Leopalace21 Corporation
Integrated Report 2019

Integrated
IntegratedReport
Report2019201931,31,
2019
2019
ForForthethefiscalfiscal
year
year
ended
ended
March
March

Leopalace21
Leopalace21
Corporation
Corporation

To Our Stakeholders

Driven by our unwavering resolve,
we are wholly committed to rectifying
the issue of construction defects sothat we may regain the trust of all our
stakeholders and once again provide
safe housing to tenants and property
owners as soon as possible.

Leopal ace21 I nt egr at ed R epor t 2019

We offer our deepest apologies to tenants, owners, and all other stakeholders for theserious distress and inconvenience caused by construction defects in our apartments
identified in the fiscal year ended March 31, 2019.
I would also like to apologize for the serious impact on our financial results andshare price as a result of these construction defects. All officers and employees of the
Leopalace21 Group are united in resolving this series of problems as soon as possible
with the aim of ensuring that tenants can live in our apartments with peace of mind.
We will step up our efforts on reforming our corporate culture in order to realize
the basic policy of increasing value for society as a whole, as set out in our mission
statement. Moreover, legal compliance is an issue that warrants our utmost attention
with respect to business execution. That is why we will continue to drive home acompliance-first policy throughout the Company by regularly distributing messages to
employees, strengthening compliance training, and introducing personnel evaluations
based on the approach to compliance practice.
In addition, as already announced publicly, we have formulated the following fivemeasures with the aim of preventing reoccurrence: (1) drastically reforming our corporate culture; (2) rebuilding our compliance and risk management systems; (3) reviewing
our construction business framework; (4) adopting measures that prevent defects; and(5) adopting measures that enable early detection and swift action. Various matterswill be addressed, including dialogue with stakeholders, employee training, reviewing
Compliance Committee operations, and guaranteeing quality based on appropriate construction supervision and execution management. We consider these recurrence-prevention measures to be the top priority for management right now and they will be
implemented swiftly so we can set about establishing a robust framework.
We also recently revamped our management structure in order to execute theaforementioned measures. We now seek to quickly resolve the problem of construction
defects and achieve an open style of management that is attentive to the opinions of
our stakeholders.
We look forward to your continued support and understanding.

September 2019
Bunya Miyao
President and CEO

01

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9Contents

Promoting Reform of
For Regaining the Trust
Cover 2 To Our Stakeholders
04 Profile

Initiatives toward Regeneration
34 CEO Message

06 Report on Construction Defects

38	Initiatives for Strengthening Relationships with
Existing Owners

18 Toward a Stronger Corporate Governance System

40 Improving Satisfaction among Foreign National Tenants

20 Corporate Governance System and Initiatives

42 Business Overview

22 Corporate Governance Dialogue		 42 At a Glance

28 Compliance		44 Leasing Business

30 Risk Management

		46 Development Business

32 Directors and Audit & Supervisory Board Members

		 48 Elderly Care Business		 49 Hotels, Resort and Other Businesses

Editorial Policy
We publish an integrated report that combines an annual report with corporate social responsibility (CSR) reporting. The purpose of this report is to enable
management to communicate its message to all our stakeholders. We seek to present our management strategy, priority measures, an overview of businessconditions, etc. as well as inform readers about our CSR activities.
This report covers the fiscal year from April 1, 2018 through March 31, 2019 (fiscal year 2018). The scope is Leopalace21 Corporation and its consolidated
subsidiaries in Japan and overseas. Our aim is to publish to the extent possible the latest information available as of the publication date. With the aim ofpromoting deeper reader comprehension, the report includes macro-economic data relating to our businesses, and the “Data Compilation” section enables
readers to understand trends to date. We take care to explain what we present in ways that are readily understandable so that the report serves as an effective communication tool that reaches our many stakeholders.
In this report, we focus on explaining the reasons behind construction defects in some of our apartments, our measures for preventing recurrence, and our
initiatives aimed at creating a new Leopalace21. We hope this report helps readers gain a better understanding of the Company.

Leopal ace21 I nt egr at ed R epor t 2019

Initiatives for Strengthening Management Foundation

For Regaining the Trust

Our Corporate Culture

03

Data Compilation

50 Leopalace21’s ESG Management

62 Ten-Year Consolidated Financial Highlights

52 Basic CSR Action Policy

64 Consolidated Financial Highlights

		 52	Providing High-Quality Services and Supporting
Affluent Living

67 Non-financial Highlights

		 54	Creating Pleasant Work Environments and Developing
Diverse Human Resources

116 Leopalace21 Data Compilation

68 Financial Section

		 56 Contributing to Local Communities		 58 Creating an Environmentally Friendly Society		 60	Engaging in Sound, Constructive Communication
with Stakeholders

Initiatives toward Regeneration

122 Corporate Profile

Initiatives for Strengthening Management Foundation

Forward-looking Statements

・ISO26000
・GRI (Global Reporting Initiative)
Fourth generation (G4) of sustainability
reporting guidelines

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

Data Compilation

Reference Guidelines

04

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9ProfileLeopalace21 has established a unique business model fusing two core businesses, the Development Business, which
involves in real estate development as well as constructing apartments aimed mainly at single person households, andthe Leasing Business, which involves renting units of apartments we manage after they are built.
Through efforts to strengthen the profitability of the Leasing Business, Leopalace21 is moving forward with theestablishment of a “stock-based business model,” which generates stable profits from renting apartments it manages.
At the same time, our portfolio extends to the Elderly Care Business and Hotels, Resort & Other Businesses.
In the International Business (within our “Leasing Business”), we are expanding globally with a focus on Asia.
In these ways, Leopalace21 is a one-stop provider in Japan and overseas of a wide range of real estate services.

Contribute to society by creating and providing
Corporate Philosophy

Mission Statement“Creating New Value”

We seek to always be innovators,

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

to create without ceasing,and further,
we strive to increase value
for society as a whole.

