Corporate Information(As of March 31, 2007)(As of June 28, 2007)

Corporate Data

Members of Board of Directors

Company Name: Leopalace21 Corporation
Head Office: 2-54-11 Honcho, Nakano-ku, Tokyo
TEL: +81-3-5350-0001 (Main Line)
President and CEO: Yoshiteru Kitagawa
Established: August 17, 1973
Common Stock: ¥ 55,640.66 million
Number of Shares Outstanding: 159.54 million shares
Operations: Construction, leasing, and sales of apartments, condominiums, and residential
housing; development and operation of resort facilities; hotel business;broadband business; Silver business, etc.
Number of Employees: 7,409 (Consolidated basis) 6,489 (Non-consolidated basis)
Building lots and buildings transaction business license:
Minister of Land, Infrastructure and Transport Permit (8) No. 2846
Construction business permit:
Minister of Land, Infrastructure and Transport Permit (Special-15) No. 11502
Registration of Class-1 architect office: Tokyo Governor Registration 36122
Loan business registration: Kanto Finance Bureau Chief Registration (7) No. 00581
Memberships: Japan Association of Home Suppliers
Japan Prefabricated Construction and Manufacturers Association

President and CEO
Senior Managing Director
Senior Managing Director
Executive Director ofManagement
Executive Director ofManagement
Executive Director ofManagement
Director
Director
Director
Director
DirectorStanding Auditor
Standing Auditor
Standing Auditor
Auditor(As of March 31, 2007)

Corporate Structure( 50.0%)

Leasing Division
SPC Leopalace REIT (Real-Estate Leasing)

Hitoshi Yamaguchi
Kou Kimura
Yoshikazu Miike
Tadahiro Miyama
Satoshi Abe
Yousuke Kitagawa
Yoshitaka Kouda
Masaru Katayama
Katsumi Furuhata
Eiichi Dobashi(As of March 31, 2007)

Securities Companies
1,374 thousand shares
0.86%

Apartment Construction Subcontracting Division(Manufacturing and Sales of Housing Materials)

Yoshinori Uehara

Shareholder Composition

Leopalace21 Corporation

Toyo Miyama Kogyo Co., Ltd.

Yoshiteru Kitagawa
Eisei Miyama
Akihiko Umeda
Jiro Nishida( 37.5%)SPC Leopalace REIT II (Real-Estate Leasing)( 33.3%)

SPC Leopalace REIT III (Real-Estate Leasing)( 25.0%)Business Corporations andother legal entities
8,431 thousand shares
5.28%
Financial Institutions
31,096 thousand shares
19.49%

Treasury Stocks
164 thousand shares
0.10%

Foreign Corporations
79,578 thousand shares
49.88%

2007

Investors
Guide
For the year ended March 2007

Individuals and Other
38,898 thousand shares
24.38%(As of March 31, 2007)

Hotel and Resort Related Division
MDI Guam Corporation(Hotel/resort operations in Guam)

Miyama Travel, Ltd.
(Travel Agency)(Condominium developer/seller)

No. of shares% ofoutstanding
sharesYusuke Miyama

21,251,774

13.32%The Master Trust of Japan ,Ltd.
(Trust Account)

10,227,700

6.41%

Japan Trustee Service Bank, Ltd. (for trust)

6,566,600

4.11%

State Street Bank and Trust Company

4,362,449

2.73%

State Street Bank and Trust Company
5051033,400,722

2.13%

BBH (Lux) For Fidelity Funds - Japan Fund

3,093,500

1.93%

Toyo Kanetsu K.K.

2,745,900

1.72%

HSBC Fund Services, Sparx AssetManagement Co., Ltd

2,691,200

1.68%

MDI Corporation

2,350,000

1.47%

Mellon Bank, N.A. as Agent for its
Client Mellon Omnibus US Pension

2,336,295

1.46%

Name of shareholder( 100.0%)( 100.0%)

Other Business
DIA KENSETSU Co., LTD.

Major Shareholders (Top 10)( 33.3%)

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

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

Leopalace21 Corporation
Code No. 8848
http://www.leopalace21.co.jp

Message from President

Medium-term Management Plan

We will further pursue the creation of new value with the aim of building a
corporate brand deserving of trust and appreciation through the promotion of
our Medium-term Management Plan, drafted in consideration for the future.

Ever since our establishment in 1973 Leopalace21 has cast aside conventional business ideas as aforerunner in the housing industry. We have continuously strived to create new value creation via

Corporate Slogan

Corporate Vision

A single dream for a united purpose

1. We strive to become a Total Support Enterprise,providing a diverse range of products andservices in accordance with solutions relating to“Effective Use of Land” and “High Quality
Housing,” as well as market needs.

A United Spirit to meet today’s constant demand for
new value and constant change

2. We will make work operations and financial

development and introduction of innovative products and services. We launched our new start in
December 2006 through the formulation and disclosure of the “Medium-term Management Plan:
United Spirit” ending the period in March 2011, the final year of implementation, in response to thetransition of our organization to a new organization in the form of a “Three Division Setup” (June2006) for the purpose of aggressively maximizing the corporate vitality in our management efforts
based on our compliance program. The “Medium-term Management Plan: United Spirit” provides acontent those of a market leader, form a“Corporate Quality” that responds to the social
responsibility of the Company as a “Corporate
Citizen” and build a “Corporate Brand” deservingof trust and appreciation.

A united purpose to fulfill our customers’ dreams
A united purpose for building a comfortable future
A united purpose aiming at a new goal
A united purpose of both employees and customers at the
new LeoPalace21
to realize a rich and comfortable lifestylevision of the future “Image of Our Company” in ten and twenty years, clarifies what needs to be done
and is formulated as a management plan for the coming five years.
Central themes that need to be pursued over the five-year period are set down as our “Corporate

Course of action and target indices of the Medium-term Management Plan

Vision,” a premise for the aforementioned efforts, to be indicated to all our employees as a basic policy
for the management of the Company. Two primary points are outlined in the vision: the first being thePresident

Yoshiteru Kitagawa

efforts to build a “Total Support Enterprise” through the further promotion of business operations andFirst phase of the Medium-term Management Plan

the second being the establishment of a “Corporate Brand” deserving of trust and appreciation. We(fiscal year ending March 2007 to March 2009)

Second phase of the Medium-termManagement Plan
(fiscal year ending March 2010 to March 2011)

will proceed with the formulation of our plans for the second phase of the plan based on this“Corporate Vision,” with our achievement targets (consolidated accounts) set for the fiscal year ending
March 2011, which will be the final fiscal year for the plan, with “¥1 trillion in net sales,” “¥100 billion
in recurring profit,” “equity ratio of 50%,” “15% ROE” and “dividend payout ratio of 30%.” The first

June 2006: The new slogan, “United Spirit” formulated;transition made to a “Three Divisional Setup.”phase of the plan (the three year period starting from the fiscal year ending March 2007 to March

2009/32009) is considered to be our “Management Base Establishing Period,” during which we will be

2008/3promoting the fulfillment of a profit base for the core business and a growth base for setting up thestrategic three businesses. Furthermore, the second phase (from the fiscal year ending March 2010 to

2007/3e Est
ent BasMarch 2011) is considered to be our “Synergic Expansion Period,” during which we intend to transition
into a phase where individual business operations can maximize their synergic effects.

three businesses started according to plan. We are certain that our challenge with considerations for

Corporate Philosophy

We aim to create new value through housing
Basic Policies
1. We view the apartment business as a social undertaking, which realizes the effective use of land and supply of high-quality housing.
2. We believe that successful leasing operations are our top priority in the apartment business.
3. We develop and introduce unique products based on a pioneering spirit.
4. We pursue client-first marketing approaches as well as prompt and systematic proactiveoperations.

1

SynergablishConsolidated target indices (for fiscal year ending March 2011)

the future will surely satisfy the expectations of our customers. We ask you, the stakeholders, toMedium-term Management Plan, drafted in consideration for the future.

PeriodDecember 2006: The “Medium-term Management Plan: United Spirit” (Five Year Plan) announced.

in a smooth favorable manner, with our core business attaining almost ¥600 billion. The strategic

the aim of building a corporate brand deserving of trust and appreciation through the promotion of ourioding Pernsion
ic Expaem
Manag

The fiscal year ended March 2007, the first year of our Medium-term Management Plan, was launched

continue granting us your support and patronage. We will further pursue the creation of new value with

2011/3
2010/3

Net sales:¥1 trillion

Recurring profit:¥100 billion

Equity ratio:
50 %

ROE:
15 %

Dividend payout ratio:
30 %Medium-term Management Strategy
1 [Overall Strategy] Leap significantly towards becoming a total support enterprise for housing
Sustain and improve growth potential and profitability of core business, while significantly expanding business in areas other than the corebusiness, primarily with the strategic three businesses (Residential Business, Silver Business and Broadband Business) in our efforts tomake a significant leap towards becoming a “Total Support Enterprise for Housing.”

2 [Core Business Strategy] Convert to a property asset management company for housing
Simultaneously promote quantitative increases and qualitative improvements for the core business (Apartment Construction Subcontracting
Business and Leasing Business) with the aim to become the largest “Property Asset Management Company for Housing.”

2Perspective of Medium-term Management Plan

[Consolidated] Transition of net sales and recurring profit for business divisions (plan)
Point 1:

1,200

1,025

Build

800

758

730
442

The net sales for the Apartment Construction Subcontracting Business in the fiscal year ended March 2007, which is the first fiscal year of
the Medium-term Management Plan, has increased significantly due to delays in the construction completion periods for a massive numberof projects, as a result of the heavy concentration of projects scheduled for completion in March 2006, the month for financial settlement
for the previous fiscal year. If this massive shift in construction completion is not included in the calculation for the amount of net sales atthe start of the plan and basing the plan on our current order taking condition in recent years (annual average of about 10%), the scale ofnet sales for the Apartment Construction Subcontracting Business in the final fiscal year is expected to be ¥400 billion.

Consolidated recurring profit (¥100 million)

Consolidated recurring profit

883

1,000
800

%
s of 10net saletotfirourring po of recure raticestofit base
new pro[Apartment Construction Subcontracting Business] Plan business from a neutral perspective,
rather than based on current conditions

600

We felt that if this figure was to be incorporated into the plan, however, a critical management issue with consideration for the future in themedium-term period would be buried and lost, since the profitability of the Apartment Construction Subcontracting Business is higher thanother business operations. It is for this reason that during the formulation of the current Medium-term Management Plan the sales amountfor the Apartment Construction Subcontracting Business did not include prospective income from the current order receiving conditions but
rather the plan was formulated from a neutral perspective (sustaining the business at a scale of about ¥320 billion).

