
through constant innovation.
5. We will create a comfortable working environment where employees can fully
exercise their skills and respect individuality and sense of values.
6. We will create a corporate culture where change and challenge is valued, andindependence is respected.
7. We will provide appropriate returns of our results through fair, transparent andhealthy business operations.
8. We will continue to grow through accurate identification of environmental
changes, reforming our business model in a timely manner.
9. We will contribute to the development of society and the economy, by committing
to high ethical standards and complying with the law.
10. We will diligently protect the global environment, and contribute to a prosperous
society through corporate activities with close ties to regional communities.

Reference Guidelines

Forward-Looking Statements

IIRC International Integrated Reporting Framework

Statements made in this integrated report with respect to Leopalace21 current plans, strategies, and future performance thatISO 26000

are not historical facts are forward-looking statements involving risks and uncertainties. Leopalace21 cautions that a number of

GRI Standards

factors could cause actual results to differ materially from such statements due to a number of factors including, but not limited
to, general economic conditions in Leopalace21’s markets; demand for, and competitive pricing pressure on, Leopalace21’s
products and services in the marketplace; Leopalace21’s ability to continue to win acceptance for its products and services inthese highly competitive markets; and movements of currency exchange rates.

Leopalace21 Integrated Report 2021

1

To Our Stakeholders
First, I would like to express my sincerest gratitude to all of our stakeholders for your exceptional support.
Since assuming my role as President and CEO, I have given top priority to solving the problem of
construction defects on our properties, and have been working on this with an unwavering determination.
However, in the fiscal year ended March 31, 2021, the COVID-19 pandemic had a major impact on ouroperations leading to a sluggish occupancy rate. In order to make greater efforts to recover our businessperformance, we had no choice but to temporarily downscale our construction structure for addressing
the construction defects. In addition, although we are progressing with the fundamental structuralreforms set up in our business plan at the beginning of the said fiscal year, we deeply apologize that
we have had a deficit for the third consecutive year.
Currently, we are continuing with fundamental structural reforms, promoting measures to improve our
occupancy rate, and uncompromisingly reducing costs to return to operating profit in the fiscal year
ending March 31, 2022. In addition, we have been steadily achieving the targets set out in the short-term
repair work plans to fix construction defects.
At Leopalace21, we have social infrastructure for housing amounting to 570,000 managed units, which
we have created together with 28,000 apartment owners. The apartment rooms are used as dormitories
and company-provided housing by about 80% of Japan’s listed companies. Based on the awarenessthat we have a role in maintaining this social infrastructure, it is our raison d’être (significance ofexistence) and social mission to firmly protect and further develop our good track record. In orderto fulfill that mission, it is important to both resolve the problem of construction defects as well as
achieve the business turnaround.
Dialogue with all stakeholders is essential for solving the problem and recovering our business.
Therefore, I sincerely hope that this integrated report will be a catalyst for dialogue with you all.
I deeply ask for your continued understanding and support for the management of Leopalace21.

President and CEO

2

Leopalace21 Integrated Report 2021

Contents
Cover 2

Our Purpose, Corporate Philosophy,
Action Guidelines, Long-Term Vision

2 To Our Stakeholders
4 Our Journey in Value Creation
6 Value Creation Process
8 CEO Message
14 Source of Competitive Advantage
15 Apartments
16 Rental Expertise
17 Our People
18 Property Owners & Tenants
19 Business Partners
20 Business Model
21 Business at a Glance
22 Growth Strategy
27 Structural Reforms
28 Financial Strategy
29 Corporate Governance
30 Discussion at the Board of Directors
32 Corporate Governance System and Initiatives
34 Strengthening Our Management Structure
36 Initiatives Aimed at Improving Effectiveness38 Compliance
40 Risk Management
Directors and42
Audit & Supervisory Board Members
44 Materiality
45 Leopalace21’s Materiality Management
46 Leopalace21’s Materiality Issues
48 Offer Rental Housing with Stable Operation
49

Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society

Maintain the Workable
Corporate Governance System
51 Strengthen Compliance50

52 Communication with Stakeholders
53 Work-Style Reform and HR Development
55 Respect for Human Rights
56 Attention to the Environment
58 Ten-Year Consolidated Financial Highlights
60 Financial Highlights
63 Non-Financial Highlights
64 Financial Section
118 Data Compilation
124 Corporate Profile

Leopalace21 Integrated Report 2021

3

Our Journey in Value Creation

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

1995
1985

Challenge/needs

Value provided

Securely managed
apartments

Established and launched an industryfirst master lease system to pay rents for
all units in buildings for up to 30 years(before 1995, it was two to ten years)

Challenge/needs

Apartments

Comfortable lifestyles
Value provided

Introduced Leopalace21
urban-type apartments

Tenants
Individuals(general)Companies(dorms/companyleased housing)

Budgeting maintenanceand repair costs fora 30-year period

Master-lease
rentsManagement ofrental revenues fora 30-year period

Leopalace21

Property owners

Payments of master leaserents are made to owners
regardless of whether or notthere are vacancies.
(Rents are reviewed
every two years)

Recruitment and management of tenants fora 30-year period

1999
Challenge/needs

Easy moving/use ascompany-leased housing
Value provided

Launched the Monthly Leopalace,short-term rental service, furnishedwith furniture and home appliances

1993
1991
Obtained a patent for“housing with lofts”

Founded in

1985

1973

1973
Rapid economic
growth period

4Introduced Leopalace21
urban-type apartments

1975

1980
Stable growth period

Leopalace21 Integrated Report 2021

1989
Listed on over-thecounter market(JASDAQ)

1985

Opened Leopalace Resort Guam

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

1990
Bubble period

1995
Post-bubble period

2011

2017

Challenge/needs

Homes where women can feel safe

Challenge/needs

Value provided

Convenient housing

Began full-fledged introduction of
security system installations for apartments

Value provided

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

2012
2002

Challenge/needs

Rooms customized totenants’ preferences

Challenge/needs

Internet access & video streamingat home2020

Value provided

Challenge/needs

Launched Room Customize(current my DIY)

Value provided

Launched broadband businessContactless services for the post-COVID-19 era
Value provided

Promotingweb-based
rentalagreements

2017
1999

2008

Launched the Monthly Leopalace
furnished with furniture andhome appliances

2000
Company name changed
to Leopalace21

2004
Listed on First Section ofTokyo Stock Exchange

Launched property
owners’ member
organization Class L
service2005

2011
Began full-fledged introduction of
security system installations forapartments

Launched
Elderly Care
Business

2012
Launched
Room Customize(current my DIY )2002

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

2015

2018

Adoptedelectronic
contractmanagement
systemConstruction
defects
problem
discovered

Launched broadband business

2020
Implemented
fundamental Net sales
business(Billions of yen)strategies
800.0
restructuring
Launched
Healthcare
Professional
Support Plan
Promotingweb-based
rentalagreements

700.0
600.0
500.0
400.0
300.0
200.0
100.0
0

2000
Economic uptrend period

2005

2010

2015

Global recession
period2020(FY)

Economic recovery period

2008

2020

Global financial crisis

Coronavirus disease(COVID-19) pandemic

2011
Great East Japan Earthquake

Leopalace21 Integrated Report 2021

5

Value Creation Process

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

Social demands
and challenges
such as Sustainable
Development Goals

Sources ofCompetitive
Advantage
p.14

Business Model
p.20

Apartments

Rental Expertise

Purpose
Corporate Philosophy
Action Guidelines

Our People
Property Owners& Tenants
Business Partners

6

Leopalace21 Integrated Report 2021

Growth Strategy

p.22

Structural Reforms
Financial Strategy

p.27
p.28

Corporate Governancep.29

Materiality

Long-Term Vision

p.44
Offer Rental Housing with
Stable Operation
Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society
Maintain the Workable
Corporate Governance System
Strengthen Compliance
Communication with Stakeholders
Work-Style Reform and
HR Development

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

Respect for Human Rights
Attention to the Environment

Leopalace21 Integrated Report 2021

7

CEO Message

Leopalace21 isworking on
various reforms in
keeping with its
corporate purpose.

Bunya Miyao, President and CEO

What is the Corporate Purpose of Leopalace21?
Due to the increasing trend of SDGs-related activities aimed at solving social issues, companies are required toclarify their corporate purpose, or raison d’être more than ever before.
Leopalace21 manages and operates approximately 570,000 rental housing units nationwide, mainly in the threemajor metropolitan areas, mostly targeting single-person households. Based on this, we believe that our corporate
purpose is to provide high-quality housing as the basis of safe and secure living for about 20 million single-personhouseholds in our society.
In 1999, we started offering Monthly Leopalace with convenient furniture and home appliances for temporary
use. By expanding rental housing equipped with furniture and home appliances as basic equipment necessary
for living to a scale of 570,000 units nationwide, I believe we play a major role in facilitating the relocation of
single-person households from an ecological perspective. Meanwhile, we adopted a 30-year master lease system
to support the construction, management, and operation of apartments. I also believe it’s valuable that we haveoffered an option of managing apartment to property owners who are worried about how to handle inheritancetaxes and asset inheritance.
We will continue to provide high-quality housing as the basis of safe and secure living under a business model that
benefits both tenants and property owners.

8

Leopalace21 Integrated Report 2021

Our Efforts to Address Construction Defects in Fiscal Year 2020
It has now been two years since I assumed a role as President and CEO. Looking back on the resolution of theconstruction defects problem, which has been a top priority since my taking office, our investigations of all properties
were mostly completed in October 2019. After that, we have been proceeding with repair work, which we haveprioritized since the problem became apparent. However, over the same period, our occupancy rate declined andbusiness performance deteriorated, causing us great financial damage. To ensure the survival of the Company, we
therefore decided to carry out subsequent repairs while proceeding with the rebuilding of our main business. For thisreason, we have downscaled our construction structure since July 2020.
During the four months between September and December 2020, the COVID-19 pandemic impacted ourconstruction work. Despite this, however, we were able to complete the repair works of 2,183 units, whereas ourrepair target during the period was about 2,000 units. In the following six months from January to June 2021,
6,002 units were completed (as of the end of June 2021), compared to the approximately 6,000 units targeted for
repair work during that period.

Fiscal Year 2020 Earnings
The COVID-19 pandemic made fiscal year 2020 a tough year. Due to restrictions placed on human movement, such as
two emergency declarations issued mainly in the Tokyo metropolitan area due to COVID-19, it was extremely difficult
to acquire new tenants. By customer type, our mainstay corporate customers showed a decrease in personnel
transfers, in the number of new graduates hired, and in usage needs due to the cancellation of business trips andtraining. With respect to individuals and students, we saw decreased demand from students due to the spread of
online classes at universities. Foreign customers were restricted from entering the country due to COVID-19 borderprotection measures, and the number of new immigrants also decreased, impacting demand. According to ouranalysis, average occupancy rate for the fiscal year ended March 31, 2021 dropped by about 4.85% due to the impactof these factors.
In response to this, in addition to promoting web-based customer service and web-based contract signing,
we have been promoting external sales in collaboration with real estate agents. However, the occupancy ratecontinued to decline, and our average occupancy rate during the fiscal year was 78.89% (the previous year’s result
was 80.78%).
As a result, in fiscal year 2020, we had net sales of JPY 408.9 billion, an operating loss of JPY 29.1 billion,
and a net loss attributable to shareholders of the parent of JPY 23.6 billion. Fiscal year 2021 is anticipated to bea difficult year for our business environment on the whole, and we are implementing even more drastic businessstructural reforms.

Leopalace21 Integrated Report 2021

9

The Progress of Our Business Structural Reforms in Fiscal Year 2020
In fiscal year 2020, we carried out business structural reforms centered on selective concentration. As the basic
strategy of this approach, we are shifting from a conventional business diversification strategy to a profitability focus
strategy centered on the Leasing Business.
Specifically, in order to optimize our workforce, we have implemented the company-wide voluntary retirement
program for the first time since the Company was founded. 1,067 people applied for the voluntary retirement program,and in addition, by revising our benefits package, etc., our annual labor cost has been reduced by about JPY 8.6 billion.
We also transferred or withdrew from non-core and unprofitable businesses, withdrew from the hotel business in Japan,transferred 17 residences for rent, transferred subsidiary Enplus Inc. which was engaged in the relocation managementbusiness and SA (serviced apartment) business, and liquidated WING MATE CO., LTD. In our overseas business, wetransferred a local subsidiary in Vietnam as well as the SA business owned by a local subsidiary in Thailand.
Furthermore, as a result of promoting sales of investment securities, we have reduced our cross-held sharesto zero. In addition, we have eliminated the positions of counselor and advisor and shareholder special benefits.
Regarding the resort business in Guam that was subject to sale, traffic to Guam has been restricted due to the impact
of COVID-19, but we will continue with the withdrawal plan in anticipation of the end of the pandemic.

We are shifting from a businessdiversification strategy to a
profitability focus strategy
centered on the Leasing Business.

Financial Strategy
In November 2020, we raised funds from the Fortress Investment Group (FIG) as part of our financial strategy, as
we faced a difficult financial situation in which we were concerned about capital deficit due to poor performance
stemming from construction defects.
The total amount of funds raised was JPY 57.2 billion, which is broken down to a capital increase of approximately JPY 12 billion through third-party allocation, issuance of preferred stock of Leopalace Power Corporation, a
consolidated subsidiary of the Company, of approximately JPY 15 billion, and loans with stock acquisition rights ofapproximately JPY 30.2 billion. As a result of this funding, FIG’s affiliate, Chidori Godo Kaisha, has become a 25%
stakeholder. The funds procured are being used for repair work costs, and was used for repayment of subsidiaries’
borrowings and as corporate bond redemption funds.
Net assets at the end of the fiscal year were JPY 3.2 billion including financing during the year. However, as aresult of funding by subsidiaries issuing preferred stock being recorded as non-controlling interests, under the criteriaof the Tokyo Stock Exchange which deducts non-controlling interests from net assets, we currently have an excess
debt of JPY 8.1 billion.
In addition, as part of our financial strategy for fiscal year 2021, we changed the total number of authorized sharesin June of this year and reduced our capital (share capital reduction) in August.
10

Leopalace21 Integrated Report 2021

Regarding the change to our total authorized shares, if the number of potential shares of stock acquisition rights
were added to our current number of issued shares, the total number would reach 98% of our 500 million authorizedshares, so we raised the total number of authorized shares to 750 million. We believe that this increase will enable
flexible financing in the future. Additionally, in our share capital reduction, 81.1 billion yen of our capital stock of 81.2
billion yen was reduced by transfer to capital surplus, the total of which is now 100 million yen.

Due to our difficult financial
situation, we raised funds inNovember 2020 as part ofour financial strategy.

Fiscal Year 2021 Business Outlook
For fiscal year 2021, with improvement of occupancy rate towards reconstruction and recovery of businessperformance as our highest priority, we will promote countermeasures focusing on three pillars: (1) Promotion ofarea-based strategy, (2) Recovery of room usage balance by corporate clients (intensified connections with existingcustomers), and (3) Stronger relationships with real estate agents.
With respect to (1) Promotion of area-based strategy, the whole country is divided into seven areas, and one manager, who is equivalent to the CEO there, is assigned to each area. The area manager aims to improve the occupancy
rate with the optimal area strategy such as the setting of rent and promotion based on the characteristics of thecorresponding area. At the same time, each area manager controls the income and expenditures of the properties in
the area for which they are in charge and improves both sales and profits, working to improve both occupancy rates
and earnings for our properties.
Regarding (2) Recovery of remaining room usage by corporate clients (intensified connections with existingcustomers), we will shift from acquiring new customers to expanding the number of our rooms used by existingcustomers. For corporate clients that are worried about construction defects, we will explain the safety of properties
which have been confirmed through combustion experiments, formulate and promote sales strategies for eachcorporate client, and expand sales activity by top managers themselves.
Furthermore, for (3) Stronger relationships with real estate agents, the ratio of rental contracts through agents
which was only 10% in the past, has been significantly increased by utilizing agents referred to by Village House
under FIG. By proceeding simultaneously along with the elimination and consolidation of directly managed leasing
sales offices, we will optimize contract costs and expand contract opportunities. We have achieved results to acertain extent: the occupancy rate at the beginning of the fiscal year, which used to be lower compared to March at
the end of the previous fiscal year, remained almost unchanged from April to August 2021.
Through these measures, we aim to raise the year-end occupancy rate for the fiscal year ending March 2022 to
85.92% (81.72% at the end of the previous fiscal year) and the average occupancy rate to 81.65% (78.89% over theprevious year). We are planning to return to profitability on an operating income basis with net sales of JPY 402.9
billion and operating income of JPY 2.0 billion.
Leopalace21 Integrated Report 2021

11

New Reforms in Fiscal Year 2021
Based on the business structural reforms centered on selective concentration carried out in fiscal year 2020, in fiscal
2021 we will work on reforms in the two main areas: thorough and rigorous cost reviews by our in-house task force
and negotiations on reviewing rents payable to apartment owners in accordance with the master lease contracts.
Our in-house task force was launched in April 2021, the members of which were selected from each business division.
Its role is to review each and every cost item one by one, thoroughly manage costs, and strengthen our profitability.
On the other hand, in response to the new subleasing law that came into effect in December 2020, we began
to review the rents, which had been frozen at least since the problem of construction defects were discovered. In
cases where there is a discrepancy with surrounding rent markets while looking at actual circumstances such as
the economic situation and the age of property, we are reviewing the master-lease rents based on the respective
contracts with the owners. We have begun to explain and negotiate how to update the master-lease rents, first withthe owners whose fixed rents are about to be revised starting from April 2021.
When this is combined with the reduction of costs and selling, general and administrative (SG&A) expenses by our
in-house task force, we anticipate a cost reduction effect of JPY 37.1 billion compared to fiscal year 2020.

We will promote thorough andrigorous cost reviews by our in-housetask force and the negotiations onreviewing master-lease rents forapartment owners.

Strengthening Governance and Compliance,
Including Recurrence Prevention
Our aim is to recover business performance by promoting fundamental business structural reforms, but we believe
it is also very important to prevent the recurrence of construction defects that led to the deterioration of ourbusiness performance. For this reason, we are working to strengthen governance and raise compliance awarenessof our employees.
First, in terms of corporate governance, the majority of the Board of Directors is comprised of outside directors.
Three internal directors and five outside directors are appointed (three of whom are independent outside directors). In addition, we are strengthening and monitoring the functions of the Board of Directors, mainly through theoperation of the Nomination and Compensation Committee by four outside directors and the President and CEO,and evaluation of the effectiveness of the Board of Directors and the Audit & Supervisory Board. Furthermore,regarding our risk management system, we have established a system to thoroughly manage potential risks. Outof 50 items of recurrence prevention measures, 44 items have been completed, and we are continuing to work on
the remaining six items.
On the other hand, regarding raising awareness of compliance, we have set “Compliance First” as one measure
to prevent a recurrence, and have established a Compliance Management Headquarters as one of the four
12

Leopalace21 Integrated Report 2021

headquarters that constitute the corporate structure. May 29th of every year has been designated as Change Day
5.29. On May 29, 2020, our second observing the regrettable anniversary, we conducted an employee awarenesssurvey “Change Day 5.29 Recurrence Prevention Questionnaire” motivated by Change Day, and I sent employees
a message from the CEO on the Company intranet. We will continue to raise awareness while positioning May 29
as the day to pledge to prevent a recurrence. In addition, we are now able to get a good idea of the results of ourawareness-raising efforts from the “Awareness Survey on Daily Work” conducted for all employees. Owing to theefforts, violations of laws and regulations and harassment cases have decreased, and workplace atmosphere has
become more transparent and open.

For Our Stakeholders
Our business model would not be possible without partnerships with apartment owners. We may make requests
that do not meet their expectations as we work toward the reconstruction, but we are making every effort to establish
a win-win relationship over the long term, and we humbly request their understanding. As for employees, we willdefinitely reward their contributions to the recovery of business performance once it is complete, and we request
their continued efforts.
We have caused a great deal of inconvenience to our shareholders, such as a slump in stock prices and ongoing
non-payment of dividends. However, the social significance of our Company and the social value we are creating
will surely lead to economic value, so their continued patience until our business performance recovers will behighly appreciated.
Even amid the current difficult situation, there are some positive signs such as the recovery of our occupancy rate.
We sincerely ask for the continued understanding and support of all of our stakeholders for the Company’s management.

Bunya Miyao
President and CEO
September 2021

Leopalace21 Integrated Report 2021

13

Source of Competitive
Advantage
The Competitive Advantage of Leopalace21
Leopalace21 possesses capital with competitive advantage, such as 570,000 units undermanagement, over forty years of accumulated rental expertise, talent with flexible mindsets,
and partnerships with property owners and business partners.

Apartments
p.15

Rental Expertise
p.16

Our People
p.17

Property Owners & Tenants
p.18

Business Partners
p.19

Social demands
and challenges
such as Sustainable
Development Goals

Offer Rental Housing with
Stable Operation
Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society
Maintain the Workable
Corporate Governance System
Apartments

Rental Expertise

Purpose
Corporate Philosophy
Action Guidelines

Our People

Growth Strategy

Structural Reforms
Financial Strategy

Property Owners& Tenants

Communication with Stakeholders
Work-Style Reform and
HR Development
Respect for Human Rights

Corporate GovernanceBusiness Partners

14

Strengthen Compliance

Leopalace21 Integrated Report 2021

Attention to the Environment

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

Source of Competitive Advantage

Apartments

Top lease management
units for single-personhouseholds in the industry

approx.

270,000

units
are used bycorporate tenantsSpecialized in

HomogeneousEquipped with furniture,studio apartments

floor plans

home appliances, andinternet in principle

570,000

as a stable service

withunits nationwide

80

approx.
%of listed companies
use units as dorms orcompany-leased
housing

While the Japanese population as a whole is in decline, single-person households are
forecast to increase in future
Number of private households by family type
(Unit: thousand households)

60,00050,00040,00030,00020,00053,332

54,107

54,11653,484

5,044

4,510

4,123

3,833

14,342

14,134

13,693

13,11812,465

11,824

10,758

11,101

11,203

11,138

10,96010,715

4,535

4,770

5,020

5,137

5,141

5,074

4,924

14,457

16,785

18,41819,342

19,96020,254

20,233

19,944

2005

2010

2015

2020

49,063
6,212
14,646
9,637
4,112

10,00051,842
5,779
14,474
10,26952,315
3,583

50,7573,350

0Single-person households

Single parent and child(ren)Married couple only

2025

projection

2030

projection

Married couple and child(ren)2035projection

2040

projection

Other

Source: Household projections for Japan (2018) by the National Institute of Population and Social Security Research

Leopalace21 Integrated Report 2021

15

Source of Competitive Advantage

Rental Expertise

Unparalleled and original rental expertise
upgraded in accordance with changing times

Innovative products& services

Units equipped with
furniture andhome appliances:approx.

High-quality service
that meets needs

95%Japanese-language
call center
operating hours:

24

hours

Directly managed
leasing sales
offices:111

Tenant matchingcapabilities thatleverage cutting-edge
technology*As of the end of June 2021

16

Leopalace21 Integrated Report 2021

Total online customer
service cases (online
viewings, interviews):
approx.

16,000

Units equippedwith internet:
approx.

98%

Installation of
Leo Lock among
eligible units(eligible units are thosecompleted since October 2017):

100%

Total my DIY cases:
approx.

50,000Note: L eo Lock is an electronic key thatenables locking/unlocking andconfirmation via smartphone

Note: my DIY is a service that allows
tenants to change one surface of
wallpaper for freeNumber of foreign
languages
supported:

Units with security
systems installed:
approx.

Buildings withsecurity cameras:
approx.

Monthly cleaning
visits:Periodic property
inspections:Contracts throughcorporate housing
services:

64

Total number
of web-based
contracts:

17,000315,000

15,000

1 per year

220

AI property search

Proportion of
corporate contracts
using Leo-sign(automatic proposalof properties)(electronic contract
management system):companies;
approx. 79,000 units

39%

Note: T he AI property search imports
room search requests and automatically distributes property
information that meet preferences

Source of Competitive Advantage

Our People

Bringing in diverse talent to carveout a new era with flexible ideas

Shifting the focus from new graduates to mid-career recruitment(Unit: thousand households)

60,00050,00049,063
6,212

40,000 Proportion of

mid-career hires14,646
inthe fiscal year ended
March 31, 2016:
9,637
20,00030,00010,000

54.0%

4,112

51,84253,332
5,044

5,779

Proportion 14,342
of
mid-career hires in
the fiscal year 10,758
ended
10,269March 31, 2021:
14,474

4,535

13,693
13,118 equipped with
14,134
12,465 furniture andshort-stay plans
and apartments
home appliances.
11,824

With a master lease system to pay rents for all units in buildings for up to 30
11,203

11,138

10,96010,715

4,770

5,020

5,137

5,141

5,074

4,924

employees who
contributed 20,254
the business model
execution by their
19,96020,233 creation and
19,342
19,944

94.2%

16,785

18,418

2005

2010

2015

years, we have established a business model that provides a one-stop service
handling everything from apartment construction to lease management. It was theunderstanding of our strengths through experiences that they built up since joining

0Single parent and child(ren)

3,833
3,583 products andary at the time4,123
in 1985, we haveprovided novel
3,350services, such as

4,510

11,101

14,457Single-person households

54,116 Leopalace21
54,107
Ever since launching
apartments, which were revolution53,484 urban-type
52,31550,757

the Company 2025
as new graduates.
2020
2030 Recently, we
2035have been shifting
2040 the focus fromprojection
projection
projection
projection

new graduates to mid-career hires in our recruiting in response to our transition to

Married couple only

Married couple and child(ren)Othera business portfolio centered on the Leasing Business. By promoting mid-career

Source: Household projections for Japan (2018) by the National Institute of Population and Social Security Researchhiring, we will increase the diversity of our people and enhance our ability togenerate innovation by utilizing a variety of ideas, concepts, skills, and knowledge.

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

Leopalace21 believes that a workforce of people from a broad array of back-(People)grounds with diverse values helps create new value, and greatly contributes to400

the growth of our company. In addition, multilingual customer support is neededin response to the increase in the number of foreign national workers and interna-

300

200

218

tional students in Japan. In order to secure the diverse talent needed to achievethis, we have been proactively recruiting foreign national employees. As of theend of March 2021, we employ 218 foreign nationals, which is a decrease on lastyear due to the transfer and liquidation of subsidiaries related to the International

100

Business. While most of our businesses focus on domestic demand, we will continue to employ a certain number of foreign national employees in order to ensure0
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

diversity and address customer needs.

Leopalace21 Integrated Report 2021

17

Source of Competitive Advantage

Property Owners & Tenants

Sharing goals
with property owners

Bringing comfort andpeace of mind to tenants

In partnership with 28,000 property owners
throughout Japan

Dialogue with customers through“Customer’s Voice”

Our rental apartment management is an ultra-long-term land use
project. Relationships of trust with property owners are crucial toensure smooth project management.

We distribute an article of “Customer’s Voice” internally once a monthon the intranet. It is for the purpose of boosting employee engagement
and fostering a customer-oriented culture as well as improving
the quality of customer service at leasing sales offices, by sharing
customers’ feedback throughout the Company. The article announces
the winners of Outstanding Customer Service Award (individual/
leasing sales office), given to those who have been recognized toprovide excellent customer service based on responses from customer
surveys conducted when customers come to leasing sales offices,and the moth’s SpotlightAward while containing tips
for improvement and realcustomers’ feedback.

Nationwide rollout centered on master
lease to pay rents for all units in buildings
for up to 30 years
We have established a subleasing business model whereby
apartments are built on landowners’ land, we lease the constructedapartments for 30 years and rent them out to customers, and we
pay the property owners (landowners) rent for 30 years.

Master lease system to pay rents for all units inbuildings for up to 30 years
Master leasesystem pays rents
for all units inbuildings

Budgeting maintenance and repair costs
Apartments for a 30-year period

Management ofrental revenues for
Individuals
a 30-year period(general)Companies(dorms/
Recruitment andcompany-leased management of tenants
housing)
for a 30-year period

Tenants

Leopalace21

Property
ownersPayments of master lease rents
are made to owners regardless ofwhether or not there are vacancies.
(Note: rents are subject to review)

Class L Operation
We previously ran Class L as a voluntary membership organization forproperty owners and provided various services, but in April 2021 wewaived annual fees and upgraded it to an organization for all of ourproperty owners. By offering a wide range of services to enhance thelives of property owners, we provide a satisfying service lineup forboth property owners and their families as a partner that supports thelife stages of property owners.
18

Leopalace21 Integrated Report 2021

rate
Corpo
voice
mer’s
o
t
s
u
c

Going forward, I have high hopes for
products that meet a wide variety of needs, suchas more properties and properties that allow pets.

Our company has a lot of staff transfers, and many of our employees are
single, so a high percentage of our workforce lives in company-leased
housing. Our partnership with Leopalace21 goes back for quite some time.
We find it very helpful how Leopalace21 reduces our expenses, makes
speedy bulk proposals for the arrangement of rooms for our new graduate
intake in April, and how their staff areswift and flexible in their work. I also get
the impression that the company is very
thorough in handling compliance issues
when handing over keys in particular.
However, I do think we would be able touse Leopalace21’s services even more in
future if they had products that meet a wide
KUSURI NO AOKI Co., Ltd.
variety of needs, such as more properties
General Manager,
and properties that allow pets, in order toGeneral Affairs Department
eliminate mismatches with demand.
Mr. Daisuke Hasegawa

Source of Competitive Advantage

Business Partners

Providing value through collaboration
with our business partners

Working together with business partners to promptly resolve the construction defects
problem and maintain apartment quality

Number of business
partners involved in building
and facility construction:

approx.

lier’sSupp

550

Number ofcleaning visit partners:

approx.

100

Number ofhouse cleaning partners:

approx.

80

Number ofproperty maintenancepartners:

approx.

1,050

voice

Let us, a business partners and Leopalace21
come together to work as one.

We will work on property management while
seeing ourselves as “apartment concierge.”

Our relationship with Leopalace21 goes back around 25 years, andis primarily centered around maintenance work. We cover the Kanto,
Chubu, and part of the Kyushu regions, so I imagine we are one of top
companies in terms of the number ofproperties we handle. In various initiatives,
we have been able to help establish
maintenance services through mutual
exchange of opinions. We are reassured byour stable relationship with Leopalace21,
and their vendor-friendly system puts our
mind at ease. We are ready to give ourall as a business partner, so let us work
JESS Co., Ltd.
together as one.
President andWe have been engaged in cleaning the common areas of Leopalace21
properties ever since the company started its apartment business. We
make sure to be careful in our work in order to ensure that a wonderfulliving environment is provided to tenants
and that property owners can entrust
their valuable assets with peace ofmind. Through regular skills training andmeetings with Leopalace21 staff, we arecommitted to developing human resources
who can sincerely respond to customer
expectations. Going forward, we willcontinue to see ourselves as “apartment
concierge” and work on property manageMCS Co., Ltd.
Representative Director
ment in partnership with Leopalace21.
Ms. Michiyo Endo

Representative Director

Mr. Takashi Matsumura

Leopalace21 Integrated Report 2021

19

Business Model
About Leopalace21’s Business Model
With rental expertise as our core competence, we have established an original
business model that integrates the core Leasing Businesswith the strategic Elderly Care Business.