Adopted on December 16, 2016

Leopal ace21 I nt egr at ed R epor t 2019

Leopalace21 delivers unique and exclusive values
in Japan and overseas through our four businesses.
Hotels, Resort & Other Businesses 1.2%
Elderly Care Business 2.7%
Development Business 11.7%

Net sales
composition ratio’19/3 FY2018

Leasing Business 84.4%

new value based on the theme of “housing.”“10 Promises” of Leopalace21 Group
1. We will broadly contribute to society through continuous reform and the creation of new value.
2.	We will aim to be a reliable and admired company with emphasis on equal opportunities andfair business practices.
3. We will prioritize serving our customers, and listen closely to what they have to say and identify their needs.
4. We will continue to provide valuable products and services in a timely manner, through constant innovation.
5. We will create a comfortable working environment where employees can fully exercise their skills and		 respect individuality and sense of values.
6. We will create a corporate culture where change and challenge is valued, and independence is respected.
7. We will provide appropriate returns of our results through fair, transparent and healthy business operations.
8. We will continue to grow through accurate identification of environmental changes, reforming our		 business model in a timely manner.
9.	We will contribute to the development of society and the economy, by committing to high ethicalstandards and complying with the law.
10.	We will diligently protect the global environment, and contribute to a prosperous society throughcorporate activities with close ties to regional communities.
Enacted on April 6, 2018

05

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Report on Construction Defects
Outline of construction defects related to parting walls, etc.
The defects found in the properties constructed by Leopalace21, as announced on and after April 27, 2018, may beclassified into the following four broad categories (1. construction defects related to parting walls in attics andother areas, 2. non-compliance of exterior walls with specifications, 3. non-compliance of parting walls with specifications, and 4. non-compliance of ceilings with specifications). The need for and method of tenants to vacate theproperties and the duration of the repair work vary by the nature of the property defect.
1. Construction defects related to part- 2. Non-compliance of exterior 3. Non-compliance of parting 4. Non-compliance of ceilings
walls with specifications
walls with specifications
with specifications
ing walls in attics and other areas
Outline of defect• Issues related to defects in which parting
walls were not constructed in attics orspaces above the ceilings• Issues related to defects in which
exterior walls did not comply with thespecifications certified by the Ministerof Land, Infrastructure, Transport andTourism stated in the construction design
documents• Issues related to defects in which mate• Issues related to defects in which therials different from those stated in theconstruction finish of ceilings did not comply with the specifications of the Ministry
construction design documents were usedof Land, Infrastructure, Transport andas insulation materials in parting walls
Tourism Notice stated in the construction• Issues related to defects in which thedesign documents
parting walls of fire-resistant buildings did
not comply with the fire-resistant structure
specifications certified by the Minister ofLand, Infrastructure, Transport and Tourism• Determine the repair method upon
consulting with the property owners andspecified administrative agencies• Some property series can be repaired
from outside the unit, while someproperty series must be repaired one unit
at a time*• Determine the repair method upon
• Due to poor fire-resistance performance,• Determine the repair method upon
consulting with the property owners and
we are in the process of helping tenantsconsulting with the property owners andspecified administrative agencies, andmove to another property quickly
specified administrative agencies, andhelp tenants move to another property orhelp tenants move to another property or • Of the 4,456 tenants occupying properties
find temporary housing
find temporary housing
managed by Leopalace21, about 93.9%
have already moved to another property or
have set move-in dates (as of September 30)

Necessary measures

Conceptual diagram (sample)
Exteriorwall
Balcony

Terrace

Top floor unit

Bottom floor unit

Parting wall

Ceiling

Sharedhallway

Sharedhallway[Example]
Parting walls are not constructed
for the entire attic[Specifications in construction
design documents]
Exterior wall (outdoor)

Exterior wall (indoor)

606 mm or less between
wall backings

Approx. 455 mm between
wall backings

SidingGlass wool
IndoorReinforced
gypsum board

Parting wall is not constructed
for the hallway eave

(Gypsum board for
fireproof structure)[Actual construction specifications]
Exterior wall (outdoor)

Exterior wall (indoor)

Large interval
between wall backings

Large interval
between wall backings

Gypsum board is not installed
for the beam
SidingFoamedurethane
IndoorReinforced
gypsum board(Gypsum board for
fireproof structure)

Box outlined in red indicates area not incompliance with Minister’s certification[Specifications in construction
design documents][Specifications in construction
design documents]

Gypsum board
t=12.5 mm
Double layer

Glass woolorrock wool filling

Gypsum board
t=12.5 mm
Double layer

Cross-sectional image of parting wall

[Actual construction specifications]Sound absorbing rock wool board (t=9 mm) on
top of reinforced gypsum board (t=12.5 mm)[Actual construction specifications]Gypsum board
t=12.5 mm
Double layer

FoamedurethanefillingGypsum board
t=12.5 mm
Double layer

Decorative gypsum
board (t=9.5 mm)
Single layer

Cross-sectional image of parting wall

Box outlined in red indicates area not incompliance with Notice specifications

Decorative gypsum
board (t=9.5 mm) on topof reinforced gypsum
board (t=12.5 mm)

Box outlined in red indicates area not incompliance with Notice specifications* For example, properties of the Nail series can be repaired by entering the attic from outside the unit, whereas properties of the 6 series must be repaired one unit at a time.

Leopal ace21 I nt egr at ed R epor t 2019

The External Investigation Committee chaired by Mr. Tetsuo Ito, attorney at law (of Nishimura & Asahi), was established on March 18, 2019, and investigations have been conducted. In response to the investigation by the External
Investigation Committee and the results of the investigation, the Company considers that the fundamental causes of
the construction defects related to parting walls and others can be summarized into the following three points.

Corporate culture in which
employees focus on the intentionsof the top management andneglect legal compliance

Lack of compliance with laws
and regulations including
the Building Standards Act• It was incorrectly interpreted thatthe construction of parting walls
was unnecessary for the attics of
the Nail series• For the rapid commercializationof products, it was considered
tolerated to give less importance to compliance of laws andregulations• Panels with foamed urethane
filling were used even though
it could have been recognizedthat they did not comply with the
Minister’s certification• Neglected to verify compliancewith laws when developing new
products• Construction management
depended on self-inspections• Most of the architects were
not involved in construction
supervision• Inadequate construction management system, including insufficient process inspections due
to shortage of qualified engineers
with license• Inadequate construction supervision system, including negligenceof on-site construction supervision by architects• Did not take seriously specified
administrative agencies’ indications regarding compliance withlaws and regulations after the
introduction of new products

The following points are noted in detail in the Final Report of the External Investigation Committee as the “overall and essential
causes and background.” Leopalace21 takes them seriously as the fundamental causes of the problem of the construction defects
related to parting walls and others.

Initiatives for Strengthening Management Foundation• The corporate culture was suchthat employees were expected toprioritize the management policyof the top management, ahead oflegal compliance and construction quality• For the construction application,
construction certification documents were created that differedfrom the actual construction

Inadequate construction
management system andconstruction supervision system

Initiatives toward Regeneration• The corporate culture was suchthat the Design Department, theQuality Department, etc. wereunable to voice their opinions to
the top management, and employees’ minds were constantly
focused on the intentions of the
top management

For Regaining the Trust

Causes and Background07

Amid the tough business environment at the time when the Company took actions
ahead of a mature planning, top priority was given to overcoming the financial crisisand expanding the construction subcontracting business.

There was low level of compliance awareness with laws andregulations related to construction and poor sensitivity to legal risks,
as well as lack a sense of ownership in quality assurance.