400
200
0

Consolidated net sales (¥100 million)

d

rio
n Pe
o
i
s
n

12,000Strategic three businesses and related businessLeasing Business
Apartment Construction Subcontracting Business

erg

ing

lish

10,000

Ma

c
tegi
[Stra

8,000

tab
e Es

as

nt B

eme
nag

ted
Rela
and
s
s
sine
e Bu
Thre

6,316

iod
Per

ase
ncre
ss] I
e
n
i
Bus

Syn
of
ratio

s
sale
net

to
tion
posi
com

25%

When the plan for the transition of net sales for the Leasing Business is formulated based on this current condition with regards to thenumber of apartments being managed, it may be possible to secure growth of from 10% to 12% almost every year and therefore ¥400
billion can be expected by the fiscal year ending March 2011.
2,553

25.5%

1,657

Point 3:

969

ally,
% annu% to 12cts
01mo
ess fr ilding contrauin busin
growthmulation of b
n
la
P
]
u
c
ss
c
e
a
in
y
s
d
u
gB
stea
4,247
[Leasinthrough
3,498

4,654
205

2,772

[Strategic Three Businesses] Increase ratio of net sales composition to 25%
We look ten years and twenty years into the future and strive to make a significant leap towards becoming a “Total Support Enterprise,”while working to increase the ratio of net sales composition for business operations other than core business. The “strategic threebusinesses” are central to this effort. In the fiscal year ended March 2005, which was prior to the inception of this setup, the ratio of sales
composition for those business operations other than core business was a mere 2%. This figure will be improved to about 25% by the fiscal
year ending March 2011, which is the final year of the Medium-term Management Plan, securing a growth base for the future.

666

383

6,000

[Leasing Business] Plan growth in business from 10% to 12% annually, through steady
accumulation of building contracts
Even though the formulation of the plan is based on a neutral perspective for the Apartment Construction Subcontracting Business, the taskof management for most of the apartments, built by this line of business, is consigned to us each year due to the bulk leasing system
requested by apartment owners, which results in a steady increase in the number of our managed apartment units.

10,000

8,700

7,667
6,938

Point 2:

a

xp
ic E

3,843

3,122

Point 4:

Convert business conditions of Leopalace Owners' Mutual Insurance System and startup of"LEO-REIT" Business

4,000

74.5%

Backup plans that involve the utilization of strong complementary elements, such as the conversion of companies into companies
applicable for consolidated accounting through the conversion of the business conditions of the Leopalace Owners' Mutual Insurance
System (planned for the fiscal year ending March 2009), as well as starting “LEO-REIT” Business operations through strategic real estate
investments on a scale of ¥100 billion, as an alternative means of raising the ratio of net sales composition for business operations otherthan core business in the future. In addition, the steadily secured operating revenue of Domestic Hotel Business, as well as the stabilizationof the Overseas Resort Business will continue to be the focus of our efforts and will continue to receive proper support.

2,497[Apartment Construction Subcontracting Business] Plan business froma neutral perspective, rather than based on current conditions.
2,000

3,161

3,150

3,200

3,200

3,200

1,952

0

Point 5:

2006/3

2007/3

2008/3

2009/3

2010/3

2011/3(record)(record)(plan)(plan)(plan)(plan)First phase of theMedium-term Management Plan

Second phase of theMedium-term Management Plan

Build new profit base to secure ratio of recurring profit to net sales of 10%
We will promote aggressive investments through such means as making “Strategic System Investments” (approximately ¥10 billion), which
will become the foundation for converting the company into a “property asset management company for housing” during the period in which
the Medium-term Management Plan is implemented, on top of the aforementioned “Strategic Real estate Investments” (approximately¥100 billion). In addition, interest-bearing liabilities will be systematically reduced in order to substantialize management without debts forthe purpose of enhancing the financial base.
We will promote the aforementioned business plan in our aggressive investments and activities for a conversion to debt-free management
in order to build a new profit base to secure the ratio of recurring profit to net sales of 10% (consolidated recurring profit for the final fiscal
year to be ¥100 billion).

3

4

Medium-term Management Strategy-1

Strategies of Core Business

Strategy of Strategic Three Businesses - 1: Residential Business and Silver Business

Promote quantitative increases and qualitative improvements simultaneously forconverting into a “property asset management company for housing”

Establish business base in three major metropolitan areas during first phase ofplan and nurture them as hubs for next source of revenue

We have been aggressively consigning apartments that wehave completed through our Apartment Construction
Subcontracting Business, thereby increasing our stock ofconsignments (number of apartment units undermanagement), based on our belief that successful leasing
operations are the key to the apartment business. We
increased the number of apartment units undermanagement by approximately 2.3 times, from 152
thousand units to 344 thousand units in five years from theend of March 2001 to the end of March 2006 as a result,rapidly increasing the volume of stock that we handle.

The overall strategy for our Medium-term Management Strategy targets a significant leap towards becoming a “total support enterprise for housing.” The
Residential Business and Silver Business will be taking on important roles for this purpose. We are providing residential dwellings in the form of rental
apartment units, primarily to younger single persons and younger families through our core business. In the future, we aim to offer home ownership to families
through our Residential Business and nursing care facilities for the elderly generation through our Silver Business in order to make a leap towards becoming
an enterprise that can provide suitable modes of housing to match the needs of various individuals.

■ Number of apartment units under management and rate of tenancy (plan)

Number of apartment units under management

Rate of tenancy(Thousands of units)
800

600

92.4

92.8

93.0

93.5

94.0

94.5

592
543

95.0

92.5

The Residential Business and Silver Business are both structured for the construction of residential housing or nursing facilities to be sold and are in factextensions of our core business model. For this reason it is possible for both of these businesses to efficiently and assuredly expand, based on their existing
business infrastructure (such as leasing operations, contracted outlets, and pool of both managed apartments and apartment owners).

493
388

400

441
90.0

344
We decided that the building of a foundation for a new
business, which can fully utilize the strengths of a stockbusiness, was essential and for this reason we determined
the “conversion to a property asset management company
for housing” is the direction we should be taking our corebusiness. In the future we will be simultaneously promoting
the “quantitative increase strategy” to increase thebenefits that comes with this scale of business and the“qualitative improvement strategy” for raising efficiency
and productivity.

(%)

200

87.5

0

2006/3

2007/3

2008/3

2009/3

2010/3

2011/3(record)(record)(plan)(plan)(plan)(plan)First phase of theMedium-term Management Plan

85.0

Second phase of theMedium-term Management Plan

1 [Quantitative increase strategy - 1 ] Introduce new apartment products and services
The first quantitative increase strategy is enhancement of the Apartment Construction Subcontracting Business, which is the driving force behind further
increases in the volume of our stock in the future. It is essential that the properties and services match the needs of the tenants in order to secure a high rateof tenancy, which is an important key for successful apartment management. We are currently offering 20 types of properties for the standard series alone,with the intention for substantiating the product to match the needs of prospective tenants, increasing in recent years, such as units suitable for couples living
together, persons living with pets, as well as substantiated security. We will continue to aggressively introduce new apartments and services in the future to
maintain a stable increase in the number of orders received.

1 [Residential Business] Proceeding with

2 [Silver Business] Early completion of entry

Our main targets for the Residential Business are the “Baby-boomer Junior
Generation” (born between 1971 and 1975), who are moving out of ourstudio apartments, offered by our core business. Approximately 6.3 millionof these people, comprising about 64% of their population, areconcentrated into three metropolitan areas (2005 estimate). We will,
therefore, enter into these three metropolitan areas and construct ourbusiness base in these areas.

Approximately 14 million or 56% of the “Silver Generation” (people 65
years and older), targets of our Silver Business, are concentrated in thethree metropolitan areas (2005 estimate). We are focusing our efforts on
operations in and around the three metropolitan areas for the time being
and strive to expand business in an assured manner.

construction of base as entry into three
metropolitan areas completed

Our business is doing well according to our plan, with the number ofproperties scheduled for sale reaching approximately 300 in the Kanto
Region by the end of March 2006. Additionally, we entered the Chubu andKinki Regions during the fiscal year ended March 2007. We intend toaccelerate our efforts in these individual areas and to build a strong
business base in each of these areas in the future.

into three major metropolitan areas andmoving on to accumulating business results

The operation of the facilities following their construction for the Silver
Business, holds the key to business success. For this reason, we intend toconcentrate on building our operational know-how during the first phase of
the plan and schedule a gradual development, unlike the Residential
Business in terms of area expansion speed.

Note: The population figure for the Baby-boomer Junior Generation and Silver Generation, in the three metropolitan areas described above, is our estimate based on the data in the "2005 Population
Census of Japan," prepared by the Ministry of Internal Affairs and Communications.

2 [Quantitative increase strategy - 2] Establish an organizational framework with 400 outlets
and 2,400 sales persons in Leasing Business

As the second strategy of the quantitative increase strategy, the enhancement of the corporate organization for the Leasing Business is promoted,
corresponding to the number of units, which continue to increase into the future. Currently 1,859 sales personnel at 280 sales offices (Leopalace Centers)
handle our Leasing Business as of the end of March 2007. We intend to enhance this organization by increasing the number of sales locations nationwide to
400 and the number of sales personnel to 2,400 to maintain a high rate of tenancy by the fiscal year ending March 2011.

■ Current state of development of Residential Business(as of March 31, 2007)
Number of properties under contract
Number of properties sold

As a strategy to improve quality, on the other hand, we are proceeding with our construction of the “leasing ALM system,” a new business base for maximizing
operating revenue with regards to apartment units managed by us (assets being held on behalf of apartment owners), which are expected to increase to about
592 thousand units by the end of the final fiscal year of the plan (fiscal
year ending March 2011). We aim to complete the construction of thissystem during the first phase of the plan (until fiscal year ending March2009) and target full-scale operations from the fiscal year ending
AssetsTenants
Owners Liabilities Leopalace21
March 2010, during which the second phase of the plan will begin.
This system organically links abundant management data
accumulated through over 20 years of our apartment business withexternal market data to optimally control operations of a gigantic
number of assets under our care. We intend to build this system to alevel that rivals the sophistication of systems used by financial
institutions in order to deliver the utmost in terms of quality and tobring out the best of our strengths in the stock business.

5●Maximization of total profits inConstruction and Leasing
Business●Leasing system maximizing thenumber of occupied units andrent●Best balance between leasing
income and lease rent

●Reduction of lifecycle costs ofproperties

73

IbarakiPrefecture

14 16
SaitamaPrefecture

23

1

78

Gunma
Prefecture

26

17

Number of facilities withcompleted contracts
Number of facilities thathave been opened

Tochigi
Prefecture

3 [Qualitative improvement strategy] Complete leasing ALM system (first phase plan) andoperate at full-scale (second phase plan)■ Current state of development of Silver Business(as of March 31, 2007)

Tokyo
Metropolitan
Area

37

4

1

Tochigi
Prefecture

Gunma
Prefecture

IbarakiPrefecture

6

40

12
Saitama 3
Prefecture

3
Chiba
Prefecture

Kanagawa
Prefecture

2

Tokyo
Metropolitan
Area

Kanagawa
Prefecture

5
Chiba
Prefecture

Note: In addition to the above, the actual record in the Kinki Region contained four buildings
under contract and three buildings which had been sold .