Growth Strategy

p.22

Structural Reforms
Financial Strategy

p.27
p.28

Corporate GovernanceSocial demands
and challenges
such as Sustainable
Development Goals

Offer Rental Housing with
Stable Operation
Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society
Maintain the Workable
Corporate Governance System
Apartments

Rental Expertise

PurposeOur People

Corporate Philosophy

Property Owners& Tenants

Action Guidelines

Growth Strategy
Structural Reforms
Financial Strategy

Communication with Stakeholders
Work-Style Reform and
HR Development
Respect for Human Rights

Corporate GovernanceBusiness Partners

20

Strengthen Compliance

Leopalace21 Integrated Report 2021

Attention to the Environment

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

Business at a GlanceCore Business (Leasing Business)
Net Sales and Operating Profit
600.0 (JPY billion)(JPY billion) 60.0

400.0

40.0

200.0

20.0

0

0
-50.0

FY
2011

FY
2012

Net sales (left axis)

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

Net sales
composition ratio
FY202095.85 %

FY
2020

Operating profit (loss) (right axis)*Figures for FY2016 (ended March 2017), FY2017 (ended March 2018), and FY2018 (ended March 2019)reflect the change in segments to combine the Hotels, Resort & Other Businesses*Figures for FY2019 (ended March 2020) onward reflect the change in segments to combine the Leasing Business andDevelopment Business

Strategic Business (Elderly Care Business)
Net Sales and Operating Profit
20.0 (JPY billion)(JPY billion) 2.0

10.0

1.0

0

0

-10.0

-1.0

-20.0

-2.0

FY
2011

FY
2012

Net sales (left axis)

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

Net sales
composition ratio
FY20203.55 %

FY
2020

Operating profit (loss) (right axis)*Figures for FY2016 (ended March 2017), FY2017 (ended March 2018), and FY2018 (ended March 2019)reflect the change in segments to combine the Hotels, Resort & Other Businesses*Figures for FY2019 (ended March 2020) onward reflect the change in segments to combine the Leasing Business andDevelopment Business

Non-Core Businesses (Other Businesses)
Net Sales and Operating Profit
20.0 (JPY billion)(JPY billion) 2.0

10.0

1.0

0

0

-10.0

-1.0

-20.0

-2.0

FY
2011

FY
2012

Net sales (left axis)

FY
2013

FY
2014

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019

Net sales
composition ratio
FY2020

0.60%

FY
2020

Operating profit (loss) (right axis)*Figures for FY2016 (ended March 2017), FY2017 (ended March 2018), and FY2018 (ended March 2019)reflect the change in segments to combine the Hotels, Resort & Other Businesses*Figures for FY2019 (ended March 2020) onward reflect the change in segments to combine the Leasing Business andDevelopment Business

Leopalace21 Integrated Report 2021

21

Growth Strategy: Securing Stable Occupancy Rates

Measures to Boost Occupancy Rates (1) Area Intensive Strategy
We will switch from a uniform nationwide strategy to a strategy to achieve
optimal sales in each area, and aim to increase the number of corporate
and individual contracts as well as the balance of occupied units.
Department Manager, Central Japan Property
Management Department

Fumiaki Takeno
We will strive to maximize the area’s sales andprofit by accurately capturing the changes to thearea’s environment and conducting speedy sales.
Department Manager, Kansai Property
Management Department

Department Manager, East Japan Property
Management Department

Yoshimori Ishizuka
We will speedily respond to analysis of each district
and information to boost profits and use communitybased outreach to create fans of Leopalace21.
Department Manager, Tokyo Metropolitan 2nd
Property Management Department

Masato Fukase
We will conduct sales that meet the needs of the
district and times and work as a team to swiftly
improve the occupancy rate in the Kansai area.

Department Manager, Kyushu Property
Management Department

Shinya Fukumitsu
We will formulate strategies and implement measuresthat address the distinctive characteristics of the districtin order to bring out the potential of the area to thefullest, and work on improving sales, cost, and profit.
Managing Executive Officer
General Manager, Tokyo Metropolitan 1st Property
Management Department

Kazuhiro Hayashi

Tatsuya Sasaki

We will advance with a goal-oriented mindset,
not allowing ourselves to be distracted in orderto ensure the success of the project.
Department Manager, Chugoku andShikoku Property Management Department

By maximizing the property profits of the Tokyo metropolitan area, which has a large number of customers, we will
help boost the performance of the Company as a whole.

Yuji Hirahara
We will speedily enact measures that meet theneeds of the district based on area analysis,
capture demand, and provide value to customers.

22

Sales, cost, and profit
management for each area

Appointment of area managers

Area strategies and promotions

Divide the country into sevenareas, and appoint an area
manager who is responsible
for strategy in each area

Implement strategies andpromotions that meet theunique characteristics ofeach area

Implement sales, cost, andprofit management for eacharea, and work to improve
profitability with an independent profitability approach

Up until now, we had executed a uniform,
nationwide sales strategy, but we havedecided to split the country into seven areas
based on the belief that executing detailed
strategies that meet the circumstances ofeach area will be an effective way of boosting
occupancy rates. We reformed our system toappoint area managers, who will function asa CEO of each area. These managers will be
responsible for strategies that leverage theunique characteristics of each area.

The characteristics and needs of tenantsdiffer by area. We will therefore work toensure optimal performance by implementing
the necessary strategies and promotions to
the target in each area. The crux of the newstrategy is moving away from Headquarters-led
operation to enable each area to work withspeed on deciding how to interact with customers, collect information, and put it into action.

In addition to executing sales strategies thatmeet the unique characteristics of each area,
management of sales, cost, and profit will
also be conducted by each area. The area
managers will also be responsible for deciding
how to improve profit, including management
costs such as restoring a property to its
original state and cleaning, and will work toraise the overall level of earnings by boosting
occupancy rates with an eye to enhancing net
sales and profit.

Leopalace21 Integrated Report 2021

Measures to Boost Occupancy Rates(2) Deepen Relationships with Existing Corporate Customers
We will aim to uncover demand from corporate clients and secure recovery
in the balance of occupied units by promoting top-level sales, implementing
strategies for each corporate customer, and strengthening ties with company
housing agencies.

Messagefrom Corporate
Sales Department
Manager

Radically Reforming the Conventional Approach
We will be executing a strategy to radically reform ourconventional approach. Returning to where we started,
we will team up with planning and sales departments
to roll out top-level sales and other individual measuresthat meet the needs of each customer.
In order to recover the trust lost due to the construction defects problem, we will strengthen communication in addition to establishing a status as the“brains of company-leased housing strategy” and boost
company-leased housing share of Leopalace21 andachieve an increase the balance of occupied rooms.

Department Manager,
Corporate Sales Department
Department Manager,
Corporate Sales Planning
Department (concurrent post)

Naomichi Mochida

Formulate and promote strategies
for each corporate customer

Strengthen ties withcompany housing agencies

Aim to secure a status as the“brains of company-leased
housing strategy”

Aim to encourage room use
by devising and promoting
strategies that meet theunique characteristics andneeds of customers

Shift from a fully in-housesystem to a strategy ofcollaboration with company
housing agencies

Under our corporate client sales strategy,
we will promote top-level sales by the
management team and strengthen theconnection with our customers. In order toreturn to where we started and become the“brains of company-leased housing strategy,”
we will establish a win-win relationship withcustomers while solving the issues they face.

We had previously used a uniform strategy
for corporate clients. We will change to an
approach where we perform an in-depth
analysis of customer industry type, area,
and characteristics and devise strategies forindividual corporate customers as with area
intensive strategy, that address the issues
and needs of each customer to build a winwin relationship.

Up until now, we have carried out sales
activities while keeping everything in house.
In order to pioneer new fields, we will
collaborate with agents to promote the useof rooms among companies with which we
do not yet have business. We aim to further
increase the number of contracts by reinforcing our relationships.

Implement top-level sales

Leopalace21 Integrated Report 2021

23

Growth Strategy: Securing Stable Occupancy Rates
Measures to Boost Occupancy Rates (3) Strengthen Ties with Real Estate Agents for Individual Customers
We will strengthen ties with real estate agents to uncover potential customer segments spread across the country.
Through this measure, we will aim to facilitate growth in the number of contracts for individuals.

Partnership and collaboration with Fortress’s subsidiary

Partner and collaborate with Village House, a rental housing management company under theumbrella of Fortress, to strengthen sales activities to real estate agents who offer properties
As part of measures to boost occupancy rates, we will partner andcollaborate with rental housing management company Village House,
which is a subsidiary of the Fortress Investment Group from which
we procured funds. Village House manages low-cost rental housing
throughout Japan, and has a network of approximately 3,800 storesrun by partner real estate agents. Until now, we have responded torequests for housing through directly operated leasing sales offices
as well as approximately 3,000 partner real estate agents, but thefocus was on directly operated leasing sales offices. By making
offerings of our properties possible through Village House partner
stores through the start of this collaboration, we can expect toexpand the range of our potential customer base and, as a result,
growth in the number of contracts.

24

Leopalace21 Integrated Report 2021

Number of contracts
with real estate agents:

7,646
40%

approx.

YoY growthNote: Based on results for Q1 of the fiscal year ending
March 2022

Securing More Foreign National Customers andServices for Foreign National Workers
We have been focusing on the growing demand from foreign
national customers, such as the international students andforeign national workers who are increasing in number every
year, and are working to strengthen our measures to gaincustomers from this customer segment.

Efforts to secure foreign national customers (1)Efforts to secure foreign national customers (2)Labor shortages mean that the number of foreign national workers will continue to growMultilingual rental website and enabled
rental agreements signed without having tomeet face-to-face

The number of international students is experiencing overall yearly
growth, and while the COVID-19 pandemic led to a slight stagnation in
FY2020 in the number of foreign national workers to address domestic
labor shortages, their number is on the rise. In light of these trends, we
expect that rental demand from foreign customers will remain firm.

Demand from foreign national customers is growing, and theirnationalities are becoming increasingly diverse. On our rental website
for tenants, property display and search can be performed in fivelanguages, including English and Chinese, and we have established asystem that allows tenants to sign rental agreements with peace ofmind without having to meet face-to-face before they arrive in Japan.

Number of foreign national workers(Thousand people)

2,000

1,500

Manufacturing industry
Wholesale industry, retail industry
Accommodation industry, food and beverage service industry
Construction industry
Healthcare, welfare
Other

1,724

1,000

500

0

2013

2014

2015

2016

2017

2018

2019

2020 (FY)*Status of reporting on the employment of foreign workers by employers(as of October 31, 2020), Ministry of Health, Labour and Welfare

Leopalace21 Integrated Report 2021

25

Growth Strategy: Providing Housing as Social Infrastructure
Post-COVID-19 Strategy
Avoiding the “three Cs” (closed spaces, crowded places, and close-contact settings) is
key when dealing with COVID-19, and it will continue to be an effective post-COVID-19
strategy. We will therefore push forward with progress on web-based contracts.

Post-COVID-19 strategy (1)Post-COVID-19 strategy (2)Promoting web-based rental contracts

Leo-sign (electronic contract management system)

Avoiding the “three Cs” is key to preventing infection of COVID-19. We
will therefore continue to promote web-based rental contracts eventhough they are usually signed in person. We started using web-based
rental agreements in June 2019, and we will promote remote support
further by expanding the use of service.

As with face-to-face contract signing, the Japanese business customof stamping contracts with a hanko seal remains strongly rooted.
With an eye to the post-COVID-19 world, however, we will aim toboost uptake of Leo-sign as part of efforts to increase proportion ofadmin-saving online tasks. We introduced Leo-sign in 2015, and it has
been already employed for over 30 percent of corporate contracts. We
will promote remote rental contract signing by further boosting use of
the system.

Introduced advanced IT in each step of rental contract conclusion to promote smarter contract signing and management

Rooms offering

Rental contractconclusion

Customer services
including online
room viewings

WEB-based
contract signing

Documentation
management

Proportion of corporate contracts using Leo-sign
(%)

40
30

AI-poweredroom searchServices for individuals and corporate clients
Services for corporate clients

20
Leo-sign

10
0

Apr

May
FY201526

Leopalace21 Integrated Report 2021

Jun

Jul
FY2016Aug

Sep

FY2017Oct

Nov
FY2018Dec

Jan
FY2019Feb

Mar
FY2020Structural Reforms: Returning to Profitability in Operating Profit and Eliminating Excess Liabilities
Strongly Pushing Forward with Structural Reforms Such as Shifting to a Leasing
Business-Focused Strategy, Transferring or Withdrawing from Non-Core andUnprofitable Businesses, and Optimizing the Workforce
By thoroughly implementing structural reforms, we are aiming to achieve profitability in operating profit for the fiscal year ending
March 2022, profitability in net income and eliminating excess liabilities by the fiscal year ending March 2023.

Structural reform (1)Initiatives in the fiscal year ended March 2021
Under the drastic structural reforms that were started in June 2020, we
have promoted transfer or withdrawal from non-core and unprofitablebusinesses; we sold domestic hotels and company-owned apartments,
transferred Enplus Inc. and the Company’s subsidiary in Vietnam, liquidated WING MATE CO., LTD. and the Company’s subsidiary in Thailand,and sold investment securities among other activities. We also
implemented our first ever voluntary retirement program in an effort
to optimize our workforce and reduce costs. In addition, as part of ourefforts to clarify management responsibility and reform governance, wehave made changes in the management team, curtailed officer compensation, and made redundant the positions of counselor and advisor.

Completed withdrawal from hotels business in JapanT ransferred or withdrew from, non-core and unprofitable businesses (transfer of Enplus Inc. and the Company’s subsidiary in
Vietnam, liquidation of WING MATE CO., LTD. and the Company’s
subsidiary in Thailand)S old assets (selling investment securities and company-owned
apartments)
Optimized workforce (voluntary retirement program)F ulfilled management responsibility (curtail officer compensation,
make redundant the positions of counselor and advisor)

Structural reform (2)Establishing an internal task force team
In terms of profit structural reforms in the Leasing Business, we will
reduce lease operating costs and construction and real estate costs
as well as carry out cost reductions across the entire company withno field left untouched. In order to realize these cost reductions, wewill ensure thorough cost reductions and management by setting up
an internal task force and revise the operational process through the

dedicated team. In particular, in terms of lease management costs, wewill aim to ensure cost reductions to the scale of JPY 5 billion per year
by rationally revising the way we manage costs for rental properties,
such as the costs associated with cleaning and restoring room to its
original state.

Cost reduction measures from the fiscal year ending March 2022 onward
Continuing the radical structural reforms that have been introduced
since the fiscal year ended March 2021, we will concentrate managerial
resources on the core Leasing Business while striving to secure stability
from both a business and financial perspective.
In addition to cost reductions, we will work to proactively save costsin terms of advertising expenses, as well as sales, general, and administrative (SGA) expenses, which have seen increasing sales commission.
Through radical reform of work processes and thorough cost reductions,
we will aim to reduce costs and SGA expenses. We expect cost reductions of around JPY 37.1 billion for the fiscal year ending March 2022,
and JPY 7.2 billion for the fiscal year ending March 2023.

❶ Cost of sales ❷ Personnel expenses ❸ Advertising expenses❹ Sales commission ❺ Other(JPY billion)

450.0

JPY -11.2 billion in personnel costs
from FY2019 to FY2021

430.0
410.0

JPY
438.1
billion

❸
+1.3
❶
-36.0

390.0

❷
-2.6

❹
+0.9
❺
-0.8

370.0
350.0

❷
+5.2
❶
JPY
-10.2
400.9
billionJPY 37.1 billion reduction
FY2020actualProvide bonuses byimproving operating profit

❸
-1.5

❹
-0.6

❺
-0.1

JPY
393.6
billionJPY 7.2 billion reduction
FY2021plan

FY2022
plan(reference)

Leopalace21 Integrated Report 2021

27

Financial Strategy: Building a Stable Financial Base

Raising JPY 57 Billion of Funding to Address the Construction Defects Problem
and Pay Back Loans
We will aim to build a stable financial base by accelerating improvements to our financial standing by securing funding,while at the same time ensuring flexibility and agility in capital policy by reducing capital and increasing the total numberof authorized shares.

Funding

Funding of JPY 57 billion from Fortress Investment GroupIn November 2020, we issued third party allotment of shares (approx.
JPY 12 billion) and issued preferred shares (JPY 15 billion) of ourconsolidated subsidiary Leopalace Power to the US-based fundFortress Investment Group. At the same time, we received financing
with share subscription rights (JPY 30 billion), thus the financial
arrangement of a total of JPY 57 billion was carried out. This funding
has enabled us to secure funds to deal with the construction defects
problem and redeem bonds and repay loans due for repayment.
Due to the impacts of the COVID-19 pandemic, we had excess
liabilities as stipulated by the listing rules of the Tokyo Stock
Exchange as of the end of the fiscal year ended March 2021. We will
aim to improve our earnings in order to eliminate excess liabilities
within the grace period for delisting standards (extended one year to
the end of the fiscal year ending March 2023 per special provisions
due to the COVID-19 pandemic).

Reduction of common stock and increase of the total number of issuable shares

Ensuring future flexibility and agility in capital policy to build a stable financial baseWith an eye to resuming dividends in future, we reduced the common
stock as per the resolution of the Ordinary General Shareholders’Meeting held on June 29, 2021. The reduction of common stock wasmade by reducing JPY 81.1 billion from JPY 81.2 billion to make JPY
100 million. No changes were made to the number of outstanding
shares, and therefore no changes in the number of shares held by
investors or net assets per share. The entire amount of capital to be
reduced was transferred to other capital surplus.
The number of outstanding shares including dilutive shares was 489
million as per 2020 capital policy, bringing the number close to thenumber of issuable shares of 500 million. In order to ensure flexibility
and agility in future capital policy, we increased the number of issuable
shares by 250 million to a total of 750 million.

28

Leopalace21 Integrated Report 2021

Goal of common
stock reduction

To ensure future flexibility and agility incapital policy

Summary of common
stock reduction

Pre-reduction common stock:
JPY 81,282,359,829–> post-reduction common stock:
JPY 100,000,000

Method of common
stock reduction

Transfer the entire amount of common
stock to be reduced (JPY 81,182,359,829)
to other capital surplus without changing
outstanding number of shares.

Corporate Governance
About Leopalace21’s Corporate GovernanceWelcoming two new outside directors, the board of directors is working to build a robust management
system by making appropriate and speedy decisions, strengthening the supervisory function andcompliance system, and establishing good relationships with stakeholders.

Growth Strategy
Structural Reforms
Financial Strategy

Corporate Governancep.30

Social demands
and challenges
such as Sustainable
Development Goals

Offer Rental Housing with
Stable Operation
Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society
Maintain the Workable
Corporate Governance System
Apartments

Rental Expertise

Purpose
Corporate Philosophy
Action Guidelines

Our People

Strengthen Compliance

Growth Strategy

Structural Reforms
Financial Strategy

Property Owners& Tenants
Business Partners

Communication with Stakeholders
Work-Style Reform and
HR Development

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

Respect for Human Rights

Corporate GovernanceAttention to the Environment

Leopalace21 Integrated Report 2021

29

Corporate GovernanceDiscussion at theBoard of Directors
Bunya Miyao

Shigeru Ashida

President and CEO

Director and Managing Executive Officer

Measures to Improve Occupancy Rates
Miyao

AshidaHayashima

In order to improve occupancy rates, we first of all need toestablish a system that enables monthly reporting of sales, cost,and profit management. If we cannot analyze the previous monthresult, it essentially means we are not conducting the check andact parts of the plan-do-check-act cycle. We need to pay renewed
attention to income and expenditure control – including costs
and sales, general and administrative (SGA) expenses – without
focusing solely on the top line.
Rather than confirming the results of various measures, we needto make sure we can timely grasp the status of progress in orderto improve occupancy rates. We should constantly optimize ourorganization and allocation of personnel to ensure that we do nothave staff shortages in the field. At the same time as implementing measures, we also need to enact far-reaching, comprehensive
cost reductions.
Our analysis of failure factors and market value analysis are
not sufficient. By making visible the sales, cost, and profit ofeach of the seven areas, we should be able to perform causal
analysis. Area managers should adjust their respective approachaccordingly in the next month, and examine the results of doing so.
Responsibility for results should also be made clear, and the area
managers will be in charge of that.

Watanabe

FujitaNakamura

I got the impression that matters pointed out at the Board of
Directors meetings were not being promptly enacted in operating
departments. They should speedily come up with measures toresolve the month’s challenges and put them into action.
I found it necessary to foster a company culture that the operating
departments should follow through until action item progress
checklists from meetings are ticked for completion. I am afraid thatmany proposals do not come with clear mentioning of deadlines
and cost-effectiveness. People should be aware that deadlines,
costs, required personnel, and cost-effectiveness are mandatorywhen making a proposal.
We need to clarify measures to achieve profit targets on a monthly
basis, and analyze the progress of target achievement for failure
reasons and countermeasures. We should organize KPIs and KGIs
and keep an eye on them. It is necessary to clarity a feasible
business portfolio and appoint candidates for the next generationof the management team to work on a concrete roadmap for
realizing the new business portfolio and to assign each theme forthem to tackle.

Proposals submitted to the Board of Directors
The Company held 43 Board of Directors meetings in the fiscal year ended March 2020, and 25 in the fiscal year ended March 2021.
While the Board of Directors faced a reduction of proposals related to the board structure, compensation for the officers, construction defects problem
and recurrence prevention, it faced an increase in proposals related to business and financial strategy and structural reforms.
In addition to passing resolutions on proposals, at Board of Directors meetings held in the fiscal year ended March 2021, the Board monitored sales
results and project progress status for each department on a monthly basis.
The Board had a series of lively discussions on how to recover the business performance and drive the restructuring of the Company.
Business and Financial Strategy• The fiscal year ended March 2020 saw discussions focused on
establishing drastic business strategies reconstruction.
• The fiscal year ended March 2021 saw an increase in proposals
aimed at rebuilding the business base and strengthening the financialbase, such as bolstering the profitability of the Leasing Business,
capital policy, and selling assets, in order to execute the drastic
business strategies reconstruction.

30

Leopalace21 Integrated Report 2021

Structural Reforms• The Board had the discussions about formulating and implementing
specific measures to carry out drastic structural reforms.
• The Board confirmed that steady progress had been made as a resultof the discussion held and decisions made at Board of Directors meetings, on the items such as the partial transfer of non-core businesses,
implementation of the first ever voluntary retirement program, andthe closures and consolidations of leasing sales offices.

Mayumi Hayashima

Akira Watanabe

Kazuyasu Fujita

Yutaka Nakamura

Director and Executive Officer

Outside Director

Outside Director

Outside Director

Drastic Business Structure Reforms
Miyao

AshidaHayashima

It is necessary to review the cost of sales as a structural reform
to somehow reduce the breakeven point. To this end, a review
of workflows, personnel rotation, and systemization are vital.
We also need to keep an eye on whether implementation of thevoluntary retirement program is leading to work overload for somedepartments and staff members.
The various comments received from outside directors at meetingsof the Board of Directors create a sense of urgency among operating departments and provide many insights. We need to optimize
the allocation of personnel and integrate similar tasks performed
across departments.
Each business division must prioritize its tasks as they face
reduced personnel and cost constraints. They need to review
routine tasks in order to increase efficiency and the managers oforganizations must make the decision to stop low-priority tasks.

Watanabe

FujitaNakamura

We need to thoroughly reform the way we think. It is very
important to leave behind the mindset we had during our period ofhigh performance, and repeatedly work to boost our motivation to
overcome the financial difficulties.
I got the impression that satisfaction with the status quo runs
through all areas. Bold reforms are necessary for rebuilding. If we
do not break through the barriers of mindset, physical ability, andsystem, we will not be able to rebuild the business in a true senseof corporate rehabilitation.
I feel that there is a necessity for drastic structural reforms toenable operating departments to independently and autonomously
formulate and implement measures toward rebuilding the business. Having the management team who can make decisions freefrom past constraints is the biggest point in the structural reform.
Business and financial strategy
It is first20of% all necessary to reset operations other than those that
Structuralreforms
directly link to current sales and profit
as wellas those that seek to
38 %
Board
structureand compensation
6%
promote growth strategy for the near future.

22 %Board Structure and Compensation•W hile there was a reduction in the number of proposals compared to thefiscal year ended March 2020, the Board had a series of discussions on how
to improve the effectiveness of the Board of Directors, covering topics such asrevision of detailed regulations regarding the selection of candidates for officers;
revision of rules regarding the election, dismissal, compensation, and disciplineof officers of affiliated companies; an abolition of the advisory system.
Construction Defects Problem and Recurrence Prevention• As a result of ongoing discussions held ever since the discovery of the construction defects problem, the establishment of a system and the formulationof a course of action and roadmap have reached a satisfactory outcome.
• In the fiscal year ended March 2021, the Construction Defects Response
Headquarters was primarily responsible for dealing with the construction
defects problem, and so was the Compliance Promotion Headquarters for
dealing with prevention of recurrence.
• While the proportion of proposals related to this issue did fall, the Board of
Directors continued to monitor it on an ongoing basis as a priority issue.

Construction defects problem andrecurrence prevention

14 %

Other

Proposals submitted to the Board of Directors in the fiscal year ended March 2020

Business and financial strategy

20 %
38 %

6%
22 %

Structural reforms
Board structure and compensation
Construction defects problem andrecurrence prevention

14 %

Other

Proposals submitted to the Board of Directors in the fiscal year ended March 2021

1%

19 %

Business and financial strategy
Structural reforms

45 %

17 %
18 %

Board structure and compensation
Construction defects problem andrecurrence prevention
Other

Leopalace21 Integrated Report 2021

31

Corporate GovernanceCorporate Governance System and Initiatives
Basic approach to Corporate Governancerelated to overall business execution prior to Board of Directors meetings, while the latter shares information about Company managementin the aim of strengthening collaboration so that business execution
proceeds smoothly.
Also, the Board of Directors has established a number of meetingbodies including the Nomination and Compensation Committee,
Risk Management Committee, Compliance Committee, Personnel
Committee, IT Committee, CSR Executive Committee, and CSR
Committee, to discuss key management issues. The meeting bodies
discuss key management issues for which the Board of Directors
consults, and they offer the recommendations to the Board of Directors
so the Board can thoroughly examine them. The management structure
comprises the four headquarters: the Business Operation Headquarters,
the Corporate Management Headquarters, the Compliance Promotion
Headquarters, and the Construction Defects Response Headquarters.
Under this system, we will take steps to clarify the scope of responsibilities and authority and make every effort to further strengthen our
corporate governance.

We consider developing and strengthening corporate governance to
be one of our most important management issues. By strengthening
corporate governance, we are aiming to realize our corporate philosophy, achieve our management plans, enhance corporate value overthe medium to long term, and achieve sustainable growth. In order torealize a higher corporate value for all stakeholders, we place aiming
for efficient, fair, and transparent management as the basic approach
underpinning our corporate activities.
Based on this approach, we are working to develop management
frameworks, structures, and systems that will allow us to engage inappropriate and speedy decision making, strengthen our monitoring andoversight functions of decision making, establish compliance systems,
improve and reinforce internal control systems, and build healthy
relationships with stakeholders.
For the purpose of achieving even faster management decision
making and smoother business execution, the Board of Directors has
established the Corporate Management Council and the Board of
Executive Officers. The former convenes to discuss important matters

Corporate Governance System

As of June 29, 2021

General Shareholders’ Meeting
Appointment/Removal

Appointment/Removal
Accounting
Audit

Inquiry/Proposal

Nomination andCompensation Committee

Appointment/Removal

Accounting Auditor(Outside Directors, President and CEO)Corporate Management Council(Directors,
Audit & Supervisory Board members)

Board of Executive Officers(Internal Directors, Executive Officers,
full-time Audit & Supervisory Board members)

Board of Directors

Consultation

Auditing
Information Sharing

Cooperating

Personnel Committee
President and CEO

Operating Departments
Corporate Management Headquarters
Compliance Promotion Headquarters
Construction Defects Response
Headquarters
Subsidiaries and affiliates

32

Leopalace21 Integrated Report 2021

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

Inquiry

Auditing
Council

Cooperating

IT Committee

ReportReportAudit & Supervisory Board

ProposalAppointment/Removal

Business Operation Headquarters

Cooperating

8 Directors(Including 5 Outside Directors)

CSR
Committee

Understand/Manage
Understand/ManageReportUnderstand/ManageReportAuditing Department(internal audit)(internal controls)

ReportCSR Executive
Committee
Understand/ManageInquiry

Compliance Committee
Risk Management
Committee

Auditing

Auditing

Progress towards strengthening governanceWe subsequently increased the number of outside directors tofurther strengthen the supervisory function of our management.
With five outside directors, a majority of directors are outside directors.
The composition of directors is well-balanced, with directors possessing
experience in areas such as corporate management, corporate rehabilitation and business restructuring, and legal affairs. In addition, theBoard of Directors has established committees to examine major management issues in the Company and provide advisory as appropriate.

We have strengthened our corporate governance system in order toachieve our corporate philosophy, attain our management plan, improve
our medium- to long-term corporate value, and achieve sustained
growth. To apply external points of view to our management, we havebeen appointing outside Audit & Supervisory Board members for over
25 years, and we appointed outside directors immediately after thecollapse of the Lehman Brothers, which had a major effect on the
management of the Company.

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

3
1

1

1

1

1

2

5

3

6

3

5

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

Compliance Committee

1st meeting

May 2008

Risk Management Committee

1st meeting

CSR Committee

1st meeting

July 2008

April 2009

Personnel Committee

1st meeting

February 2011

IT Committee

1st meeting

March 2016

Nomination and Compensation Committee

1st meeting

April 2018

CSR Executive Committee

1st meeting

Members of each established body, etc.
Position

Name

President and CEO

Bunya Miyao

Director

Shigeru Ashida

Director

Mayumi Hayashima

Outside Director

Akira Watanabe

Outside Director

Kazuyasu Fujita

Outside Director

Yutaka Nakamura

Outside Director

Akio Yamashita

Outside Director

Jin Ryu

Audit & Supervisory Board
MemberAudit & Supervisory Board
MemberOutside Audit &Supervisory Board Member
Outside Audit &Supervisory Board Member

Board ofDirectors

Kenichiro Samejima

Notes 2

Yoshitaka Murakami

Notes 2

Jiro Yoshino

Notes 2

Takao Yuhara

Notes 2

Corporate
Management
Council

Board of
Executive
Officers

Nomination
Risk
andManagement
Compensation
Committee
Committee

Compliance
Committee

Personnel
Committee

IT
Committee

CSR Executive
Committee

CSR
Committee

8

1

—

8

6

2

4

2

Employees

—

3

7

2

4

5

Outside Experts, etc.

—

2

2

Executive Officers

11

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

Leopalace21 Integrated Report 2021

33

Corporate Governance

Strengthening Our Management Structure
Nomination and Compensation Committee
We have established the Nomination and Compensation Committee as an advisory body to the Board of Directors in order to deliberate on thefairness and appropriateness of officer appointment/removal, compensation and other issues to ensure the transparency and accountability of ourmanagement. This committee consists of the President and CEO as well as outside directors, and—in order to ensure the independence and neutrality of the committee—all the committee members other than the President and CEO are appointed only from outside directors.