Data Compilation

The Company ran things on its way with the leadership of
too much authoritative top management.

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Measures to Prevent Recurrence (Announced on May 29, 2019)

1. Fundamental reform of the corporate culture
Leopalace21 will fundamentally reform the corporate culture, with the aim of encouraging our officers and employees to takethe perspective of customers such as owners and tenants, and to realize that the Company’s social significance lies in providing value that our customers appreciate. In order to restore customer trust that we have lost due to the construction defects
related to parting walls and others, and to materialize the fundamental reform, we will carry out the following measures.

Development ofcustomer-oriented
corporate culture
Address the fundamental causes
and take measures to preventthe recurrence of the construction defects related to parting
walls and others with a sense ofurgency instead of overcoming
the problem as an occurrence inthe past
Encourage our officers andemployees to reaffirm the importance of providing value that
customers appreciate• Repeatedly use all available opportunities, such as notifications, meetings, andtrainings, to make officers and employees aware of the importanceEstablishment ofcompliance-first policy
Periodic dissemination of
messages concerning thecompliance-first policy• On January 21, 2019, a message wassent to officers and employees about ourcompliance-first management policy• Top management will continue to use
all available opportunities to send astrong message about the compliancefirst policy

Examination of introductionof the performance rating
system, including adherence tocompliance• Value highly adherence to compliancefirst policy• Consider introduction of multidirectional personnel rating system	Consider introduction of a multi-directional
personnel rating system, including subordinates’ rating of superiors of their compliance with laws and regulations and ratingby other departments

Realization of corporate
culture reform through dialogue
with stakeholders
Promote active dialogue among
management and employees• Boost dialogues between management
and employees by increasing theirfrequency and duration• Communicate the will of management toemployees• Incorporate employee suggestions intobusiness operation

Implement employee awarenesssurveys• Periodically survey employee awareness,
including level of compliance awareness• Review the content of compliance training on the basis of the survey results

Promote dialogue withstakeholders and visualize resultsof the dialogue(Implement stakeholder engagement
measures)• Promote and expand dialogue withstakeholders• Reflect information and points ofimprovement obtained from dialogues inbusiness operation

Periodically report the implementation      

09For Regaining the Trust

Development of a system forreporting violation of laws
and regulations
Notification and full conformity to
the reporting rules• As per our compliance regulations, officers and employees of the Leopalace21
Group must report or consult in casesof compliance violations or suspicion
Officers and employees are informedthat they will be subject to disciplinary
measures if they fail to report, according
to employee rules and regulations• Notify employees of the system,
explain its use, and describe cases of
non-compliance incidents• Ensure employees fully understand theleniency system

Revising the personnel
management system

Training to prevent the root
causes and recurrence of theconstruction defects of parting
walls

Revise the personnel management system• Carry out training on the causes andrecurrence prevention measures so that
all officers and employees understandthe essentials• Repeatedly carry out training andseek to firmly establish the recurrence
prevention measures not to forgetthe lessons learned from construction
defects problem

Carry out training• Training based on organizational
hierarchy• Job specific training• Train the people in charge at the internalreporting contact point• Acquire authentication for the internalreporting system(enhance job rotation)• More actively transfer personnel
between departments and consider
revising the personnel management
system so that employees gain a deeper
understanding of the work performed atother departments and the organization
shares information internallyInitiatives for Strengthening Management Foundation

Notification and full applicationof the internal reporting system

Carrying out training forcorporate culture reform

Initiatives toward Regeneration
Data Compilation      

Leopal ace21 I nt egr at ed R epor t 2019status to the Compliance Committee

10

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9
Leo palace2 1 An nua l Repor t 2018

2. Restructuring of the system for managing compliance and risk
1

Establishment of the Compliance Management Headquarters

On April 1, 2019, Leopalace21 established the Compliance Management Headquarters, in order to fundamentally revise and rebuild asolid compliance system for the Group.

Compliance and Risk Management System
Audit &
Supervisory Board

Audit & Supervisory
Board members

Board of Directors

Directors

President & CEO

President & CEO

Risk Management Committee

Compliance Committee

General manager & CLO

Head office
Officerin charge

Head officeCompliance Management Headquarters
Officerin charge

Division manager Compliance Management Division

Compliance Management Department
Management
Management
Planning
Headquarters
Headquarters

Compliance
Planning
Section

Risk
ComplianceManagement
SectionSectionConsultation andcoordination regarding
controls

Training
Planning
SectionMonitoring of controls

Construction Legal
Department
Construction
Legal
SectionInspection
Section

Legal Affairs
Department

Legal Affairs
SectionBranches Inspection Inspection
Section also
SectionInternal
audit

established atmajor branches

Internal
audit

Auditing
Department

Process inspections
Internal
audit

Business divisions
Subsidiaries
and affiliates

2

Business divisions

Construction Management
Department

Establishment of the Construction Legal Department in the Compliance Management Division to
examine compliance for new products and other matters outside the business divisions

The Construction Legal Department, independent from the Construction Subcontracting Business Division, was established in the
Compliance Management Division on February 7, 2019 to examine compliance with laws and regulations.

Construction Legal Section

Inspection Section• Conduct legal checks and approve new businesses andnew products/services related to construction operation• Establish and implement inspection items for construction operation•C heck contracts and others related to construction operation• Recommend remedies and provide guidance, advice,and follow-up based on inspection results• Provide legal consultations and supports related to construction operation• Help adapt to legal revisions related to construction
operation• Check and help make improvements to quality and safety of existing construction operation

Leopal ace21 I nt egr at ed R epor t 2019

Improving the operation of the Compliance Committee

On April 22, 2019, we clarified that the Company’s Compliance Committee is the highest authority in the compliance system of theentire Leopalace21 Group. We revised the content of deliberation and the membership of the Committee to provide expert opinions
and promote active discussions on compliance violations.

For Regaining the Trust

3

11Compliance Committee• It is the highest authority in the compliance system of the entire Leopalace21 Group.
• The content of deliberation and the membership of the Committee have been revised to provide expert opinions and promote active discussions on compliance violations.

• Information on the status of the activities of the Compliance Committee is communicated inside and outside the Company
to ensure the transparency.

4

Initiatives toward Regeneration• An outside directors has been appointed to chair the Compliance Committee to strengthen its function of monitoring andchecking the business execution. We expect to strengthen the Compliance Committee’s authority so that it can instructdepartments to suspend execution of operations in cases where they are in clear violation of laws and regulations.

Improving the risk management method

Risk Management Committee• Discuss and determine levelof response and the need for
additional responses,
instruct improvements, etc.

• Report critical risks, etc.