6Medium-term Management Strategy-2

Strategy of Strategic Three Businesses - 2: Broadband Business

Promote conversion to revenue through enormous size brought about by corebusiness as part of stock business

Launching “LEO-REIT” Business aiming for 7% rate of return on operations throughstrategic real estate investments of approximately ¥100 billion

If we were to consider the Leasing Business as a stock business that utilizes managed apartment units as an intermediary, then the Broadband Business is astock business that utilizes software (or IT) as an intermediary. We have been providing a unique broadband service, “Leopalace BB,” to mainly occupants ofmanaged apartment units and have been proceeding with the installation of STB units (LEO-NET terminals). The installation has been completed at
approximately 83.3% (324,000 units) of the managed units as of March 31, 2007. This gigantic market unique to us deals with the occupants of managed
apartment units as subscribers. Through an increased number of managed units and the improvement of the STB installation rates, the scale of the businesswill become even more gigantic. The expansion and increase in number of targeted individuals will continue as services are implemented to our silver
facilities, as well as through sales to external institutions, such as hotels and medical institutions.

We have hotels at seven locations nationwide (with one opening in Hakata in April 2007) and high-rise apartment buildings, “Leopalace Flat” situated at 14
locations, to form synergic effects by complementing the nationwide network of our core business. We will coincide our timing with the exit of the Japanese
economy from deflation and in the future conduct strategic real estate investments amounting to approximately ¥100 billion by the fiscal year ending March
2011, to fulfill and substantiate our business infrastructure, as well as to improve the quality of our fixed assets.

We are currently developing and implementing paid services to occupants and services that utilize media value to corporations in a sequential manner, inorder to promote our conversion into revenue gained from benefits of our gigantic size.

■Content of Broadband Business’s principal services

Services aimed
at tenants

Corporateorientatedservice utilizing
media content
Set Top Box
(STB)

Free
services● Continual internet connection● Basic CS (satellite television) service (Four channels including MTV)● Informational services (news, weather, fortune telling, maps etc.)● Services such as gaming, shopping, and home delivery● Creation of participatory programming for tenants and their transmission

Paid
services● Video on demand (VOD): Approximately 3,000 titles● CS Plus (satellite television) service (Four additional channels including WOWOW)

Under
development

In planning stage● Sale of systems to condominiums, hotels, and hospitals● Classified advertisements using the LEO-NET and related program guide “LEO-NET BOOK”● Programs with commercial tie-ups (Tools for switching to surveys and request forbrochures following commercials)● Interlocking TV and cell-phone program (character entry tool using cell-phone)●Various subscription services (such as regional information and corporate information)

Strategy for Related Business - 1: Conversion of business conditions for Apartment Total Support Business

Consideration of all services provided to apartment owners as consistent business
operation, and converting Leopalace Owners' Mutual Insurance System to business
operation
In order to resolve uncertainties relating to the risks of managing apartment units for apartment owners and to be able to promise to deliver stable
management of apartment units over long periods of time, we are implementing our master sublease system that ensures rent income and the cooperative
program (Leopalace Owners' Mutual Insurance System) that guarantees apartment building maintenance and administration. The master sublease system isimplemented as the basic structure of our Leasing Business and the system itself is incorporated into the business. The Leopalace Owners' Mutual Insurance
System on the other hand, is a system set up as a contingency to deal with unexpected situations and was operated separately from our business operations.
However, in the future we intend to consider all services provided to apartment owners as a business comprised of a series of consistent services and we aim
to centrally manage all our management resources (personnel, properties, funds and information). We are currently preparing to convert the Leopalace
Owners' Mutual Insurance System for the Apartment Total Support Business in order to incorporate the business as a part of corporations subject toconsolidated accounting, for the fiscal year ending March 2009.

7

Strategy for Related Business - 2: The "LEO-REIT" Business through strategic real estate investments

In addition to hotels and high rise apartment buildings, situated on sites near railway stations, the subject of our investments will include retail spaces of ourcore business (Apartment Construction Subcontracting Business and Leasing
Business) as well as for establishing and maintaining the facilities of our strategic■ Summary of strategic real estate investments
business (Silver Business and Broadband Business), even for the fulfillment of● Investment scale: Approximately ¥100 billion
venues for various events. Our policy is to implement all these activities as(by fiscal year ending March 2011)
corporation-wide undertakings. Furthermore, facilities arising from these(about
50% of operating cash flow)
investments will be converted into real estate securities as much as possible andlaunched as our “LEO-REIT” Business operation, with the aim of securing operational
revenue of 7%.

● Investment standard: ROI of about 7%

Strategy for Related Business - 3: Domestic hotel businessAsahikawa

Increasing synergic effects with core business by increasing
the number of locations as well as part of strategic
real property investments(Opened August 2003)

Sapporo(OpenedNovember 2002)

NiigataIn April 2007 we opened “Hotel Leopalace Hakata,” our eighth domestic hotel location. Knowhow derived from apartment management is being used effectively in our Domestic HotelBusiness. The hotels are available in the ordinary mode of accommodation, for people on tours
or business trips, as well as for long-term stays with a “Monthly Leopalace Flat” contract, which isthe same as the contract for our apartment leasing. Furthermore, our core business locations
are also installed inside these hotels and they are utilized as a sales center for these areas.

(Opened
September 2002)

Okayama(Opened
September 2003)

SendaiHakata(Opened April 2003)(OpenedApril 2007)

We intend to continue increasing the number of locations as needed in the future, through theaforementioned strategic real estate investments and aim to create synergic effects, such as
contributing to the enhancement of community based activities for core business.

Nagoya(Opened May 2002)

Yokkaichi(Opened February 2003)

Strategy for Related Business - 4: Overseas Resort Business

Increasing revenue at Overseas Resort Business starting on a course for stable growth
Our Overseas Resort Business (in Guam), implemented through our wholly-owned
subsidiary, MDI Guam, started on a stable course after completing a series ofinfrastructure improvements by 2005 and negotiating business in collaboration withmajor travel agencies, as well as developing our own projects, which resulted in an
increased trend of drawing customers. The average availability of Leopalace Resort
units during the fiscal year ended March 2007 was 59.9%, with a room occupancy
totaling 136,258 rooms, with 28.1% being used by our apartment owners and 2.7%
being used by our shareholders. In addition to increasing synergic effects with corebusiness, we are focusing our sights on the development of silver facilities as
options for long-term stays.

Westin Resort

Leopalace Resort8Outline-1: Company History（●All events illustrated in the timeline occurred in respective calendar years, while all operational data in charts
represent respective fiscal year figures.）●Opening of Leopalace Center Taipei and Leopalace Center Pusan●Number of managed properties increased to 300,000●Start of Residential and Silver Businesses●Listed on 1st Section of Tokyo Stock Exchange●Capital increase by public offering, capital increase to ¥55.64 billion●Opening of Leopalace Center Shanghai●Launch of Monthly Leopalace Flat service●Opening of Leopalace World Nagoya and Leopalace Center Seoul●Beginning broadband business●Launch of Leopalace REIT II and III, a series of real estate securitization products●Capital increases to ¥37.24 billion following public offering of new shares (¥37.56 billion in 2003)●Launch of Leopalace REIT, a real estate securitization product●Capital increases to ¥30.52 billion following third-party allotment of new shares●Change company name to “Leopalace 21 Corporation”

Other Divisions

6.0％●Launch of Monthly Leopalace service●Leopalace 21 Villa Colonna Series wins the 1998 Good Design Award

Leasing Division

11.3％

97

●Launch of Leopalace Fraternity

Construction
Division●Sales breakdown by division for FY

96

ended March 1991 (non-consolidated)

2.1％

Apartment
development/sales80.6％●Listed on over-the-counter market( JASDAQ)

88

87

86

91

90

89

92

eriod
P
e
l
ubb

93

Post lebubbiod
Per

B

d
Perio
h
t
w
Gro

94

95

ess
n
i
s
u
B odelm itiontrans99

Net worth turns positive on a consolidated basis(in fiscal year ended March 2001)
Other Divisions

5.0％

Return to profitability at net level(in the fiscal year ended March 1997)

Construction
Division

Leasing
Division

50.6％

44.4％

(in the fiscal year ended March 1996)

Developer
Construction Subcon tracting
Establishment of
New Business Model●Sales breakdown by division for FY

ended March 2007 (non-consolidated)「Synergies from Construction and Leasing start to be felt in earnest■ Number of Apartment Units under Management (non-consolidated)■ Net Sales by Division (non-consolidated; ¥ 100 million)

full-operation■ Number of Members of the Leopalace Owners' Mutual

Insurance System (non-consolidated)

7,000
6,246

6,000

400,000

25,000388,500

5,000

4,692

4,571

4,166

4,000

350,000

21,440344,045

3,546
2,915

3,000
1,918

2,000
1,168

2,205

1,445

1,073
743

572

629

707

1,021

1,334

1,602

20,25820,0001,849 2,004 1,814

304,111300,000

17,107259,221

0
Real Estate
Construction
Leasing
Other

05

owth
r
g
s
ing
earn
o
t
rn
Retu
98

Return to profitability at operating level

Apartment development/
sales business

1,000

03

02

01

00

04

87/3

88/3

89/3

90/3

91/3

92/3

93/3

94/3

95/3

96/3

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3

497
54
19
3

1,049
54
47
17

1,265
34
109
37

1,632
45
180
61

1,777
46
250
132

536
78
316
143

183
86
354
120

42
137
364
86

18
224
373
92

0
531
428
62

0
760
519
55

12
915
618
57

27
1,040
728
54

44
1,073
841
46

0
637
1,082
96

0
1,544
1,268
102

0
1,902
1,628
16

0
2,250
1,889
27

0
2,480
2,166
46

0
1,952
2,497
122

0
3,161
2,772
313

250,000
15,00014,218
216,463

200,000
11,594

181,484■ Recurring profit (non-consolidated; ¥ 100 million)
800

10,000152,351

150,000
742

9,128

136,755
117,273

600
471

518

404

400

388

7,115

100,035

100,000

5,517

83,176

5,000

325
200

158

171

211
148

78
0

-44

-71

-58

-50

92/3

93/3

94/3

95/3

44

79

109

135

154

4,397

50,000

154

2,991
1,897

0
-100
87/3

9

07

06

88/3

89/3

90/3

91/3

96/3

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3

0
97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3

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

10

Outline-2: Business Mix

Status of Business Expansion

Overall Image of Business Operations (excluding overseas operations)

We consider Apartment Construction Subcontracting and Leasing Businesses, relating to apartment management,
as our two core businesses, providing comprehensive support for managing apartment units and enhancing
implementation of the strategic three businesses, as well as related business, in order to make a significant leap
towards becoming a total support enterprise for housing for our customers.

Implement multifaceted business operations for customers of both the Property Owner base and User base by
setting a comprehensive target that widely considers the entire “Land Utilization-Related Market”.

Enhancing and ExpandingCore Operations

Leopalace21

The fundamental base of our business management is thestrong synergy of our Apartment Construction Subcontracting
and Leasing Businesses. We will build a new managementbase using the "Leasing ALM System," based on the business
relationship between stock increases and efficient operation,in order to further enhance and expand our core business.

Enhancing and expanding core business operations
Apartment
Construction
Subcontracting
Business

Leasing
Business

Synergy

Moving our strategic three businesses
into full effect
The three divisions of Residential, Silver, and Broadband
Businesses are extensions of our two core businesses and are
all businesses that are open to an efficient and rapid
expansion based on effective utilization of our existing
business infrastructure. These businesses were off to a goodstart as new businesses in 2005 and we are currently
developing into three full-scale strategic divisions.