Members

Chairperson: an outside director (independent outside director)
Committee members : the President and CEO and three outside directors (of which two are independent outside directors)

Objective

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

Role

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

Number ofmeetings heldin the fiscal year
ending March 2021

7

Main deliberation
content

The committee mainly deliberated on the nomination and removal of directors and Audit & Supervisory Board members as well as officer
compensation recommendations. In particular, during the previous fiscal year ended in March 2021, the committee held deep deliberations
on the appointment of the President and CEO, the policy of having a majority of outside directors, and the selection of outside director
candidates based on this policy.

Reasons for appointing new outside directors
We appointed five outside directors with the aim of obtaining objective advice on decision-making and strengthening the supervisory function of ourmanagement. Outside directors attend important meetings such as Board of Directors meetings and provide a variety of advice that contributes tothe enhancement of our corporate value from an objective perspective. We consider objective decision-making to be particularly important when it
comes to the appointment of officers and setting their compensation.

34

Name

Reason for appointment

Akio Yamashita

Mr. Yamashita possesses abundant experience as an officer and employee of financial institutions and other organizations. He has also been
involved in various projects spanning real estate related businesses, real estate finance, urban redevelopment funds, management buyouts, andcorporate rehabilitation. We believe that he can leverage his deep insights and in-depth expertise and experience of corporate management tocontribute to our growth strategy. Therefore, the Company has appointed him as an outside director.

Jin Ryu

Mr. Ryu possesses an extensive track record and experience as officer and employee of investment funds. He has also been involved in various
projects in the real estate related business and corporate investment and revitalization. We believe that he can leverage his deep insights andin-depth expertise and experience of corporate management to contribute to our growth strategy. Therefore, the Company has appointed him as
an outside director.

Leopalace21 Integrated Report 2021

Skills of officers
The Board of Directors is aiming to strengthen our governance systemand to flexibly and promptly solve problems. We reviewed the skill setof the Board of Directors as necessary given the business environmentand other factors. As of June 29, 2021, there were a total of eight
directors, of which five were appointed as outside directors. This meansthat outside directors are in the majority, and over one in three are
independent outside directors.
The Company requires its directors to have an extremely broad rangeof expertise, experience, and knowledge, and so many of the appointed
directors possess multiple of the required qualities. Particular focus is
paid to knowledge of corporate management, corporate rehabilitation
and business restructuring, quality management, and legal affairs
when appointing outside directors. We expect that directors will beable to leverage these skills to make significant contribution to theCompany’s efforts to implement structural reforms and strive to recover
performance and trust.

Skill set matrix
Attribute

Name

Executive Position

Independency

Expertise, Experience, and Knowledge

Nomination andCompensation
Committee

Age

Diversity

Member

61

Male

1

Bunya
Miyao

President and CEO
Chairman of theBoard of Directors

2

Shigeru
AshidaDirector andManaging Executive
Officer

56

Male

3

MayumiHayashima

Director andExecutive Officer

48

Female4

Akira
Watanabe

Director

Independent
OutsideMember

74

Male

5

Kazuyasu
FujitaDirector

Independent
OutsideMember

74

Male

6

YutakaNakamura

Director

Independent
OutsideMember

62

Male

7

Akio
Yamashita

Director

OutsideMember

59

Male

8

Jin Ryu

Director

Outside36

Male,foreignnational

Corporate
Management

Corporate
RehabilQuality
itation, Sales andManageBusiness Marketing
ment
Restructuring

Legal

Accounting andTax Affairs

FinanceIR

GlobalAudit

Note: Ages of each director are listed as of June 7, 2021

Leopalace21 Integrated Report 2021

35

Corporate GovernanceInitiatives Aimed at Improving Effectiveness
The Board of Directors
and Compensation Committee with outside directors as its members.
In addition to regularly meeting once a month, the Board of Directors
flexibly convenes meetings as necessary to make important management decisions, monitor how business is being executed, and supervise
the execution of duties by directors.

The Board of Directors focuses on both ensuring agile management andachieving comprehensive supervisory functions, and it currently consistsof eight directors, including five outside directors. In order to improve
corporate value, we consider it important to deliberate on nominating
suitable directors, and making compensation recommendations, which
we have incorporated in the decision-making process by the Nomination

Internal directors

Outside directors

Evaluation of the effectiveness of the Board of Directors
After the end of the fiscal year ended March 2021, we evaluated thefunction and others to be fulfilled by the Board of Directors, mainly to
improve management issues. The evaluation method was an individual evaluation using a questionnaire targeting all the board members.
The secretariat of the Board of Directors reported the aggregated andanalyzed results to the Board of Directors, and discussions were held.
In the evaluation for the fiscal year ended March 2021, we confirmedthat the Board of Directors and governance system functioned effectively in general.
More specifically, based on the evaluation of the Board of Directors

in the previous fiscal year, we steadily implemented structural reform,
strengthened the profitability of the Leasing Business, and worked on
initiatives aimed at resolving the problem of construction defects.
For the fiscal year ending March 2022, the Board of Directors
agreed to implement the business plan as a top priority and to monitor
the progress of initiatives aimed at implementing structural reforms
to turn the business back on track, boosting the profitability of the
Leasing Business, and strengthening communication between the
management team and employees so that the Board can discuss,
make decisions, and instruct necessary corrections.

Priority issues during the fiscal year ended March 31, 2021

Priority issues during the fiscal year ending March 31, 2022

1. Steadily implement structural reforms
2. Strengthen the profitability of the Leasing Business
3. Support the initiatives aimed at resolving the problem of construction defects
Positive points

Points to be improved• Transfer or withdrawal from non-core
unprofitable businesses• Formulation and implementation of policy
and strategy relating to raising funds as acapital policy• Achievement of repair plan by June 2021
• Restart of tenant recruitment, shift to handling
repair works in-house• Postponing the formulation of a medium-term
management strategy due to focusing on theconstruction defects problem• Boosting employee motivation and improving
performance• Occupancy rates plan not achieved• Visualizing costs related to construction defects,
funds management (already dealt with)

1. Implement structural reforms to turn the business back ontrack
2. Boost the profitability of the Leasing Business3. Strengthen communication between the management teamand employees

Board members’ compensation
In order to set directors’ compensation at an appropriate level, it isdecided through deliberations of the Nomination and Compensation
Committee. Comprising outside directors and the President and CEO,
this committee is chaired by Mr. Fujita, an outside director. In addition,
the compensation of Audit & Supervisory Board members is decided
through deliberations of the Audit & Supervisory Board. Officer
compensation has been curtailed since February 2019, and the scale of36

Leopalace21 Integrated Report 2021

reductions to officer compensation has been revised as announced on
February 12, 2021 (see the table below for more details).
Curtailment of officer compensation (April 2021–March 2022)
President and CEO
60%
Other Internal Directors
40 – 45%
Full-time Audit & Supervisory Board members
35%
Executive Officers
35 – 40%

Messages from Outside Directors
I was appointed as outside director after the company to which I belong
became a sponsor of Leopalace21. The Company has a solid customer
base and an established business model. While the Company does haveattractive points like these, it is currently struggling with the construction defects problem. I would like to take a hands-on approach to bringout the potential of the Company and work together with the membersof the management to bring the business back on track.
Since I have become involved with Leopalace21, I have come tofeel that the Company has positive aspects other than its customer
base and business model. That is to say, the energy of the employees.
The younger generation of Japan are said to have been mollycoddledwith a pressure-free upbringing. But when I look at how seriously andenergetically the Company’s employees approach their work, I think
there will be no problem in getting the business back on track as long as
proper methods are used.
I believe that what we need to achieve this goal is completely novel
expertise and a sense of speed and leadership in our work. By bringing
these aspects into play, I hope to swiftly resolve the Company’s issues
and rapidly restore its performance.
Another important point is committing to achieving the numericaltargets. We need to set specific and feasible quantitative targets forthe management team and right down to the frontline employees,

fully commit to these targets, and achieve them. Up until now, theCompany had been in a negative spiral with regard to the construction
defects problem, but moving forward, I would like to see us create apositive spiral triggered by boosting the monthly occupancy rate. The
results of this are already starting to appear.

I have been working closely with the management team and employees
since November 2020, before I was appointed as an outside director.
During this time, I strongly felt that there are still a lot of outstanding
employees in the Company and that many employees believe in the
Company revival and are giving their all to their work on a day-to-day
basis. I would also like to serve as a member of the Company and work

together with employees to rebuild it, with an even greater sense of
personal involvement than ever before.
I see my role as leveraging my extensive experience in corporate andreal estate investment to make hypotheses, using numbers to shed lighton facts, and explaining them in words that anyone would understand.
There is a high possibility of taking the wrong course of action if wemake management decisions when it is not clear which of the manyfacts are important, and which are not. Visualizing important matters istherefore helpful in making the correct management decisions in future,such as in which areas we should concentrate managerial resources.
To be quite frank, the Company is currently in a crisis situation, andthe management team is also aware that they should have a higher
sense of urgency. Among the matters at hand, we first need to solve
the issue of financing. It is important to shed light on facts, show
employees effective measures to stop the outflow of funds, and put
those measures into action. In order to get out of this crisis situation
and achieve recovery in performance, it is vital for each and every
employee to understand what needs to be done and why it needs doing,
commit to target figures, and work with a sense of speed in the limited
time available.

Outside Director
Fortress Investment Group (Japan)

Outside Director
Representative in Japan, Fortress Investment Group (Japan)
Managing Director

Akio Yamashita

Managing Director

Jin Ryu
Leopalace21 Integrated Report 2021

37

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

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

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

Compliance training
Compliance training was conducted in the fiscal year ended March 2021
as detailed below. Additionally, we made efforts to instill a compliancemindset in all employees by frequently posting internal notices aboutcompliance.

E-Learning, training, etc. related to compliance (18 times)
Promotion of understanding of the compliance-first policy

11 times

Harassment prevention (for managers)

2 times

Basic knowledge about sexual harassment and how todeal with it (for non-managers)

1 timeTraining to reflect on the construction defects problem
and prevention of recurrence

1 timeSurveys on compliance

2 timesCall for essays on the subject of “Leopalace21 10 years
from now”

1 timeCompliance Committee
With one of the outside directors serving as the chairman, theCompliance Committee consists of members that include lawyers
and other external experts. To strengthen governance, the committee
develops various compliance measures, such as enhancing training andreinforcing information management systems, as well as strengthening
monitoring systems and identifying problems for improvement.

Compliance Committee deliberations content (April 2020–March 2021)

16%
5%

Whistle-blowing situation andincident reports 22 items

26%

14%

Preventive measures 22 items
Compliance-related training andreports 11 items
Legal-violation incident reports 12 items

13%

26%

Policy revisions 4 items
Others 13 items*The above percentages have been adjusted tocome up to 100% in total.

38

Leopalace21 Integrated Report 2021

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

Board of Directors

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

Compliance Committee

Whistleblowing system

Chairman: an outside director(Compliance hotline)

Committee members: in-house committee
members, legal advisors, andoutside committee members

Run by: Compliance Promotion Department(Compliance Committee secretariat)

Reporting,consultation,etc.

Business divisions,departments,and subsidiaries
and affiliates

Whistle-blowing situation andincident reports 22 items

16%

Whistleblowing compliance management system certification registration
Preventive measures 22 items
26%
5%

The whistleblowing system of our Group has been registered for the
Whistleblowing Compliance Management System (WCMS) certification
regime introduced by the Consumer Affairs Agency. The Whistleblowing
Compliance Management System Certification (self-declaration ofconformity system) regime is a system whereby a business evaluates
its own internal reporting system, is registered as a business with
self-declaration of conformity if it meets the certification criteria via theCompliance-related training andreports
11 items
screening of the designated registration
organization,and is granted the
14to%Legal-violation incident reports 12 items
right
use the WCMS symbol.

26%

13%

Policy revisions 4 items
Others 13 items*The above percentages have been adjusted tocome up to 100% in total.

Declaration to eliminate harassment

コンプライアンス
Declaration to eliminate harassment
委員会
委員長：社外取締役
1. We取締役会
will not tolerate harassment.
報告

委員：社内委員、顧問弁護士
社外委員

2. We will not overlook any acts of harassment.

3. We will make serious efforts to eliminate acts of harassment.

In accordance with the declaration to eliminate harassment, inparticular, in the fiscal year ended March 2021, we implemented
harassment prevention training sessions held from September to
October for managerial employees to learn the necessary knowledge
and skills to prevent harassment, and E-learning courses in October for
non-managerial employees to acquire basic knowledge about sexual
harassment and methods for preventing sexual harassment. In February
2021, a harassment field survey was conducted among all officers andemployees in order to gain an understanding of current circumstancesin the workplace. The results of the survey and six awareness-raising
documents for preventing harassment have been posted internally.

コンプライアンス
Steady progress has been made toward transforming
the・
mindsets
各事業部
ホットラインof employees, and the proportion of all types of harassment
各部・ in the
所管：コンプライアンス推進部
通報・
各関係会社
whistleblowing system in the fiscal
year ended March
2021 fell in
相談等（コンプライアンス委員会事務局）
comparison to the previous year.
Proportion of cases of harassment in the whistleblowing system(cases)

(%)

160

40

40

30

30

20

20

10

10

0

0

136
120

33.8

124

102

29.0

24.5

80
40
0
FY2018

Number of cases reported (left axis)

FY2019FY2020

Proportion of harassment cases (right axis)

Leopalace21 Integrated Report 2021

39

Corporate GovernanceRisk Management
Restructuring of the risk management framework
In order to grasp and manage Company-wide risks and strengthen
our risk management framework, the Group has put in place a Risk
Management Committee as an advisory body to the Board of Directors.
The President and CEO serves as chair of this Risk Management
Committee, while other members of the Committee comprise external
experts such as lawyers. The Committee not only monitors risk management status, but also plans and implements training sessions andworks to mitigate or prevent risks from materializing. Each department
identifies and analyzes risks related to the work it is in charge of,formulates a risk response plan to manage these risks, and reports theresults to the Risk Management Committee.
The Risk Management Committee regularly meets once a month andwhenever the chair determines that an extraordinary meeting is required.
It offers consultation and guidance to ensure that risk is appropriately
managed by each department. Furthermore, the general manager of
the Compliance Promotion Headquarters reports on the status of risk
management to the Board of Directors on a quarterly basis.

Review of the risk management method
To manage both materialized and potential risks, in October 2019 andJanuary 2020, we invited external instructors to hold risk management
training sessions and workshops for the senior managers of each department as well as the top management of the subsidiaries and affiliates.
In the fiscal year ended March 2021, we identified risks in eachdepartment, organized response methods with dead lines in accordancewith the size of the risk, and calculated potential costs. Based on thesix major risk types and fifteen sub-types shown in the risk type tablebelow, action is taken upon the results of analysis of major and minor
risks for each department which are reevaluated through the risk
management system of the Risk Management Committee.

Risk type table

40

Externalfactors(1) Risks relating to changes in external environment
The risk of a major impact on performance due toa delay in addressing changes to legal, political,
economic, and/or social phenomena(2) Country risks(3) Disaster risks

Compliance(1) Legal violation/lawsuit risks(2) Compliance risks
The risk of incurring losses due to the signing of
inappropriate contracts, harassment, or other factors

Strategy/
governance(1) Strategy risks
The risk of a major impact on performance due toflawed strategy of the Company, in items such as
management plans(2) Managerial risks
The risk of the failure of managerial functions due tofactors such as the absence of a decision-maker due
to unforeseen circumstances, etc.
(3) Contractor/subsidiary management risks

Operations(1) Operational risks(2) Information management risks(3) Personnel risks(4) System risks

Financial(1) Market risks(2) Liquidity risks
The risk of incurring losses due to inability to raise
funds or termination of transactions due to factors
such as credit uncertainties of the Company(3) Default risks

Reputation

The risk of incurring losses due to reports in the mainstream media, reputation, gossip, rumors, etc.

Leopalace21 Integrated Report 2021

Responding to disaster risks — to protect the social infrastructure of 570,000 units
With the Leasing Business as our core business, we are able to exist
thanks to the use by customers of buildings we construct, manage, andoperate. For this reason, it is our social mission to swiftly respond tobuilding damage and direct damage to customers including injuries andpromptly enact countermeasures.
In 2010, we established a Disaster Response Policy in the aimof swiftly grasping internal damages such as safety of employees
and damage to company office buildings and facilities and businessdamages such as damage to apartment buildings managed andoperated as part of businesses in which we engage, and safety oftenants and property owners in preparation for earthquake, typhoon,
concentrated downpours and infectious diseases. The policy is set
for obtaining basic information needed for restoration activities andinitiatives to prevent the spread of damage and is revised as necessary.
The Disaster Response Policy is also the backbone of our business
continuity plan.

Disaster Response Policy
Under the Disaster Response Policy, the roles of relevant departments
are clarified with an end-to-end system whereby secretariats are
established at head office in accordance with disaster type and scale
and a Disaster Response Headquarters is established at the location of
the disaster. The policy also stipulates criteria for activation and dissolution of Disaster Response Headquarters, preliminary preparations forassessing internal damages, initial disaster response, and measures forrecovery from internal and business damages.
In particular, in an effort to mitigate damage to business, we conductbuilding inspections and promote awareness among tenants with regards
System diagram in the event of a natural disasterto typhoons and other disasters for which prevention activities are possible.
From a business continuity plan perspective, post-disaster response
is stipulated as follows: tenants safety confirmation procedure; property
owners safety confirmation and damage confirmation procedure; plan
to dispatch staff in accordance with disaster scale; provision of rescuematerials; procedures for property inspections in disaster areas andthe subsequent repairs and insurance response. The Disaster Response
Policy and manuals that detail these measures are also stored in paper
format at each Group branch and office in anticipation of power cutsand damage to IT devices in the event of a disaster.

I. Natural disaster such as earthquake, storm and flood damage; fire; leak of hazardous substances

Head ofthe Disaster Response
Headquarters
Administrative manager

Secretariat manager
Appointed at head office

Disaster Response
Headquarters
at the disaster area
Established at the local site

Leasing Operations
Department

Property Management
Department• Confirm safety of corporate tenants• Tenant support• Confirm status of damage at existing properties

Wealth Management
Department• Confirm safety of property owners• Property owner support

Construction Engineering
Management Department• Property inspection by qualified personnel• Property restoration support• Handling of out-of-hours incoming calls by service centers• Status reports on the number of properties in the affected area and the status of damages

Human Resources and • Employee and family safety confirmation when confirmation of damage is needed
General Affairs• Office and company building damage confirmation, arrangement of necessary supplies
Department
Corporate Planning
Department• Confirmation of impact on business continuity and response• External response

Information Systems
Department• Office terminals and network damage confirmation

Leopalace21 Integrated Report 2021

41

Corporate GovernanceDirectors and Audit & Supervisory Board Members
Internal Directors (as of June 29, 2021)

President and CEO
Chief of the Business Operation Headquarters

Director, Managing Executive Officer,
Chief of the Corporate Management Headquarters,
Chief of the Construction Defects Response
Headquarters (concurrent)

Director, Executive Officer, Chief of the Compliance
Promotion Headquarters, CLO*,
Deputy Chief of the Corporate Management
Headquarters (concurrent) *CLO: Chief Legal Officer

Bunya Miyao

Shigeru Ashida

Mayumi Hayashima

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

Apr. 1988	Joined Leopalace21 Corporation
Nov. 2003	Deputy Manager of the Financial Department
Apr. 2010	General Manager of the Corporate Planning
Department
May 2012	General Manager of the Business Operation
Department
Apr. 2013	Administrative Officer
Apr. 2014	Executive Officer
Jun. 2019	Director and Managing Executive Officer (current),
Chief of the Emergency Headquarters forConstruction Defects
Jul. 2020	Chief of the Corporate Planning Headquarters
May 2021	Chief of the Corporate Management Headquarters(current), Chief of the Construction Defects
Response Headquarters (current)

Apr. 1996	Joined Leopalace21 Corporation
Apr. 2009	Deputy Department Manager of the EasternJapan Corporate Sales Department Leasing
Section3, Leasing Business Division
Jul. 2010	Department Manager of the Corporate Sales
Department, Eastern Japan Section2,
Leasing Business Division
Apr. 2014	Department Manager of the Corporate Business
Promotion Department
Apr. 2015	Administrative Officer
Apr. 2018	Executive Officer
Jun. 2019	Director and Executive Officer (current), Chief of
the Compliance Management Headquarters,
Chief Legal Officer (CLO)
Jun. 2020	Chief of the Compliance Promotion Headquarters,
Chief Legal Officer (CLO) (current)
Jul. 2020	Chief of the Management Headquarters
May 2021	Deputy Chief of the Corporate Management
Headquarters (current)

Outside Director

Outside Director

Outside Director

Akira Watanabe

Kazuyasu Fujita

Yutaka Nakamura

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

Apr. 1965	Joined the Osaka Prefectural Government
Nov. 1970	Joined Toyo Shutter Co., Ltd.
Oct. 1999	Business Administration Manager,
Toyo Shutter Co., Ltd.
Jun. 2000	Director, Manager of Business Promotion
Department and Purchasing Department,
Toyo Shutter Co., Ltd.
Jun. 2002	President and Representative Director,
Toyo Shutter Co., Ltd.
Apr. 2006	President and Representative Director,
Executive Officer for General Supervision,
Toyo Shutter Co., Ltd.
Jun. 2010	Special Adviser, Toyo Shutter Co., Ltd.
Jun. 2011	Resigned from Toyo Shutter Co., Ltd.
Sep. 2011	Established Management Consulting Partners
Inc., President and Representative Director,
Management Consulting Partner, Inc. (current)
Feb. 2020	Outside Director, Leopalace21 Corporation(current)

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

Outside Directors (as of June 29, 2021)

42

Leopalace21 Integrated Report 2021

Outside Directors (as of June 29, 2021)

Outside Director

Outside Director

Akio Yamashita

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

Apr. 2010	Joined Morgan Stanley MUFG Securities Co., Ltd.
Apr. 2011	Joined RBS Securities Japan Ltd.
May 2012	Joined Fortress Investment Group
Dec. 2020	Managing Director,
Fortress Investment Group (current)
Jun. 2021	Outside Director, Leopalace21 Corporation(current)

Audit & Supervisory Board Members (as of June 29, 2021)

Full-time Audit &Supervisory Board Member (Outside)

Full-time Audit &Supervisory Board Member

Audit & Supervisory Board Member (Outside)

Audit & Supervisory Board Member

Jiro Yoshino

Kenichiro Samejima

Takao Yuhara

Yoshitaka Murakami

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

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

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

Apr. 1972	Joined Ministry of FinanceJul. 1993	Management and Co-ordination
Assistant Regional Commissioner,
Tokyo Regional Taxation Bureau
Jul. 1998	Large Enterprise Examination andCriminal Investigation Deputy
Commissioner, National Tax Agency
Jun. 2000	Taxation Deputy Commissioner,
National Tax Agency
Jun. 2003	First Deputy Commissioner, National
Tax Agency
Oct. 2005	Senior Executive Officer, East Nippon
Expressway Company Limited
Jun. 2011	Full-time Audit & Supervisory Board
Member, Credit Saison Co., Ltd.
Jun. 2019	Outside Director, Leopalace21
Corporation
Jul. 2020	Audit & Supervisory Board Member,
Leopalace21 Corporation (current)

Leopalace21 Integrated Report 2021

43

Materiality
Leopalace21’s Material Issues
Leopalace21 has identified material issues from two perspectives—those which it aims
to resolve through its business operations and those for which it should concentrate on
strengthening its management foundation, and working on efforts to respond to challenges.

Offer Rental Housing with
Stable Operation
p.48
Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society
p.49
Maintain the Workable
Corporate Governance System
p.50
Strengthen Compliancep.51

Growth Strategy

Structural Reforms
Financial Strategy

Communication with Stakeholders
p.52
Work-Style Reform and HR Development
p.53
Respect for Human Rights
p.55
Attention to the Environment
p.56

Social demands
and challenges
such as Sustainable
Development Goals

Offer Rental Housing with
Stable Operation
Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society
Maintain the Workable
Corporate Governance System
Apartments

Rental Expertise

Our People

PurposeGrowth Strategy

Structural Reforms
Financial Strategy

Corporate Philosophy

Property Owners& Tenants

Action Guidelines

Leopalace21 Integrated Report 2021

Communication with Stakeholders
Work-Style Reform and
HR Development
Respect for Human Rights

Corporate GovernanceBusiness Partners

44

Strengthen Compliance

Attention to the Environment

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

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

Achieving a sustainable society
The Sustainable Development Goals (SDGs) are global targets for theyears 2016 to 2030 that were adopted at the United Nations Summit
in September 2015. They consist of 17 universal goals and 169 targets,
which are applied to all countries including developed countries,
addressing challenges such as disparities, sustainable consumption andproduction, and climate change. The Company strives to meet the needs
and demands of society and contribute to solving the issues throughinitiatives which are in line with our Basic CSR Action Policy.

Updating material issues given the current socioeconomic climate andthe Company’s own business conditions
The Company initially identified the material issues for the fiscal year

aims to resolve through its business operations and those for which it

ended March 2021, and updated them considering the current socioeco-

should concentrate on strengthening its management foundation.

nomic climate as well as the Company’s own business conditions.

Handling construction defects problem was a materiality unique to

The Company extracted social challenges that are related to thethe Company. The Company is making sure that the problem receives

Company’s business and analyzed them whether they would be risks orcontinued priority by setting two KPIs related to material issues in thechallenges for the Company for the fiscal year ending March 2022.

governance field, to ensure the execution of publicly announced repair

Replacing the existing Environment, Social and Governance segmen-completion plan and to avoid a recurrence of the same problem.

tation, the Company categorized material issues into those which it

Step 1

Step 2

Step 3

Step 4

Identifying material issues in two
Extract social challenges relevant to
the Company

Ascertaining the opportunities
and risks for the fiscal year ending
March 2022

categories: those which it aims
to resolve through its business
operations and those for which it

Approval by the CSR Committee

should concentrate on strengthening
its management foundation

Leopalace21 Integrated Report 2021

45

Leopalace21’s Materiality Issues
Based on Leopalace21’s corporate philosophy of creating new value, the Company strives to meet the expectations of all stakeholders,and make every effort to contribute to a sustainable society. In accordance with this approach, the Company has identified material
issues as priority challenges in response to the changing needs of its stakeholders, social and environmental problems, and therequirements of ISO26000 as well as other standards and guidelines.

Social challenges

Opportunities and risks relevant to the Company*

Opportunities

Shrinking labor force
because offalling birthrate andaging populationIncreased demand for housing for single-person households to respond to growing
number of single-person households, foreign national workers, and students
Increasing number of elderly peopleGrowing demand for nursing care
Excess supply of apartments

Risks

Increasing number of abandoned houses
Shortage of nursing care staff
Population concentration in the three major metropolitan areas

Demographic trends

OpportunitiesC orporate customers’ continuing demand for housing in areas other than the threemajor metropolitan areas

Risks

Intense competition in acquiring orders for new apartment buildings

Opportunities

Rising demand forconvenient living conditions

Risks

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

Opportunities
Innovation inE nhanced convenience for the benefit of people who live in remote areas and foreign
national customers

digital technology

Systems and services becoming obsolete due to rapid advances in ICT

Risks

Reduced relocations due to the popularization of remote working
More university classes held online
Increased number/ratio of independent outside directors

Tighter checks on
corporate governance

Opportunities

Diversity in the Board of Directors
Requirement for dialogue with shareholders

Risks
Creation of jobs to compensate for the declining population of working age

Employment issues

Opportunities

Multiple ways of working and respect for diversity
Pursuit of comfortable working environments
Growing demand for shared offices

Risks

Shortage of workers
Wider spread of energy-saving net-zero energy houses (ZEH)

Climate change:
realizing recycling andeco-friendly society*

46

denotes opportunities andOpportunities

Growing interest in the use of renewable energy
Realizing carbon neutrality in 2050

Risks
denotes risks

Leopalace21 Integrated Report 2021

Increasing interest in green-minded societyFrequent occurrence of natural disasters

Updated material issues
Leopalace21 initially identified the material issues for the fiscal year ended March 31, 2021, and updated them considering thecurrent socioeconomic climate as well as the Company’s own business conditions. Replacing the existing Environment, Socialand Governance segmentation, the Company categorized material issues into those which it aims to resolve through its business
operations and those for which it should concentrate on strengthening its management foundation.

Materiality

Related SDGs

KPI

Challenges the Company
aims to resolve throughits business operations
Challenges for which the Company should concentrate on strengthening its management foundation

Offer rental housing withstable operation• Implement measures for increasing occupancy rates(end of Mar. 2022: 85.92%; average during FY2021: 81.65%)• Promote the diagnostic inspection of apartment buildings by
Leopalace21’s own engineers(70% of inspection carried out by Leopalace21’s own engineers)

Respond to new lifestyles in
preparation forthe post-COVID-19 society• Promote web-based customer services and web-based contract signing(number of web-based rental contracts: 25,000 during FY2021)

Maintain the workablecorporate governance system• Dialogue between Directors and employees (four times a year)• Complete repair of all obvious construction defects by the end of 2024

Strengthen compliance• Implement measures to prevent the recurrence of the construction defects
problem and disclose the state of progress (twice a year)• Ensure to respond to posts to the suggestion box for management(100% response rate)• Make use of the whistleblowing system (100 cases received)
Note: t he receipt of a certain number of reports proves that the system is being
run properly

Communication withstakeholders• Share customer feedback with all employees(12 times a year/once a month)• Hold property owner briefing sessions (90 times a year)• Hold engagement meetings with institutional investors(meetings with investors from 100 companies)• Deliver in-house newsletters (60 times a year)

Work-style reform and
HR development• Organize training sessions for foreign national nursing care staff(12 times a year/once a month)• Implement 360-degree assessment (target number of employees: 644)
• Paid leave acquisition rate (acquisition rate: 85%)
• Promote health and productivity management (ratio of fitness habits: 70%
or more; ratio of overweight and obesity: 28% or less)

Respect for human rights• Employment of persons with disabilities(maintain employment ratio of 2.3%)• Create jobs for Leopalace Smile, for roles such as the provision of security
camera recordings, replacement of apartment locks and keys, document
mail service (outsource 100% of specified jobs to Leopalace Smile)

Attention to the environment• CO2 emissions reduction for Scope 1 and 2(achieve 26% reduction in FY2030 in comparison to FY2016)• Engage in electricity saving by use of energy-saving lighting(lighting replacement opportunities by LED lighting: 100%)• Reduce paper consumption(reduce consumption by 20% compared to FY2020 result)

Leopalace21 Integrated Report 2021

47

Materiality

Offer Rental Housing with Stable Operation

Targets to be completed by the end of the fiscal year ending March 2022

KPI

• Implement measures for increasing occupancy rates(end of Mar. 2022: 85.92%; average during FY2021: 81.65%)• Promote the diagnostic inspection of apartment buildings by Leopalace21’s own engineers(70% of inspection carried out by Leopalace21’s own engineers)

Leopalace21’s initiatives

Implement measures for increasing occupancy rates
In order to ensure the provision of rental housing with stable operation,
we consider it essential to boost the occupancy rate. To this end, we aretaking measures to improve occupancy rates in accordance with customer types, such as corporate, individual, student, and foreign national.
Particular measures include: area intensive strategy, whereby thecountry is split into seven areas and measures are taken in accordancewith the unique characteristics of the area; recovery in the balance ofoccupied rooms by corporate clients, whereby we will seek to boost
use among existing corporate clients through top-level sales; andstrengthening ties with real estate agents for individuals, whereby wewill aim to boost agreements made via real estate agents by working
with Village House. Through these measures, we are aiming to increase
the number of contracts and the balance of occupied rooms.