Compliance Management Division• Identify and report on
potential risks• Risk assessment and criticalrisks identification• Report if risks (crises) arise• Discuss response policy andmeasures• Formulate and report on
measures for potential andexplicit risks

Business divisions• Detect potential risks from cases
brought to the ComplianceManagement Division• Extract potential risks by holding
regular meetings with businessdivisions, etc.
• Analyze potential and explicit
risks (crises) that were detected
and revealed

Data Compilation• Provide feedback on resultsof the Risk Management
Committee’s discussions

Initiatives for Strengthening Management Foundation

We have positioned the Risk Management Committee as an agency that cross-sectionally manages and supervises risk in the entire
Company. It will actively identify the potential risks of each business division as well as conduct effective risk management and crisis
response in line with risk severity.

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

5

Verification of compliance with applicable laws and regulations at the start ofnew businesses and the change of business content

In the past, internal procedures did not necessarily require checks on compliance with laws and regulations by the ComplianceManagement Division in cases of carrying out new businesses or making changes to the content of businesses. However, to ensurethat they are in compliance with laws and regulations, the Corporate Management Division will verify compliance as follows.

Division manager

ComplianceManagement
Headquarters

ComplianceManagement
Department
Legal Affairs
Department
orConstruction
Legal Department

Business divisions

6

Recheck and confirm theinvestigation results by
Legal Affairs Department andConstruction Legal Department

Verify business division
investigations in termsof legal compliancerisk examination

Feed back response byCompliance Management
Headquarters

Execute planning alongwith legal compliancecheck andrisk examination

Implement andcommence actions
following internal
approval procedures

Revising the system of assigning persons in charge of compliance

We will revise the system of assigning persons in charge of compliance and consider clarifying their position in the personnel system, upon enhancing their authority and responsibilities. We will also hold meetings among persons in charge of compliance in eachregion, and consider having the persons take initiatives in creating departmental compliance system.
Who are persons in charge of compliance?
In order to swiftly detect compliance violations, persons in charge of compliance have the role of increasing awareness ofcompliance measures and reporting violations of laws and regulations if they are found. Primarily managers of the branches
are appointed.

7

Revising the method of response to cases where non-compliance is suspected

To ensure appropriate reports about violations of laws and regulations, we will review the reporting route and employees are disciplined in the absence of such a report. In cases of suspected violations of laws and regulations with regard to existing products,
services, and operations, the Compliance Committee will have the authority to suspend operations.

Leopal ace21 I nt egr at ed R epor t 2019

Revision of the construction business framework
The Construction Management Department used to have the functions of inspection, training and others. However, we reviewed theconstruction business framework, and established the Construction Legal Department within the Compliance Management Division,
which conducts inspections, provides training, and offers technical guidance to business divisions. Furthermore, they are responsible
for monitoring control activities in business divisions.

For Regaining the Trust

3. Revision of the construction business framework

13

Board of Directors
President and CEO
Board of Directors

Construction Subcontracting Business Division

President and CEO

Compliance Management Headquarters

Construction Management Department
Business Operation Headquarters

Compliance Management Division
Compliance Management Headquarters

Design Management
Department

Construction
Construction
Subcontracting Business
Division
Supervision Technology
Administrative
Department
Department
Construction Management Department

Subcontracting
Administrative
Department

Compliance Planning
Construction Legal
Legal Affairs
Department
Department
Department
Compliance Management Division

DesignDesignSection
Management
Department

Supervision Technology
Supervision
Technology
Section
Department

Subcontracting
Administrative
Department

Construction Legal
Inspection
Compliance PlanningSection Construction Legal Section Legal Affairs
Department
Department
Department

Design Section(branch)DesignSupervision Technology
Section (branch)
Supervision
Technology
SectionInspection, training, technicalguidance
Construction
Legal
SectionDesign Section(branch)Subcontractors
Supervision Technology
Section (branch)

Inspection, training, technical guidance

SectionConstruction
Supervision

Construction
Administrative
Department

Inspection Section(branch)Inspection
SectionInspection Section(branch)Subcontractors
Improvementof processes for the development of new products and other things

Lack of documented rules on the organizational responsibility for examining legal compliance and lack of consistency in various
drawings at the time of new product development resulted in the construction defects of parting walls and other deficiencies. For
Revised product development process
this reason, when developing new products (including version and material changes), we have decided to subdivide
the new product
Request for Approval
Board ofdevelopment processes for detailedComplianceexaminationManagement
including compliancewith laws and regulations.
Division
Directors
Check whether the confirmation of

Check appropriate verification

Check whether the required
standards are met

legaldevelopment
compliance is appropriate
Revised productprocessmethod and legal compliance

Check whether consistency with generaldrawings, etc. has been achieved
Request for Approval

Compliance Management Division

Approval

Board ofDirectors

STEP 1
STEP 2
STEP 3
STEP 4
STEP 5Check whether the confirmation of
Check appropriate verification
Check whether the required
Check whether consistency with general
Product planninglegal compliance is appropriate
method and legal compliancestandards are met
drawings, etc. has been achieved
Construction verification
Product development
Production design
Product release
Market acceptance
Performance verification
Detailed design
Construction manuals
analysis
Detailed design of the
Product development
architecturalfeatures, structure,
Detailed
designequipment,
etc.

STEP 2

Structure, equipment,
energy-saving,etc.
Architecturaldesign(approximate estimate)
Concept
Confirmation of legal
compliance

Verification of safety,
durability,
constructability,
Detailed
design of the andfunctionality,
architecturalfeatures,etc.
structure,equipment,
Confirmation ofetc.
legalcompliance

Structure, equipment,
energy-saving, etc.
(approximate estimate)
Confirmation of legal
compliance
Commercialization planning

Verification of safety,
durability, constructability, andfunctionality, etc.
Confirmation of legal
compliance
Construction andperformance verification plan

Board of Executive Officers

Product development
budget application

STEP 3

Construction verification
using a 3Dverification
design tool
Construction
Constructionverification
verification
Performanceusing a mock-up
Construction verification
using various experiments
Construction verification
verification
Construction
using company-owned
a 3D design toolusing
properties,
Construction
verification
using aetc.
mock-up
Construction
verification
Detailed estimate
using various experiments
Construction verification
Sales
tools, etc.
using
company-owned
properties,
etc.
Detailed estimate

STEP 4

STEP 5

Production
andProduction
designconstruction drawings

Product Development Section
Productwebsite
releaseConstruction
Productionmanuals
andconstruction drawings

IR
Product Development
SectionwebsiteConstruction manuals

IR

Construction manuals

Sales tools, etc.

Construction andCommercialization
planning* In casesof changing thedesign, use materials, and certified and notice specifications after the product release, it shall be approved by the Compliance Management Division, followed by consent andperformance verification plan
approval in accordance with the approval rules.
Board of Executive Officers

Product development
budget application* In cases of changing the design, use materials, and certified and notice specifications after the product release, it shall be approved by the Compliance Management Division, followed by consent andapproval in accordance with the approval rules.