Moving our strategic three businesses into full effectResidential
Business

SilverBusiness

Creating new profitable units
through our change to anationwide-level of operations.

Broadband
Business
Profits deliveredby our added
value service.

Property Owner segment(Landowners)

Investor segment
Customers considering
investments
in securitized real estate

Customers using
the facilities(For Real Estate Securitization Business)

Sale of securitized real estate(For Allotment Sales Business)

Leopalace21(For Allotment Sales Business)

Sales of residences by allotment

Assessment and purchase of land
Customers
considering
sale of land

Residential Business(For Real Estate Securitization)(For Real Estate Securitization
Business)

Leasing operations of
securitized properties

Proposal to securitize real estate

Proposal to manage
leased apartments

Apartment
Construction
Subcontracting
Business

Leasing
Business

Broadband
Business

Customers
considering
effective
use of land(starting from fiscal year ending March 2009)

Overseas
Hotel/Resort
Business
Responding
to local needs.
Implementation ofOverseas development
strategic real propertyof business operations
investments"LEO-REIT"
Business

We are promoting our “Domestic Hotel Business” and“Overseas Hotel/Resort Business” as related businesses thatcan be implemented using our management resources. These
play the role of fillers for gaps that exist among the corebusiness and between our strategic three businesses, withthe drawing of new customers and complementing functions
for the core business. In addition, preparations are currently
being made to launch the “Apartment Total Sapport Business”
and the “LEO-REIT Business”.

Summary of Operations

11

Provision of broadband
ISP services

Tenant segment(individual andcorporation tenants)

Silver Business

Promotion of related businesses
Domestic
HotelBusiness

Provision ofleasing services

Provision of nursing
care services

Promotion of related businesses

Conversion to companies Apartment
subject to consolidated accounting Total Support
due to change in business mode BusinessResidential
buyersApartment Construction
Subcontracting
Business

We provide products with strong overall features offering high performance functions that are required of leased residential properties, such as low cost,energy saving and high durability, as well as sophisticated designs and user-friendly functionality to complement a unique total-support system, which
provides powerful support for the management of residential leasing properties and ultimately their owners.

Leasing BusinessWe are leasing residential properties based on our Leopalace21 Leasing System which offers features, such as no security deposit and no key
money payments, as well as the Monthly Leopalace Flat that provides furnished rooms with furniture and consumer appliances on a weekly andmonthly basis. We are responding to a wide range of prospective tenant needs to secure an extremely high rate of tenancy.

Broadband Business

Our Broadband ISP service business, Leopalace B.B., includes digital rental video services, satellite television broadcasting services, internet
access services and IP telephone services for the tenants of leased apartments that we manage throughout the country.

Silver BusinessWe will respond to the full-scale onset of an aging society and provide community-based Group Homes and Day Services and offer various nursing
care facilities and services, such as planning, developing, administering and managing Private Nursing Homes and Short Stay Services (specified
short-term nursing home care).

Residential BusinessWe will continue to conduct our Residential Housing Allotment Sales business, Condominium Units Sales business and Leopalace Flat businessthat deal with urban-type medium to high rise studio units, through our Real Estate Development business.

Apartment Total
Support Business“Leopalace Owners' Mutual Insurance System” currently operating as a cooperative program to ensure maintenance and administration ofapartment units as a part of our support strategy for apartment owners, will be redefined as a new Apartment Total Support Business andconversion into a business operation is expected (scheduled date for business conversion: Fiscal year ending March 2009).

"LEO-REIT" Business

Various facilities which will be created with strategic large-scale real estate investments for the future will be aggressively converted into realestate securities as needed (business operations are expected to be launched officially following the conversion of the first property into realestate security during the period covered by the Medium-term Management Plan).

Domestic HotelBusiness

We are operating hotel businesses in major cities around the country, aiming to manage hotels that are accessible to our customers by providing
new services that are in line with the times and by setting reasonable prices.

Overseas Hotel/
Resort BusinessWe are engaged in major resort business operations at two locations in Guam, one in the central district and the other in the northwesternsection of the island, through our wholly owned subsidiary, MDI Guam.

Proposal to develop nursing careinsurance applicable facilities

Silver segment(including family
members)

Comprehensive development of Land Utilization-Related Market
Build business models that aim to
maximize the use of customer
resources with the two core operations

Realizing Maximized Business
Opportunities by Implementing Various
Approaches for the Property Owners

Expanding Customer Base throughDiversification of Approaches Implemented
to Users

We are conducting business operations
from various perspectives as a go-between
for the customers who own properties andthe customers who are using the facilities
that are built and managed by us.

Aside from the Apartment Construction
Subcontracting business, which is one of
our core operations, we also have strategic
business operations, such as the
Residential business and Silver businessthat can be included in our proposals toproperty owners.

Approaches employed to aid users are conductedby four business operations, including the Leasing
business, which is a core operation, along with the
Broadband business, Residential business andSilver business.

Apartment Construction Subcontracting
and Leasing businesses are the two
operations at the core of such activities.
The synergic effects on peripheralbusinesses are extremely powerfulresulting from a high degree of credibility
and recognition secured through dealing
with our customers who are property
owners and our customers who are users.
This has become our business model withthe aim to maximize the use of customer
resources.
Customers on both ends of the business
are not only in a relationship with theentrance and exit of operations, but rather,
they should be positioned as criticalbusiness management resources thatbring operating revenue.

The needs of our customers vary from“effective use of land” to “sale of land” and“investment in securitized real estate”. We,
therefore, offer our proposals on thesethree business operations, suggestingManagement of Rental Apartments,
Securitization of Real Estate andDevelopment of Nursing Care Insurance
Applicable Facilities depending on theirneeds, while conducting the Assessment
and Purchase of Land for customers whoare considering selling their property andproviding services related to the Sale ofSecuritized Real Estate, such as Leopalace
REIT to those customers who are interested
in investing in securitized real estate.
We are realizing a maximization ofbusiness opportunities through such various
approaches.

Along with properties managed by the Leasing
business, we perform leasing operations forproperties, which have been securitized by the
Residential business and provide leasing services
to the individual and corporate tenant base.
Furthermore, we are increasing the attraction ofleasing properties and connect it to theacquisition of business revenue by offering bothfree and for-fee Broadband ISP services(Leopalace B.B.) to the tenant base. Furthermore,
we will sell residences (houses and condominium
units) that has been developed by the Residential
business to prospective home buyers, whilevarious nursing care services are provided tothose in need of nursing care (including familiesof patients) by the Silver business.
We will be expanding the customer base of users
through the operation of these businesses andpromote diversification of our revenue sources.

12

Outline-3: Core BusinessCore Business Model

Construction/Leasing Synergies

Our fundamental strength is the “Model of Synergies between Construction and Leasing”
Our Company
Proposing and contracting
construction of leased
apartments

Property ownersegment(Landowners)

Bulk leasing contract(promising stable
management)

Apartment
Construction
Subcontracting
Business

Simple and convenient
leasing format(available for use startingfrom two weeks )Leasingbusiness

Tenant segment(those moving in)●Individuals

Leopalace21 Leasing System
Provision of various services
that support daily life

Cooperative systems(maintenance andmanagement of buildings)

Monthly Leopalace Flats(general)●Corporations(dormitories
and company
housing)[Construction subcontracting revenue][Management services revenue]

Studios (less than 30m2): Construction
Division’s Main ProductIn the apartment business, accurately
assessing the changing needs of specificcustomer groups over the next 20-30 years isessential. In this context, we havedeveloped products primarily targeting
single individuals, who account for the
majority of apartment tenants. Thus, weoffer studios of less than 30 square meters
as our main product in the Construction
Division. Indeed, proposals we submit toowners are for the construction of apartmentbuildings located in areas where we expect
large lease demand based on our detailed
marketing analysis.

[Usage fee revenue]

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

Membership-based leases for long-term
occupancy and Monthly Leopalace
Flat for short-term stays: the Leasing
Division’s two main products
The Leasing Division offers products
designed for long-term occupancy andshort-term stays. The former responds tothe long-term occupancy through the
Leopalace21 Leasing System that does not
require lease deposits and key money, while
the latter is Monthly Leopalace Flat, which
is provided with furniture and consumer
electronics and includes utility expenses.
To cope with the diversifying needs oftenants in recent years, we haveapproached product development with aneye to convenience and amenity for shortterm stays.

The increasing number of property owners who selectour services leads to an increased number of leased
properties (managed properties), thereby promoting
the expansion of the Leasing business.

Monthly Leopalace Flat has multiple
functions
In recent years, Monthly Leopalace Flat has
been employed by a diverse group oftenants. Simply put, long-term occupancy
tenants account for some 60% of Monthly
Leopalace Flat tenants and short-term
tenants make up the remaining 40%. Longterm occupancy functions include ordinary
residential use, company and school
dormitories, and housing for job transferees
away from families. Meanwhile, reasons for
short-term stays include business trips(mainstay), job training, entrance
examinations and lectures, temporary
housing during moves and homerenovation, and sightseeing. As mentioned
earlier, the success of the Monthly
Leopalace Flat service owes to our accurate
response to diverse customer needs.
●Breakdown of Monthly Leopalace Flat tenants(for fiscal year ended March 2007)
Temporary use (space lease)/Other

1.4％
Building a Unique Business Model with
the Fusion of Construction Businessand Leasing Business Based on theConcept that “Apartment Management
Exists Only Because of Leasing”
We are building our business based on thebasic policy that states “Apartment
Management Exists Only Because of Leasing”
and with our belief that apartment building
construction and leased property management
are inseparable businesses. From theperspective of property owners, the biggest
concern regarding their decision to build anapartment building is “whether it would bepossible to continue securing an adequate
number of tenants throughout the years”.
Consequently, we provide a “Bulk Leasing
System” to the property owners by conducting
the Leasing business on our own and bybuilding an organization that can sustain ahigh rate of tenancy. We resolve the concerns
regarding apartment building management
for property owners and provide them with amechanism that makes it possible tocommission us with the construction of anapartment building by realizing a “Model of
Synergies between Construction and Leasing”.
By owning such a unique synergy between
Construction and Leasing, we are able torealize extremely high stability in ourbusiness operations.

13

Exhibiting an Extremely Strong
Competitiveness in the Industry by
Facilitating Compatibility Between
Benefits for Property Owners andBenefits for Tenants
Our customers are from both the property
owner base, owners of the real property, as
well as tenants, who wish to move into leased
properties. The strength of the “Model of
Synergies between Construction and Leasing”
is borne out of various mechanisms thatmaximize the benefits for both parties.
We established a “Total System for Apartment
Operations” that not only offers the membersof the property owner base recruitment andmanagement of tenants, through a bulk
property leasing system and cooperative
system, but also includes maintenance andmanagement of the buildings through theprovision of comprehensive support.
Furthermore, to the members of the tenantbase, we provide not only the development
and provision of leased properties thatfeature superior designs and functionality,
but also units furnished with consumer
electronics by providing leasing formats(such as Leopalace21 Leasing System andMonthly Leopalace Flat) to respond to thediverse life styles of modern times.
Our business model that offers significant
benefits to both parties exhibits an extremely
strong competitiveness.