Plan for occupancy rates
95 (%)
90
85
80
75
Apr

May

Jun

Jul

Aug

FY2013 to FY2017 average (actual)
FY2021 (plan)
FY2022 (ref.)

Sep

Oct

Nov

Dec

Jan

Feb

Mar

FY2020 (actual)120 (reports)
80

Promote the diagnostic inspection of apartment buildings by Leopalace21’s own engineers
Leopalace21 has been implementing an annual building inspection
as a matter of principle to ensure peace of mind for property owners
and to provide comfort for tenants to live in the apartments that
Leopalace21 manages. In order to enhance the management services,
Leopalace21 increased the number of check items from 50 to 100 per
building in July 2021.
Leopalace21’s own engineers will perform most of the periodic
building checks to ensure good quality inspections and record the stateof building wear and tear by assigning five levels in place of four for
more accurate diagnosis to determine the priority for repair.

400
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

100 (%)
75
50

48

Leopalace21 Integrated Report 2021

25
0

Materiality

Respond to New Lifestyles in Preparation
for the Post-COVID-19 Society

Targets to be completed by the end of the fiscal year ending March 2022

KPI

• Promote web-based customer services and web-based contract signing(number of web-based rental contracts: 25,000 during FY2021)

Leopalace21’s initiatives

Promote web-based customer services and web-based contract signing
It is important to avoid closed spaces, crowded places, and closecontact settings in order to prevent the spread of COVID-19, and wehave been promoting web-based customer services and rental contract
90
signing that are usually carried out in person.
Concerning web-based customer services in particular, we can assist
85
customers’ apartment-hunting and deal with various inquiries via video
80
calling from anywhere they like such as their home. The customers
75
can enjoy the same level of services including receiving information
about
roomsJunwithoutleasing
We alsoApr May
Jul visiting
Aug SepLeopalace21
Oct Nov Dec
Janoffices.
Feb Mar
FY2013
to FY2017(actual) which
FY2020run
onlineroomaverage
viewings,
is a(actual)real-time service of video calling
FY2021 (plan)
FY2022 (ref.)which enables a customer to take a look at the room and to talk to a
Leopalace21 staff.
120 (reports) Written documents have typically been the norm for rental
agreements, and shifting to web-based rental contract signing proved
80
difficult. Overcoming these obstacles, we now also provide web-based
rental contract signing services that enable customers to complete
40
rental agreement procedures without coming into direct contact, suchas filling out housing applications and submission of personal identifi0
cationdocuments
and Octthe explanation
importantmatters via
Apr May
Jun Jul online
Aug Sep
Nov Dec Jan ofFeb
Mar (FY2020)
video calls.
By making customer services, room viewings, and rental contracts
signing possible online, we can avoid the “3Cs” and improve convenience for those relocating from remote areas without having to visit
100 (%) the leasing sales offices.
95 (%)

Number of web-based rental contract signing (cumulative total)
15,000 (agreements)

10,0005,000

0Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

Improving corporate value: 71
Improving corporate culture: 14
Content of work:
11
Customer feedback:4
Improving work environment: 39
New business proposals:
3
About systems:
20

75
50
25
0

Leopalace21 Integrated Report 2021

49

Materiality

Maintain the Workable
Corporate Governance System

Targets to be completed by the end of the fiscal year ending March 2022

KPI

• Dialogue between Directors and employees (four times a year)• Complete repair of all obvious construction defects by the end of 2024

Leopalace21’s initiatives

Dialogue between Directors and employees
We set up opportunities for dialogue between Directors and employees
as part of efforts to ensure effective governance and measures toprevent recurrence. In the fiscal year ended March 2020, we were able
to conduct dialogue with employees in regional areas under the regional
small meetings initiative. We were not able to conduct this initiative inthe fiscal year ended March 2021 due to the effects of the COVID-19
pandemic and our sluggish business performance. However, we plan torun both online and face-to-face meetings regularly from the fiscal year
ending March 2022 onward.
With participants recruited via self-nomination, the initiative isdesigned to facilitate proactive exchange of opinions rather than justbeing one-way communications from Directors. We also work to ensuretransparency by reporting the content on the Company intranet.

Complete repair of all obvious construction defects by the end of 2024
We are proceeding with repair works in good faith, on the basis of
discussions with property owners and relevant government authorities.
In addition, we proceed with repair works upon gaining the understanding of tenants by giving thorough explanations. To give an update on themost recent status of repairs, we have completed works for the 2,000
units we aimed to repair from September to December 2020, and we
also achieved our target of 6,000 repaired units for January to June
2021. Following on from this, we have continued to carry out repair
works while disclosing monthly progress reports. We aim to completely
repair all obvious construction defects by the end of 2024.
50

Leopalace21 Integrated Report 2021

(As of July 31, 2021)

SeriesTotal number
Number ofof units in
Total number obviously
obviously
Requiresof buildings defective
defective repair, etc.*
buildings
buildings

Repairs
completeNail/
6 series

15,283

7,746

121,652

95,44443,992Other series

23,802

5,010

78,19369,939

4,641

Total

39,08512,756

199,845

165,383

48,633*Includes units that have not yet been surveyedMateriality

Strengthen ComplianceTargets to be completed by the end of the fiscal year ending March 2022

• Implement measures to prevent the recurrence of the construction defects problem anddisclose the state of progress (twice a year)• Ensure to respond to posts to the suggestion box for management (100% response rate)• Make use of the whistleblowing system (100 cases received)

KPI

Note: the receipt of a certain number of reports proves that the system is being run properly

15,0

95 (%)

Leopalace21’s initiatives

90

Implement measures to prevent the recurrenceof the construction defects problem anddisclose the state of progress

95 (%)
90
85
80
75

We publish status updates regarding the measures to prevent recurrence
in response to the construction defects problem announced in May 2019
via our website in order to communicate progress to a wide audience.
More specifically, we outline progress of each item of the threemajor categories of the measures to prevent recurrence: 1. fundamental
reform of the corporate culture; 2. restructuring of the system forcompliance and risk management; and 3. revision of the construction
business framework. Measures to prevent recurrence continue to bepositioned as one of our most important management challenges. As
we work on building a strong system through continued implementation
and reforms, we communicate our commitment and resolve toward
measures to prevent recurrence by giving progress updates on an
ongoing basis to a wide external audience.
Apr

May

Jun

Jul

Aug

FY2013 to FY2017 average (actual)

Sep

Oct

Nov

Dec

Jan

Feb

Make use of the whistleblowing system

10,0In order to evaluate whether the whistleblowing system is being oper80

5,0

85

ated appropriately, we run the system with targets set for the number
75
of reports received by multiplying the number of employees by a certain
Apr ForMaytheJun
JulyearAugended
Sep March
Oct Nov
Feb Marpercentage.
fiscal2021,Decwe Jan
continued
theFY2017 average (actual)
FY2020received.
(actual)previousFY2013
fiscaltoyear’s
target of 100 reports
FY2021 (plan)

FY2022 (ref.)Number of incident reports received (total)
120 (reports)
15,000 (agreements)
80
10,00040
05,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

0Mar

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

FY2020 (actual)

FY2021 (plan) to respondFY2022 (ref.)Ensureto posts to the suggestion box for management

In July 2019, we started operating a suggestion box for management as
120 (reports)a system for employees to make direct suggestions to the management.
Submissions to this suggestion box are divided into seven categories
80
that include improving our corporate value, improving our corporate
culture, and improving our work environment. In the fiscal year ended
40
March 2021, submissions concerning improving corporate culture weremost numerous. The management team does not just read the posts,
0
but replies to 100% of submissions, thereby enabling mutual communiApr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)
cation between employees and the management team.

100(%)
Numberof posts to the suggestion box for management
75
50
25
0

Improving corporate value: 71
Improving corporate culture: 14
Content of work:
11
Customer feedback:4
Improving work environment: 39
New business proposals:
3
About systems:
20

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Leopalace21 Integrated Report 2021

25,000 (t-CO2)

51

900

Materiality

Communication with Stakeholders

Targets to be completed by the end of the fiscal year ending March 2022

KPI

• Share customer feedback with all employees (12 times a year/once a month)• Hold property owner briefing sessions (90 times a year)• Hold engagement meetings with institutional investors (meetings with investors from 100 companies)• Deliver in-house newsletters (60 times a year)

Leopalace21’s initiatives

Share customer feedback with all employees

Hold property owner briefing sessions

We conduct surveys of customers who visit our leasing sales offices
and publish the results internally once a month. Based on the answers
received, outstanding cases of customer service are recognized with the
Outstanding Customer Service Awards (individual/leasing sales office),and particularly exceptional cases are recognized with the Monthly
Spotlight Award. These awards are presented alongside identified
areas for improvement and real customer feedback in the aim of improving the quality of customer service provided at leasing sales offices
and boosting employee engagement and fostering a customer-oriented
culture by sharing customer feedback throughout the Company. Thisinitiative was started in the fiscal year ended March 2021, and we plan
to continue it from the fiscal year ending March 2022 onward.

The Company has long been regularly holding property owner briefing
sessions throughout the country as a way for the property owners allover Japan to interact with Company employees. We strive to regain
the trust of property owners by explaining corporate policy and building
and maintaining a relationship of mutual trust. In the fiscal year ended
March 2021, we managed to hold 87 briefing sessions for over 3,000
participants, including online sessions. While we are reviewing the way
we hold these briefing sessions in light of the impact of the COVID-19
pandemic, we also plan to primarily conduct briefings online in thefiscal year ending March 2022.
In addition to the property owner briefing sessions, we deliver
video messages from the President and CEO via Class L, our portalsite for all property owners.

Hold engagement meetings withinstitutional investors
With dedicated IR team acting as the point of contact, we conductengagement meetings with institutional investors and analysts fromJapan and overseas throughout the year. In individual meetings, theExecutive Officer and Senior Department Manager of the Corporate
Planning Department acts as the main speaker. We also strive to incorporate feedback from markets into our management with by holding
meetings where the President and CEO also participates. In addition toindividual meetings, we also hold twice-yearly financial results briefingsand participate in conferences held by securities firms.
Last year, we also conducted shareholder relations activities andmeetings from an ESG perspective in addition to investor relations
meetings. In this way, we have increased communication with investors
concerning not only short-term performance, but also the medium- tolong-term improvement of corporate value.
52

Leopalace21 Integrated Report 2021

Deliver in-house newsletters
The history of our in-house newsletter Leoleo goes back over 20 years.
At first, we distributed a paper-based newsletter to all employees
once a month. Newly joined employees around head office wereprimarily selected for the Leoleo editorial team, who worked to publish
easy-to-understand articles from their perspectives as new employees.
In 2010, the publication was moved from its existing paper-basedformat to online. Since the editorial team are now free to choose howoften to communicate information, over 50 articles a year are posted.
The Public Relations Group of the Corporate Planning Department isin charge of the publication. Articles are written based on interviews
with various departments and Group companies and are published in aformat that enables mutual communication between employees, with a
LeoLike! button and a comment field.

Materiality

Work-Style Reform and HR Development (1)Targets to be completed by the end of the fiscal year ending March 2022

KPI

• Organize training sessions for foreign national nursing care staff (12 times a year/once a month)• Implement 360-degree assessment (target number of employees: 644)

Leopalace21’s initiatives

Organize training sessions for foreign national nursing care staff
In response to the growing number of foreign staff as a solution tochronic labor shortages in the nursing care industry, we conduct training
sessions in the aim of improving staff skills. Using dedicated teachingmaterial and through conversation that actually occurs in nursing
care settings, the training sessions do not only improve the necessarycommunication skills for working in the nursing care fields, including theJapanese language skills needed for nursing, but also aim to develop
personnel who will be able to work in Japan over the long term, withcourse content covering the acquisition of nursing care qualifications
and study of kanji characters and honorifics targeted for Japanese
language proficiency test.

Implement 360-degree assessment
As part of our personnel evaluation system based in fairness andtransparency, we have introduced a multi-faceted evaluation systemwith 360-degree assessments. In the previous fiscal year, we held
seminars taught by external instructors and briefings about 360degree assessment for senior department managers throughout theCompany. In December 2020, we introduced 360-degree assessment
for senior department managers across the Company. In the current
fiscal year, we are aiming to roll out the system to include in thescope lower managers than senior department managers level.

Evaluated
employee

Juniorstaff

Colleagues
Superiors

Leopalace21 Integrated Report 2021

53

Materiality

Work-Style Reform and HR Development (2)95 (%)
90
85
80
75
Apr

May

Jun

Jul

Aug

FY2013 to FY2017 average (actual)
FY2021 (plan)
FY2022 (ref.)

Sep

Oct

Nov

Dec

Jan

Feb

Mar

FY2020 (actual)

Targets to be completed by the end of the fiscal year ending March 2022

KPI

• Paid leave acquisition rate (acquisition rate: 85%)120 (reports)• Promote health and productivity management(ratio of fitness habits: 70% or more*1; ratio of80overweight and obesity: 28% or less*2)*1 Exercising at least 30 minutes once a week
40
*2 BMI of 25 or more; national average: 26.3% (National Health and Nutrition Survey 2019, Ministry of Health, Labour and Welfare)0Junior

Evaluated
Apr May
Jun Jul Aug Sep staff
Oct Nov Dec Jan Feb Mar (FY2020)

Leopalace21’s initiatives

Paid leave acquisition rate
We consider work-life balance promotion an important issue, and partof this includes creating a system and work environment that makeit easy for our employees to use their paid leave entitlement. Morespecifically, we are promoting the usage of the planned five-day annual
leave in summer and winter as well as the three-day refreshment
leave, which can be used anytime throughout the year. We have also
introduced a half-day paid leave and hourly paid leave system. These
efforts, along with the impact of the voluntary retirement system,
resulted in a paid leave acquisition rate of 90.5% in the fiscal year
ended March 2021, a considerable improvement over the ratio of 31.7%
in the fiscal year ended March 2014.

Promote health and productivity management
Based on the belief that the mental and physical health of each andevery employee is a driving force for innovation, we support the healthof employees and proactively implement a health and productivity
management strategy. With the officer in charge of human resources
responsible for health promotion, we proactively offer health supports
to improve employee health literacy and promote good health withfull-time health nurses and clinical psychotherapists. The key themes ofthe strategy seek to create a workplace environment where employees
can thrive energetically, including: 1. mental health promotion plan;
2. support for balancing work with treatment for conditions such as
cancer and cerebrovascular disease; and 3. improvement of health index
figures. The rate of obesity among our employees is higher than thenational average. To address this, we conduct internal awareness-raising activities to reduce the rate of obesity while seeking to boost theratio of employees with regular exercise habits.
54

employee

Colleagues

Paid leave acquisition rate

Superiors

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

25,000 (t-CO2)
Health and Productivity Management Cycle:

20,000Physical and Mental Health is a Key to the Company Growth

15,000

Health maintenance and improvement

10,0005,000¥
Concentrate on work

Increase company profit

0Change perceptions of health

FY2016FY2017FY2018FY2019Boost productivity

FY2020Lower employee turnover rate
Scope 1 (emissions from the use of gas)
Scope 1 (emissions from vehicle gasoline)
Scopeoutstanding
2 (emissionstalentsfrom the use of electricity)
SecureEnhance corporate image

15,000 (items)

10,0005,000
Leopalace21 Integrated Report 2021

0Reduce burden of insurance costs

Materiality

Respect for Human Rights

Targets to be completed by the end of the fiscal year ending March 2022

KPI

• Employment of persons with disabilities (maintain employment ratio of 2.3%)• Create jobs for Leopalace Smile, for roles such as the provision of security camera recordings,
replacement of apartment locks and keys, and document mail service(outsource 100% of specified jobs to Leopalace Smile)

Leopalace21’s initiatives

Employment of persons with disabilities
We are aiming to expand our hiring of persons with disabilities.
To do so, we established Leopalace Smile Co., Ltd. in August 2009
and received the authorization as a special subsidiary company inNovember 2009. This company currently handles the Leopalace
Group’s mail sorting, shipping, and related outsourced work. Ouroperations are aimed at achieving the normalization of persons withdisabilities in society.

Create jobs for Leopalace Smile, for roles such as the provision of security camera recordings,
replacement of apartment locks and keys, and document mail service
A wide variety of tasks are outsourced to Leopalace Smile. Tasks thatused to be carried out by staff of leasing services departments are now
conducted by Leopalace Smile employees, such as mail sorting andsending, analysis and processing of security camera videos, resetting ofapartment key equipment, and sending documents to tenants. This not
only allows us to create work to promote the employment of persons
with disabilities, but also significantly reduce the working hours ofleasing services department staff by outsourcing to Leopalace Smile,
helping to improve productivity across the entire Group.

Leopalace21 Integrated Report 202155

95 (%)
90

Materiality

85

Attention to the Environment (1)
80
75
Apr

May

Jun

Jul

Aug

FY2013 to FY2017 average (actual)
FY2021 (plan)
FY2022 (ref.)

Sep

Oct

Nov

Dec

Jan

Feb

Mar

FY2020 (actual)120 (reports)
15,00080 (agreements)

95 (%)
90

40
10,000

85

0
5,000

80

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

75
Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

0

Mar

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

FY2013 to FY2017 averageTargets(actual)FY2020tobe(actual)completed by the end of the fiscal year ending March 2022
FY2021 (plan)
FY2022 (ref.)2
100 (%)

KPI

120 (reports)• CO emissions reduction for Scope 1 and 2(achieve 26% reduction in FY2030 in comparison to FY2016)
75

80

50

40

25

Leopalace21’s initiatives

0

Improving corporate value: 71
Improving corporate culture: 14
Content of work:
11
Customer feedback:4
Improving work environment: 39
New business proposals:
3
FY2013 FY2014 FY2015 FY2016
AboutFY2017
systems:FY2018 FY2019 20FY2020

0

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

CO2 emissions reduction for Scope 1 and 2
We have set a goal of reducing the Scope 1 and 2 CO2 emissions—emissions from the use of electricity and gas, and vehicle gasoline—of
our facilities by 26% in FY2030 compared to FY2016.
100 (%)
In line with this goal, we started disclosing our total CO2 emissions
in FY2016, and the total results for each fiscal year are shown on
75
our website and in the integrated reports. Furthermore, regarding
our totalization process and results, we have obtained the guarantee
50
of an independent third party to increase the reliability of the infor25
mation we present. Each of our employees will continue to maintainan awareness of the environment as they go about their work, and0
as a company we will continue to conduct environmental protection
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
activities, including the reduction of company cars and the green
procurement of business supplies.
While setting targets for reductions to Scope 1 and 2 emissions, it is2)
25,000 (t-CO
important
to identify the processes that should be focused on for environmental conservation by gaining an understanding of the emissions
20,000that occur in upstream and downstream business activities. Based on
15,000this belief, our Scope 3 emissions are mainly from electricity and gas
10,000 usage by tenants, which we address by taking measures such as using
LED lighting. Also, we consider the way we lease apartments equipped
5,000with furniture and home appliances to be eco-friendly in and of itself,0
because tenants can move in with just one suitcase, reducing the waste
FY2016FY2017FY2018FY2019FY2020that is produced when moving and minimizing energy consumption
Scope 1 (emissions from the use of gas)
Scope 1 (emissions from vehicle gasoline)
when
movingScope
2 (emissions
frombelongings.
the use of electricity)
15,000 (items)

5,000

25,000 (t-CO2)
20,00015,00010,0005,000
0FY2016

Leopalace21 Integrated Report 2021

FY2017FY2018FY2019FY2020

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

15,000 (items)

CO2 emissions (Scope 3)
900,000 (t-CO2)
10,000800,000
5,000
700,000
600,000
0
FY2016FY2017FY2018FY2019FY2020500,000
FY2016FY2017FY2018FY2019FY2020Category 1 (purchased materials)
Category 2 (capital goods)
Category 3 (electricity-related), category 6 (business travel), category 7 (employee commuting)
Category 13 (electricity and gas use by rental housing)120 (million sheets)
90

10,00056

CO2 emissions (Scope 1 and 2)

60
30

25,000（t-CO2）20,00015,00020,004

19,186

FY2013 to FY2017 average (actual)
FY2021 (plan)
FY2022 (ref.)FY2020 (actual)120 (reports)
80

Materiality

95 (%)

15,000 (agreements)
40

90

Attention to the Environment (2)10,000085

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

5,000

80
75
Apr

May

Jun

Jul

Aug

FY2013 to FY2017 average (actual)
FY2021 (plan)
FY2022 (ref.)

Sep

Oct

Nov

Dec

Jan

Feb

0

Mar

FY2020 (actual)

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

100 (%)
75

120 (reports)
50
80

Improving corporate value: 71
Improving corporate culture: 14
Content of work:
11
Customer feedback:4
Improving work environment: 39
FY2013 FY2014 FY2015 FY2016
FY2017 FY2018
FY2019 3FY2020
New businessproposals:
About systems:
20

25

40

0

0
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (FY2020)

Targets to be completed by the end of the fiscal year ending March 2022

• Engage in electricity saving by use of energy-saving
lighting
25,000 (t-CO )(lighting replacement opportunities by LED lighting:100%)
20,000• Reduce paper consumption (reduce consumption by 20% compared to FY2020 result)

KPI

900

2

100 (%)

800

15,000700

10,000

75

600

5,000

50

Leopalace21’s initiatives

0500
FY201625

FY2017

Scope 1 (emissions from the use of gas)
Engage in electricity saving by use of energy-saving lighting

FY2018FY2019FY2020

Scope 1 (emissions from vehicle gasoline)
Scope 2 (emissions from the use of electricity)

0

FY2013 FY2014
FY2015 approximately
FY2016 FY2017 57,000
FY2018 apartments
FY2019 FY2020
Leopalace21
manages
across Japan.
We recognize that we also have a responsibility to take measures toaddress the environmental burden of electricity usage by tenants. We
replace approximately 10,000 items of lighting equipment installed in
25,000 (t-CO2)
private room spaces a year. As we do so, we are proactively replacing
20,000 fittings with LED lightbulbs, with a future goal of 100% LED lighting.
In addition to energy reductions in private room spaces, we are
15,000also looking into rolling out measures to reduce the electricity used in
10,000common areas, such as adjusting the time lights are turned on and off
5,000 by season.

0

Number of lighting equipment items (in rooms) replaced
15,000 (items)

120

90

10,000900,000 (t-CO2)

60
800,000
5,000

30

700,0000
600,000

0
FY2016FY2017FY2018FY2019FY2020500,000
FY2016FY2017FY2018FY2019Reduce paper consumption

FY2020FY2016

The amount of paper we use in our head office, branches and offices
15,000 (items)
throughout Japan is falling on a yearly basis. We reduce paper usage of

all Company officers and employees by, for example, working to reform
10,000 individual employee mindsets and running meetings using tablets. At

the same time, we have also reduced the amount of paper used forcustomer-facing work through the electronic contract management
5,000
system we have introduced in 2015 and the web-based rental contract
signing that was launched across Japan in 2020. In addition, we
0
expanded the scope of digitized services for individuals in June 2021,
FY2016FY2017FY2018FY2019FY2020by launching the electronic contract signing service for parking spaces.
These efforts have enabled us to go paperless and digitize all rental
contractual procedures we conclude with customers, with the exceptionof fixed-term rental agreements, which must be signed in writing by law.

FY2018FY2019FY2020Paper usage (number of sheets in A4 size)
120 (million sheets)
25,000（t-CO2）90

20,00060

15,00030

20,004

19,186

10,0005,000

0FY20160

FY2017FY201817/3期

FY2019FY2020

18/3期■スコープ1（ガス使用由来） ■スコープ1（車両走行ガソリ

Leopalace21 Integrated Report 2021

25,000（t-CO2）20,000FY2017

Category 1 (purchased materials)
Category 2 (capital goods)
Category 3 (electricity-related), category 6 (business travel), category 7 (employee commuting)
Category 13 (electricity and gas use by rental housing)

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

20,004

19,18657

Ten-Year Consolidated Financial Highlights
FY2011For the years ended March 31:

FY2012FY2013

FY2014

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

458,220
379,091
62,913
8,845
7,370
403,572
51,278
3,369
4,052
4,290
(855)
(1,702)(2,415)
9,416
1,133
372

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

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

At year-end:
Total assets
Net assets
Interest-bearing debt
Cash and deposit balance

264,783
31,761
51,654
41,477

261,649
56,14549,026
56,681

288,165
103,354
37,22774,767

308,882
124,928
44,48775,221

Cash flow:
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Free cash flow (FCF)(3,174)(3,537)
7,245(6,712)

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

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

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

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

187.502.21—

265.3274.85—

393.0569.38—

475.1757.73—

554,948

Index:
556,207546,204

548,912

Average annual occupancy rate (%)

81.16

82.94

84.58

86.57

Construction subcontracting orders received (JPY million)

50,01973,006

81,13987,395Equity ratio (%)
Return on equity (ROE) (%)
Return on assets (ROA) (%)
Dividend payout ratio (%)
Debt/equity ratio (%)
Number of employees

12.0
1.2
0.4
—
1.6
6,165

21.5
30.5
4.2
—
0.9
6,277

35.9
19.7
4.1
—
0.4
6,758

40.4
13.3
4.5
—
0.4
7,339

Units under management*With changes in accounting policies at subsidiaries in the Leasing Business, consolidated accounts reported in the past have been retroactively revised, and historical data for past fiscal years shown here reflects these retroactive revisions.
(Notes) 1. USD amounts are translated from yen at the rate of JPY110.71 = USD 1.00, the approximate rate prevailing at March 31, 2021.
2. Return on equity (ROE) = Net income/average net assets during the fiscal year x 100
3. Return on assets (ROA) = Recurring income/average total assets during the fiscal year x 100
4. Debt/equity ratio = Interest-bearing debt/(net assets – non-controlling interests)

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

Construction Business • Custom-built homes
Elderly Care Business • Elderly care business• Hotels and resort business
Hotels & Resort Business • Travel agency services

Others58• Small-amount, short-term insurance• Solar power generation• Clerical services agency• Real estate development

Leopalace21 Integrated Report 2021

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

Leasing Business• Custom-built homes• Real estate development

Development Business• Elderly care business

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

Hotels, Resort andOther Businesses

(JPY million)

FY2015(USD thousand)

FY2016*FY2017FY2018FY2019FY2020

FY2020511,513
410,641
74,16010,79815,913422,604
67,82321,08522,8483,340(1,354)(360)(3,388)30,70019,90919,631

520,488416,594
74,566
11,536
17,791
427,820
69,76922,89822,4595,051(1,650)664(3,626)32,23522,355
20,401

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

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

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

3,693,968
3,540,465—
131,193
22,3083,503,504
454,061(263,597)(175,101)—(6,511)(14,017)(67,966)(169,506)(308,644)(213,897)

327,609
144,865
50,82488,043337,828
158,870
49,918104,432

337,257
159,438
53,829106,543

291,790
81,33848,04784,536

196,953
1,589
36,13760,501

161,708
3,277
35,40954,863

1,460,652
29,601
319,835
495,559

22,104(11,087)
1,374
11,01727,504(8,653)(14,048)
18,85027,338(2,336)(18,354)
25,001(7,212)
7,379(15,181)167(51,639)
39,533(12,048)(12,106)(40,816)
11,82923,571(28,986)(368,679)
106,852
212,908(261,827)

550.9474.68
10.00

603.7677.61
22.00

630.8458.02
22.00

331.87(278.58)—5.34(328.77)—(25.83)(84.88)—(0.23)(0.77)—

561,961

568,739

570,672

574,798

575,798

573,673573,673

87.95

88.53

90.59

88.34

80.78

78.89

78.89

86,43987,13975,90564,495

7,814

5,927

53,544

44.2
14.6
6.3
13.4
0.4
7,846

47.0
13.4
6.7
28.3
0.3
7,695

47.2
9.3
6.6
37.9
0.3
7,690

27.7
(57.2)
2.2
—
0.6
7,600

0.7
(195.1)(14.9)
—
23.0
7,043

(5.3)
—
(19.1)
—
(4.4)
5,082

(5.3)
—
(19.1)
—
(4.4)
5,082

5. In this report, net income attributable to shareholders of the parent is stated as net income.
6. Regarding the Hotels, Resort & Other Businesses, we added the results of the Hotels & Resort Business to the results of Others for the period from the fiscal year ended March 2011 to the fiscal year ended March 2016, andthen we changed the segments in the fiscal year ended March 2018, so we retroactively changed the figures for the fiscal year ended March 2018 to the new segment (Hotels, Resort & Other Businesses).
7. Development Business was integrated to Leasing Business from the fiscal year ended March 2021.

From Fiscal Year 2020 (Year ended March 2021)

Reference: Fiscal Year 2020 (JPY million)
Net sales

Core
Business

Leasing Business
Development Business(Leasing Segment)

Operating profit (loss)

391,964(19,385)

Strategic
Business

Elderly Care Business

14,524(720)

Non-coreBusinesses

Other Businesses

2,469(1,551)

Leopalace21 Integrated Report 2021

59

Financial Highlights
Net sales
JPY

Operating profit (loss)

408.9 billion

JPY

Down 5.7% y/yOperating margin-29.1 billion-7.1 %-8.4% in fiscal 2019

JPY -36.4 billion in fiscal 2019

(JPY billion)(JPY billion)

600.0

40.0

(%)

10

20.0

5

0

0

-20.0

-5

400.0

200.0

0

-40.0

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020-10

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Operating profit (loss) (left axis)

Operating margin (right axis)

Starting in the fiscal year ended March 2010, net sales were continuously
increasing, reaching a peak in the fiscal year ended March 2018—due in part toour efforts to strengthen the profitability of the Leasing Business. However, oursales declined for the third year in a row starting in the fiscal year ended March
2019, due to the construction defects problem causing us to suspend tenant
recruitment for rooms, which led to a decrease in occupancy rates, as well as
the effects of the COVID-19 pandemic.

Profits had been rising from the fiscal year ended March 2012, when the
results of efforts to strengthen the profitability of the Leasing Business began
to emerge. However, with the construction defects problem in the fiscal year
ended March 2020 and the COVID-19 pandemic in the fiscal year ended March
2021, an operating loss has been recorded for two consecutive years with amarked decrease in profit.

Net income (loss) attributable to shareholders of the parent

EBITDA (Operating profit + depreciation)

JPY-23.6 billion

JPY

JPY -80.2 billion in fiscal 2019-18.7 billion

JPY -24.3 billion in fiscal 2019

(JPY billion)(JPY billion)

30.0

60.0

20.0
30.0
10.0
0
0

-30.0

-90.0

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

As with operating profit, net income attributable to shareholders of the parent
had been increasing since the fiscal year ended March 2012, when the resultsof efforts to strengthen the profitability of the Leasing Business began toemerge. However, we recorded an impairment loss in the fiscal year ended
March 2018 as a result of selling Company-owned apartments. Furthermore,from the fiscal year ended March 2019, we have recorded provision for losses
related to repairs, which has led to a fall in business profitability and brought
about a net loss for the three consecutive fiscal years.