Data Compilation

STEP 1
Product
planning
ArchitecturaldesignMarket Concept
acceptanceanalysis

Approval

Initiatives for Strengthening Management Foundation

Construction Supervision1

Initiatives toward Regeneration

Business Operation Headquarters

14

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Before change

Specific floor plans, elevation plans,
expansion plans, cross-sections, etc.

Creation of simple plans, etc.

In case when
BIM is not used

Perspective drawingsand details

Manual amendment of drawings

Finalization

ChangeIntroduction of Building Information Modeling (BIM)
Previously, in the creation of general drawings (the collective term for structure lists, finish schedules, detailed floor plans, expansion
plans, fixtures lists, and detailed section drawings), there was a possibility of discrepancies arising during the respective processes
After change
because creation and revisions were done for individual two-dimensional drawing data. We
have decided
in the future,
we will
Structurelists thatFinishschedules
introduce
Building
Information
Modeling(BIM).
By
creating
virtualthree-dimensionalmodels(digitalmodels)using
acomputerfrom
In case when
the initial
phase, and by automatically creating floor plans, expansion plans, elevation plans, and finish schedules at the same
BIMdesign
is used
Detailed
Detailed
time, we can avoid discrepancies at all times, thus ensure consistencyAutomation
as a benefit of the centralizeddata.
floor plansway of maintaining
section drawings
Creation of
a 3D digital model
inBefore
the initialphasechangeCreation of simple plans, etc.

In case when
BIM is not used

Manual amendment of drawings
Other advantages• Drawings
After change
automatically reflect
amendments

ChangeAdvantage 2

Advantage 3

Advantage 4

Advantage 5• Easy tocommunicate 3D
images to customers• Smooth communication
with construction
companies• Enables analysisof the environment,etc.

• Facilitates
confirmation of themaintenance and repair
history over time

Advantage 1• Interference areas,
etc. can be visible

Specific floor plans, elevationExpansion
plans,
Perspective
drawings
plans
Fixtures lists
Finalization
expansion plans, cross-sections, etc.
and details• Calculating thequantities of thematerials is easy

In case when
BIM is used

Automation

Creation of
a 3D digital modelin the initial phase

Structure lists

Finish schedules

Detailed
floor plans

Detailed
section drawings

Expansion plans

Fixtures lists

Other advantages
Advantage 2

Advantage 3

Advantage 4

Advantage 5• Easy tocommunicate 3D
images to customers• Smooth communication
with construction
companies• Enables analysisof the environment,etc.

• Facilitates
confirmation of themaintenance and repair
history over time

Advantage 1• Interference areas,
etc. can be visible• Drawings
automatically reflect
amendments

2• Calculating thequantities of thematerials is easy

Reviewing of the system for checks at the time of making drawings for confirmation application

Previously, for drawings for confirmation application and construction drawings, it was required that each drawing be checked forconsistency and compliance with laws and regulations. However, sufficient time for checking was not secured in reality. In the
future, time for checking consistency and legal compliance in the design process will be scheduled beforehand, in order to ensurecomplete verification.
Drawings for confirmation application

Structure lists, finish schedules, detailed floor plans, expansion plans, fixtures lists, etc.

Construction drawings

Beam joint number drawings, wall panel layout drawings, ALC panel layout drawings, etc.

[Before change][After change]

Dates for checking drawing consistency and legal
compliance were not included in the schedule ofthe design process, and sufficient time forchecking was not secured

Complete verification by scheduling the following checkdates in the design process• Date for checking consistency of each drawing• Date for checking compliance with laws and regulations

Drawings for confirmation application

Structure lists, finish schedules, detailed floor plans, expansion plans, fixtures lists, etc.

Construction drawings

Beam joint number drawings, wall panel layout drawings, ALC panel layout drawings, etc.

[Before change][After change]Leopal ace21 I nt egr at ed R epor t 2019

[Before change][After change]
Implementation of appropriate construction supervision
by reviewing the construction

3

supervision system● Ground improvement and other things● Ground improvement and other things● Foundation (layout)● Foundation (layout)● Framework-raising (interim inspection (1))● Framework-raising (interim inspection (1))

One of the causes for construction defects related to parting walls and other deficiencies was that architects were hardly involved in● Foundation (reinforcement and anchors)● Foundation (reinforcement and anchors)construction supervision. In order to properly conduct construction supervision in accordance with the Act on Architects and Building● Foundation (concrete)● Foundation (concrete)
Engineers, we will make the construction supervision system stricter.

For Regaining the Trust

Change construction supervision from 5 processes to 8 processes using on-site inspection in the 8 important processes (from April 2019)15

Fire-resistantincoating
Change construction supervision from 5 processes to 8 processes using on-site●inspection
the 8 important processes (from April 2019)● Fire-resistant coating● Carpentry interim (interim inspection (2): parting walls)[Before change]● Completion of construction work
● Ground improvement and other things● Carpentry interim (interim inspection (2): parting walls)[After change]● Completion of construction work
● Ground improvement and other things* The fire-resistant coating is for fire-resistant structures only

* Fire-resistant structures: 8 processes; semi-fire-resistant structures: 7 processes● Foundation (layout)● Foundation (layout)● Foundation (reinforcement and anchors)● Foundation (concrete)● Foundation (concrete)● Framework-raising (interim inspection (1))● Framework-raising (interim inspection (1))● Fire-resistant coating● Fire-resistant coating● Carpentry interim (interim inspection (2): parting walls)● Carpentry interim (interim inspection (2): parting walls)● Completion of construction work

● Completion of construction work

* The fire-resistant coating is for fire-resistant structures only

* Fire-resistant structures: 8 processes; semi-fire-resistant structures: 7 processes

We will properly conduct construction supervision and construction management by incorporating construction supervision dates andvoluntary inspection dates in the construction management process, which were not integral parts of the process.