Expansion of student rental market
through business collaboration;
improved occupancy rates throughimproved corporate sales

Short-term stay(housing)

43.0％
By actively developing expansion for new
demand, we have been successful infurther improving our occupancy rates inthis particular sector.
With the original intention of retaining
existing student tenants from 2005 weconcluded an agreement with companies
that have a large number of students intheir correspondence study businesses. We
also established a new payment option thatallows for monthly payments for the use ofMonthly Leopalace Flats, providing thepossibility of making payments necessary tomove into the leased properties as if they
were being paid as rent on a monthly basis
through a business alliance with credit cardcompanies. This has expanded demand anddeveloped a structure that eases theburden on students starting a new life.
Furthemore, as a part of the strategy for
expanding corporate trading, we launched
the new “Corporations Only Plan” in April
2006, which allows residential dwellers tomove nationwide. The number of corporate
accounts during the fiscal year ending
March 2007 was approximately 19,160 (anincrease by 31.2% over the same period of
the previous year), showing a favorable
increase. Furthermore, starting in April
2007 corporate sales locations increased
by about 40 locations, resulting in a 67location corporate organization, further
improving the potential for increased
trading and occupancy rates.

“Leopalace21 Series” exterior view

Long-term
occupancy

55.6％“Leopalace21 Series” Interior view

●Security Installations

Unit bath comes equipped withconvenient bathroom dryer features

Intercomequipped with
monitorCard key

Security windows(first floor only)

Television also offers broadband services

Microwave oven

Air-conditioner

Kitchen with an electricalcooking facility●Facility with pet accommodating
specifications (some available)

Refrigerator

Bed

Table and chair (table is collapsible)
Leash hook

Western door with pet access*Includes currently unfinished properties

14

Outline-4: Characteristics and Competitiveness of Core BusinessCharacteristics and Competitiveness 1

Master sublease system and owners’ mutual insuranceWith our unique supply plan, we promise 30 years of stable management
Based on our belief that successful leasing operations are thekey to the apartment business, we introduced a mastersublease system which guarantees 30 years of stable apartment
operations, ahead of industry rivals. Under the system, we firstdraft apartment supply plans based on our research on market
potential and tenant needs in each of the 1,051 segmented
areas across the country. Based on these plans, we makeproposals to prospective apartment owners, offering
comprehensive support for the apartment business fromconstruction to maintenance and administration. The mastersublease system, which ensures stable rent income over the
maximum 30-year period, and Leopalace owners’ mutual
insurance system＊, which guarantees apartment building
maintenance and administration, represents our key support
systems for apartment owners.

OwnersPayment ofmaster sublease
rent to owners

Three unique points that support the master-lease system

Unique tenant
recruitment
systemLeopalace21
Corporation

Tenants
Payment ofsublease rent

Comprehensive
maintenance andadministration

Building

system ensure smooth maintenance and administration

Multiple tenant recruitment channels

Innovative leasing systems

Without successful tenant recruitment, theapartment business would not run smoothly. Our
thorough research in local market’s potential
backed by our nationwide marketing activities
enables independent, nationwide tenant
recruitment. We employ various recruitment
media, including our nationwide office network,
web sites, apartment rental publications, and TV
commercials to ensure efficient tenant
recruitment. Meanwhile, prospective tenants areable to search for housing units, anytime,
anywhere from all over Japan.

Our products cover short-term stay
as well as conventional long-term
housing needs, aided by our
unique systems. Moreover, wehave introduced innovative
business practices not requiring
lease deposits and key money.
Thus, we have successfully
recruited a broad range of tenantgroups unrivaled by competitors,
meeting multiple needs of bothindividuals and corporations.

Reliable proxy maintenance andadministration
On behalf of apartment owners, we carryout operations from building maintenanceto tenant administration. By maintaining
the asset value of buildings at high levels
through consistent maintenance efforts,
we endeavor to secure stable apartment
operations. Furthermore, building
maintenance, which is long-term innature, is guaranteed by the Leopalace
Owners’ Mutual Insurance System＊,
which protects owner lifestyles fromunforeseeable situations.

＊The “Leopalace Owners' Mutual Insurance System” is currently preparing for a business conversion to

become an “Apartment Total Support Business” in the fiscal year ending March 2009.

Characteristics and Competitiveness 2

Nationwide studio apartment network, supported byonline search capabilities

Apartment buildings under master sublease contracts with Leopalace21 are available nationwide

Domestic network of 276 Leopalace Centers

Studios for which we have subcontracted construction and havecarried out maintenance and administration are located all overJapan, totaling some 388 thousand units. These studios werebuilt in areas where we estimated reasonable potential demand
based on thorough market research, in order to meet needs ofprospective tenants. We are the only industry player with thismany studios nationwide.

Visitors to Leopalace Centers at 276 locations nationwide cansearch real-time for studios using our online network. For
example, a person who lives in Tokyo can look for the most up-todate information about studios for lease available in other areas
such as Hokkaido and Kyushu, apply for the apartment, and sign
the contract on the spot. The nationwide sales center network
combined with our online network guarantees our ability to meeta variety of needs among prospective corporate and individual
tenants.

Hokkaido area:
8,725units

Koshinetsu area:
16,380units

Hokuriku area:
12,979units

Tohoku area:
24,969units

Kinki area:

Hokkaido area:
10Outlets

Koshinetsu area:
14Outlets

Hokuriku area:
10Outlets

Tohoku area:
24Outlets

Kinki area:
Chugoku area:

54,618units●Number of apartments managed by area

(at end-March 2007)

Chugoku area:

Kanto area:

26,150units

143,032units

Kyushu/Okinawa area:

Tokai area:

31,542units

60,765units

Total number of units in Japan 388,500

Kanto area:●Number of Leopalace Centers by area

(at end-March 2007)

85Outlets

Kyushu/Okinawa area:

Tokai area:
34Outlets

29Outlets

Total number of outlets in Japan 276

Shikoku area:
9,340units

Characteristics and Competitiveness 3

41Outlets

21Outlets*In addition to a further four overseas outlets.

Shikoku area:
8Outlets

Real-time web search possible anywhere, anytime

Powerful web research based on nationwide network
Visitors to our web sites can search real-time for the most up-todate information on studios available across the country, andapply for the apartment and sign a contract on the spot. With
some 388 thousand studios managed nationwide, we are theonly industry player that can provide prospective tenants withreal-time search capabilities of studios available nationwide evenusing our mobile Internet site.

15

SearchSelection

Application

Leasing Agreement

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

16

Market Trend-1

Demands (Residential Construction Market)

Supply (Residential Leasehold■ Number of new residential housing starts (sorted by user relationships)
Leased units
Residential houses for allotment sales
Condominium units for allotment sales
Homeowner's houses
Company housing and others

Construction Market)

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

Studio housing stock

Number of new residential leaseholds under 30m2

Number of new residential leaseholds
Number of new residential leaseholds under 30m2
Market share of new residential leaseholds under 30m2

Number of units we supply
Our share(Thousands of units)
600

(%)
60.0

(%)
75.0

(Thousands of units)
150

537.9

3,447

1,400

50.0

454.5

1,341

458.7

1,173

1,145

500

104.2

0
90

426

418

444

147

518
442

455

459

45.0

43.8

538

467

300

39.6

30.0

800

39.6

136

118
113

119

600

192

211
166

116

129

139

138

138
200

22.9

23.6

24.3

23.7

30.0

23.7
20.0

218
198

202

207

231

636

100

366

373

367

353

10.0

356
104.2

31

28

19

15

13

12

12

10

12

10

11

97/3

98/3

99/3

00/3

01/3

02/3

03/3

04/3

05/3

06/3

07/3

Note: Excerpted from Residential Housing Construction Work Commencement Statistics for fiscal 2006 of the Ministry ofLand, Infrastructure and Transport.

108.1

113.5

122.8

242.9
03/10

0

2001~2003
1996~2000
1991~1995
1981~1990
1980 and before

1,303

16,076
1,043

Now(6.5%)

2,790

2,664

5 years ago(16.6%)

2,577

10 years ago(16.0%)

4,510

20 years ago(28.1%)

5,282

25 years ago(32.9%)

2,054

0
04/3

05/3

06/3

07/3

Note 1: Excerpted from Residential Housing Construction Work Commencement Statistics
for fiscal 2006 of the Ministry of Land, Infrastructure and Transport.
Note 2: All figures are based on fiscal year periods.

Construction of leased units less than 30m2 aresteadily recovering

According to the Residential Housing Construction Work Commencement Statistics ofthe Ministry of Land, Infrastructure and Transport, the number of newly built
residential housing units peaked in fiscal 1996 (ending March 1997) with 1,630
thousand units, while the figures changed to 1,179 thousand in fiscal 1998 (ending
March 1999) and thereafter continued to hover around 1,200 thousand units. In thepast four years the trend has been showing a slow recovery.

Leased units under 30m2 comprise our core field and haveshown a rapid increase in recent years. The number of
construction work commencing in fiscal 1999 (ending March
2000), for leased units under 30m 2 , bottomed at 73
thousand units but showed a recovery by reaching 100
thousand units by fiscal 2002 (ending March 2003). In fiscal
2006 (ending March 2007), this figure increased further to127.6 thousand units. Furthermore, although the proportionof residential units less than 30m2 among the overall total
number of leased units being constructed had increased infiscal 2004 (ending March 2005), in the most recent two
years units over 30m2 showed an increase over the units lessthan 30m2, which displayed a slight decrease. Both units had
similar shares of almost one quarter of the total figure(23.7%).

In the meantime, homeowner's houses recovered somewhat, but was still declining,
while leased units and residential houses for allotment sales increased in number,
resulting in a dramatic shift in the market share makeup.

Central roles played by the shifting of the market share makeup for residential housing
supplies (commencement of construction for new residential housing), include anincrease in the number of leased units and residential houses for allotment sales
A look at the trends for commencing new residential housing in recent years, in terms
of user relationships indicate that leased units and residential housing for allotment
sales are supporting slow overall recovery trends. Of all residential housing forallotment sales, Residential houses maintained a high level approaching 140 thousand
units in the most recent three years, whereas the number of condominium units has
increased four years in a row, with an increase of 22.2% in fiscal 2006 (ending March
2007) over fiscal 2002 (ending March 2003). Furthermore, leased units have recorded
a consecutive increase for six years since fiscal 2001 (ending March 2003), gaining thehighest share of the market by dominating 41.9% in fiscal 2006 (ending March 2007)
for all new units of residential housing construction.

5,371

49.7

5,100
8,000

55.9

6,000
4,000

0
03/3

44.9

35.0

127.6

Residential housing supply status has been recovering slowly over the past
four years while undergoing changes in terms of market share makeup

17

16,132
15,470

15.0

42.8

438
377

0

16,00010,000

438

98/10

242
30

200

59.3
93/10

12,000

223

476

32.0
88/10

Note: Excerpted from Residential Housing and Land Statistics Survey for fiscal 2003 of the Ministry of Public Management,
Home Affairs, Posts and Communications.