60

Leopalace21 Integrated Report 2021

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Our EBITDA—the combination of operating profit and depreciation—had been
increasing from the fiscal year ended March 2012 to the fiscal year ended
March 2018 thanks to increased operating profit as a result of a recovery in
profitability and higher depreciation stemming from proactive capital investments in new businesses. However, our EBITDA has declined for three years in arow starting in the fiscal year ended March 2019 due to falling operating profit.

Total assets
JPY

ROA

161.7 billion

Down 17.9% y/y

Net assets-19.1 %

JPY

-14.9% in fiscal 2019

2.1 × fiscal 2019

(JPY billion)

(%)

400.0

60

200.0

3.2 billion

ROE—-195.1% in fiscal 2019

(JPY billion)

(%)

200.0

40

150.0

30

100.0

20

50.0

10

0

0

30

0

0

-300

-30

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Total assets (left axis)

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

ROA (right axis)

Net assets (left axis)

ROE (right axis)

Our ROA recovered rapidly after returning to the black in the fiscal year ended
March 2012, climbing to 6.6% in the fiscal year ended March 2018. However,profit has significantly dropped from the fiscal year ended March 2019, and ROA
has been negative for the most recent two years in a row.

As a result of our earnings steadily increasing due to our Leasing Business inparticular, our ROE hovered in the 10% range starting in the fiscal year ended
March 2015. It subsequently declined at the same time net assets fell due to amajor drop in profit. While net assets rose in response to an increase in capitalin the fiscal year ended March 2021, equity was negative.

Equity ratio

Interest-bearing debt —incl. lease obligations

35.4 billion-5.3 %

JPY

Down 6.0 points y/y

Down 1.0% y/y(%)(JPY billion)

50

60.0

40
40.0

30
20

20.0

10
0

0

-10

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Concerning the equity ratio over the past ten years, in step with a recovery inearnings, we have endeavored to secure financial soundness. Accordingly, theequity ratio rose to 47.2% during the fiscal year ended March 2018. However,
the equity ratio once again fell as a result of worsening business profits since
the fiscal year ended March 2019, falling to -5.3% at the end of the fiscal year
ended March 2021.

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

In the last 10 years, we have focused on reducing and curtailing the debt ratio in
consideration of our repayment capacity. As a result, our interest-bearing debt
was JPY 35.4 billion at the end of the fiscal year ended March 2021.

Leopalace21 Integrated Report 2021

61

Free cash flow
JPY

Cash and deposits balance-28.9 billion

JPY

JPY -12.1 billion in fiscal 2019
(JPY billion)(JPY billion)

30.0

120.0

15.0

90.0

0

60.0

-15.0

30.0

-30.0

0

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

We have increased our cash flows from operating activities mainly in the formof net income before tax adjustments since the global financial crisis, and as aresult of curtailing the outflow of cash used for capital investments and otherinvesting activities, we achieved continued growth in free cash flow. However,as a result of declining profits from the fiscal year ended March 2019 onward,
cash flows from operating activities became negative from the fiscal year ended
March 2020, and free cash flow was negative for two consecutive years.

As a result of an increase in our cash flows from operating activities, curtailingthe outflow of cash used for capital investments and other investing activities,
and moreover selling off owned assets, our cash and deposits balance
continued to increase until the end of the fiscal year ended March 2018. Due tofactors that included our cash flows from operating activities becoming negative
starting in the fiscal year ended March 2019, our cash and deposits balance has
been falling.

Units under management

Average annual occupancy rate

78.9 %

573,673 units

Down 1.9 points y/y

Down 0.4% y/y(Thousand units)

(%)

600

90

450

80

300

70

150

60

0

62

54.8 billion

Down 9.3% y/y

50

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Because expanding our number of units under management strengthens ourearnings base, we strived to expand the number of units under management
by supplying more properties in areas where we expect strong tenant demand,with a focus on Japan’s three major metropolitan areas in particular. We are
currently focused on improving the occupancy rate of properties we alreadymanage as opposed to increasing the quantity of properties. At the end of the
fiscal year ended March 2021, our units under management fell by around 2,000
compared to the previous year to 573,673.

Our rental housing occupancy rates tend to follow a cycle of peaking in Marchahead of the new school year and before new company recruits head off towork, before typically decreasing in April, then gradually picking up again.
In order to eliminate falls in occupancy as a result of this cycle, we promotemeasures to encourage long-term tenancies, and our average annual occupancy
rate had been gradually increasing. However, occupancy rates have been falling
for three years running as a result of the construction defects problem and the
COVID-19 pandemic.

Leopalace21 Integrated Report 2021

Non-Financial Highlights
No. of employees on childcare leave

Ratio of paid leave usage

4.8 %90.5 %

Up 1.0 point y/y

Up 6.2 points y/y

(%)

(%)

5.0

100

4.0

80

3.0

60

2.0

40

1.0

20

0

0

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Under the guidance of the Japanese government, work-style reform for both
men and women are gaining momentum. This includes awareness of working
styles and associated changes in behavior. To this end, we have been taking
steps towards developing a workplace environment with systems in place
to make it easier for employees to request childcare leave, in addition toconsidering improvements to work-life balance, such as reducing the amount ofovertime work and encouraging increased use of paid leaves. As a result, uptakeof childcare leave has been on the rise, reaching a record high of 4.8% in thefiscal year ended March 2021.

The dissemination of work-style reform implemented by the Company hascaused a shift in employees’ sense of value attributed to work, from one thatprioritized long working hours to one that emphasizes productivity. With efforts
to promote the use of paid leave, such as the planned five-day annual leave insummer and winter and the three-day refreshment leave, which can be usedanytime throughout the year, the rate of usage of paid leaves has continuallysurpassed 70%. During the previous fiscal year, the voluntary retirement
program led to an increased uptake of paid leave before retirement, leading to atemporary rise in the rate of usage.

Rate of workforce turnover

Ratio of employees with disabilities

2.33 %

31.4 %

Up 0.07 points y/y

Up 19.0 points y/y
(%)

(%)

40

3.0

30
2.0
20
1.0
10

0

0

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

The Company places utmost importance on human resources, and implements
employee training programs and other measures that help all employees express
their diverse individuality and harness their capabilities. In addition to this, we
aim to build pleasant workplaces where people enjoy work, in an effort to improveissues with long working hours that are specific to this industry. As a result, while
the rate of workforce turnover fell to 12.4% in the fiscal year ended March 2020,
the fiscal year ended March 2021 saw a temporary uptick in the rate of workforce
turnover due to the implementation of the voluntary retirement program.

Leopalace21 believes that providing a place for a workforce of people froma broad array of backgrounds with diverse values to thrive helps create newvalue, and greatly contributes to the growth of our Company. With regard
to the employment of persons with disabilities, we established the special
subsidiary company Leopalace Smile in August 2009. While complying with thelegally prescribed employment quota of persons with disabilities, we provide
workplaces where all employees can work with a higher sense of fulfilment.

Leopalace21 Integrated Report 2021

63

Financial Section

Management’s Discussion and Analysis
1. Operating Environment
The domestic economy, apart from some parts of the industries thatshowed signs of recovery, remained extremely challenging, as consumer spending was sluggish and corporate earnings deteriorated
sharply due to such factors as the issuance of a declaration of astate of emergency in response to the spread of COVID-19 pandemic and requests to stay home and refrain from going out.
The new housing starts of leased units declined for the four
years in a row (down 9.4% year on year) due to the tightening oflending terms by financial institutions. In the rental housing market,
the number of vacant houses continues to increase, and in order tosecure a stable occupancy rate amid difficulty in recovering nationwide demand, the Company believes it is important to implementa differentiation strategy by providing value-added services and by
focusing on supplying apartments in the three metropolitan areas
where high occupancy rates are expected in the future.
Under these circumstances, Leopalace21 Group (the “Group”)
posted a significant loss for the two years in a row in the previous
fiscal year, mainly due to a deterioration in the occupancy rates
caused by the construction defects. The Company announced, on
April 30, 2020, “Drastic Business Strategies Reconstruction” andhas been continuing to stabilize both business and financial position by implementing strategies centered on Reconstruct businessfoundation – selective concentration; Implement structural reforms;
and Restore the trust of society.
Although the business performance headed for recovery following the progress of repair works and resumption of tenant recruitment, the protracted COVID-19 impact contributed sluggish demand
due to restraint transfer and reduction of new hires at the corporate
customers, promotion of online course lectures at colleges and universities and strict immigration control for foreign nationals.
2. Analysis of Business Results(1) Net Sales
Net sales for the consolidated fiscal year ended March 2021
amounted to JPY 408,959 million (down 5.7% year on year). The
decrease was mainly caused by the protracted COVID-19 impact
which resulted in corporate customers’ demand restraint in job
transfers, in hiring new graduates, and cancellation of business trips
and group trainings. Prevailed online course lectures at colleges anduniversities and strict immigration control for foreign nationals wereanother factors which played negatively in the business.

64

Leopalace21 Integrated Report 2021

Net Sales by Segment(JPY million)

FY 2019

FY2020ChangeLeasing Business

412,746

391,964(20,781)

Elderly Care Business

14,62014,524(96)

Other Businesses

6,186

2,469

(3,716)

433,553

408,959(24,594)

Total(2) Earnings
Operating loss was JPY 29,182 million (a reduced loss of JPY
7,290 million year on year) due mainly to a decrease in rent
revenues by stagnant occupancy rates, despite JPY 31,885 million reduction in cost of sales and SGA expense year on year.
Recurring loss was JPY 34,170 million (a reduced loss of JPY
2,171 million year on year) due to the incurrence of funding costs
and increased interest expenses. Net loss attributable to shareholders of the parent was JPY 23,680 million (a reduced lossof JPY 56,543 million year on year) mainly due to recording of
impairment loss on non-current assets and goodwill of JPY 4,041
million and special severance allowance of JPY 2,479 million
associated with the voluntary retirement program in extraordinary
losses despite reversal of provision for losses related to repairs of
JPY 15,374 million resulting from lowered unit repair cost throughplacing batch orders and by employing a new repair method, andgains on sale of investment securities of JPY 4,065 million.
Operating Profit by Segment(JPY million)

FY 2019

FY2020

Leasing Business(25,966)(19,385)

Change6,580

Elderly Care Business

(541)

(720)

(179)

Other Businesses(994)(1,551)(557)

Adjustments(8,971)(7,524)

1,446

Total

(36,473)(29,182)

7,290

Change in Operating Profit

As a result of orders becoming sluggish due to intensified competition in the metropolitan areas and changes in the environmentof apartment loans, in addition to stop taking new orders forapartment construction because of the construction defects problem such as parting walls, orders received during the consolidated
fiscal year amounted to JPY 5,927 million (down 24.1% year onyear) and the orders received outstanding stood at JPY 9,651 million (down 65.2% from the end of the previous fiscal year).
As a result, net sales amounted to JPY 391,964 million (down
5.0% year on year) and operating loss was JPY 19,385 million (anincrease of JPY 6,580 million year on year).

(JPY billion)

0
-10
-20
-30

1.44

6.58
-0.17

-40

-0.55

-36.47-50-60-29.18-70
FY2019

LeasingElderlyCare

Otherbusinesses

Adjustments

FY2020(3) Segment Information
Leasing Business
The Company offers my DIY which enables the tenant to customize one of the walls of the room to their tastes, smart apartment
functionality to lock/unlock the door and control home appliances
through smart phones, high level of remote customer support by
web-based customer services, room viewing and contract signing,and security systems in alliance with large security companies asa part of the value-added services. In addition, to achieve stable
occupancy rates, the Company has been strengthening sales activities towards corporate customers to respond to their dormitory
and company housing demand and increasing support for foreign
tenants. The subsidiaries in the ASEAN region operate serviced
apartments and serviced offices in the respective countries.
Since the demand continued slow centered on the corporate
customers, the major customer group, resulting from the spread of
COVID-19 pandemic albeit diminishing impact from the construction defects problem, the occupancy rate at the end of the consolidated fiscal year ended March 2021 was 81.72% (down 1.35
points from the end of the previous fiscal year) and the averageoccupancy rate was 78.89% (down 1.89 points year on year). The
number of units under management at the end of the consolidated
fiscal year ended March 2021 was 573 thousand (decreased by
two thousand from the end of the previous fiscal year).
The Company has been improving the efficiency in sales andoperation through promoting web-based contract signing and useof real estate agents, which enabled the lean operation with 139
direct leasing sales offices at the end of the consolidated fiscal
year ended March 2021 (decreased by 50 from the end of the previous fiscal year).

Elderly Care Business
The Company has been improving the profitability of the Elderly
Care Business, a strategic growth business, through continuous
operational reformation and cost control. However the users of
the facilities decreased due to the risk of infection of COVID-19.
Net sales were JPY 14,524 million (down 0.7% year on year)
and operating loss was JPY 720 million (increased loss of JPY 179
million year on year). The number of facilities was 87 at the endof March 2021.
Other Businesses
Net sales of the Other Businesses, including resort facilities in
Guam and finance business, were JPY 2,469 million (down 60.1%
year on year) and operating loss was JPY 1,551 million (increased
loss of JPY 557 million year on year) as a result of sharply
declined occupancy rate of Guam resort facilities impacted by the
spread of COVID-19 pandemic and downscaled operation due tothe transfer of hotels business in Japan.
3. Analysis of Consolidated Financial Position(1) Position of Assets, Liabilities, and Net assets
Total assets at the end of the fiscal year decreased by JPY 35,244
million from the end of the previous fiscal year to JPY 161,708
million. This was mainly attributable to a decrease of following
items: JPY 5,638 million in cash and deposits, JPY 2,447 million
in real estate for sales in process, JPY 8,583 million in securities
and investment securities as a result of sale of those securities
for the purpose of securing the stable operating funds, JPY 2,105
million in prepaid expenses and long-term prepaid expenses, JPY
5,774 million in land due to the sale or impairment losses of realestate for sale, JPY 4,306 million in buildings and structures (net),
and JPY 3,691 million in leased assets (net).
Total liabilities decreased by JPY 36,932 million from the end of

Leopalace21 Integrated Report 2021

65

the previous fiscal year to JPY 158,431 million. This was mainly
attributable to a decrease of following items: JPY 5,340 million inadvances received and long-term advances received because of
decreased monthly rental contracts, JPY 5,341 million in accounts
payable – other due to reduced expenses, JPY 22,738 million inprovision for losses related to repairs and JPY 3,644 million inprovision for apartment vacancy loss.
Net assets increased by JPY 1,687 million from the end of theprevious fiscal year to JPY 3,277 million. This was mainly due toan increase of JPY 5,999 million in common stock, JPY 10,026
million in capital surplus and JPY 11,366 million in non-controllinginterests as a result of issuance of new shares through third party
allotment and issuance of preferred stock in a Company’s consolidated subsidiary despite recording of JPY 23,680 million in net
loss attributable to shareholders of the parent. The ratio of total
shareholders’ equity to assets dropped by 6.0 points from the endof the previous fiscal year to minus 5.3%.
(2) Cash Flow Position
Cash flow from operating activities was a net outflow of JPY
40,816 million (a reduction of JPY 10,823 million in net outflow year
on year). This was mainly due to a recording of JPY 10,416 million
in depreciation, JPY 4,041 million of impairment loss, whereas arecording of JPY 22,925 million of net loss before income taxes andother adjustments, reversal of provision for losses related to repairsof JPY 15,374 million, a decrease of JPY 5,861 million in accounts
payable, a decrease of JPY 5,327 million of advances received and
JPY 8,313 million of payment related to repairs.
Cash flow from investing activities was a net inflow of JPY
11,829 million (a reduction of JPY 27,704 million in net inflow year
on year). This was mainly due to JPY 2,328 million of expenditurein purchase of property, plant and equipment, whereas JPY 4,167
million of proceeds from sale of property, plant and equipment, JPY
5,600 million of proceeds from redemption of securities and JPY
4,341 million of proceeds from sale of investment securities.
Cash flow from financing activities was a net inflow of JPY
23,571 million (a net outflow of JPY 12,048 million in the previous
fiscal year). This was mainly due to JPY 17,790 million of expenditure in repayment of long-term debt and JPY 8,103 million of
expenditure in payment for redemption of bonds, JPY 4,181 millionof expenditure in repayment of finance lease obligations and JPY
2,868 million of expenditure in payment for funding costs whereas
JPY 30,234 million of proceeds from long-term debt, JPY 11,999
million of proceeds from issuance of shares and JPY 15,000 million
of proceeds from share issuance to non-controlling shareholders.

66

Leopalace21 Integrated Report 2021

As a result, cash and cash equivalents at the end of the fiscal
year ended March 2021 was JPY 53,346 million, decreased by
JPY 5,570 million from the end of the previous fiscal year.
4. M anagement Policies, Key Issues to Address,
and Business Environment
Forward-looking statements in the discussion below are basedon judgments by the Company as of the time of preparing thisintegrated report.
(1) Management Policies
The Company will continue to pursue the policy set forth in the“Drastic Business Strategies Reconstruction” announced on April
30, 2020 and will invest management resources in the core Leasing
Business through selection and concentration. It will also continue
to implement structural reforms to drastically improve our corporate structure starting in the fiscal year ended March 2021. The
Company will strive to stabilize the business and finances, improvethe balance of revenues and expenditures on a sustainable basis,and strive to realize excessive liabilities elimination. Below are themore specifics about implementing the policy with related timeline.
(i) Drastic restructuring
As part of structural reforms, the Company implemented various
measures to reduce SGA expenses. The measures include withdrawal from non-core and unprofitable businesses such as sale ofreal estate and investment securities and transfer or liquidation ofsubsidiaries. In addition, the Company reviewed its personnel cost
structure and offered a voluntary retirement; reduced executive
remuneration; terminated contracts with advisors and counselors;
reduced payroll cost including various allowances cutdown intandem with a revised human resources management system. The
Company further implemented the reduction of the cost of revenue from operations and cost of management in Leasing Businessincluding the fixed cost of the leasing sales offices throughreorganization; abolished the shareholders benefit plan; reduced
the advertising and sales promotion expenses; cut down the commission expenses through reviewing outsourcing contracts; andlowered the IT system related expenses.
In the fiscal year ending March 2022, the Company is continuing structural reforms to reform the profitability structure, and areplanning to significantly reduce these costs as some measuresbring about the full 12-month reduction effect which were executed in the middle of fiscal year ended March 2021.

(ii) Improving occupancy rates
Since the Leasing Business, being our core business, is a recurring revenue business model, it is essential to improve occupancy
rates in order to stabilize the business as a goal.
In the second half of the fiscal year ended March 2021, despite
the impact of COVID-19 remained unchanged, the occupancy rates
gradually increased as a result of efforts in utilizing IT, such as
web-based customer services including online room viewing andweb-based contract signing, and in strengthening ties with realestate agents network for recruiting tenants.
In addition to continue and strengthen the above measures in
the fiscal year ending March 2022, the Company will increase its
sales efforts with specific targets such as corporate customers,
individual customers and foreign national customers and reorganize the Leasing Business by implementing area intensive strategy for providing quicker response to the market requirements
and allocating human resources to realize the goal.
Financial Strategy
At the end of the fiscal year ended March 2021, the Company
had cash and deposits of 54,863 million yen, a sufficient funds
to continue operations for foreseeable future. The Company willcontinue to monitor liquidity on hand in the future.
In order to ensure the flexibility and speediness of the capital
policy, the Company has decided to reduce the common stock,
as stipulated in Article 447, Paragraph 1 of the Company Act.
There will be no change in the total number of outstanding
shares and there will be no effect on the number of shares heldby all shareholders. In addition, there will be no change in net
assets and in net assets per share. Please see the details in 33.
Subsequent Events.
The Company’s outstanding number of shares including dilutive securities as a result of capital policy executed November
2020 was 489,138,215 shares. The Company increased by the
resolution of the Ordinary General Shareholders’ Meeting held on
June 29, 2021 the number of authorized shares to 750,000,000 in
preparation for ensuring the speedy fundraising in the future.

The Tokyo Stock Exchange has changed a part of the Securities
Listing Regulations and extended the grace period from one year
to two years in case a company incurs excessive liabilities due tothe impact of spread of COVID-19. The Company has been therefore granted the extension of the grace period from April 1, 2021
to March 31, 2023.
The Company will eliminate the excessive liabilities at the endof the fiscal year ending March 2023 through implementing theabove mentioned measures, on the assumption that the sharesubscription rights are not exercised. The Company will inform theresults quarterly.
(3) Business Environment
Regarding population trends, a factor affecting the businessenvironment as a mid to long-term point of view, the total numberof households in Japan is expected to decline after the peak of2025 but single-person households is expected to increase up to2030 and keep the level of about 20 million households till 2040.
Net domestic migration to the three major metro regions (inflows
exceed outflows) will continue. Furthermore, the population aged
65 or over will mark 30% of the total population and continue torise for the following years. The decreasing trend in productive
population (aged 15 – 64) will continue and a planned increase inforeign workers will partly compensate for the lacking workforce
in the aging society.
The number of new housing starts of leased units continued
to decline for the four consecutive years as we mentioned in 1.
Operating Environment.
Under these circumstances, we need to turnaround the business by acquiring the additional corporate demand for providing
their employees with company-provided housing or dormitories.
We will keep realizing our purpose as a provider of social infrastructure for housing amounting to 570,000 managed units.

(2) Key Issues to Address
The Company announced the recurring loss of JPY 34,170 million
due to drastic decline in operating revenues resulting from adeclaration of a state of emergency in response to the spreadof COVID-19 and economic impact by requests to stay home andrefrain from going out. Consequently, the Company’s liabilities
exceeded its assets by 8,494 million yen.

Leopalace21 Integrated Report 2021

67

Financial Section

Consolidated Balance Sheet
Leopalace21 Corporation and consolidated subsidiaries
March 31, 2021 and 2020

JPY million

2021

2020

2021

54,863
7,930
524
86
100
180
349
238
497
2,076
1,819
4,112
(182)
72,59860,501
7,260
532
132
5,951
1,189
2,797
725
539
3,053
1,242
4,543
(164)
88,304

495,559
71,636
4,740
779
904
1,634
3,160
2,152
4,497
18,75916,43037,149(1,646)
655,758

53,778(34,220)
19,557
20,601(12,011)
8,589
31,11828,924(25,418)
3,506
82
18,358(11,160)
7,198
70,05264,333(40,469)
23,863
20,690(10,892)
9,798
36,89330,756(23,558)
7,197
208
16,817(9,244)
7,572
85,534

485,758(309,103)
176,654
186,081(108,491)
77,589281,080
261,261(229,591)
31,670742
165,827(100,804)
65,022632,759

3, 9, 28
12, 17

12
4,161
4,173

127
5,376
5,504

113
37,58537,6996, 7, 126
6, 10
3
3, 4, 11

5,431
1,096
249
1,121
2,194
5,443
(651)
14,883
89,109

8,163
1,025
225
2,250
1,297
5,328
(905)
17,385
108,424

49,0599,900
2,251
10,12819,81749,164(5,888)134,434
804,893——
161,708

224
224
196,953——
1,460,652

Notes

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

68

Leopalace21 Integrated Report 2021

USD thousand (Note 1)

3, 5, 6, 12
6
6
6
3, 6, 7, 12
3, 11, 12
3
33, 6, 113, 9, 11, 15, 16, 17, 28
3, 12, 15, 16, 17

3, 9, 12, 15, 16, 17

9, 12, 15, 16
3, 17, 26

99, 12, 15, 16, 17

3, 6, 113

JPY million

2021

2020

2021

19
3,172
514
—
114
—
3,133
9,593
696
28,239
541
67
2,783
3,777
9,301
30
3,811
65,798

176
3,376
1,245
847
2,659
3,066
4,344
14,935840
31,997
1,783
117
1,200
8,302
11,71544
3,354
90,006

176
28,659
4,650
—
1,033
—
28,30686,656
6,294
255,075
4,888
609
25,13934,116
84,018277
34,427594,329—
30,615
1,544
7,869
6,423
9
29,732
2,960
9,650
63
3,763
92,633
158,431

5,037
15,650
4,532
9,451
6,286
5
47,945
4,191
8,701
89
3,465
105,357
195,363—276,540
13,95571,07958,01987
268,563
26,741
87,167572
33,994
836,721
1,431,050

81,282
55,174(142,586)

75,28245,148(118,874)

734,191
498,373(1,287,931)

25

(344)
(6,474)

(473)
1,083

(3,113)(58,479)

11
3
13

(0)
(1,877)(142)(2,019)388
11,383
3,277
161,708

1,047
(280)
(546)
220
269
16
1,589
196,953(1)(16,954)(1,288)(18,244)3,506
102,819
29,601
1,460,652

Notes

LIABILITIES AND NET ASSETS
Current liabilities:
Electronically recorded obligations – operating
Accounts payable
Accounts payable for completed projects
Short-term borrowings
Current portion of long-term debt
Bonds due within one year
Lease obligations
Accounts payable – otherAccrued income taxes
Advances received
Customer advances for projects in progress
Provision for warranty obligations on completed projects
Provision for fulfillment of guarantees
Provision for losses related to repairs (short-term)
Provision for apartment vacancy loss (short-term)
Asset retirement obligations
OthersTotal current liabilities
Non-current liabilities:
Bonds
Long-term debt
Lease obligations
Long-term advances received
Lease/guarantee deposits received
Deferred tax liabilities
Provision for losses related to repairs
Provision for apartment vacancy loss
Liability for retirement benefit
Asset retirement obligations
OthersTotal non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock:
Authorized: 500,000,000 shares in 2021 and 2020
Issued: 3 29,389,515 shares in 2021 and
244,882,515 shares in 2020
Capital surplus
Retained earnings
Treasury stock: 561,610 shares in 2021 and
771,210 shares in 2020
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on other securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Share subscription rights
Non-controlling interests
Total net assets
Total liabilities and net assets

USD thousand (Note 1)

6
6
6
6, 12
6, 12
6
6, 12
6, 11
3, 11
3, 11
3, 11
3, 11
3, 11
11, 246, 7, 12
6, 12
6, 12
3
11
3, 11
3, 13
11, 2425, 3333

The accompanying notes are an integral part of these statements.

Leopalace21 Integrated Report 2021

69

Financial Section

Consolidated Statement of Income
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2021 and 2020

JPY million

2021

Notes

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

70

Leopalace21 Integrated Report 2021

28, 32

28

13

3

29

408,959
391,964
16,994
387,872
370,872
17,00021,08650,269
2,302
1,852
107
351
19,218
1,883
2,944
2,202
5,695
13,708(29,182)
1,084
66
84
—
141
110
243
438
6,072
2,171
251
—
2,904
44
—
700
(34,170)
19,664
225
4,065
—
—
0
15,374
8,419
18
114
4,041
—
982
—
114
—
2,479
427
151
90
(22,925)
280
710
(429)
(23,205)475(23,680)

USD thousand (Note 1)

2020
433,553
412,746
20,807408,112387,510
20,601
25,441
61,915
1,964
2,111
117
493
26,282
1,878
2,899
2,582
5,958
17,626(36,473)
1,788
146
181
977
166
—
—
317
1,656
624
161
157
—
72
255
384
(36,341)
11,681
8,945
2,368
17
350
—
—
33,353972
71
7,620
21,501
2,894
2
—
63
227
—
—
—
(58,013)
22,211726
21,485(80,224)(0)(80,224)2021

3,693,968
3,540,465
153,5023,503,504
3,349,945
153,558
190,463454,061
20,79916,734
971
3,176
173,594
17,015
26,59919,89851,446
123,824(263,597)
9,799
598
759
—
1,278
999
2,200
3,962
54,846
19,6102,270—
26,238402—
6,324(308,644)
177,622
2,035
36,717——
0138,869
76,050165
1,029
36,505
—
8,874
—
1,029
—
22,392
3,861
1,372
818
(207,072)
2,530
6,413
(3,882)(209,603)
4,294(213,897)

Financial Section

Consolidated Statement of Comprehensive Income
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2021 and 2020

JPY million
Notes

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

11
3
13

USD thousand (Note 1)

2021

2020

2021

(23,205)(80,224)(209,603)(1,047)(1,597)
403

766
(100)
(218)

(9,459)(14,433)3,645

0(2,240)(25,445)(3)
444(79,780)

6(20,240)(229,843)(25,920)(79,779)(234,132)

474

(0)

4,288

The accompanying notes are an integral part of these statements.

JPY million
Notes

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
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted forusing equity method
Amount accrued in the fiscal year
Total

USD thousand (Note 1)

2021

2020

2021

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

1,691
(586)
1,105
(338)
766

23,084(36,717)(13,633)
4,174(9,459)(1,591)(6)(1,597)—(1,597)

(100)
—
(100)
—
(100)

(14,373)(59)(14,433)—(14,433)

(75)
478
403
—
403

(249)
175
(73)
(144)
(218)

(680)
4,325
3,645
—
3,645

0
(2,240)(3)444

6(20,240)

3

Leopalace21 Integrated Report 2021

71

Financial Section

Consolidated Statement of Changes in Equity
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2021 and 2020

JPY million
Shareholders’ equity

Balance as of March 31, 2019
Issuance of new shares
Net income attributable toshareholders of the parent
Disposal of treasury stock
Change in the scope of
consolidation
Change in share of parent
from transactions with
non-controlling interests
Net change of items otherthan shareholders’ equity
Total change during period
Balance as of March 31, 2020
Issuance of new shares
Net income attributable toshareholders of the parent
Disposal of treasury stock
Change in the scope of
consolidation
Share change of the parent
company concerning
the business with noncontrolling shareholder
Net change of items otherthan shareholders’ equity
Total change during period
Balance as of March 31, 2021

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

75,28245,148(38,635)(655)(80,224)
(47)

181

33

—
75,28245,148

5,999

5,999

(80,238)

181(118,874)(473)(23,680)
(32)

128

4,026

Total
Net unrealized
shareholders’ gains on other
equitysecurities

81,140

280

Total
Share
Foreign
Remeasurements accumulated Subscription
currency
otherof definedrightstranslation
benefit plans comprehensive
adjustments
income

(176)

(327)

(224)

404

Noncontrollinginterests

Total net
assets17

81,338——(80,224)(80,224)

134

134

33

33

—

—
766

(103)

(218)

444

(135)

(0)

307

(80,056)

766

(103)

(218)

444

(135)

(0)

(79,748)

1,083

1,047

(280)

(546)

220

269

16

1,589

11,99911,999(23,680)(23,680)

96

96

—

—

4,026

4,026

—

(1,047)(1,596)403(2,240)119

11,366

9,245

5,999

10,026(23,712)128(7,557)(1,047)(1,596)403(2,240)119

11,366

1,687

81,282

55,174(142,586)(344)(6,474)(0)(1,877)(142)(2,019)388

11,383

3,277

Noncontrollinginterests

Total net
assets

USD thousand (Note 1)
Shareholders’ equity

Balance as of March 31, 2020
Issuance of new shares
Net income attributable toshareholders of the parent
Disposal of treasury stock
Change in the scope of
consolidation
Share change of the parent
company concerning
the business with noncontrolling shareholder
Net change of items otherthan shareholders’ equity
Total change during period
Balance as of March 31, 2021

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

679,996

407,809(1,073,743)(4,275)54,19554,195(213,897)
(290)

1,162

36,368Total
Net unrealized
shareholders’ gains on other
equitysecurities

9,786

9,457

Total
Share
Foreign
Remeasurements accumulated Subscription
currency
otherof definedrightstranslation
benefit plans comprehensive
adjustments
income(2,533)(4,933)

1,989

2,429

151

14,357

108,391

108,391(213,897)(213,897)

871

871

—

—

36,36836,368—(9,459)(14,420)

3,645(20,234)

1,076

102,667

83,50954,19590,564(214,188)

1,162(68,266)(9,459)(14,420)

3,645(20,234)

1,076

102,667

15,243734,191

498,373(1,287,931)(3,113)(58,479)(1)(16,954)(1,288)(18,244)3,506

102,819

29,601

The accompanying notes are an integral part of these statements.