Initiatives toward Regeneration● Foundation (reinforcement and anchors)

Construction management process[Before change][After change]● Start construction of the main foundation● Start construction of the main foundation

yyyy/mm/dd

yyyy/mm/dd● Layout verification voluntary inspection (1)yyyy/mm/dd● Layout verification voluntary inspection (2)yyyy/mm/dd● Inspection by Inspection Section for layout verification

yyyy/mm/dd● Construction supervision by an architect

Construction management process

yyyy/mm/dd●[After change]●[Before change]● Finish construction of the main foundation

yyyy/mm/dd● Start construction of the main foundation

yyyy/mm/dd● Start construction of the main foundation

yyyy/mm/dd● Finish construction of the main foundation

yyyy/mm/dd● Layout verification voluntary inspection (1)yyyy/mm/dd● Layout verification voluntary inspection (2)yyyy/mm/dd

4

Assurance of construction quality by implementing appropriate
construction management● Inspection by Inspection Section for layout verification

yyyy/mm/dd

We now employ a sufficient number of engineers (qualified engineers with license
and technicalsupervisors)
to ensure propercon● Construction
supervisionby an architect
yyyy/mm/dd●
struction, and use an IT system which helps optimum engineer assignment per building. We
previously had inspections conducted by●a third party for the reinforcement inspection, framework-raising inspection, waterproof
inspection, and parting wall inspection,● Finish construction of the main foundation
yyyy/mm/ddand
we will also have fire-resistant coating inspections conducted by a third party.
Reinforcement inspection

Confirmation of foundation reinforcement,
sleeve reinforcement, concrete cover,and rod-to-rod dimensions

Constructor

Supervision
Technology Section

Third-party
inspection

Framework
assembly

Framework-raisinginspection

Confirmation of the foundation, building frame(leveling and verticality test, bolting, rust prevention, etc.),
and roof

Constructor

Supervision
Technology Section

Third-party
inspection

Waterproofing
work

Waterproof inspection

Confirmation of the waterproof paper, the waterproofing of
the wall-penetrating parts, and the waterproof treatmentof the vertical section of the foundation

Constructor

Supervision
Technology Section

Third-party
inspection

Added
Fire-resistant coating inspection

Confirmation of the fire-resistant coating spraying status(fire-resistant structures only)

Constructor

Supervision
Technology Section

Added
Parting wall inspection

Parting wall completion status(this must be before ceiling hanger and joist construction)

Constructor

Supervision
Technology Section

Implemented in August 2019

Coatingwork

Third-party
inspection
Implemented in July 2018

Parting walls
work

Third-party
inspection

Data Compilation

Foundation
work

Initiatives for Strengthening Management Foundation● Finish construction of the main foundation

yyyy/mm/dd

Implemented in August 201916

Coating
L eopalac e21 Integ r a t e dAdded
Report 2019
Fire-resistant coating inspection
work

Confirmation of the fire-resistant coating spraying status(fire-resistant structures only)

Constructor

Supervision
Technology Section

Constructor

Supervision
Technology Section

Third-party
inspection
Implemented in July 2018

Parting walls
work

Added
Parting wall inspection

Parting wall completion status(this must be before ceiling hanger and joist construction)

Third-party
inspection

Constructor capability assessment and selection for ordering have been carried out in order to secure on-time construction completion and proper building quality by the method of implementing constructor-specific evaluation worksheet. Third-party inspectors
will newly get involved for the assessment focusing on the aspect of constructor’s workmanship in terms of construction defects bypart of the building and defect rate. The inspector’s assessment result is fed back to respective constructors in the evaluation sheet
and is utilized to train the constructors for improving the construction quality. The third-party inspector will be invited to join periodic
meetings between the Company and constructors to share notices and changes in construction drawings.
[Before change][After change]

Implementation of third-party inspection

Implementation of third-party inspection

Third-party inspection results feedback

Third-party inspection results feedback

Indicate the parts which had problems
for each worksite and branch nationwide

Indicate the parts which had problems
for each constructor

Feedback results not entered in the evaluation sheet
for each constructor

Feedback results enteredin the evaluation sheet for each constructor

Information sharing with constructors

Information sharing with constructors

Third-party
inspection results
feedback method

Information sharing
withconstructors

The Company

Constructors

Sharing of notices
Sharing of the content of drawing changes, etc.

5

The Company

Third-party
Inspector

Constructors

Sharing of notices
Sharing of the content of drawing changes, etc.

Implementation of inspections by the Construction Legal Department of
the ComplianceManagement Division
【変更前】
【変更後】

We will enhance the inspection system by having the Construction Legal Department of the Compliance Management Division implement the following inspections to realize 第三者検査の実施
the systematic and effective construction management and第三者検査の実施
construction supervision in lightof the recent fact that the existing system did not properly work.
第三者検査結果のフィードバック

第三者検査結果のフィードバック

問題があった部位を指摘問題があった部位を指摘

第三者検査結果のInspections by the Construction 全国の現場
Legal Departmentof the Compliance Management Division
施工業者ごとに・支店ごとにフィードバック

Implementationof inspections concerning construction supervision
方法• The Construction Legal Departmentof the Compliance Management
Division will conduct inspectionsof construction supervision
施工業者ごとの評価シートに施工業者ごとの評価シー
トにoperations and the document storage
concerningbuildings
whose
constructionisunderwayorcompleted
フィードバック結果の反映あり
フィードバック結果の反映なし

Comprehensive inspections through triple-check function

施工業者との情報共有
施工業者との情報共有• To check whether construction management
is properly conducted, voluntary inspections were conductedby constructors and by own
people in charge of construction (recorded in photographs)
施工業者との
当社
工務店
当社
第三者
工務店
• In the future, the Construction Legal Department of the Compliance Management Division will inspect whether construction is conducted
情報共有
in accordance with the construction manuals and design documents, as well as keep records of the inspections including photographs
通達内容の共有
図面変更内容の共有等

Appropriate process management for assuring quality

通達内容の共有
図面変更内容の共有等• In the event that the Construction Legal Department finds any anomalies in construction management and construction supervision, thedepartment will instruct to redo the voluntary inspections and revise the construction timelines

Previously

Improvement measures• To check whether construction management is properly conducted, voluntary inspections were conducted by constructors and by own
people in charge of construction (recorded in photographs)
Leopal ace21 I nt egr at ed R epor t 2019
• In the future, the Construction Legal Department of the Compliance Management Division will inspect whether construction is conductedin accordance with the construction manuals and design documents, as well as keep records of the inspections including photographs

17

Appropriate process management for assuring quality• In the event that the Construction Legal Department finds any anomalies in construction management and construction supervision, thedepartment will instruct to redo the voluntary inspections and revise the construction timelines

Implementation of training by the Construction Legal Department of
the Compliance Management Division

The Construction Legal Department has decided to conduct training on the design intentions of products and the importance of construction quality and construction supervision, targeting the internal people in charge and the people in charge in the constructors.