14,000

400

451

2.0

110.4

(Thousands of units)
18,000

60

126

4.0

1.9

■ Trend in residential Leaseholds by period

40.5

33.6
200

3.4
2.4

40.0

516
1,000

6.0

1,000

113.5

400

1,173 1,193

8.0

60.0

108.1

1,249

1,226 1,213

7.0

1,500

122.8
120

467.3

1,285

616

10.0

2,451

1,717

127.6

500

14.0
12.0

3,000

2,000

517.9

1,179

(%)
16.0

3,215

2,500

1,630

1,200

Our share

3,500(Thousands of units)
1,800

1,600

Our stock(Thousands of units)
4,000

0

0
03/3

04/3

05/3

06/3

8,045

6,939

2,000

07/3

Note: As of March 2007, the total number of units supplied by our company is taken as theactual number of units supplied.

0
93/10

98/10

03/10

Our share of supply for studio apartments is 43.8%

Increasing studio stocks

The reason behind this increase in leased units under 30m2,
is the increase in the number of young and single households
in urban areas seeking a new lifestyle, along with the birth ofa new demand, such as the outsourcing of corporate
dormitories and company housing.

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

Furthermore, the graph shown above represents the numberof new units supplied by our studio apartment operations(Apartment Construction Subcontracting Business) for theconstruction of leased units under 30m 2. In fiscal 2006
(ending March 2007) we were able to maintain or improve on
our high market share of 43.8% of all supplied units in themarket. It is clear that we are in possession of a formidable
market share in this field.

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

18

Market Trend-2

Demands (Leasing Market)

Demand (Residential Construction■ Estimation for future number of general households by family category
SinglesSingle parents with kid(s)Married couples
Married couples with kid(s)Others(Thousands of households)
60,000■ Estimates for total number of households in the future

by household age groups

and Leasing Markets)

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

65 years and over

65 years and over

35 years to 64 years

35 years to 64 years

Under 35 years

Under 35 years(Thousands of households)
60,000(Thousands of households)
18,000■ Breakdown of uses of month-to-month leases (March 2007)

Temporary stay to visit hospitalized relation 0.22％
Temporary stay to visit relation on assignment 0.17％
Domestic tourism (individual) 0.16％
Tourism (foreigners) 0.02％
Domestic tourism (group) 0.01％

Temporary stay duringhomerenovation/
rebuilding 0.55％
Study 0.28％
Training 2.83％

16,663

17,159Temporary use (for space) 1.4％
. Office spaceand other

Temporary stay
between moves

15,98450,13950,00050,47650,27049,06349,64350,00030,00012,911( 27.6%)

3,578

50,47650,27049,643

14,457( 29.5%)

4,112

15,169( 30.3%)15,000

4,400

4,625

16,663

17,159( 34.6%)40,000 11,136(23.8%)

13,546(27.6%)

43.0％

14,457

12,911
15,984GeneralTemporary use

15,16946,782

46,78240,00049,06350,13915,406(30.7%)

17,616

18,471

18,426(37.1%)

30,00012,0006,354
3,865(26.7%)

4,709

6,801
(39.6%)

9,637

10,421Company dormitories

Student dormitories 3.30％
Job assignment away from home 0.90％
Daily use because of long commute 0.40％

9,000

26,138
10,291

20,00026,371■ Number of tenants by contract type
5,444

5,917

6,161

6,389

26,81820,00025,888

6,573

6,000

25,43537.52％
15.42％

4,750

10,507

55.6％

Business trips

3,032(23.5%)

4,577
10,58935.58％
Residential use

5,664

4,794
8,835

400 (Thousands of units)
Monthly Leopalace Flat
Leopalace21 Leasing System
350

371.7
326.9
117.3

300

277.8

25,132109.7

250

14,91914,6465,302(41.1%)
14,16913,517

10,00012,776

10,000

3,000

6,539

6,212

2000/10

2005/10

5,981

5,761

5,574

5,401

2010
(Projected)

2015(Projected)

2020(Projected)

2025(Projected)

0

Note: Excerpted from the National Census from the Ministry of Public Management, Home Affairs, Posts andTelecommunications for fiscal 2003 and the Number of Households and Future Estimates of fiscal 2005 from theInstitute of Population Problems.

Large market needs exist for studios that will be sustained over a long
periodWith declining birth rates and an aging society, the population problem in Japan is an
issue that needs to be considered. In terms of family categories, singles consisted of
14,457 thousand in 2005, which comprised 29.5% share of the market. It is
anticipated that this will increase to 15,169 thousand by 2010 and comprise over
30.3% of the market share. Furthermore, an estimate for 2025 shows the number ofhouseholds will reach approximately 17,159 thousand, with 34.6% of the market
share, a rapid increase in this period. This indicates that the household makeup in
Japan will be moving toward the formation of a gigantic single person household basevery rapidly.
The market needs for studios provided by us is large and will be sustained over a long
period in the future, as indicated by this data on future estimates.

Our share
9,146

7,915

6,971

6,363

6,085

0

0
2000/10

2005/10

2010
2015
2020
2025
(Projected) (Projected) (Projected) (Projected)

6.5%

4,160

3,921

3,785
(22.1%)

2.7%
2000/10

2010
2015
2020
2025
(Projected) (Projected) (Projected) (Projected)

The graph shown above is made up of data at the upper rightand an estimation for the future number of generalhouseholds by family category, as viewed in terms of age
group. The so-called silver population, comprised of people
aged 65 and over, will exceed the 30% share of the makeup
in 2010 and their share of the makeup will reach 37.1% by2025. This means that a gigantic silver business market,
comprised of one out of every three households, will emerge.

113.8

129.4
3.5

143.9
32.5

74.7
57.8

217.2

254.4

174.4
150.1

113.8

125.9

111.4

109.8

119.7

1999/3

2000/3

2001/3

2002/3

2003/30
2004/3

2005/3

2006/3

2007/3

Note: Based on company data

Note: Excerpted from the National Census from Ministry of Public Management, Home
Affairs, Posts and Telecommunications for fiscal 2003 and the Number of Households
and Future Estimates of fiscal 2005 from the Institute of Population Problems.

Anticipated emergence of gigantic silver businessmarket based on estimated figures for future numberof households by age group100
50

2005/10

103.4
89.7

167.6
150

4,544

In terms of single person households categorized byage group, the silver population base emerges
together with the under 35s as the target populations
for our core business
Furthermore, the graph, shown above, represents dataprepared by categorizing the extracted information regarding
single person households obtained from the estimation for
the future number of general households by family category,shown on page 19, by age group. Targets comprised of theunder 35 population base of corporate users and the silverbusiness market, comprised of persons 65 and over, forwhom there are increasing needs in terms of hobby andnursing care, are emerging.
Our share in the market of the single person households forunder 35s was 2.7% in 2000, although it reached a level of
6.5% in 2005.

19

239.8
194.4

200

5,148
(35.6%)

11,998
9,509. Place for hobby,
creative activities. Common space(for friends and others). Social area
. Conference room
. Other

1.23％

Pioneering new markets through monthly leasing
We are pioneering into new markets outside the existing leasing markets byimplementing Monthly Leopalace, which is available for short or long-term leasing,along with Leopalace21 Leasing System intended for long-term tenants. The purposes
for using the monthly leasing service can be categorized into “residential use” and“temporary use.” In terms of the residential use, the purposes for using the service
are expanding, such as “dormitory (for employees and students),” “job assignment
away from home,” “daily use because of long commute,” besides the “general use ofrooms.” Furthermore, as for “temporary use,” the purposes vary, including “businesstrips,” which is the most often cited purpose, as well as accommodation duringmoving, taking seminars, taking exams and tourism.

Steady increase of a user base for monthly leasing responding tovarious needs
The trend for number of tenants by contract type indicates that since Monthly Leopalace
provides furniture, consumer electronics and utility expenses, launched in March 2000,
the number of transactions for monthly leasing increased rapidly, which indicates theservice matched the needs of the market. Furthermore, Monthly Leopalace Flats waslaunched in March 2002, offering tenancy periods in shorter segments, responding
appropriately to the changing needs of the market. The number of units for this service
increased to 117.3 thousand units by the fiscal year ending in March 2007.

20

Financial Highlights

Consolidated
Net sales

Non-Consolidated

Operating profit

Recurring profit

Net sales

Operating profit

Recurring profit

800,000 (¥ million)

80,000 (¥ million)

80,000 (¥ million)

800,000 (¥ million)

80,000 (¥ million)

80,000 (¥ million)

600,000

60,00060,000600,000

60,00060,000400,000

40,00040,000400,000

40,00040,000200,000

20,00020,000200,000

20,00020,000

0

0

0
'03/3

'04/3

'05/3

'06/3

'03/3

'07/3

Net income

'04/3

'05/3

'06/3

0
'03/3

'07/3

Total assets

40,000 (¥ million)

500,000 (¥ million)

30,000400,000

'04/3

'05/3

0

'07/3

'06/3

'03/3

Net assets

'04/3

'05/3

'06/3

'07/3

0
'03/3

Net income

200,000 (¥ million)

40,000 (¥ million)

150,000

20,000

'04/3

'05/3

'06/3

'07/3

'03/3

Total assets

'04/3

'05/3

'06/3

'07/3

'06/3

'07/3

Net assets

500,000 (¥ million)

200,000 (¥ million)

400,000

150,000

20,000300,000

300,000

'03/3

'04/3

'05/3

'03/3

200,000

'06/3

0

'07/3

-10,000

100,000-20,000

0

'06/3

0

100,000

10,000

'05/3

'06/3

'03/3

'07/3

100,000'07/3-40,000

0
'04/3

'05/3

-20,000

50,000

'03/3

'04/3

'04/3

'05/3

'06/3

'07/3

200,000
50,000100,000
0

0
'03/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

'05/3

(Unit : ¥ million)

Net sales(Unit : ¥ million)

2003/3

2004/3

2005/3

2006/3

2007/3

2003/3

2004/3

2005/3

2006/3

2007/3360,368

422,224476,266

465,386

631,608

Net sales

354,647

416,590

469,181457,135

624,553

44,892

51,78354,87939,53474,74540,41947,10451,81738,752

74,183Operating profit

44,52551,67054,682

40,77576,007

Operating profit

Recurring profit

36,34541,29953,265

44,15173,002

Recurring profit

Net income

20,46420,96033,262-16,582

37,358Net income

25,416

27,84328,750-33,346

39,597

Total assets

410,340

421,163

453,434

412,803454,819

Total assets

401,708

432,552

469,467

409,721444,020

Net assets

68,30881,419149,798

133,622

185,784

Net assets

79,447

105,568

168,457

133,106

167,796

Common stock

37,50037,50055,64055,64055,640Common stock

37,50037,50055,64055,64055,640Net assets per share (¥)

492.06585.82941.06

839.44

1,054.99

Shares outstanding (thousand shares)

139,543

139,543

159,543

159,543

159,543

Net income per share (¥)