72

Accumulated other comprehensive income

Leopalace21 Integrated Report 2021

Financial Section

Consolidated Statement of Cash Flows
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2021 and 2020

JPY million
Notes

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Impairment loss
Increase in provision for losses related to repairs
Reversal of provision for losses related to repairs
Loss related to repairs
Special severance allowance for severance
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in liability for retirement benefits
Increase (decrease) in provision for apartment vacancy loss
Losses on liquidation of subsidiaries and associated companies
Interest and dividend income
Interest expense
Funding costs
Foreign exchange loss (gain)
Equity in losses (earnings) of affiliated companies using
equity method
Loss (gain) on sale of property, plant and equipment
Loss on retirement of property, plant and equipment
Loss (gain) on valuation of investment securities
Loss (gain) on sale of investment securities
Investment loss (returns) from anonymous associations
Gain on reversal of share subscription rights
Gain on cancelling contracts
Loss (gain) on sale of shares in subsidiaries
Decrease (increase) in accounts receivable
Decrease (increase) in real estate for sale in process
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
Other
SubtotalInterest and dividends received
Interest paid
Payment related to repairs paid
Payment of special severance allowance
Income taxes paid
Net cash provided by operating activities

9, 28
20
18
21
3
3
3

3
3

17

3

21

USD thousand (Note 1)

2021

2020

2021

(22,925)
10,416
4,041—(15,374)
982
2,479
6
340
1,360
(3,644)
151
(150)
2,171
2,904
(110)
44

(58,013)(207,072)
94,09036,505—(138,869)
8,874
22,392
61
3,075
12,291(32,921)
1,372(1,357)
19,61026,238
(999)
402

(206)
114
(50)
(3,951)
—
—
—
(0)
(579)
3,432
486
744
(5,861)(1,241)(5,327)
603
(421)
1,804
(27,759)
154(1,500)(8,313)(2,479)(918)(40,816)(7,973)

12,157
7,620
21,501
—
2,894
—
260
40
413
3,178
—
(327)
624
—
157
72

71
(166)
(2,368)
(977)
(17)
(350)
2
1,095
(852)
(46)
878
(1,922)(1,868)(5,032)(383)
113(2,810)(32,029)455(574)(18,855)—(635)(51,639)(1,869)1,029(459)(35,688)———(0)(5,234)31,002
4,396
6,724(52,940)(11,217)(48,123)5,454(3,807)
16,296(250,741)
1,398(13,557)(75,088)(22,392)(8,299)(368,679)

The accompanying notes are an integral part of these statements.

Leopalace21 Integrated Report 2021

73

JPY million

USD thousand (Note 1)

2021

2020

2021

Payment for purchase of property, plant and equipment(2,328)(3,601)(21,029)

Proceeds from sale of property, plant and equipment

4,167

32,05737,645

Payment for purchase of intangible assets

(509)

(142)

(4,605)

Proceeds from redemption of securities

5,600

—

50,582

Notes

Cash flows from investing activities:

Payment for purchase of investment securities(363)(1,082)(3,282)

Proceeds from sale of investment securities

4,341

8,213

39,210

Proceeds from liquidation of subsidiaries

18

—

163

Payments for sale of shares in subsidiaries due to change inscope of consolidation

(92)

(101)

(835)

Proceeds from sale of shares in subsidiaries due to change inscope of consolidation

7

4,292

71

Payment for loans

(36)

(657)

(328)

Proceeds from collection of loans

57

960

519

Payments for deposit of time deposits

(4)

(68)

(44)

Proceeds from withdrawal of time deposits

67

—

614

904

(335)

8,171

11,82939,533

106,852

Repayment of short-term debt

(847)

(222)

(7,657)

Proceeds from long-term debt

30,234—

273,099

Repayment of long-term debt

(17,790)(2,767)(160,693)

Repayment of finance lease obligations(4,181)(5,093)(37,772)

Proceeds from issuance of shares

11,999—108,391

Other
Net cash provided by (used in) investing activities
Cash flows from financing activities:

215

—

1,946

(2,868)—(25,913)

Payment for redemption of bonds(8,103)(3,966)(73,191)

Proceeds from share issuance to non-controlling shareholders

15,000—135,489

(87)

—

(790)

Proceeds from issuance of stock acquisition rights
Payment of funding costs

Payment of dividends to non-controlling shareholders
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities01(12,048)

212,908

Effect of exchange rate changes on cash and cash equivalents

(154)

51

(1,394)

Net increase (decrease) in cash and cash equivalents(5,570)(24,102)(50,313)

Cash and cash equivalents at beginning of year

58,916

83,019532,170

53,346

58,916

481,857

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

74

0
23,571

Leopalace21 Integrated Report 2021

5

Financial Section

Notes to Consolidated Financial Statements
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2021 and 2020

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of
Leopalace21 Corporation (“the Company”) have been preparedin accordance with the provisions of Financial Instruments andExchange Act of Japan, its related accounting regulations and in
conformity with accounting principles generally accepted in Japan,
which are different in certain respects, as to application and disclosure requirements from International Financial Reporting Standards.
The accompanying consolidated financial statements have beenreformatted and translated into English (with certain expanded disclosure) from the consolidated financial statements of the Company
prepared in accordance with accounting principles generally accepted in Japan and filed with the Financial Services Agency as requiredby the Financial Instruments and Exchange Act of Japan.
The translation of the Japanese yen amounts into U.S. dollars
is prepared solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2021, which was
JPY 110.71 to USD 1.00. Such translation should not be construed
as a representation that the Japanese yen amounts have been,
could have been, or could in the future be, converted into U.S.
dollars at this or any other rate of exchange. Certain amounts inthe previous year’s financial statements have been reclassified toconform to the current fiscal year’s presentation.
Figures are rounded down to the nearest JPY 1,000,000 or
USD 1,000.
2. Going concern assumption
There are no issues applicable to the going concern assumption.
3. Summary of Significant Accounting Policies(1) Consolidation
Names of significant subsidiaries (20 in total)
Leopalace Leasing Corporation
Plaza Guarantee Co., Ltd.
Leopalace Power Corporation
Leopalace Energy Corporation
ASUKA SSI
Leopalace21 Business Consulting (Shanghai) Co., Ltd.
Leopalace21 (Thailand) CO., LTD.
Leopalace21 (Cambodia) Co., Ltd.
LEOPALACE21 PHILIPPINES INC.
PT. Leopalace Duasatu Realty
Leopalace21 Singapore Pte. Ltd.
Morizou Co., Ltd.
Azu Life Care Co., Ltd.
Leopalace Guam Corporation
Leopalace Smile Co., Ltd.

LEOPALACE21 VIETNAM CO., LTD., Enplus Inc. and anothersubsidiary have been excluded from the scope of consolidationin the consolidated fiscal year ended March 2021 because theCompany has sold its all shares. WING MATE CO.,LTD. was dissolved and excluded from the scope of consolidation in the consolidated fiscal year ended March 2021.
The accompanying consolidated financial statements as ofMarch 31, 2021 include the accounts of the Company and its 20(24 as of March 31, 2020) subsidiaries and four associated companies Woori & Leo PMC Co., Ltd, Ancora Residential Fund LP, PT
TEGUH BINA KARYA, and Learn JP Corp. in equity method (together, “the Companies”). The fiscal year closing dates of these four
companies are different from the consolidated balance sheet date.
The respective financial statements of the Companies were used
for consolidation.
The Company holds the shares in TRUMAN HOLDINGSLIMITED but did not include it in the companies where theCompany applies the equity method for consolidation. The total
assets, sales, net income (loss) and retained earnings both on an
equity method basis and other items do not make material impact
on the consolidated financial statements.
The balance sheet dates of Leopalace Guam Corporation andother 11 subsidiaries are all the same, being December 31. For the
consolidated entities whose fiscal year ends different from that of
the Company but within 3 months, their financial results are usedin the preparation of consolidated financial statements. Whensignificant transactions occur to those subsidiaries between theirfiscal year ends and the Company’s fiscal year end, those transactions are necessarily adjusted to consolidate.
(2) Cash and deposits or cash equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments with insignificant risk of change
in value and maturities of generally three months or less as cash
and deposits. These include cash on hand, demand deposits atbanks and highly liquid short-term investments with negligible riskof fluctuation in value and maturities of less than three months.
Cash equivalents, on the other hand, is defined as those including
maturities of greater than three months.

Leopalace21 Integrated Report 202175

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

Item
Loss from inventory revaluation

USD thousand

2021

2020

2021

41

634

376

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

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Leopalace21 Integrated Report 2021

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

(i) The amount stated in the fiscal year ended March 2021
Fiscal year ended March
Provision for losses related repairs(current liabilities)
Provision for losses related repairs(non-current liabilities)
Total

JPY million

USD thousand

2021

2021

3,777

34,11629,732

268,563

33,509302,679(ii) Accounting estimates per item
The Company established the Emergency Headquarters forConstruction Defects and carried out all-building investigations
related to the announcement of parting wall defects in theattics in April 2018 and other defects in May 2018, in February
and May 2019. The Company has been repairing the defects
which were identified at the investigations to make them tocomply with the related laws and regulations.
The Company provided the provision for losses related to
repairs based on the assumed amount in accordance with theactual defects rate to be prepared for possible repair expenses
and associated expenses for the apartment buildings constructed by the Company. The Company has built the provision provided for repairing all the significant defects that the Company
has recognized and there should not be any further expenses
which may incur in the future.
The Company employed the following methods.
a. Repair expenses
Sort out the repairs by the types of defects and repair
method and calculate the number of defective rooms basedon the defective rate as a result of the all-building investigations, which is then multiplied by the actual unit cost or
estimated unit cost.
b. Leasing expenses
Estimate the number of months for leasing the apartmentbuildings which other companies manage but not theCompany, which is then multiplied by the actual monthly rent.
c. Investigation expenses
Calculate the number of rooms which are yet to be investigated and of which repair completion needs to be confirmed,
which is then multiplied by the actual unit expenses for commission payable to the first-class architects.
d. Relocation expenses
Calculate the number of rooms which other companies mainly manage, which is then multiplied by the actual unit costfor relocation.
The way of calculating the repair expenses and associatedexpenses has been changed from the unit cost which was basedon own construction department’s estimate to the estimated unit
cost prepared by the external construction companies. In addition,

lowered unit repair cost was attributable to placing batch orders
and by employing a new construction method, insourcing for a partof repair works, and impact from revised repairing plan.
In case of changes in conditions and assumptions based on
which the estimate was prepared, provision for losses related to
repairs may be changed in the consolidated financial statements
for the fiscal year ending March 2022.
(13) Provision for apartment vacancy loss
Provision for vacancy losses on apartment units managed undermaster lease agreements is calculated according to the projected
loss that could incur during a reasonably estimable period to prepare for the risk of increasing vacancies. It is based on estimatedlosses resulting from current rental income and expected futureoccupancy rates for each rental property managed by the Leasing
Business Division of the Company and included in the cost of saleof the Leasing Business Division.
(i) The amount stated in the fiscal year ended March 2021
Fiscal year ended March
Provision for apartment vacancy
loss (current liabilities)
Provision for apartment vacancy
loss (non-current liabilities)
Total

JPY million

USD thousand

2021

2021

9,301

84,0182,960

26,741

12,262

110,759(ii) Accounting estimates per item
The Company employed below specific method for estimation.
Compare the sum of revenue from the tenant for the rent andassociated services considering the occupancy rate projection
for individual apartments and sum of expenses which consist of
master lease rent and management expenses. In case the sumof expenses exceeds the sum of revenue for a certain apartment, multiply the monthly deficit by the remaining number ofcontract months.
The Company applied in the above calculation the revised
master lease rent which is to be agreed with the apartment
owners through consultation process, instead of actual master
lease rent as of the end of March 2021.
The Company made occupancy rate projection considering
the apartment’s surrounding conditions, room demand andimpact of COVID-19 spread as step one; adjusted the step one
result by taking account of the results of suspended tenant
recruitment which may be required because of repair works as
step two.
In case of changes in conditions and assumptions basedon which the estimate was prepared, provision for apartment
vacancy loss may be changed in the consolidated financial
statements for the fiscal year ending March 2022.

Leopalace21 Integrated Report 2021

77

(14) Provision for warranty obligations on completed projects
Provision for warranty obligations on completed projects is accrued
to reserve for execution of warranty obligations under defect liabilities in the future. It is calculated using the percentage of the past
execution of warranty obligations on the completed projects.
(15) Provision for fulfillment of guarantees
In order to reserve for losses due to its rent obligation guarantees
business, the Company’s consolidated subsidiary, Plaza Guarantee
Co., Ltd., records the amount of loss expected based on the rate ofpast guarantee fulfillments.
(16) Revenues and costs of construction contracts
In recognizing construction revenues and costs of constructionsin process, the percentage-of-completion method is applied tosuch contracts in which the outcome of the construction activity isdeemed certain by the end of the fiscal year, while the completed
contract method is applied to other constructions. Progress rateof construction is estimated based on the method of the ratio of
actual cost incurred to total estimated cost.
(17) Advances received
With respect to advances received, such as rent, the Company
reports the portion corresponding to more than a year in “longterm advances received” under “non-current liabilities,” and the
portion corresponding to a year or less in “advances received”
under “current liabilities.” This allows the Company to moreclearly present the characteristics and actual transactions of theCompany’s leasing business.
(18) Amortization method and period of goodwill
The Company has adopted a policy whereby goodwill is amortizedon a straight-line basis over the period in which the economic
benefits are expected to be realized. However, if the amount is
negligible, it is amortized at once when it takes place.
(19) Income taxes
Income taxes comprise corporate, inhabitant and enterprise taxes.
The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequencesof temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
(20) Leased assets
Leased assets are depreciated by the straight-line method overthe lease-term of respective assets as their useful lives with noresidual value.

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Leopalace21 Integrated Report 2021

(21) Foreign currency transactions
All monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the spot exchange
rates as of each balance sheet date. The foreign exchange gains
and losses from translation are recognized in the consolidated
statement of income.
(22) Foreign currency financial statements
The assets and liabilities of consolidated overseas subsidiaries
are translated into Japanese yen at the spot exchange rates as ofeach balance sheet date, and income and expenses are translated
at the average exchange rates of the fiscal year. Foreign currencytranslation adjustments resulting from the translation of assets,
liabilities and net assets are reclassified into foreign currencytranslation adjustments and non-controlling interests.
(23) Interest capitalization
Leopalace Guam Corporation, a consolidated subsidiary, of whichinterest paid on borrowing for real estate development businessfor the development period capitalized into acquisition cost of
property, plant and equipment.
Capitalized interests included in carrying value of property,
plant and equipment were JPY 300 million (USD 2,712 thousand)as of March 31, 2021.
(24) Consumption taxes
National and local consumption taxes are basically excluded fromtransaction amounts. However, transaction amounts of Asuka SSI,a consolidated subsidiary, include national and local consumption
taxes. The nondeductible portion of consumption taxes on thepurchase of assets is recorded as long-term prepaid expenses andamortized evenly over 5 years.
(25) Earnings per share
Basic earnings per share of common stock is computed by net
income available to common shareholders divided by the weighted-average number of common stock outstanding for the period.
Diluted earnings per share of common stock reflects the potential dilution that could occur if securities or other contracts to issuecommon stock were converted or exercised into common stock or
resulted in the issuance of common stock.

4. Additional Information(1) U napplied Accounting Standards for Revenue Recognition
and related Implementation Guidances• Accounting Standard for Revenue Recognition (ASBJ Statement
No.29 issued on March 31, 2020 by Accounting Standards Boardof Japan)• Implementation Guidance on Accounting Standard for Revenue
Recognition (ASBJ Guidance No.30 issued on March 26, 2021 byAccounting Standards Board of Japan)

(a) Summary
The International Accounting Standards Board (IASB) and
Financial Accounting Standards Board (FASB) jointly developed
the converged accounting standards for revenue recognition
and announced, “Revenue from Contracts with Customers”(IFRS 15 in IASB and Topic 606 in FASB) in May 2014. IFRS 15
is effective for annual reporting periods beginning on or afterJanuary 1, 2018 and Topic 606 is effective for annual reporting
periods beginning on or after December 15, 2017. AccountingStandards Board of Japan (ASBJ) then developed andannounced ASBJ Statement No.29, ASBJ Guidance No.30 and
ASBJ Guidance No.19 to progress with the change.
ASBJ developed the accounting standards for revenue
recognition by adopting the basic rules in IFRS 15, for the basic
policy that is to be consistent with IFRS 15 and to take advantage of the financial compatibility with IFRS 15. Additionally,
considering the accounting practices that Japan has carried out
so far, substitutive treatments have been supplemented the
new standard without affecting the financial comparability.

(a) Summary
Considering nearly identical details of fair value measurementby the International Accounting Standards Board (IASB) andthe Financial Accounting Standards Board (FASB), namely IFRS
13 “Fair Value Measurement” under International Financial
Reporting Standards (IFRS) and Topic 820 of “Fair Value
Measurement” in the Accounting Standards Codification under
U.S. GAAP Accounting Standards, the Accounting Standards
Board of Japan disclosed the “Accounting Standards for Fair
Value Measurement” in an effort to ensure Japanese GAAP isconsistent with international accounting principles principallywith respect to the guidance and disclosures about fair value offinancial instruments.
The Accounting Standards Board of Japan adopted a basic
policy that a uniform calculation method should be employedin the development of the accounting standard for improving
the comparability of financial statements between the companies in and outside Japan and accepted the provisions of
IFRS No. 13. In addition, the Accounting Standards Board ofJapan accepted the other handling of individual items without
affecting the financial comparability of financial statements,
considering the accounting practices that had been conductedso far in Japan.

(b) Effective date
The new standards will be effective from the beginning of the
fiscal year ending March 2022.

(b) Effective date
The new standards will be effective from the beginning of the
fiscal year ending March 2022.

(c) Impact of the application of the relevant accounting
standards
The impact of the application of Accounting Standard for
Revenue Recognition on consolidated financial statements iscurrently being evaluated.

(c) I mpact of the application of the relevant accounting
standards
The impact of the application of the Accounting Standard for
Measurement of Fair Value on consolidated financial statements has not been determined at this time.

(2) Unapplied Accounting Standards for Fair Value
Measurement and related Implementation Guidances• Accounting Standard for Fair Value Measurement (ASBJ
Statement No.30 issued on July 4, 2019 by AccountingStandards Board of Japan)• Accounting Standard for Measurement of Inventories (ASBJ
Standard No.9 issued on July 4, 2019 by Accounting Standards
Board of Japan)• Accounting Standard for Financial Instruments (ASBJ Statement
No.10 issued on July 4, 2019 by Accounting Standards Board ofJapan)• Implementation Guidance on Accounting Standard for Fair Value
Measurement (ASBJ Guidance No.31 issued on July 4, 2019 byAccounting Standards Board of Japan)• Implementation Guidance on Disclosures about Fair Value of
Financial Instruments (ASBJ Guidance No.19 issued on March
31, 2020 by Accounting Standards Board of Japan)(3) A pplied Accounting Standard for Disclosure of
Accounting Estimates
Accounting Standards for the Disclosure of Accounting Estimates(ASBJ Statement No. 31 issued on March 31, 2020 by AccountingStandards Board of Japan) has been applied for the consolidated
financial statements for the fiscal year ended March 2021 andnotes are provided to the consolidated financial statements.
In accordance with the transitional handling stated in item 11
provisory clause of ASBJ Statement No. 31, the impact to the previous fiscal year ended March 2020 is not mentioned in the notes.

• Implementation Guidance on Disclosures about Fair Value of
Financial Instruments (ASBJ Guidance No.19 issued on March
31, 2020 by Accounting Standards Board of Japan)(4) A ccounting estimates for the spread of COVID-19 andits impact
The Companies assume that the spread of COVID-19 and theresulting economic sluggishness will continue for the time being
and affect their overall business.

Leopalace21 Integrated Report 2021

79

In particular the Leasing Business, our mainstay business, willremain weak due to suppressed job reassignment and reduced
number of new hires by the corporate customers, prevailing online
class lectures in the universities and restrictive immigration policy
affecting the inbound foreign workers and students. Although theassumption is made that the spread of COVID-19 will lessen in
the second half of the fiscal year ending March 2022, the impact
remains for the rest of the fiscal year. Based on the assumption,accounting estimates such as the recoverability of deferred tax
assets are made.
In the event of a change in the time for the ending of COVID19 pandemic and its impact on the economic environment due touncertainty in the assumptions used in the estimates, this may
have an impact on the companies’ financial position and results ofoperations.

5. Cash and Cash Equivalents(1) A reconciliation between cash and cash equivalents in the consolidated balance sheet and consolidated statement of cash
flows are as follows:
JPY million

Cash and deposits in the consolidated balance sheet
Time deposits with original maturities of more than three months
Cash and cash equivalents in the consolidated statement of cash flows(2) Major assets and liabilities related to the company whichwere excluded from consolidation as a result of theCompany’s sale of shares in the company
For the year ended March 2021
None
The breakdown of assets and liabilities at the time of sale of sharesin Life Living Co., Ltd., selling price and revenue from the sale,
which excluded Life Living Co., Ltd. from consolidation, for the year
ended March 31, 2020 were as follows.
JPY million

2020

Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Loss on sale of shares
Sale value
Cash and cash equivalents
Proceeds from sale

5,435
722
953
(1,389)
(12)
(2)
5,706
(1,414)4,292

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

80

Leopalace21 Integrated Report 2021

USD thousand

2021

2020

2021

54,863(1,517)53,34660,501(1,585)58,916495,559(13,702)481,857(b) Nature and extent of risks arising from financial instruments
Operating receivables and loans outstanding are exposed tocredit risk.
Foreign currency denominated debts and credits originated inconjunction with overseas business development are exposed to
exchange rate risk.
Securities and investment securities are mainly held-to-maturity securities and shares of the companies with which theCompany has a business or capital alliance, and those securities are exposed to market risk and credit risk associated with
the issuers.
Almost all electronically recorded obligations, accounts
payable, accounts payable for completed projects which areoperating liabilities, and account payable-other are scheduled tobe paid within one year.
Loans payable are mainly for the purpose of raising funds
necessary for the repair works, and lease obligations related tofinance lease transactions are mainly for investment in facilities,
and the longest repayment date is 6 years subsequent to thefiscal year end.
As of end of the year ended March 2021, there was no balance of derivative transactions.
(c) Risk management for financial instruments
Credit risk management for operating receivables and loans outstanding follows the “Receivables management rules”. Whileeach business division manages the extension of credit to its
customers, and each division is also organized for early detection and loss reduction of accounts where collection is doubtful
due to worsening credit or similar problems.
Regarding securities and investment securities, the Company

periodically investigates and understands the share price andthe financial condition of the share issuing organization. In
addition, for items other than held-to-maturity securities, theCompany considers the relationship with the trading partnercompanies and constantly re-evaluates its holdings.
Trade payables and debts are exposed to liquidity risk, but
this risk is monitored by various means such as the preparationof a monthly financial plan by each company in the Companies.

(d) S upplementary explanations on fair value offinancial instruments
Fair value of financial instruments is measured based on thequoted market price, or reasonably assessed value if a quoted
market price is not available.
Fair value of financial instruments whose quoted market
price is not available is calculated based on a fluctuating factor,
and the value might differ if different assumptions are used.

(2) Fair value of financial instruments
The carrying value on the consolidated balance sheet and fair value of financial instruments as of March 31, 2021 and 2020 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.
JPY million

March 31, 2021
(1) Cash and deposits(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts *(i)Net(5) Long-term loans
Allowance for doubtful accounts *(i)Net(6) Bad debts
Allowance for doubtful accounts *(i)
Net
Total
(1) Electronically recorded obligations(2) Accounts payable and accounts payable for completed projects(3) Accounts payable-other(4) Long-term debt *(ii)(5) Lease obligations
Total

Carrying value

Fair value

Difference

54,863
8,455
638
86
(3)
83
1,096
(79)
1,016
249
(249)
—
65,056
19
3,687
9,593
30,7304,678
48,70954,863
8,455
643

—
—
5

91

8

1,016

—

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

—
14
—
—
—
(699)
(37)
(737)

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

Leopalace21 Integrated Report 2021

81

JPY million

March 31, 2020
(1) Cash and deposits(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts *(i)Net(5) Long-term loans
Allowance for doubtful accounts *(i)Net(6) Bad debts
Allowance for doubtful accounts *(i)
Net
Total
(1) Electronically recorded obligations(2) Accounts payable and accounts payable for completed projects(3) Accounts payable-other(4) Short-term borrowings(5) Bonds *(ii)(6) Long-term debt *(ii)(7) Lease obligations
Total

Carrying value

Fair value

Difference

60,501
7,792
2,713
132
(5)
126
1,025
(83)
942
225
(225)
—
72,077
176
4,622
14,935847
8,103
18,3108,877
55,87260,501
7,792
2,724

—
—
10

140

13

942

—

—
72,102
176
4,622
14,935847
8,117
18,436
9,705
56,841

—
24
—
—
—
—
14
126
828
969

*Notes:(i)	Operating loans, long-term loans and bad debts have deductions of their respective allowance for doubtful accounts, which are recorded separately.
(ii)	As of March 31, 2020, bonds due within one year of JPY 3,066 million, and current portion of long-term debt of JPY 2,659 million are included inlong-term debt.
USD thousand

March 31, 2021
(1) Cash and deposits(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts *(i)Net(5) Long-term loans
Allowance for doubtful accounts *(i)Net(6) Bad debts
Allowance for doubtful accounts *(i)
Net
Total
(1) Electronically recorded obligations(2) Accounts payable and accounts payable for completed projects(3) Accounts payable-other(4) Long-term debt *(ii)(5) Lease obligations
Total

Carrying value

Fair value

Difference

495,559
76,377
5,764
779
(29)
750
9,900
(718)
9,181
2,251
(2,251)—
587,632
176
33,30986,656
277,574
42,261
439,978495,559
76,377
5,811

—
—
47

829

79

9,181

—

—
587,760
176
33,30986,656271,254
41,923433,321

—
127
—
—
—
(6,319)(337)(6,657)*Notes:(i) Operating loans, long-term loans and bad debts have deductions of their respective allowance for doubtful accounts, which are recorded separately.
(ii) As of March 31, 2021, current portion of long-term debt of USD 1,033 thousand are included in long-term debt.

82

Leopalace21 Integrated Report 2021

Notes:(a) Matters concerning the calculation method for the fair value of financial instruments and securities
AssetsCash and deposits
Trade receivables and accounts receivable for completed projects
These assets are stated at carrying amount as they are settled in the short-term and their fair values approximate their carrying amount.
Securities and investment securities
Shares are stated at the stock exchange quoted price; bonds are stated at either the stock exchange quoted price or the price presented
by transacting financial institutions.
For notes to securities by holding purposes, please refer to “7. Securities”.
Operating loans
The fair value of operating loans is stated at the net present value, which is calculated by discounting the principal with interest by thediscount rate (i.e. the estimated interest rate for new transaction).
Long-term loans
Bad debts
The fiscal year-end outstanding balances are calculated mainly using expected future cash flows of the potentially recoverable principal
and interest.
Liabilities
Electronically recorded obligations
Accounts payable and accounts payable for completed projects
Account payable-other
These liabilities are stated at carrying amount as they are settled in the short-term and their fair values approximate their carrying amount.
Long-term debt,
Lease obligations
These liabilities are stated at the net present value, which is calculated by discounting the principal with interest by the discount rate (i.e.
the estimated interest rate for new borrowings or lease transaction).
(b) Financial instruments whose fair value appear to be extremely difficult to recognize
JPY million

Item
Unlisted shares
Unconsolidated subsidiaries and associates
Unlisted bonds (subordinate corporate bonds)
Subordinate beneficiary rights to loans and accounts receivable in trust
Investments in silent partnership
Total

USD thousand

2021

2020

2021

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

2,935
1,060
6,424
866
114
11,40015,871
12,074
7,445
7,784
1,023
44,199As they have no market value, and as it is understood that it is extremely difficult to estimate their future cash flow, the above financial
instruments are not included in “Assets: (3) Securities and investment securities”.