Previously
Target of
the training

For Regaining the Trust

6

Improvement measures

Internal people in charge

Target of
the training

Internal people in charge andpeople in charge in the constructors

As and when needed

When training
is held(In addition, implementation of joint training withthe responsible people in each branch
and the head office staff, on an ad hoc basis)Once a year for overall training
When training
is held

Training
content

Construction supervision flow
Construction supervision guidelines

Training
content

Review construction supervisionand construction management

Initiatives toward Regeneration

Design intentions of products
Explain the design intentions behind construction drawingsand construction manuals, etc. based on
the Building Standards Act(reference to the legal requirements)

Confirm do’s and don’ts based on
the actual state of construction supervisionand construction management every six months

Additional measuresfor preventing recurrence (announced改善策
on July 31, 2019)
従来
研修対象

社内担当者

研修対象
Measures for preventing
defects 社内担当者、施工業者担当者

1回/年の全体研修の開催を固定化
1. Securing personnel appropriate for the workload and building a workable
operation structure
開催時期

必要に応じ適宜開催

2. Information provision to constructors

開催時期（その他各支店責任者及び本社スタッフと合同研修の実施その他必要に応じ開催する）

Initiatives for Strengthening Management Foundation

Learn the construction supervision
guidelines at operating worksites

3. Efforts for the realization of appropriate construction management
4. Establishing procedures ensuring that the departments in charge of product各商品の設計趣旨
development should
be attentive to the Minister’s certification and that the constructors
shouldcomprehend the written
施工図
・施工マニュアル等の建築基準法に基づく設計趣旨を説明（どのような根拠に
specifications
基づいて設計されているか）

研修内容

・施工管理のチェック
Measures to enable early detection and early工事監理
response

1. Building a system of collecting and verifying risk information

半期毎の工事監理・施工管理の実態を踏まえ共通認識を図る

稼働現場で工事監理要領を研修
2. Recording the preparers of important documents, such as drawings andclarifying approval procedures

3. Clarifying storage and management rules for important documents

Data Compilation

研修内容

工事監理フロー
工事監理要領18

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Toward a Stronger Corporate Governance System
Management Structure Overhaul
Board of Directors
The Board of Directors views the problem of construction
defects in parting walls to be an extremely serious matter. It
therefore made the decision to overhaul the Company’s management structure with the goal of regaining stakeholder trust
undermined by this event and getting earnings back on track
as soon as possible. With the exception of newly appointed
President Bunya Miyao, seven of the eight internal directors
stepped down at the conclusion of the General Meeting of
Shareholders held in June 2019.
The Board of Directors hitherto comprised 11 members—
eight internal directors and three outside directors. Now
however, our focus is on enhancing the oversight functions ofmanagement and we therefore raised the number of outside
directors to five so that the Board has an even split of internaland outside directors. This will allow the Board to acquire

objective advice concerning decision making and should serveto strengthen management oversight functions.
The Board of Directors meets once a month and also flexibly
convenes meetings as necessary to make important management decisions, monitor how business is being carried out, andsupervise the execution of duties by directors.
In addition, the Audit & Supervisory Board (ASB) comprises
four members, three of which are outside auditors. The ASB
focuses on strengthening the oversight of execution of duties
by directors. A system is in place to enhance the effectivenessof audits in accordance with the ASB’s audit plan by checking
the status of business operations and attendance at important
meetings (Board meetings in particular), as well as throughappropriate collaboration with the Auditing Department,
accounting auditors, and outside directors.

Previously

New structureInternal
directors
8

Internal
directors
5

Outsidedirectors
3

Outsidedirectors
5

Outside directors

38Internal directors

Outside directors

55Internal directors

Furthering dialogue with employees
At Leopalace21, we have thus far held regional small meetings periodically at different locations across Japan so that employees and the management team can exchange opinions and engage in dialogue. We are now organizing these meetings more
frequently and providing more time for discussion in an effort to further stimulate dialogue.
During regional small meetings, employees hear explanations from management about Company policies as well as progress
reports on the construction defects issue. They also actively discuss issues specific to their region and the compliance-first
approach by taking part in group discussions.
Furthermore, in July we started offering a suggestion box service through which employees can directly propose ideas to the
management team. The ideas submitted by employees are discussed among internal directors, outside directors, and executive
officers and then reflected in business operations.

Leopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

Compliance Committee

Previously

New structure

Chair: President and CEO

Chair: Outside director

SaitamaSendai

Data Compilation

Regional small meetings are held nationwide and facilitate employee-management dialogue.

Initiatives for Strengthening Management Foundation

active debate and the presentation of expert opinions concerning mainly compliance violations.
The President and CEO previously served as chair of theCompliance Committee, but in rebuilding our compliancesystem, we decided to appoint one of our outside directors tofulfil this role. The other members of the Committee comprise
external experts such as lawyers. As a measure for strengthening governance, the Committee draws up compliance policy
plans, including education and training sessions and theimprovement and enhancement of information management
systems. It also beefs up monitoring systems and strives to
identify and improve problem areas.
Furthermore, in order to establish a system under which compliance initiatives are proactively carried out on the ground, eachdepartment appoints a person to take charge of compliance matters.
Up ahead, we will continue to communicate information internally and externally regarding the initiatives of the Compliance
Committee for the purpose of ensuring transparency.

Initiatives toward Regeneration

We deeply regret not having in place a system capable ofexamining the legal compliance of newly developed products—the root cause of construction defects in our parting
walls and other things. We are now making a start on reforming our corporate culture and we are also taking steps toembed a compliance-first approach into our business.
We have hitherto endeavored to reinforce the Group’s compliance framework by establishing a Corporate Ethics Charter, aninternal reporting system, and also a Compliance Committee toserve as an advisory body to the Board of Directors. However,from the standpoint of systematically ensuring that we adhere
to a compliance-first approach, we decided to rebuild our compliance and risk management system.
As part of this overhaul, we clearly specified that from April
2019 the Compliance Committee would be the highest body in
the Group’s compliance framework. And after reviewing whoshould sit on this Committee and what kind of issues it should
be addressing, we put in place a system that encourages

Osaka

19

20

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Corporate Governance System and Initiatives

Basic Approach to Corporate Governanceand Compensation Committee, Risk Management Committee,
Compliance Committee, Personnel Committee, IT Committee,
CSR Executive Committee, and CSR Committee.
We employ a system comprising four headquarters to execute business: (1) the Business Operation Headquarters oversee business execution and collaboration; (2) the Management
Planning Headquarters are tasked with management strategy
formulation and supervision and also boost collaboration inbusiness divisions; (3) the Management Headquarters support
business administration; and (4) the Compliance Management
Headquarters are responsible for the development and oversight of our compliance system.
We also recognize that improving our capabilities to oversee
business operations is a key management issue. That is why wehave in place the Audit & Supervisory Board to monitor businessexecution of directors, set up the Auditing Department to perform internal audits, and appointed outside directors, throughwhich we strive to enhance management oversight functions.
Under these systems, we will take steps to clarify the scopeof responsibilities and authority and make every effort tofurther strengthen our corporate governance.