160.56150.91220.79-104.17234.68

Net assets per share (¥)

569.87757.391,056.95

835.15

1,052.81

Net income per share (¥)

198.46

199.74

190.47-209.23

248.45

Dividends per share (¥)

15.00

15.00

15.00

15.00

50.00

2003/3

2004/3

2005/3

2006/3

2007/3

Segment information■ Sales breakdown (Consolidated)
Other Division

4.9％

Apartment Construction
Subcontracting Division

43.6％

49.8％

(Unit : ¥ million)

2003/3

2004/3

2005/3

2006/3

2007/3

Apartment Construction Subcontracting Division

190,216

225,011

248,032

195,202316,117

Apartment Construction Subcontracting Division

41,484

54,15357,05139,452

74,614

Leasing Division

162,769

188,866

216,593249,699

277,166

Leasing Division

9,404

7,428

7,243

8,079

7,031

Hotel Resort Related Division

6,688

7,056

9,561

10,86910,842

Hotel Resort Related Division-2,736-3,849-3,928-2,667-2,628Other Division

1,458

2,590

4,361

12,14931,187

Other Division-1,235-3,516-2,640

-393

1,091

Eliminations/Unallocated(764)(1,300)(2,282)(2,532)(3,704)

Eliminations/Unallocated(2,391)(2,545)(3,043)(3,695)(4,101)

360,368

422,224476,266

465,386

631,608

Total

44,52551,67054,682

40,77576,007

1.7％

Leasing
Division

21(Unit : ¥ million)

Hotel Resort
Related Division

2007/3■ Operating profit (Consolidated)

Total

22

Financial Indicators

Consolidated

Non-Consolidated

Profitability
Gross profit / Net sales

Operating profit / Net sales

Net income / Net sales

Gross profit / Net sales

Operating profit / Net sales

30（％）

30（％）

20（％）

30（％）

15（％）

20

20

10

20

10

10

10

0

10

5

Net income / Net sales
10（％）
5
0

0

0
'03/3

'04/3

'05/3

'06/3

'07/3

-10
'03/3

'04/3

'05/3

'06/3

0

'07/3

2003/3'03/3

2004/3'04/3

2005/3

'05/3

'06/3

25.39

25.84

24.92

23.94

Operating profit / Net sales (%)

12.35

12.23

11.48

8.76

Net income / Net sales (%)

5.67

4.96

6.98

-3.56

-10

0
'03/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

2007/3

2006/3Gross profit / Net sales (%)

'07/3

-5

'05/3

'06/3

'07/3

'03/3

'04/3

'05/3

'06/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/324.84

Gross profit / Net sales (%)

25.54

25.89

25.64

24.46

25.34

12.03

Operating profit / Net sales (%)

12.65

12.43

11.69

8.64

11.96

5.91

Net income / Net sales (%)

7.16

6.68

6.12

-7.29

6.34

Stability
Equity ratio

Current ratio

Fixed assets/Equity ratio

60（％）

150（％）

600（％）

40

100

400

Equity ratio

Current ratio

40（％）

Fixed assets/Equity ratio

120（％）

600（％）

80

400

40

200

30
20
20

50

200
10

0

0
'03/3

'04/3

'05/3

'06/3

'07/3

0
'03/3

'04/3

'05/3

'06/3

'07/3

0
'03/3

'04/3

'05/3

'06/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/3

16.64

19.33

33.03

32.36

36.96

Equity ratio (%)

0
'03/3

'04/3

'05/3

'06/3

'07/3

0
'03/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

'06/3

'05/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/3Equity ratio (%)

19.77

24.40

35.88

32.48

37.79

88.47

79.79

79.04

78.30

79.53

343.28283.19187.75188.05160.54Current ratio (%)

88.08

80.09

80.25

79.50

86.00

Current ratio (%)

Fixed assets/Equity ratio (%)

407.66348.97

197.84186.44159.50

Fixed assets/Equity ratio (%)

Efficiency
Total assets turnover

Fixed assets turnover

1.5 (Times)

3.0 (Times)

1.0

2.0

Tangible fixed assets turnover

Total assets turnover

4.0 (Times)

Fixed assets turnover

Tangible fixed assets turnover

1.5 (Times)

3 (Times)

4.5 (Times)

1.0

2

3.0

0.5

1

1.5

3.0
2.0
0.5

1.0
1.0

0

0

0
'03/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

'05/3

'06/3

'07/3

0
'03/3

'04/3

'05/3

'06/3

'07/3

0
'03/3

'04/3

'05/3

'06/3

'07/3

0
'03/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

'05/3

'06/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/3

2003/3

2004/3

2005/3

2006/3

2007/3

Total assets turnover (times)

0.91

1.01

1.08

1.07

1.45

Total assets turnover (times)

0.95

0.99

1.04

1.03

1.46

Fixed assets turnover (times)

1.40

1.50

1.64

1.70

2.44

Fixed assets turnover (times)

1.40

1.45

1.52

1.61

2.40

Tangible fixed assets turnover (times)

1.60

1.75

1.97

2.11

3.12

Tangible fixed assets turnover (times)

2.60

2.86

3.13

3.13

4.23

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

23

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

24

Financial Indicators

Consolidated

Non-Consolidated

Productivity
Net sales per employee

Operating profit per employee

120 (¥ million)

12 (¥ million)

90

9No. of employees at end-FY

Net sales per employee

Operating profit per employee

9,000 (persons)120 (¥ million)

15 (¥ million)

6,000

80

10

3,000

40

5

0

0

No. of employees at end-FY
8,000 (persons)
6,000

6

60

4,000

3

30

2,000

0

0
'03/3

'04/3

'05/3

'06/3

'03/3

'07/3

'04/3

'05/3

'06/3

'03/3

'07/3

'04/3

'05/3

'06/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/3

Net sales per employee (¥ million)

83.68

83.71

78.33

69.85

88.47

Operating profit per employee (¥ million)

10.33

10.24

8.99

6.12

10.64

No. of employees at end-FY (persons)

4,385

5,702

6,457

6,868

7,409

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

0
'03/3

'04/3

'05/3

'06/3

0
'03/3

'07/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

'05/3

'06/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/3

Net sales per employee (¥ million)

98.77

101.20

94.65

82.74

102.41

Operating profit per employee (¥ million)

12.50

12.57

11.07

7.15

12.25

No. of employees at end-FY (persons)

3,661

4,572

5,341

5,708

6,489

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

Investment Indices
ROE

ROA

90（％）

ROE

20（％）

60

ROA

60（％）

20（％）

40

15

15

20
30

10

10
0

0

5

-30

0
'03/3

'04/3

'05/3

'06/3

5

-20

0

-40

'07/3

'03/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

'05/3

'06/3

'07/3

'03/3

'04/3

'05/3

'06/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/3

2003/3

2004/3

2005/3

2006/3

2007/3

35.78

27.99

28.77

-11.7024.75

ROE (%)

40.71

30.09

20.98

-22.11

26.31

10.19

16.82

ROA (%)

10.87

11.29

11.48

8.81

17.37

ROE (%)ROA (%)

9.26

9.93

12.18

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

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

Consolidated

Cash Flows
Free cash flows

Per Share Data

Capital investment

Depreciation expense

60,000 (¥ million)

6,000 (¥ million)

30,000 (¥ million)

40,0004,000

20,00020,0002,000

10,000Net assets per share

Net income per share

1,200 (¥)

Shares outstanding at the end of fiscal year

300 (¥)

180,000 (thousand shares)

150

120,000

0

60,000

900
600
0

0
'03/3

'04/3

'05/3

'06/3

'07/3

300

0
'03/3

'04/3

'05/3

'06/3

'03/3

'07/3

'04/3

'05/3

'06/3

'07/3
-150

0
'03/3

2003/3

2004/3

2005/3

2006/3

'04/3

'05/3

'06/3

'07/3

0
'03/3

'04/3

'05/3

'06/3

'04/3

'05/3

'06/3

'07/3

2007/3

Cash flows from operating activities

23,34731,49240,34856,971

63,308Cash flows from investing activities-21,011-12,532-8,978-11,266-15,930

Net assets per share (¥)

Cash flows from financing activities-1,010-30,129-20,959-47,946-17,018

Net income per share (¥)

160.56

Depreciation expense (¥ million)

4,707

5,251

5,855

4,565

4,559

Shares outstanding at the end of fiscal year (thousand shares)

138,821

Capital investment (¥ million)

19,023

12,715

8,919

13,193

21,830Cash flows (¥ million)

'03/3

'07/3

2003/3

2004/3

2005/3

2006/3

2007/3492.06585.82941.06

839.44

1,054.99

150.91220.79-104 .17

234.68138,984

159,180

159,180

159,379

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

25

26

Balance Sheets

Consolidated

Non-Consolidated

Consolidated

Non-Consolidated(Unit : ¥ million)

2005/3

2006/3

2007/3

2005/3

2006/3

2007/3

Cash and cash equivalents

156,847
46,852

163,518
44,612

186,555
75,166

152,984
44,086

159,258
41,769174,558
59,872

41,588

8,114

9,594

40,654

7,222

8,865

13,142

10,4268,501

13,142

10,426

8,501

Marketable securities

151

155

29

151

13

29

Real estate for sale

477

7,524

27,765-

1,955

Property inventories

-

-

-

477

3,248

35,249

8,818

-

-

-

Trade receivables and accounts receivable for completed projects
Operating loans

Payment for construction in progress
Supplies
Other inventories
Prepaid expenses

455
-

638
-

722
21,819216,914

193,548

203,376

219,475

77,39290,80580,846

77,330

Short-term borrowings

30,09820,34816,51814,857

2,042

3,778

-

-

-

14,941

18,005

12,740
4,199

Long-term borrowings due within one year

-

-

-

-

-

Bonds due within one year

1,435

1,435

1,126

1,435

1,435

1,126

8,974

Unpaid expenses

10,517

9,503

13,287

9,709

8,508

12,755

5,568

18,791

Accrued expenses

48

23

30

40

17

23

3,248

35,249

8,818

Accrued income taxes

16,367

4,423

27,021

16,363

4,419

27,008

261

350

544

Advances received

28,27437,626

46,74428,21537,51046,603Customer advances for projects in progress

8,732

42,061

23,5298,732

42,061

23,529

-

-

-

4,390

5,457

6,950

2,224

2,487

2,798

2,224

2,487

2,798

16,032

18,98422,024Long-term borrowings from affiliates due within one year

Deposits payable
Allowance for employees’ bonuses

5,076

-

-

-

90

47

25

29,41522,56422,07529,412

22,56122,068

-

-

-

-

-

5,288

Other

19,89424,893

8,273

3,793

5,762

6,964

Long-term borrowings

Allowance for doubtful accounts-1,175-1,487-1,289-1,163-1,481-1,289Retirement benefit reserves