Leopalace21 Integrated Report 2021

83

(c) The scheduled redemption amounts of monetary claims and investment securities with maturity subsequent to fiscal year end
JPY million

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

54,863

—

—

—

8,455

—

—

—

100
—

300
—

200
—

—
—

—
—
—
22
14
—
63,456

—
—
—
36
606
—
942

36
—
—
19
12
—
268

—
824
861
8
462
249
2,406

March 31, 2020

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

Cash and deposits

60,501———

Trade receivables and accounts receivable forcompleted projects

7,792

—

—

—

(1) Government and municipal bonds

200

200

500

—

(2) Corporate bonds

—

—

—

—

(1) Government and municipal bonds

150

—

36

—

(2) Bonds (Corporate bonds)

March 31, 2021
Cash and deposits
Trade receivables and accounts receivable forcompleted projects
Securities and investment securities
Held-to-maturity debt securities(1) Government and municipal bonds(2) Corporate bonds
Other securities with maturities(1) Government and municipal bonds(2) Bonds (Corporate bonds)(3) Others
Operating loans
Long-term loans
Bad debts
Total

JPY million

Securities and investment securities
Held-to-maturity debt securities

Other securities with maturities
5,600

—

—

824

(3) Others

—

—

—

866

Operating loans

46

52

21

12

Long-term loans

145

414

18

447

Bad debts

—

—

—

225

74,436

666

575

2,376

Total

84

Leopalace21 Integrated Report 2021

USD thousand

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Cash and cash equivalents

495,559———

Trade receivables and accounts receivable forcompleted projects

76,377———(1) Government and municipal bonds

903

2,709

1,806

—

(2) Corporate bonds

—

—

—

—

(1) Government and municipal bonds

—

—

325

—

(2) Bonds (Corporate bonds)

—

—

—

7,445

(3) Others

—

—

—

7,784

Operating loans

203

326

176

73

Long-term loans

129

5,480

113

4,177

March 31, 2021

Due after
10 years

Securities and investment securities
Held-to-maturity debt securities

Other securities with maturities

Bad debts
Total

—

—

—

2,251

573,173

8,516

2,421

21,732(3) Scheduled repayment amounts of bonds payable, long-term debt, lease obligations, and other interest-bearing debt subsequent to fiscal year end is as follows:
JPY million

March 31, 2021

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Short-term borrowings

—

—

—

—

—

—

Bonds

—

—

—

—

—

—

Long-term debt

114

98

107

117

30,102

189

Lease obligations

3,133

1,178

276

70

19

—

Total

3,248

1,277

384

188

30,121

189

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

JPY million

March 31, 2020
Short-term borrowings

847

—

—

—

—

—

Bonds

3,066

3,066

1,971

—

—

—

Long-term debt

2,659

2,639

2,437

1,396

1,405

7,771

Lease obligations

4,344

3,113

1,151

238

28

—

Total

10,918

8,818

5,560

1,634

1,434

7,771

March 31, 2021

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

USD thousand

Short-term borrowings

—

—

—

—

—

—

Bonds

—

—

—

—

—

—

Long-term debt

1,033

893

973

1,062

271,902

1,707

Lease obligations

28,306

10.640

2,501

639

174

—

Total

29,33911,534

3,475

1,701

272,076

1,707

Leopalace21 Integrated Report 2021

85

7. Securities(1) On March 31, 2021 and 2020, information with respect to held-to-maturity debt securities for which market prices are available
is summarized as follows:
JPY million

March 31, 2021

Consolidated balance
sheet amount

Fair value

Difference

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

602

607

5

Corporate bonds

—

—

—

Others———Subtotal

602

607

5

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

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

Others———Subtotal

—

—

—

Total

602

607

5

JPY million

March 31, 2020

Consolidated balance
sheet amount

Fair value

Difference

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

905

915

10

Corporate bonds

—

—

—

Others———Subtotal

905

915

10

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Securities whose fair value does not exceed the consolidatedbalance sheet amount:86

Others———Subtotal

—

—

—

Total

905

915

10

Leopalace21 Integrated Report 2021

USD thousand

March 31, 2021

Consolidated balance
sheet amount

Fair value

5,438

5,485

47

—

—

—

Difference

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

—

—

—

5,438

5,485

47

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

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

Others———Subtotal

—

—

—

Total

5,438

5,485

47

(2) Investment securities classified as other securities as of March 31, 2021 and 2020 are as follows:
JPY million

March 31, 2021

Consolidated balance
sheet amount

Acquisition cost

Difference

—

—

—

—

—

—

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

—

—

—

Others———Others———Subtotal

—

—

—

—

—

—

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

36

36

(0)

Corporate bonds

—

—

—

Others———Others———Subtotal

36

36

(0)

Total

36

36

(0)

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

Leopalace21 Integrated Report 2021

87

JPY million

March 31, 2020

Consolidated balance
sheet amount

Acquisition cost

Difference

1,610

100

1,510

112

111

0

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

—

—

—

Others———OthersSubtotal

—

—

—

1,722

211

1,510

12

13

(0)

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

74

74

(0)

Corporate bonds

—

—

—

Others———Others———Subtotal

86

87

(0)

Total

1,808

299

1,509

Note:
March 31, 2020
Unlisted shares of JPY 2,935 million, shares in unconsolidated subsidiary and associates of JPY 1,060 million, unlisted bonds (corporate
bonds and subordinate corporate bonds) of JPY 6,424 million, subordinate beneficiary rights to loans and account receivable in trust of JPY
866 million, and investments in silent partnership of JPY 114 million, are not included in the other securities given above, because they haveno fair value and assigning them fair market prices is recognized to be extremely difficult. The Company acquired the unlisted bonds (subordinate corporate bonds) and the subordinate beneficiary rights to loans and accounts receivable in trust, as a result of the securitization of
non-recourse apartment loans that financial institutions had loaned to clients as funds for paying construction charges to the Company.

88

Leopalace21 Integrated Report 2021

USD thousand

March 31, 2021

Consolidated balance
sheet amount

Acquisition cost

Difference

—

—

—

—

—

—

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

—

—

—

Others———Others———Subtotal

—

—

—

—

—

—

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

326

328

(2)

Corporate bonds

—

—

—

Others———Others———Subtotal

326

328

(2)

Total

326

328

(2)

Note:
March 31, 2021
Unlisted shares of USD 15,871 thousand, shares in unconsolidated subsidiary and associates of USD 12,074 thousand, unlisted bonds (corporate bonds and subordinate corporate bonds) of USD 7,445 thousand, subordinate beneficiary rights to loans and accounts receivable in trustof USD 7,784 thousand, and investments in silent partnership of USD 1,023 thousand, are not included in the other securities given above,
because they have no fair value and assigning them fair market prices is recognized to be extremely difficult. The Company acquired theunlisted bonds (subordinate corporate bonds) and the subordinate beneficiary rights to loans and accounts receivable in trust, as a result of
the securitization of non-recourse apartment loans that financial institutions had loaned to clients as funds for paying construction charges
to the Company.
(3) Proceeds from sales of other securities and gain or loss on these sales for the years ended March 31, 2021 and 2020 are summarized as follows:
JPY million

March 31, 2021
Stock

Proceeds from sale

Gain on sale in total

Loss on sale in total

5,151

4,065

114

Bonds:
Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Others

—

—

—

Total

5,151

4,065

114

Leopalace21 Integrated Report 2021

89

JPY million

March 31, 2020

Proceeds from sale

Gain on sale in total

Loss on sale in total

4,782

2,368

—

Stock
Bonds:
Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Others

3,400

977

—

Total

8,182

3,346

—

USD thousand

March 31, 2021

Proceeds from sale

Gain on sale in total

Loss on sale in total

46,53536,717

1,029

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others

—

—

—

Stock
Bonds:

Others

—

—

—

Total

46,53536,7171,029(4) Investment in non-consolidated subsidiaries and associates included in investment securities of the consolidated balance
sheet is as follows:
JPY million

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

8. Derivative Transactions(1) Derivative transaction not subjected to the application of hedge accounting
For the year ended March 31, 2021
None
For the year ended March 31, 2020
None(2) Derivative transaction subjected to the application of hedge accounting
For the year ended March 31, 2021
None
For the year ended March 31, 2020
None

90

Leopalace21 Integrated Report 2021

USD thousand

2021

2020

2021

1,336

1,060

12,074

83

77

755

9. Main Properties(1) Breakdown of major property, plant and equipment:
JPY million

USD thousand

2021

2020

2021

3,303

7,334

29,834

—

1,401

—

Head office and branches

24,09725,940217,665

Leopalace Resort Manenggon Hills Guam

19,412

21,586

175,348

Leopalace Power (solar power systems)

7,861

8,896

71,013

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

USD thousand

2021

2020

2021

Machinery, equipment, and vehicles

155

155

1,400

Other (non-current assets)

44

—

405

(3) The Companies recognize impairment loss on the following asset groups for the years ended March 31, 2021 and 2020:
March 31, 2021
PurposeCategory

LocationHakata-ku, Fukuoka-shi etc.

Impairment loss
JPY million

USD thousand

1,254

11,3292,299

20,773

Rental assets (Apartment buildings and others, 18 units)

Building and Structures

Hotel

Land

Chigusa-ku, Nagoya-shi

82

746

Rental assets(Serviced apartment)

Building and Structures

Sriracha District, Chonburi,
Thailand

177

1,602

Land

110

996

1

9

Shared assets

Others (non-current assets)

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

873

OthersGoodwill—

Land

Others (non-current assets)

Total

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

107

973

4,041

36,505operating loss, the book values of shared assets were reduced
to the recoverable amount, and the amount of the reduction wasrecorded as impairment loss.
The recoverable amount of shared assets is measured according to the net selling price based on the value in use.
In addition, for the goodwill posted when the Company
acquired Enplus Inc., the Company recorded all of the unamortizedbalance of the goodwill as impairment loss because profitability inthe original business plan examined at the time of acquisition was
no longer expected.

Leopalace21 Integrated Report 2021

91

March 31, 2020
PurposeCategory

Location

Rental assets (Apartment buildings and others, 3 units)

Land

Minami-ku, Yokohama-shi etc.

Hotel

Buildings and Structures

Chigusa-ku, Nagoya-shi

Land
Buildings and Structures

285
298
41

Guam

2,749

Land

1,068

Rental assets(Serviced apartments)

Buildings and Structures

Bangkok, Thailand

Rental assets(Serviced apartments)

Buildings and Structures

Phnom Penh, Cambodia

Business assets

SoftwareNakano-ku, Tokyo

45

Shared assets

Buildings and Structures

Construction Subcontracting
Division, Nakano-ku, Tokyo etc.

102

Land

Land

191
111
693

59

Shared assets

Buildings and Structures

Elderly Care Division,
Kanuma-shi, Tochigi etc.

51

OthersGoodwill

—

982

Total

The Companies recognized each property in domestic rental
assets as a unit, domestic shared assets as a business division,and group the overseas assets by managerial accounting segmentation. In addition, the Companies group by company the assets
which a part of consolidated subsidiaries possess.
The Companies wrote down book values of rental assets, ahotel, resort facilities, and others whose profitability significantly
declined, to recoverable amount and recognized the reduced values as impairment losses.
Recoverable amount of rental assets, a hotel, and others aremeasured in the higher of their values in use or their net realizablevalues. Recoverable amount of overseas real estates for lease andresort facilities was based on the appraisal value by a real estateappraiser. Value in use is computed by discounting its future cash92

JPY million

941

Construction in progress
Resort facilities

Impairment loss

Leopalace21 Integrated Report 2021

7,620

flows at 5.7%, while net realizable value is determined based on
publicly appraised value.
For the domestic business, which has been in a continuous
operating loss, the book values of shared assets were reduced
to the recoverable amount, and the amount of the reduction wasrecorded as impairment loss.
The recoverable amount of shared assets is measured based on
the net selling price based on the value in use and posted prices.
In addition, for the goodwill posted when the Company
acquired Morizou Co. Ltd., the Company recorded all of theunamortized balance of the goodwill as impairment loss because
profitability in the original business plan examined at the time ofacquisition was no longer expected.

10. Bad Debts
Bad debts are claims as stipulated under Article 32, Paragraph 1, and Item 10 of the Regulation concerning Financial Statements. Bad debts
on March 31, 2021 and 2020 consist of the following:
JPY million

USD thousand

2021

2020

2021

Bad debts

70

70

638

Others

178

154

1,613

Total

249

225

2,251

11. Income Taxes(1) Significant components of deferred tax assets and liabilities as of March 31, 2021 and 2020 are as follows:
JPY million

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

USD thousand

2021

2020

2021

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

42,165
17,223
7,288
4,870
4,346
415
683
513
377
332
254
202
145
168
1,667
80,655(42,045)(36,769)(78,814)1,840

463,306
92,68050,82733,914
26,715
8,698
6,510
4,116
2,374
2,348
1,665
1,485
1,066
767
11,591
708,070(463,143)(224,850)(687,993)
20,076

(20)
—
(17)
(38)
2,184

(66)
(462)
(19)
(548)
1,292

(189)
—
(158)
(346)
19,730*Notes:(i)	The valuation allowance decreased by JPY 2,646 million from the previous fiscal year. The increase was JPY 9,229 million in valuation
allowance for loss carryforwards due to disappointing business result whereas major decreases were JPY 6,962 million in valuation
allowance for provision for losses related to repairs, JPY 1,421 million in valuation allowance for retirement benefit liability, JPY 1,123
million in valuation allowance for impairment loss as a result of sale of own properties during the previous fiscal year and JPY 2,368 million in valuation allowance for temporary differences.

Leopalace21 Integrated Report 2021

93

(ii) Loss carryforwards for tax purposes and deferred tax assets carried forward by due date.
JPY million

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Total

Tax loss carryforwards *(i)

4,566

611

762

1,035

769

43,546

51,292

Valuation allowance(4,566)

(611)

(762)

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

Deferred tax asset

—

—

—

—

2

15

18*(ii)March 31, 2021

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

March 31, 2020

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Total

Tax loss carryforwards *(iii)

7,197

4,596

664

816

1,174

27,71742,165

Valuation allowance(7,197)(4,596)

(664)

(816)

(1,103)(27,666)(42,045)

Deferred tax asset

—

—

—

—

70

50

120*(iv)*Notes:(iii)	Tax loss carryforwards are calculated by multiplying the statutory tax rate.
(iv)	Deferred tax assets of JPY 120 million are recorded for tax loss carryforwards of JPY 42,165 million (the amount multiplied by the statutory tax rate).The Company does not recognize a valuation allowance for such tax loss carryforwards to the extent that it is deemed
recoverable based on projected future taxable income.
USD thousand

March 31, 2021

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Total

Tax loss carryforwards *(v)41,246

5,526

6,890

9,351

6,953

393,337

463,306

Valuation allowance(41,246)(5,526)(6,890)(9,351)(6,932)(393,195)(463,143)

Deferred tax asset

—

—

—

—

21

141

163*(vi)*Notes:(v) Tax loss carryforwards are calculated by multiplying the statutory tax rate.
(vi)	Deferred tax assets of USD 163 thousand dollars are recorded for tax loss carryforwards of USD 463,306 thousand (the amount multiplied by the statutory tax rate).The Company does not recognize a valuation allowance for such tax loss carryforwards to the extent that
it is deemed recoverable based on projected future taxable income.
(Changes in significant components of deferred tax assets and liabilities)
The items of Loss on valuation of real estate for sale, accrued enterprise tax, loss on valuation of property, plant and equipment, provision
for warranty obligations on completed project, sales promotion cost, and accrued bonuses were individually shown in deferred tax assets
for the previous fiscal year. Since the amount of each item became immaterial for the fiscal year ended March 2021, they were included inothers. Notes for March31, 2020 reflected the changes.
Consequently, loss on valuation of real estate for sale of JPY 206 million, accrued enterprise tax of JPY 100 million, provision for warranty obligations on completed project of JPY 57 million, sales promotion cost of JPY 8 million and accrued bonuses of JPY 7 million wereclassified in others.
(2) Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate for the year
ended March 31, 2021 and 2020:
Information concerning reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate isomitted, since net losses before tax were recorded in March 2020 and March 2021.
94

Leopalace21 Integrated Report 2021

12. Short-term Borrowings and Long-term Debt
(1) Short-term borrowings, long-term debt and lease obligations on March 31, 2021 and 2020 consist of the following:
JPY million

2021

USD thousand

2020

2021

Short-term borrowings

—

847

—

Current portion of long-term debt, with average interest rate of 4.26%

114

2,659

1,033

Current portion of lease obligations, with average interest rate of 2.69%

3,133

4,344

28,306Long-term debt, due 2022 to 2027, with average interest rate of 14.34%

30,615

15,650276,540

Long-term lease obligations, due 2022 to 2026, with average interest rate of 3.04%

1,544

4,532

13,955

Total

35,40928,034

319,835Note:
The average interest rates above are calculated in weighted average in terms of the fiscal year-end balance of the borrowings and debts.
Please note, however, that the current portion of lease obligations and lease obligations (net of the current portion) are recorded in the consolidated balance sheet in the amount before deducting the interest portion from total lease liabilities for certain consolidated subsidiaries,
and that such lease obligations are not included in the calculation of the average interest rate.
(2) The amounts of long-term debt and lease obligations (excluding their current portion) scheduled for repayment in five years
from fiscal year ended March 31, 2021 are as follows:
JPY million
Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

Long-term debt

98

107

117

30,102

Lease obligations

1,178

276

70

19

Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

USD thousand

Long-term debt

893

973

1,062

271,902

Lease obligations

10,640

2,501

639

174

(3) Assets pledged as collateral for short-term borrowings and long-term debt on March 31, 2021 and 2020 are as follows:
JPY million

USD thousand

2021

2020

2021

Cash and deposits

126

130

1,145

Real estate for sale

37

—

342

Others (current assets)

242

251

2,191

Buildings and structures

5,094

54

46,014

45

83

408

Machinery, equipment, and vehicles
Land

24,988—

225,708

Others (intangible fixed assets)

1,010

730

9,126

Investment securities

2,339

36

21,132Others (investments and other assets)
Total

100

108

904

33,985

1,395

306,975

Leopalace21 Integrated Report 2021

95

(4) Liabilities with collateral at March 31, 2021 and 2020 are as follows:
JPY million

USD thousand

2021

2020

65

76

591

Long-term debt

30,437629

274,925

Total

30,502706

275,517

Current portion of long-term debt

2021

Note:
Within the assets pledged as collateral, cash and deposits, others (current assets) and JPY 36 million in investment securities are pledged ascollateral for investees of consolidated subsidiaries and lenders of client’s housing loans, and there are no liabilities with collateral.
(5) Securities and investment securities which have been deposited with the Legal Affairs Bureau on March 31, 2021 and 2020 are
as follows:
JPY million

USD thousand

2021

2020

2021

Deposit for housing construction warranty

788

1,156

7,118

Advanced payment certificate in accordance with Payment Services Act

332

628

2,998

Deposit for operation stipulated in Building Lots andBuildings Transaction Business Act

100

95

908

Deposit for business security under the Insurance Business Act

201

120

1,815

Deposit for housing defect warranty

109

109

984

2

9

21

Others(6) Bond balances on March 31, 2021 and 2020 consist of the following:
JPY million

USD thousand

Issuance date

2021

2020

2021

Leopalace21 Corporation 14th unsecured straight bondSeptember 30, 2015

—
(—)

4,403
(1,666)—(—)

Leopalace21 Corporation 15th unsecured straight bondSeptember 30, 2015

—
(—)

3,700
(1,400)

—
(—)

—
(—)

8,103
(3,066)—(—)

Company nameName of bond

Total

Notes:(i) Figures in parentheses represent the current portion.
(ii) The corporate bonds were redeemed on November 11, 2020, prior to the maturity date.
Company name96

Name of bondInterest rate (%)

Collateral

Date of maturity

Leopalace21 Corporation

14th unsecured straight bond

0.13

None

September 30, 2022

Leopalace21 Corporation

15th unsecured straight bond

0.63

None

September 30, 2022

Leopalace21 Integrated Report 2021

13. Retirement Benefit Plans(1) Outline of retirement benefit plans
The Companies have an unfunded defined benefit pension plan
and a defined contribution pension plan to provide for employees’
retirement benefits. The defined benefit plan is a lump-sum retirement distribution plan (unfunded, but certain plans are funded as
the Companies have adopted a retirement benefit trust for the
lump-sum retirement distribution plan), and the amounts of retirement benefits are provided mainly based on accumulated points inreference to job level and length of service.
Also, retirement allowances may be paid with a premium for
retired employees.
Certain consolidated subsidiaries have adopted a simplified
method in calculating the liability for retirement benefits andretirement benefit liabilities expense. Since the amount is immaterial, it is included in following notes based on the general rule.

(2) Defined benefit pension plan(a) List of adjustments between the balances of retirement benefit obligations at the beginning and end of year are as follows:
JPY million

USD thousand

2021

2020

2021

Beginning balance of retirement benefit obligations

13,576

13,215

122,631

Service cost

1,159

1,468

10,470Interest cost

48

67

440

Actuarial gains and losses accrued

68

11

622

Retirement benefits paid

(742)

(1,186)(6,710)Decrease due to a large number of leavers(4,451)—(40,209)

(8)

—

(76)

9,650

13,57687,167

OthersClosing balance of retirement benefit obligations(b) List of adjustments between the balances of pension assets at the beginning and end of year are as follows:
JPY million

USD thousand

2021

2020

2021

Beginning balance of pension assets

4,874

5,001

44,031

Expected return on plan assets

28

111

254

Actuarial gains and losses accrued

(5)

(238)

(47)

Retirement benefits paid
Decrease due to large number of leavers
Closing balance of pension assets

(62)

—

(567)

(4,834)—(43,672)

—

4,874

—

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

USD thousand

2021

2020

2021

Funded retirement benefit obligations—

13,576—

Pension assets—(4,874)

—

—

8,701

—

Unfunded retirement benefit obligations

9,650

—

87,167

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

9,650

8,701

87,167

Liability for retirement benefit

9,650

8,701

87,167

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

9,650

8,701

87,167

Leopalace21 Integrated Report 2021

97

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

Service cost

USD thousand

2021

2020

2021

1,159

1,468

10,470Interest cost

48

67

440

Expected return on plan assets

(28)

(111)

(254)

Amortization of actuarial gain or loss

434

175

3,926

Retirement benefit expenses related to the defined benefit plan

1,614

1,599

14,582Premium severance pay (Note)

2,479

227

22,392

Loss on partial termination of retirement benefit plan (Note)

427

—

3,861

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

USD thousand

2021

2020

2021

Actuarial gains/losses

(403)

73

(3,645)

Total

(403)

73

(3,645)(f) Cumulative items posted as the remeasurements of defined benefit plans (before tax effects) are as follows:
JPY million

USD thousand

2021

2020

2021

Unrecognized actuarial gains/losses

142

546

1,288

Total

142

546

1,288

2021

2020

—
—
—
—

99%
—
1%
100%

(g) Matters concerning pension assets are as follows:(1) Major components of pension assets
Bonds
SharesOthersTotal

Note:Total of pension assets is the amount contributed to retirement benefits trust from the lump-sum retirement distribution plan. The Company
cancelled the retirement benefits trust during the fiscal year ended March 2021.
(2) Method of determining the long-term expected rate of return
There was nothing applicable as the Company cancelled the retirement benefits trust.

98

Leopalace21 Integrated Report 2021

(h) Main calculation basis for actuarial assumptions are as follows (shown as weighted average):
Discount rate
Expected long-term rate of return on pension assets

2021

2020

0.03 – 0.81%—%

0.03 – 0.89%
1.43%(3) Defined contribution pension plan
The necessary contribution amount for the defined contribution plan was JPY 408 million (USD 3,687 thousand) and JPY 566 million for theyears ended March 31, 2021 and 2020, respectively.

14. Stock Options(1) Stock option expenses recorded relating to stock options:
JPY million

Selling, general and administrative expenses

USD thousand

2021

2020

2021

—

15

—

(2) Gain recorded relating to unused and expired share subscription rights
JPY million

Gain on reversal of share subscription rights

USD thousand

2021

2020

2021

—

17

—

(3) Outline of stock options and activities are as follows:(a) Outline of stock options:2016 Stock Option

2017 Stock Option

2018 Stock Option

Title and numberof grantees

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

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

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

Type and numberof stock options*

Common stock: 252,700 shares

Common stock: 282,800 shares

Common stock: 348,000 shares

Grant dateAugust 18, 2016

September 14, 2017

September 14, 2018

Vesting conditions

Not applicable vesting conditions
are specified

Not applicable vesting conditions
are specified

Not applicable vesting conditions
are specified

Vesting period

Not applicable period ofservice is specified

Not applicable period ofservice is specified

Not applicable period ofservice is specified

Exercise period

From August 19, 2016 toAugust 18, 2046

From September 15, 2017 to
September 14, 2047

From September 15, 2018 toSeptember 14, 2048

* Note:Reported by converting to the number of shares

Leopalace21 Integrated Report 2021

99

(b) Stock option transactions:
Number of stock options as of the fiscal year ended March 31, 2021 is reported by converting to the number of shares.
Number of stock options:2016 Stock Option

2017 Stock Option

2018 Stock Option

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

—

—

—

Granted———Forfeited———

Vested———Outstanding

—

—

—

171,000

190,300

225,900———

Exercised

61,50068,80079,300Forfeited

—

400

—

109,500

121,100

146,6002016 Stock Option

2017 Stock Option

2018 Stock Option

1

1

1

Average stock price at exercise

212

212

199

Fair value at the grant date

547

528

332

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

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

15. Gain on Sale of Property, Plant and Equipment
Gain on sale of non-current assets for the years ended March 31, 2021 and 2020 are as follows:
JPY million

Buildings and structures
Machinery, equipment, and vehicles
Land
Total

100

Leopalace21 Integrated Report 2021

USD thousand

2021

2020

2021

12
0
212
225

3,137
0
5,808
8,945

115
3
1,916
2,035

16. Loss on Sale of Property, Plant and Equipment
Loss on sale of non-current assets for the years ended March 31, 2021 and 2020 are as follows:
JPY million

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

USD thousand

2021

2020

2021

4
—
13
0
18

697
0
274
—
972

40
—
123
1
165

17. Loss on Retirement of Non-current Assets
Loss on disposal of non-current assets for the years ended March 31, 2021 and 2020 are as follows:
JPY million

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

USD thousand

2021

2020

2021

52
3
7
11
38
114

64
1
0
3
1
71

477
34
68
104
344
1,029

18. Loss related to repairs
For the year ended March 2020 and the year ended March 2021, repair costs and incidental expenses are incurred as repair works to thedefect properties constructed by the Company.
19. Provision for losses related to repairs
For the year ended March 2021
None
For the year ended March 2020, the Company recorded the provision for estimated losses related to repairs based on the rate of construction defects and other factors in order to prepare for the repair costs and incidental expenses for the construction defects related to theproperties constructed by the Company.

20. Reversal of provision for losses related to repairs
The reversal of provision was made reflecting a lowered unit repair cost placing batch orders and by employing a new construction method
for the fiscal year ended March 2021.
For the fiscal year ended March 2020
None

Leopalace21 Integrated Report 2021

101

21. Special severance allowance
For the year ended March 2021, the special severance allowance was paid to the employees who left the Company by applying for the voluntary retirement program.
For the year ended March 2020, the special severance allowance was paid to the employees who left the Company as a result of sale ofthe three domestic hotels in Sapporo, Sendai and Hakata.
22. Repair expenses
For the year ended March 2021
None
For the year ended March 2020, the repair expenses were related to the repairs conducted for the properties which were sold in the previous
fiscal years.

23. Rental Properties
The Companies possesses rental apartments in major cities andregions throughout Japan. Some subsidiaries possess serviced
apartments in addition to rental residences and office buildings.
For the years ended March 31, 2021 and 2020, income arising fromthese rental properties are JPY 502 million (USD 4,539 thousand)and JPY 910 million, and impairment losses are JPY 3,843 million(USD 34,712 thousand) and JPY 1,407 million, respectively.
Furthermore, the changes in book value of rental properties
during the years ended March 31, 2021 and 2020, and the fairvalue as of March 31, 2021 and 2020 and increase (decrease)during the period are as follows:

March 31, 2021
JPY million

Balance as of April 1, 2020

Increase/(Decrease)

Balance as of March 31, 2021

Fair value as of March 31, 2021

13,886(5,793)

8,092

10,859March 31, 2020
JPY million

Balance as of April 1, 2019

Increase/(Decrease)

Balance as of March 31, 2020

Fair value as of March 31, 2020

27,036(13,150)

13,886

17,585

March 31, 2021
USD thousand

Balance as of April 1, 2020

Increase/(Decrease)

Balance as of March 31, 2021

Fair value as of March 31, 2021

125,427(52,333)

73,09398,090Notes:(i)	Book values recorded on the consolidated balance sheets are the amount after deducting accumulated depreciation and accumulated
impairment loss from acquisition cost.
(ii)	For the years ended March 31, 2021 and 2020, the main decreases are due to the sale of rental properties of JPY2,085 million (USD
18,833 thousand) and JPY 11,714 million, and impairment losses of JPY 3,843 million (USD 34,712 thousand) and JPY 1,407 million,
respectively.
(iii) Fair values as of the end of the fiscal years are calculated by the Company mainly based on “Real-estate appraisal standards”.

102

Leopalace21 Integrated Report 2021

24. Asset Retirement Obligations
Disclosure is omitted due to immateriality in the consolidated financial statements.
25. Supplemental Information to the Statement of Changes in Equity(1) Main changes in equity for the year ended March 31, 2021
(a) Shares issued and treasury stocks for the year ended March 31, 2021 are as follows:
SharesType of shares

April 1, 2020

Increase

Decrease

March 31, 2021

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

84,507,000—

329,389,515

Total

244,882,515

84,507,000—

329,389,515

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

209,600

561,610

Total

771,210—

209,600

561,610*Notes:(i) An increase of 84,507 thousand shares in common stock is resulting from the third party allotment with the payment due on November 2, 2020.
(ii) A decrease of 209 thousand shares in treasury stock is due to exercise of subscription rights to shares.
(b) Stock acquisition rights (SAR) and treasury share acquisition rights for the year ended March 31, 2021 are as follows:
Number of shares issued upon exercise of SARs

Outstanding as of March 31, 2021

Type

Class of sharesissued upon
exercise of SARs

April 1, 2020

Increase

Decrease

March 31, 2021

JPY million

USD thousand

5th series SAR*

Common stock—

159,748,700—

159,748,700

215

1,947

SARs as stock option

—

—

—

—

—

172

1,558

Total

—

—

159,748,700—

159,748,700

388

3,506

*Note:
An increase of 159,748 thousand shares was from new shares issuance in exercise of new share acquisition rights.
(c) Matters concerning dividends for the year ended March 31, 2021 are as follows:
None
There are no dividends with record dates in the consolidated fiscal year ended March 2021 but with effective dates in the following fiscal year.
(2) Main changes in equity for the year ended March 31, 2020(a) Shares issued and treasury stocks for the year ended March 31, 2020 are as follows:
SharesApril 1, 2019

Increase

Shares issued
Common stock

Type of shares

Decrease

March 31, 2020

244,882,515——

244,882,515

Total

244,882,515——

244,882,515

Treasury stock
Common stock

1,067,510—

296,300*

771,210

Total

1,067,510—

296,300*

771,210*Note:
A decrease of 296 thousand shares in treasury stock is resulting from the exercise of subscription rights to shares.

Leopalace21 Integrated Report 2021

103

(b) Stock acquisition rights (SAR) and treasury share acquisition rights for the year ended March 31, 2020 are as follows:
Outstanding as ofMarch 31, 2020

Class of sharesissued upon
exercise of SARs

April 1, 2019

Increase

Decrease

March 31, 2020

JPY million

SARs as stock option

—

—

—

—

—

269

Total

—

—

—

—

—

269

Type

Number of shares issued upon exercise of SARs(c) Matters concerning dividends for the year ended March 31, 2020 are as follows:
None
There were no dividends with record dates in the consolidated fiscal year ended March 2020 but with effective dates in the following fiscal year.

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

(2) Operating lease transactions
Future minimum lease payments related to non-cancelable operating leases subsequent to March 31, 2021 and 2020 are as follows:

JPY million

March 31, 2021

Future lease payments Prepaid lease payments

Differences

Due within one year

227,409(227,272)

538
(538)

226,871(226,733)

Due after one year

91,075(90,858)

611
(611)

90,464(90,246)

Total

318,485(318,130)

1,150(1,150)317,335(316,980)

JPY million

March 31, 2020

Future lease payments Prepaid lease payments

Differences

Due within one year

234,427(234,225)

805
(805)

233,622(233,420)

Due after one year

100,070(99,774)

1,089(1,089)98,981(98,684)

Total

334,498(333,999)

1,894(1,894)

332,603(332,104)

USD thousand

March 31, 2021

Future lease payments Prepaid lease payments

2,054,104(2,052,864)

4,867(4,867)2,049,237(2,047,997)

Due after one year

822,652(820,687)

5,522(5,522)

817,129(815,165)

Total

2,876,756(2,873,551)

10,389(10,389)2,866,366(2,863,162)

Note:Future minimum lease payments fixed under master lease agreements in leasing business are shown in parentheses.
104

Differences

Due within one year

Leopalace21 Integrated Report 2021

27. Guarantee Obligations
Guaranteed obligations as of March 31, 2021 and 2020 are as follows:
JPY million

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

28. Segment Information(1) Overview of Reportable Segments
The Company’s reportable segments are the components for which
separate financial information is available, and whose operating
results are reviewed regularly by the board of directors in order todetermine allocation of resources and assess segment performance.
The Company comprises three segments, the Leasing Business,
the Elderly Care Business and the Other Businesses.
The Leasing Business operations comprise the leasing andmanagement of apartment rooms and other properties, repair
works, broadband internet service, rent obligation guarantee,
company residence agency business, solar power generation business, and small-amount short-term insurance business, real estate
brokerage, running serviced apartments and serviced offices andothers. The Elderly Care Business operates elderly care facilities.
The Other Businesses operate resort facilities in Guam, financing
business and others.
(2) Calculation Method for Sales, Profits or Losses, Assets,
Liabilities, and other Items by Reportable Segment
The accounting methods for reportable segments are in accordance to accounting policies adopted in the preparation of consolidated financial statements. The reportable segment profits (orlosses) represent operating profits (or losses). Inter-segment sales
and transfers are based on prevailing market prices.