296,366

249,128

268,190316,286

250,316

269,388

Directors' accrued severance indemnities

154,103

Provision of reserve for rental income
Lease/guarantee deposits received

Tangible fixed assets

243,010

196,512207,112

151,427

140,663

6,683

6,534

8,465

1,831

585

627

90,55555,85552,120107,461

73,23856,747

Bonds

12,762

11,327

8,194

12,762

11,327

8,194

Directors’ long-term borrowings

64,48931,402

27,32059,46426,752

27,320---22,12622,126

4,645

2,556

3,246

4,111

2,541

3,229

4,091

-

-

2,986

-

-

2,986

-

-

533

-

-

533

10,566

9,801

8,974

10,566

9,801

8,974

179

76

-

-

-

-

285,982

261,530

269,035

301,010276,615

276,223

17,653

17,651

-

-

-

-

Other
Long-term liabilities

Buildings and structures

117,004

83,66680,62642,971

39,61338,805

Land

109,740

107,216

118,255

105,927

97,862

108,929

Construction in progress

12,697

1,964

4,397

719

1,555

4,331

Other

3,568

3,665

3,832

1,808

1,629

2,035

579

579

569

564

565

565

52,77652,03560,509164,294

109,087

114,718

9,815

11,046

7,934

5,401

6,185

5,713

Shareholders’ equity

Shares of subsidiaries and affiliates

-

-

-

64,293

5,755

2,980

Share capital

55,64055,640-55,64055,640-

Corporate bonds issued by subsidiaries and affiliates

-

-

-

1,200

1,200

-

Capital surplus

33,75933,759-33,49533,495-Retained earnings

72,09653,123-

79,14643,409

-

258

714

-

266

654

-

-11,761-9,418----Intangible fixed assets
Investments and other assets
Investment securities

Long-term loans receivable

4,315

2,930

2,281

938

1,877

1,781

Other
Total liabilities
Minority interests
Minority interests

Net unrealized gains on ‘other securities’

-

-

-

1

0

-

Long-term loans to executives

-

-

-

1,700

-

-

Long-term loans to subsidiaries and affiliates

-

-

-

56,67356,242

53,923Long-term trade receivables

10,979

2,835

2,125

10,979

2,835

2,125

Long-term prepaid expenses

32,82633,03542,72729,062

33,61843,068Deferred tax assets

2,174

1,901

3,074

2,174

1,893

2,834

Net assets

Other

3,341

3,349

4,942

3,354

3,349

5,001

-10,676-3,064-2,575-11,485-3,871-2,709Long-term loans to employees

Allowance for doubtful accounts
Deferred assets
Organization costs
Bond issuance costs
Total assets

27

2007/3

81,231

10,827

Fixed assets

2006/3

205,674

2,796

Deposits payable

2005/391,046

5,076

Other accounts receivable

2007/3

195,427

10,827

Accrued income

2006/3

Accounts payable including payables for completed projects

Current liabilities

2,796

Deferred tax assets

2005/3Liabilities

AssetsCurrent assets(Unit : ¥ million)

220

156

73

196

146

73

24

9

-

-

-

-

196

146

73

196

146

73

453,434

412,803454,819

469,467

409,721444,020

Translation adjustments

-195

-197

-

-91

-93

-

Total shareholders’ equity

149,798

133,622-

168,457

133,106-

Total liability, minority interest and shareholders’ equity

453,434

412,803-

469,467

409,721-

Shareholders’ equity--

175,348--

167,264

Share capital--

55,640--55,640Capital surplus--

34,104--33,495Retained earnings--

85,700--78,225

Treasury stock

-

-

-96

-

-

-96

Treasury stock---7,205--532

Net unrealized gains on other securities

-

-

532

-

-

532

Translation adjustments---7,737---

Minority interests--

17,641---

Total net assets--

185,784--

167,796

Liabilities and net assets--

454,819--444,020

Effect of evaluation and exchange rate difference28

Statements of Income

Statements of Cash Flows

Consolidated

Non-Consolidated

Consolidated(Unit : ¥ million)

2005/3
Ordinary income and loss
Net sales
Sales from Contracting Division
Sales from Leasing Division
Sales from Other Division
Cost of sales
Cost of Contracting Division
Cost of Leasing Division
Cost of Other Division
Gross profit
Selling, general and administrative expenses
Advertising expense
Selling fees
Provisions for allowance for doubtful accounts
Director compensation
Salaries and bonuses
Provisions for allowance for employees’ bonuses
Provisions for retirement benefit reserves
Provision of reserve for directors' retirement benefits
Welfare expenses
Fees paid
Rents paid
Depreciation expense
Taxes and public charges
Other
Operating profit
Non-operating profit and loss
Non-operating profit
Interest income
Dividend income
Gain on sale of investment securities
Equity method income
Income from cancellation of resort memberships
Income from cancellation of construction contracts
Unrealized gains on interest rate swaps
Foreign currency translation gain
Other
Non-operating expenses
Interest expense
All other financing costs
Equity method investment loss
Bond interest expense
Amortization of bond issuance costs
Other
Recurring profit
Extraordinary income and losses
Extraordinary income
Gain on sales of fixed assets
Gain on sale of affiliates’ stocks
Gain on sale of affiliates' bonds
Reversal of allowance for doubtful accounts
Gain from forgiveness of debt
Gain on redemption of affiliates' loans
Extraordinary losses
Loss on sales of fixed assets
Write-offs of fixed assets
Impairment losses
Markdown on investment securities
Loss on devaluation of affiliates’ stocks
Provision for allowance for doubtful accounts
Amortization of transition obligation
Provision of reserve for directors' retirement benefits
Provision of reserve for rental income
Other
Net income before taxes and adjustments (loss)
Corporate, residential, and enterprise taxes
Income tax rehabilitation
Income tax adjustments
Minority interest
Net income (loss)
Retained earnings brought forward
Unappropriated retained earnings (loss)

29

2006/3

2007/3

2005/3

2006/3(Unit : ¥ million)

2007/3476,266
248,032
216,590
11,643
357,546
163,176
177,671
16,698
118,72064,038
7,889
2,401
387
364
23,161
1,518
590
3,928
1,585
2,135
20,07554,682

465,386
195,202249,695
20,488353,928
129,397
203,664
20,866
111,458
70,683
8,265
2,909
1,653
425
25,714
1,752
861
4,101
1,293
2,391
21,314
40,775

631,608
316,117
277,163
38,328474,713
209,395
228,119
37,197
156,895
80,887
8,564
3,429
1,035
547
30,218
1,983
999
196
4,580
1,246
3,455
24,62876,007469,181
248,032
216,599
4,550
348,882
163,176
179,507
6,198
120,299
65,419
7,867
5,124
387
353
22,711
1,518
589
4,616
4,194
3,947
1,584
1,735
10,78754,879457,135
195,202249,702
12,230345,319
129,397
205,480
10,441
111,816
72,281
8,245
5,565
1,653
414
25,249
1,752
859
5,982
3,763
4,112
1,292
1,909
11,47939,534

624,553
316,117
277,168
31,267466,251
209,395
230,065
26,790158,301
83,556
8,548
6,693
1,035
543
29,791
1,983
996
196
7,173
4,770
4,593
1,245
2,974
13,00874,745

3,308
62
100
1,481
28
293
52
915
374
4,725
3,902
822
53,265

6,493
53
125
512
11
174
233
4,780
601
3,116
2,300
815
44,151

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

1,239
64
261
100
28
293
52
192
245
4,301
3,352
155
196
598
51,817

2,156
55
429
125
11
174
233
903
222
2,938
2,051
96
269
521
38,752

1,584
47
411
166
19
70
122
281
465
2,146
1,121
606
58
73
286
74,183

1,011
7
4
1,000
1,662
6
373
1,109
157
15
52,615
12,282
6,197
873
33,262
-

68
13
31
24
66,96310453
65,480831
187-22,743261
729-8,023871-16,582
-

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

1,678
6
671
1,000
6,279
6
335
5,768
157
11
47,217
12,2696,197
28,75050,396
79,14639
7
31
79,17310452
18,34859,342
831
187-40,381251
729-8,016-33,346
76,75643,409

4,121
1
549
1,680
932
958
7,386
16
215
3,009
210
700
2,789
446
70,917
26,425
4,894
39,597-

2005/3

2006/3

2007/3

Cash flows from operating activities
Net income before taxes and adjustments (Decrease)
Depreciation expense
Increase (Decrease) in allowance for doubtful accounts
Increase in directors' accrued severance indementies
Interest and dividends income
Interest expense
Gain from forgiveness of debt
Foreign exchange loss (gain)
Equity method loss (income)Loss on sale of tangible fixed assets
Write-offs of tangible fixed assets
Impairment losses
Gain on sale of affiliates’ stocks
Gain on sale of affiliates’ bonds
Gain on sale of investment securities
Markdown on investment securities
Decrease (Increase) in accounts receivable
Decrease (Increase) in inventories
Increase in real estate for sale (Increase)
Increase in payment for construction in progress
Increase in long-term prepaid expenses (Increase)
Increase (Decrease) in accounts payable
Increase (Decrease) or decrease in amount received for uncompleted works
Increase in advances received
Decrease in guarantee deposits received (Decrease)
Increase (Decrease) in accrued consumption tax
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

52,615
5,855
1,454
-99
4,268
-1,000-915-1,481
6373-100-12,841452-8,794
19,949-1,685
6,558-1,855-705-893
61,16081-3,992-16,900
40,348-22,743
4,565
1,737
-256
2,518
-4,780-512
10453
65,480-31-12542,237-39,212-7,345-10,208
33,3289,294-1,761-1,166699
72,181228-2,356-13,081
56,971

69,329
4,559
159
2,986
-136
1,332
-501
2,320
16
215
3,009
-2,514-1,119-166
210
914-18,554
26,430-12,366-2,571-18,531
9,093
-780
2,923
2,769
69,028129-1,290-4,55963,308Cash flows from investing activities
Payment for purchase of tangible fixed assets
Proceeds from sale of tangible fixed assets
Commissions paid on sale and disposal of tangible fixed assets
Payment for purchase of affiliates’ stocks
Income from sale of affiliated companies' stock due to changes in consolidation
Proceeds from sale of affiliates’ bonds
Payment for purchase of investment securities
Proceeds from sale of investment securities
Payment for loans madeProceeds from collection of loans
Other
Net cash provided by (used in) investing activities-8,91945-16-1,743952-1,0202,414-690-8,978-13,193914-34-2,827
2,835-1,381
2,843-422-11,266-21,8308-119-1,100
4,109
2,880
-792
1,000
-1,3783,646-2,355-15,930

Cash flows from financing activities
Proceeds from short-term debt
Repayment of short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Payment for accounts payable for long-term projects
Proceeds from shares issued
Proceeds from issuance of privately placed bonds
Payment for retirement of privately placed bonds
Payment for redemptions of privately placed bonds
Dividends paid to minority shareholders
Payment for purchase of treasury stock
Dividend paid for shareholders
Net cash (used in) provided by financing activities

39,405-46,434
10,000-54,346-1,43636,260-1,435-875-6-2,090-20,959

17,750-28,564
10,680-42,703
13,259-13,667-1,435-873-1-2,390-47,946

34,190-32,454
13,000-22,655-2,006-1,435-873-2-4,781-17,018

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents (Decrease)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year-154
10,25636,59646,8520-2,24046,852
44,612

195
30,55444,61275,16630