USD thousand

2021

2020

2021

430

468

3,890

—
430

3
472

—
3,890

(3) C
 hanges in Reportable Segments
The Company had four reportable segments, the Leasing Business,
the Development Business, the Elderly Care Business, the Hotels,
Resort and Other Businesses and changed them into the aforementioned three segments. It reflected the Group’s redirection
from business diversification strategy to profit-oriented strategy
centered on the Leasing Business as a result of implementing adrastic business restructuring. The Leasing Business integrated the previous Development Business because it strengthens
relations with the property owners and provide comprehensive
proposals related to their owned properties. As a result, sales
and cost of sales for the Development Business which were separately reported in the fiscal year ended March 2020, have been
included in those for the Leasing Business. Specifically, sales forthe Development Business of JPY 23,806 million and cost of sales
for the Development Business of JPY 19,415 million were included
in sales for the Leasing Business and cost of sales for the Leasing
Business respectively for the consolidated statement of income
for the year ended March 2020. The Company renamed the Hotels,
Resort and Other Businesses to the Other Businesses because of
the decision of withdrawing the business of hotels and resort.
The reportable segment information for the fiscal year ended
March 2021 was reclassified into the current reportable segment
structure for disclosure purposes.

Leopalace21 Integrated Report 2021

105

(4) Information Regarding Sales, Losses, Assets, Liabilities, and other Items by Reportable Segment for the years ended March 31,
2021 and 2020 are as follows:
JPY million

Reportable segment

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

Adjustments

Consolidated
Total

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

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

1,097

8,601

1,815

10,416

154

2,386

608

2,994

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment Total

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

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

7,456

47

2,204

26

JPY million

Reportable segment

March 31, 2020
Sales
Sales to customers
Inter-segment sales and transfers
Total
Segment profit (loss)
Segment assets
Other items
Depreciation
Increase in property, plant and equipment andintangible fixed assets

Adjustments

Consolidated
Total

433,5532,620
436,174(27,502)
117,173—(2,620)(2,620)(8,971)79,779433,553—433,553(36,473)
196,953

1,441

10,005

2,151

12,157

480

3,833

45

3,879

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment Total

412,746209
412,956(25,966)
86,25014,620—14,620
(541)
3,470

6,186
2,410
8,596
(994)
27,452

8,464

100

3,353

0

USD thousand

Reportable segment

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

106

Leopalace21 Integrated Report 2021

Adjustments

Consolidated
Total

3,693,968
6,751
3,700,719(195,631)
869,289—(6,751)(6,751)(67,966)
591,362

3,693,968—
3,693,968(263,597)
1,460,652

9,910

77,694

16,396

94,0901,399

21,552

5,494

27,047

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment Total

3,540,465
1,295
3,541,761(175,101)
648,541

131,193—
131,193(6,511)
32,13722,3085,455
27,764(14,017)
188,610

67,350433

19,913239

Notes:(i) Breakdown of adjustments is as follows:
Segment profit (loss)
JPY million

Inter-segment eliminations
Corporate expenses*
Total

USD thousand

2021

2020

2021

169
(7,693)(7,524)(85)(8,885)(8,971)

1,529(69,495)(67,966)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are not part of reportable segments.
Segment assets
JPY million

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

USD thousand

2021

2020

2021

65,46979,779591,362

Increase in non-current assets and intangible assets
JPY million

USD thousand

2021

2020

2021

608

45

5,494

Capital expenditures which do not belonging to any reportable segments(ii) Segment loss is adjusted to operating loss on the consolidated statement of income.

Leopalace21 Integrated Report 2021

107

Related information
1. Products and services
Information concerning products and services is omitted, since similar information is reported in “28. Segment Information.”
2. Geographic area
(1) Sales
Information concerning sales by geographic area is omitted, since more than 90% of sales reported in the consolidated statement ofincome are generated in Japan.
(2) Plant, property, and equipment
March 31, 2021
JPY million
Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

49,316

19,412

512

667

143

70,052

March 31, 2020
JPY million
Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

62,071

21,586

887

755

232

85,534Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

445,460

175,349

4,625

6,029

1,294

632,759

March 31, 2021
USD thousand

108

Leopalace21 Integrated Report 2021

3. Major customers
Information concerning sales to major customers is omitted, since no sales to any particular customer exceed 10% of sales reported in the
consolidated statement of income.
Information concerning impairment loss on non-current assets by reportable segments
March 31, 2021
JPY million

Impairment loss

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

3,950

8

82

—

4,041

March 31, 2020
JPY million

Impairment loss

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

2,471

51

5,097

—

7,620

March 31, 2021
USD thousand

Impairment loss

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

35,68673746—

36,505

Information concerning goodwill amortization and unamortized balance by reportable segments
March 31, 2021
JPY million

Goodwill amortization
Balance

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

6
12

—
—

—
—

—
—

6
12

Note:
The Company posted impairment loss of JPY 107 million for goodwill in the Leasing Business.
March 31, 2020
JPY million

Goodwill amortization
Balance

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

260
127

—
—

—
—

—
—

260
127

Note:
The Company posted impairment loss of JPY 982 million for goodwill in the Leasing Business segment. The Company sold all the shares inLife Living Co., Ltd. in the year ended March 2020 and excluded it from the scope of consolidation, which resulted in the reduction of goodwill by JPY 953 million in the Leasing Business.
March 31, 2021
USD thousand

Goodwill amortization
Balance

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

Consolidated total

61
113

—
—

—
—

—
—

61
113

Note:
The Company posted impairment loss of USD 973 thousand for goodwill in the Leasing Business.

Leopalace21 Integrated Report 2021

109

Information concerning gain on negative goodwill by reportable segments
For the years ended March 31, 2021 and 2020.
None

29. Amounts per Share
The following tables set forth the net assets and net income per share of common stock for the years ended March 31, 2021 and 2020:
JPY

Net assets
Net loss attributable to shareholders of the parent

USD

2021

2020

2021

(25.83)84.88

5.34
328.77(0.23)
0.76

Notes:(i)	Diluted net income per share is not indicated because net loss per share is indicated, although there are potential common shares withdilutive effects.
(ii) Basis of computation of basic and diluted net income per share for the year ended March 31, 2021 and 2020 is as follows:
JPY million

Net loss attributable to shareholders of the parent
Amount not attributable to common stock
Net loss attributable to common stock
Basic weighted-average shares during the year (Thousands of shares)
Dilutive securities without dilutive effects and excluded from calculation ofdiluted net income per share.

USD thousand

2021

2020

2021

23,680—23,680279,00380,224—80,224
244,011

213,897—
213,897
244,011—30. Related Party Transactions
For the year ended March 31, 2021 and 2020.
None
31. Business Combinations
Business Combination under common control
None
32. Other
The following tables set forth quarterly information for the year ended March 31, 2021:
First quarter

Second quarter

Third quarter

Full-year

Net sales (JPY million)

Cumulative period

103,986

208,647

308,326

408,959

Income (loss) before income taxes (JPY million)(15,012)(17,034)(23,900)(22,925)

Net income (loss) attributable to shareholders of the parent (JPY million)(14,123)(17,571)(25,003)(23,680)

Net income (loss) per share (JPY)(57.84)(71.95)(95.18)(84.88)First quarter

Second quarter

Third quarter

Full-year(57.84)(14.11)(24.82)

4.02

Accounting period

Net income (loss) per share (JPY)110

Leopalace21 Integrated Report 2021

Cumulative period

First quarter

Second quarter

Third quarter

Full-year

Net sales (USD thousand)

939,268

1,884,628

2,784,994

3,693,968

Income (loss) before income taxes (USD thousand)(135,606)(153,867)(215,885)(207,072)

Net income (loss) attributable to shareholders of the parent(USD thousand)(127,569)(158,713)(225,843)(213,897)(0.52)(0.65)(0.86)(0.76)First quarter

Second quarter

Third quarter

Full-year(0.52)(0.12)(0.22)(0.03)Net income (loss) per share (USD)
Accounting period

Net income (loss) per share (USD)

33. Subsequent Events
Reduction of common stock
The Company determined, under the approval of the Board of Directors on May 14, 2021, to submit a proposal on reduction of common stock to the Ordinary General Shareholders’ Meeting held on June 29, 2021. The proposal was approved at the Ordinary General
Shareholders’ Meeting.
(1) Purpose of reduction of common stock
In order to ensure the flexibility and speediness of the capital policy, the Company has decided to reduce the common stock, as stipulated in
Article 447, Paragraph 1 of the Companies Act.
There will be no change in the total number of outstanding shares and there will be no effect on the number of shares held by all shareholders. In addition, there will be no change in net assets and in net assets per share.
(2) Main points in reduction of common stock(a) Reduced amount of common stock
Reduce common stock by JPY 81,182,359,829 from JPY 81,282,359,829 to make the common stock of JPY 100,000,000.
(b) Method of reduction
There will be no change in the total number of outstanding shares. The entire amount of the reduction, JPY 81,182,359,829, will be transferred to other capital surplus.
(3) Timeline in 2021
May 14 (Board of Directors Meeting)June 29 (General Shareholders’ Meeting)
July 30
August 10

Approval at the Board of Directors Meeting
Approval at the General Shareholders’ Meeting
Expiration of period for creditors’ making objections
Effective date(4) Impact on the Company’s financial result
The above measure involves reassignments of funds within the net assets category with no changes in the amount of net assets and will nothave any impact on the Company’s business performance.

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Data Compilation
Social Key Performance Indicators
The Company engages in sustainable management initiatives under the leadership of the CSR Committee, which is chaired by the CSR officer, incollaboration with divisions and departments. The CSR Committee reports on the progress of initiatives in line with the five themes of the BasicCSR Action Policy, based on the quantitative targets set by each division and department, and moves initiatives to the next phase of the PDCA cycle.
For the fiscal year ending March 2022, we updated the material issues identified for the previous fiscal year considering the current socioeconomic
climate as well as the Company’s own business conditions, and set KPIs for each materiality. Key topics and KPIs are approved by the CSR
Committee, and these are periodically reported to the Board of Directors to conduct CSR activities.

Governance
FY2018FY2020FY2019Outside directors

3

7

6

Female directors

1

2

1

Directors’ compensation (JPY million)

595

228

170

Directors (excluding outside directors)

495

131

56

Audit & Supervisory Board members(excluding outside ASB members)

19

13

16

Outside directors and ASB members

80

83

97

Employee Composition (Parent company)
FY2018Total

Men

FY2020FY2019
Women

Total

Men

Women

Total

Men

Women

No. of employees

6,331

4,395

1,936

5,814

4,035

1,779

4,169

2,671

1,498

No. of regular employees

5,833

4,142

1,691

5,461

3,830

1,631

3,864

2,499

1,365

498

253

245

353

205

148

305

172

133

Average age

37 years,
7 months

38 years,
7 months

35 years,
2 months

38 years,
8 months

39 years,
3 months

36 years,
4 months

39 years,
0 months

40 years,
0 months

37 years,
3 months

Average cumulative yearsof service

9 years,
7 months

10 years,
10 months

6 years,
7 months

10 years,
6 months

11 years,
10 months

7 years,
6 months

10 years,
6 months

12 years,
7 years,
0 months 10 months

Women

Total

Women

Total

No. of temporary hires

Work-Life Balance (Parent company)
FY2018
Total

118

Men

FY2020FY2019
Men

Men

Women

Total number of working hours
per month

173.0

166.3

160.3

Overtime work hours per month

15.0

13.3

11.4

No. of employees with
reduced working hours

199

11

188

277

15

262

216

3

213

No. of employees onchildcare leave

238

55

183

268

37

231

246

47

199

Ratio of paid leave usage

76.8%

74.4%

82.6%

84.3%

83.1%

87.1%

90.5%

92.4%

86.1%

Ratio of workforce turnover

8.6%

7.2%

12.0%

12.4%

11.2%

15.1%

31.4%

35.9%

20.8%

Ratio of new hires

19.1%

18.2%

20.3%

22.1%

17.3%

28.3%

16.7%

18.2%

14.3%

Leopalace21 Integrated Report 2021

Diversity (Consolidated (excluding Guam), Parent company + Leopalace Smile for employees with disabilities)
FY2018Total

FY2020FY2019

Men

Women

Total

Men

Women

Total

No. of employees with disabilities (annual average)

161.9

154.0

107.9

% of employees with disabilities (annual average rate)

2.23%

2.26%

2.33%

Men

Women

No. of mandatory retirees that have been rehired

31

24

7

21

17

4

22

15

7

No. of foreign national employees

351

144

207

366

143

223

218

89

129

No. of foreign national managers

25

20

5

26

20

6

22

16

6

No. of people newly employed

725

336

389

523

229

294

329

149

180

Gender ratio for new hires

100.0%

46.3%

53.7%

100.0%

44.7%

55.3%

100.0%

45.3%

54.7%

No. of managers

1,758

1,648

110

1,671

1,549

122

1,061

987

74

Gender ratio for managers

100.0%

93.7%

6.3%

100.0%

92.7%

7.3%

100.0%

93.0%

7.0%

Support for Employees Seeking to Obtain Qualifications
FY2018FY2019FY2020No. of employees using support for
obtaining qualifications

368

266

170

No. of employees using support
system for obtaining specified
qualifications

245

144

69

No. of employees in program for
language skills improvement

15

13

6

No. of employees awarded an
incentive payment for obtaining
Takken qualification

108

109

95

Community Contributions
FY2018FY2019FY2020No. of cleanup campaign participants

6,142

2,309

1,002

Of which, in vicinity of existing properties

—*

0

0

Of which, in vicinity of construction sites

6,142

2,309

1,002

Total sum of donations (thousands of yen)

3,754

3,708

1,998

No. joining observation tours and
OTJ training at Leopalace Smile

417

111

0

Certified Employees (as of March 2021)(People)Real estate broker

717

Rental property manager

408

General insurance solicitor(basic course/fire insurance course)

661

Architect (first-class, second-class)

244

Building construction management engineer(1st Grade, 2nd Grade)

194

Certified skilled worker of financial planning(1st Grade, 2nd Grade)

204

Land surveyor, Assistant land surveyor

23

Care worker

720

Care support specialist

205

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

345

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

FY2018FY201914,73013,624FY20209,350

Head office and branches

6,185

6,343

4,647

*Cleanup campaign was held all together in the management center of 170 branches once in fiscal 2018.

Azumi En nursing care facilities

6,056

4,899

4,395

Labor Safety and Health

Leopalace hotels

2,489

2,381

307

CO2 emissions from vehicle gasoline(t-CO2)

3,345

3,172

2,212

Scope 3 CO2 emissions (t-CO2)

786,510

692,463

693,388

Category 1 (purchased materials)

31,263

10,8985,850

Category 2 (capital goods)

29,835

12,692

9,621

4,338

5,701

4,931

724,543

663,171

672,987

FY2018FY2019FY2020No. of labor accidents

55

56

46

Accidents requiring time off work

14

21

19

Accidents not requiring time off work

41

35

27

Category 3 (electricity-related)

Stakeholder Communication Initiatives
FY2018FY2019FY2020Category 6 (business travel)

No. of property owner briefing sessions

517

381

87

Category 7 (employee commuting)

No. of IR events(meetings for individual investors, etc.)

19

5

6

Category 13 (electricity and gas
use by rental housing)

Career-support activity programs

35

0

0

Leopalace21 Integrated Report 2021

119

Leasing Business Data
(Units)Units Under Management
As of March 31, 2021, units under management—the earnings base for our Leasing Business—
numbered 573,673, marking a slight decline for the firsttime in eight years. The number of units under management plateaued or fell in each region except for the Tokyo
metropolitan area.

FY2018FY2019FY202013,90935,65240,494
170,358
40,00388,19480,861
39,208
14,691
51,428574,798

13,86635,62340,494
171,080
39,981
88,08681,011
39,415
14,73651,506575,798

13,55035,32740,437
170,320
39,94387,75680,85939,39014,73651,355
573,673

FY2018FY2019FY2020

Hokkaido
TohokuKita-Kanto
Tokyo metro area
Hokuriku-Koshinetsu
Chubu
Kinki
Chugoku
Shikoku
Kyushu-Okinawa
Total

(%)

Fiscal Year-End Occupancy Rates by Region
Although the occupancy rate declined in many regionsof Japan due to the effects of the construction defects
problem and the COVID-19 pandemic, the amount of thedecline is decreasing. The regions of Hokkaido, HokurikuKoshinetsu, and Kinki saw improved results.

Hokkaido
TohokuKita-Kanto
Tokyo metro area
Hokuriku-Koshinetsu
Chubu
Kinki
Chugoku
Shikoku
Kyushu-Okinawa
Total

69.0
84.8
80.3
86.0
79.1
85.1
83.1
88.0
84.3
87.6
88.3

Occupied Units by Contract TypeWe are strengthening our marketing efforts aimed atcorporate customers, where we can expect stable,
long-term earnings. As of March 31, 2021, there was asignificant decrease in the number of corporate contracts
for apartments compared to individuals and students dueto the effects of the construction defects problem as well
as reduced personnel rotation and training as a resultof the COVID-19 pandemic. As a result, the number ofcorporate contracts for apartments at the end of the fiscal
year ended March 2021 was 266,814 units, down 2.1%
from a year earlier.

FY2018

Corporate
Of which, foreign
national (%)
Individuals
Of which, foreign
national (%)
Students
Of which, foreign
national (%)
Total

120

Leopalace21 Integrated Report 2021

FY2020FY2019

Units

%

Units

%

Units

%

280,64357.9

272,566

57.0

266,814

56.9

—

5.6

—

6.0

—

5.3

163,31833.7

165,594

34.6

164,441

35.1

—

4.7

—

5.4

—

5.6

40,757

8.4

40,135

8.4

37,548

8.0

—

29.1

—

35.2

—

32.4

484,718100.0

478,295

100.0

468,803

100.0

Number of Leasing Sales Offices and Sales Personnel
As a result of the voluntary retirement system implemented
in the fiscal year ended March 2021, the number of sales
personnel has fallen, with 1,047 sales personnel at theend of the fiscal year ended March 2021, marking a 21.8%
decline on the previous year. To compensate for the reduction in personnel, in the leasing business, we are reducing
the number of directly managed sales offices and shifting
to a sales structure that utilizes real estate agents.

69.8
83.0
77.3
81.8
80.6
80.3
81.8
86.5
82.6
86.5
78.9

73.1
84.7
77.2
84.9
79.1
81.9
81.5
87.0
83.4
87.4
80.8

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

FY2018FY2019FY2020

302
189

295
189

239
139

113

106

100

1,494

1,339

1,047

Subsidiary Equipments and Services
FY2018

Security systems installed (cumulative, units)

FY2020FY2019308,944314,776

313,382

Security cameras installed (cumulative, buildings)

14,41014,671

14,749No. of incoming calls to Services Centers

387,398

382,518

380,343

Of which, inquiries

254,334

266,644

237,564

Of which, maintenance-related

106,508

92,762

114,988

Of which, complaints or claims

26,55623,112

27,791

0392

13,697

No. of web-based rental agreements

Monthly Occupancy Rates for the Past 10 Years

(%)

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

FY2011

81.09

80.64

80.87

80.45

80.50

81.05

80.43

80.69

80.54

81.65

82.73

83.40

FY2012

81.77

82.18

82.69

82.53

82.90

83.13

82.59

82.55

82.29

83.39

84.48

84.81

FY2013

83.32

83.67

83.69

83.50

83.84

84.28

84.23

84.31

84.12

85.61

86.92

87.47

FY2014

86.00

86.03

85.96

85.63

85.78

86.33

86.14

86.10

85.69

87.24

88.65

89.29

FY2015

87.88

87.61

87.59

87.32

87.26

87.70

87.26

87.14

86.89

88.38

89.80

90.53

FY2016

88.97

88.55

88.60

87.95

87.78

88.31

87.50

87.41

86.97

88.41

90.18

91.66

FY2017

90.51

90.28

90.55

89.75

89.88

90.21

89.73

89.69

89.44

90.83

92.43

93.72

FY2018

92.82

92.76

92.10

90.45

89.41

88.40

87.24

86.38

85.26

85.38

85.57

84.33

FY2019

82.35

81.95

81.40

80.67

80.21

80.07

79.49

79.21

78.91

80.19

81.82

83.07

FY2020

81.40

79.91

79.43

78.56

78.18

78.09

77.46

77.09

77.07

78.16

79.60

81.72

*Occupancy rate = number of units under contract/number of units under management at the end of each month(%)

Ratio of General Contracts andMonthly Contracts Over 10 Years
While the proportion of monthly contracts has been fallingover the past 10 years, the proportion of general contracts
without a fixed contract period has grown from 79.8% in
the fiscal year ended March 2012 to 93.9% for the fiscal
year ended March 2021. In this way, the proportion ofunits under a more stable leasing contract is on the rise.

General contracts

Monthly contracts

FY201179.8

20.2

FY201282.9

17.1

FY201385.8

14.2

FY201488.4

11.6

FY201589.8

10.2

FY201690.0

10.0

FY201791.1

8.9

FY201894.1

5.9

FY201993.2

6.8

FY2020

93.9

6.1

Leopalace21 Integrated Report 2021

121

(JPY million)

Orders

FY2018After the discovery of the construction defects problem,
we stopped booking activities for new properties andfocused on following up with property owners, meaningthat the orders received for apartments, etc., fell significantly with a 47.5% year-on-year decline. However,subsidiary Morizou saw a year-on-year increase inorders received for custom-built homes, with orders
totaling JPY 3,381 billion.

Building categories
Apartments

56,859

2,546

4,852

Elderly care facilities

931

156

0

Stores & commercial space

1,934

280

0

Custom-built homes bysubsidiary Morizou

4,771

2,526

3,381

0

0

0

64,495

7,814

5,927

Solar power systems
Total

Wealth Management Offices and Personnel
In accordance with the business portfolio changes in thefiscal year ended March 2021, we established WealthManagement Departments under the umbrella of the
Leasing Business Division to strengthen our connection
with property owners and regain their trust, and theprevious construction subcontracting sales departmentsin the Development Business were transferred. We set
branches in each area to enable close follow-up withproperty owners.

FY2020FY2019FY2020No. of offices

65

No. of sales personnel

319

Elderly Care Business Data
(Facilities)

Number of Facilities
We have positioned our Elderly Care Business as a growthstrategy business, and our plan is to work on increasing
the stability of this business to handle Japan’s aging
population. At the end of March 2021, we had a total of
87 facilities, which was the same as the past two years.

FY2018FY2020FY2019Fee-based homes

21

21

21

Day services, Short stays

64

64

64

Group homes

2

2

2

Total

87

87

87

(Utilization rate, %)Utilization Rate
The utilization rate of fee-based homes for seniors andgroup homes as well as short stays remained high,exceeding 90%. We are focusing on temporary-typeofferings, notably day services and short stays, andthe utilization rate of both is relatively stable, althoughimpacted by the COVID-19 pandemic in the fiscal year
ended March 2021.

122

Leopalace21 Integrated Report 2021

FY2018FY2019FY2020Day services

72.6

72.8

67.1

Short stays

93.6

95.6

92.1

Fee-based homes &group homes

91.6

92.4

93.0

External Environment(Thousand units)

Number of New Housing Starts
The number of new housing starts in FY2020 decreased by 8.1%
year on year. Starts for housings for rent also fell for the fourthconsecutive year, with a 9.4% year-on-year decrease to 303,000
units. However, starts of rental units of less than 30 square
meters aimed mainly at single-person households rose 1.0% year
on year to 53,000 units.

FY2018FY2019FY2020

390
73
563
953

335
53
549
884

303
53
509
812

Rental housing
Of which, under 30m2
Other
Total

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

Number of Households
The number of households in Japan is expected
to decline starting 2025 due to the nation’s trendsof an aging population and low fertility rate.
On the other hand, the number of single-personhouseholds is expected to continue increasing
until 2030.

Single-personhouseholds
Of which,under age 25
Of which,age 25–34
Of which,age 35–64
Of which,age 65 or older
Married couple
Married couple
with child(ren)Single parent
with child(ren)
Other
Total

2020

2025

2030

2035

2040

2010

2015

16,785

18,41819,342

19,96020,254

20,233

19,944

2,060

2,021

2,009

1,879

1,781

1,681

1,584

2,999

2,987

2,830

2,795

2,705

2,558

2,429

6,745

7,157

7,479

7,774

7,809

7,577

6,968

4,980

6,253

7,025

7,512

7,959

8,418

8,963

10,26910,758

11,101

11,203

11,138

10,96010,715

14,474

14,342

14,134

13,693

13,11812,465

11,824

4,535

4,770

5,020

5,137

5,141

5,074

4,924

5,779
51,842

5,044
53,332

4,510
54,107

4,123
54,116

3,833
53,484

3,583
52,3153,350
50,757(projection) (projection) (projection) (projection) (projection)

Source: Household projections for Japan (2018), the National Institute of Population and Social Security Research

Number of Vacant Homes in Japan
Amid the concentration of populations in cities,
the number of vacant homes is growing, especially in rural areas. According to the Housing andLand Survey, the number of vacant houses for rent
is 4.3 million, meaning that roughly one in five arevacant. In order to operate our business in such
tough circumstances, it is essential to enhance
the added value of the properties we manage.

Number of vacanthouses for rent
(thousand units)
Houses for rent
(thousand units)
Ratio of vacant
dwellings (%)

1988

1993

1998

2003

2008

2013

2018

2,336

2,619

3,520

3,675

4,127

4,292

4,327

14,015

15,691

16,73017,166

17,77018,51919,065

14.3

14.3

17.4

17.6

18.8

18.8

18.5

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

Projected Future Population of Japan
The population of Japan has been falling after
peaking in 2008. It is predicted that the population
will be 119.13 million in 2030, falling below
120 million. On the other hand, the populationof advanced elderly age (75 years or older) is
estimated to increase until 2030, and the proportion of the population that is 75 years or older
continues to gradually increase.

2010

Age 0–14
Age 15–64
Age 65–74
Age 75 or older
Unknown
Total
Proportion age 75 orolder (%)

2015

2020

2025

2030

2035

2040

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

1,680
1,589
1,507
1,407
1,321
1,246
1,194
8,103
7,629
7,406
7,170
6,875
6,494
5,978
1,517
1,734
1,747
1,497
1,428
1,522
1,681
1,407
1,613
1,872
2,180
2,288
2,260
2,239
98
145
128,060 127,090 125,320 122,540 119,130 115,220 110,920
11.0

12.7

14.9

17.8

19.2

19.6

20.2

Source: Annual Report on the Ageing Society 2021, Cabinet Office

Leopalace21 Integrated Report 2021

123

Corporate Profile
Corporate Data

Members of Board of Directors and Auditors(As of March 31, 2021)(As of June 29, 2021)

Company Name:

Leopalace21 Corporation

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

August 17, 1973

Common stock:

JPY 100 million (As of August 10, 2021)

Operations:	Construction, leasing and sales ofapartments, condominiums, and residential
housing; development and operation ofresort facilities; broadband business; andelderly care business, etc.
Number of Employees:	5,082 (consolidated basis)
4,172 (non-consolidated basis)

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

Bunya Miyao
Shigeru Ashida
Mayumi Hayashima
Akira Watanabe
Kazuyasu Fujita
Yutaka Nakamura
Akio Yamashita
Jin Ryu

Audit & Supervisory Board Members
Full-time Audit & Supervisory Board Member (Outside) Jiro Yoshino
Full-time Audit & Supervisory Board Member
Kenichiro Samejima
Audit & Supervisory Board Member (Outside)
Takao Yuhara
Audit & Supervisory Board Member
Yoshitaka Murakami

Major Shareholders (Top 10)(As of March 31, 2021)
Number of Shares
Percentage of(thousands of shares) Outstanding Shares

Shareholder Name (honorific titles are omitted)

1 Chidori Godo Kaisha

84,50725.69

2 Ardisia Investment, Inc

48,68314.80

3 Noriyasu Shimada

11,474

3.48

4 STATE STREET BANK AND TRUST COMPANY 505103

9,295

2.82

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

6,416

1.95

6 JPMBL RE NOMURA INTERNATIONAL PLC 1 COLL EQUITY

5,415

1.64

7 Stockholding Association for Leopalace21’s Business Connection

5,319

1.61

8 SBI SECURITIES Co., Ltd.

5,029

1.52

9 Stockholding Association for Leopalace21’s Apartment Owners

4,712

1.43

10 Stockholding Association for Leopalace21’s Employees

3,093

0.94

Note 1. Of the shares held by The Master Trust Bank of Japan, Ltd. (Trust Account) as of March 31, 2021, those held in trust accounts as part of trust bank operations were 4,441 thousand shares.
2. The above percentages of outstanding shares are calculated excluding treasury stock.
3. The number of shares outstanding increased by 84,507 thousand shares through the issuance of new shares through a third-party allotment with a payment date of November 2, 2020.

Corporate Data (As of March 31, 2021)
Number of shares authorized:

500,000,000

Number of shares outstanding: 329,389,515
Number of shareholders:

Securities companies

Treasury stockBusiness corporations
and other legal entities

Individuals and other

Financial institutions

Foreign corporations

2.71%

0.17%

60,798

Listing:	First Section of
the Tokyo Stock Exchange
Administrator of Shareholder Registry:
Sumitomo Mitsui Trust Bank, Limited

124

Shareholder Composition (As of March 31, 2021)

Leopalace21 Integrated Report 2021

42.48%
7.08%

31.97%

15.59%

Number of Apartment Rooms under Management and Domestic Leasing Sales Offices by Region(As of March 31, 2021)

Total number ofmanaged rooms

Number of franchised sales offices
Number of directly managed sales offices

Number ofmanaged rooms

573,673 units
Total number of
directly managed sales offices

133 offices

5,917

Total number offranchised sales offices

Okinawa

2
7

13,550

3
1

Hokkaido

100 offices

512

35,3277
1239,943

TohokuHokuriku-Koshinetsu
122380,8593
1040,437Kita-Kanto

39,39098

Kinki

Chugoku
15
1145,438170,320

Kyushu28
28

87,756
14,736
Shikoku

13
17

3
4
Chubu

Tokyo metro area

Share Price and Trading Volume (As of March 31, 2021)
Trading Volume

Share Price(JPY)(Thousand shares)

300

150,000

200

100,000

100

50,000

0

0

Apr
2020

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2021

Feb

Mar

Leopalace21 Integrated Report 2021

125

Leopalace21 Corporation
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TEL: +81-3-5350-0001 (Main Line)
http://eg.leopalace21.com/©Leopalace21 Corporation 2021
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