The Leopalace21 Group considers developing and strengthening corporate governance to be one of our most importantmanagement issues. With this in mind, we are working todevelop management frameworks, structures, and systems
that will allow us to engage in appropriate and speedy
decision making, strengthen our monitoring and oversightfunctions of decision making, establish compliance systems,
improve and reinforce internal control systems, and build
healthy relationships with stakeholders.
To facilitate even faster management decision making andsmoother business execution by the Board of Directors, both
the Corporate Management Council and the Executive Board
have been established to convene meetings prior to Board of
Director meetings. The former discusses important mattersrelated to overall business execution, while the purpose of thelatter is to share information about Company management. In
this way, we aim to strengthen collaboration so that businessexecution proceeds smoothly. Moreover, a number of meetingbodies discuss key management issues and offer their recommendations to the Board of Directors so the Board can thoroughly examine them. Those bodies include the Nomination

As of July 1, 2019

General Shareholders’ Meeting
Appointment / Removal

Nomination andCompensation Committee

Accounting Audit

Inquiry / Proposal(All Outside Directors, President and CEO)
Consultation

Board of Executive Officers

Information Sharing(Directors, Executive Officers,
Full-time Audit & Supervisory Board Members)

Appointment /Removal

Accounting Auditor

Board of Directors

Corporate Management Council(Directors, Full-time Audit & Supervisory
Board Members)

Appointment /RemovalCooperating

10 Directors(including 5 Outside Directors)
Auditing

Audit & Supervisory Board

4 Members (including 3 Outside Audit &Supervisory Board Members)
ProposalAppointment / Removal

Cooperating

Personnel Committee
President and CEO

Inquiry

Operating Departments
Business Operation Headquarters
Management Planning Headquarters
Compliance Management Headquarters
Management Headquarters
Subsidiaries and affiliates

Cooperating

IT Committee

Reporting

Reporting

Auditing
Council

CSR
Committee

Auditing Department

Reporting

CSR Executive
Committee
Apprehending /Apprehending / Management

Management

Apprehending /Management

ReportingCompliance Committee

Apprehending /Management

Reporting

Risk Management
Committee(internal audit)(internal controls)

Inquiry

Auditing
AuditingLeopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

Board Members’ Compensation
The compensation of individual directors is deliberated anddecided on by the Nomination and Compensation Committee
to ensure appropriateness in fulfilling the aforementioned
objectives. This Committee comprises the Company’s outside
directors and the President and CEO. Outside Director Tadashi
Kodama currently serves as chair.
In order to make no secret of the responsibility of the management team with respect to the problem of construction
defects, we made the decision to reduce the amount of basic
remuneration paid to directors, Audit & Supervisory Board members, and executive officers from May 2019 through March 2020
based on the results of an objective examination carried out byoutside directors that sit on the Nomination and Compensation
Committee. Remuneration was reduced by 60% for the representative director, 45%–55% for the other internal directors,
35% for full-time Audit & Supervisory Board members, and35%–45% for executive officers. Also, no stock options nor
annual incentive bonuses will be paid for fiscal 2019.

Initiatives for Strengthening Management Foundation

Composition of board members’ compensation
President

Average for other directors

16%
30%

14%

54%

Fixed

Performance-linked

60%

26%

Initiatives toward Regeneration

The Company’s compensation of directors is designed to motivate directors to execute their duties to the fullest in order toachieve management plans and enhance corporate value overthe medium- to long-term. Compensation has four components: (1) basic remuneration (fixed compensation); (2) stock
options designed to boost medium- to long-term Company
earnings and corporate value by sharing the advantages anddisadvantages of stock price fluctuations with shareholders;(3) annual incentive bonuses on the attainment of fiscal-year
management targets; and (4) medium-term incentive bonuses
on the attainment of Medium-term Management Plan. Eachform of compensation is paid according to their respective
purposes. Whereas the ratio of fixed compensation to performance-linked compensation had been around 75:25, theproportion of performance-linked compensation was increased
from fiscal 2017. The ratio now stands at 54:46 for the
President and an average of 60:40 for the other directors.

Performance-linked

21

Fixed

Basic remuneration
Bonuses
Stock options*1 Amount of stock option compensation based on weighting at the time of May 2017 revision to the board members’ compensation system*2 Medium-term incentive bonuses not included

Amount of Compensation Awarded to Directors and Audit & Supervisory Board Members

Directors (excludes outside directors)
Audit & Supervisory Board members(excludes outside Audit & Supervisory
Board members)
Outside directors/Audit & Supervisory
Board members

Fixedcompensation

Performance-linked
compensation

Stock options

BonusesNo. of relevant
positions

495

321

—

52

121

9

19

19

—

—

—

1

80

80

—

—

—

6

Total
remuneration* The above includes 1 Audit & Supervisory Board member who resigned as of June 28, 2018.

Data Compilation

Category(Millions of yen)

Total remuneration, etc. across categories

22

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Corporate Governance Dialogue
Toward a new Leopalace21

Eisuke Nagatomo

Bunya Miyao

Tadashi Kodama

Representative Director,
EN Associates Co., Ltd.

President & CEO, Leopalace21

Outside Director, Leopalace21
Former Representative Director & Vice Chairman of the Boardof Directors, Aioi Nissay Dowa Insurance Co., Ltd.

Our President Bunya Miyao, Outside Director Mr. Tadashi Kodama, and Mr. Eisuke Nagatamo—the latter of which possesses a wealth of knowledge of capital markets, corporate governance, and risk management—sat down to discuss how
the Company should go about transforming itself by heeding the lessons of the recent problem of construction defects.

Progress on addressing the issue of
construction defects
Miyao: We are currently investigating more than 39,000
buildings together with external architects, while the results of
the assessments are also being examined by a third party. As
part of this process, we have increased the number of people
needed to carry out the investigations from an initial 210 to
4,000 (both internal and external, as of Sep 2019). However,since February of this year we have needed to once again
investigate ceilings, room parting walls, and exterior walls
because a number of other potentially illegal defects—separate to the parting wall construction deficiencies—were newly
identified. Progress on rectifying the problems for repair works

has therefore been delayed, but we have mostly completed ourinquiry into the approximately 15,000 high-priority buildingsthat we considered to be at high risk of having construction
defects. Together with the other 24,000 or so buildings, ourinvestigations are now 90% complete (as of Sep 2019).
Meanwhile, we are preparing documents containing theassessment results and information about repair works foreach property so that we can have the appropriateness of
our repair methods and other matters checked by the approximately 480 specified administrative agencies in charge ofthe areas where our properties are located. The fact that ourdelayed investigations and repair works have caused muchinconvenience and concern to many people is something thatweighs heavily on my mind.

Leopal ace21 I nt egr at ed R epor t 2019

Data Compilation

Having held major positions during his career, including Senior Executive Officer of
the Tokyo Stock Exchange, Inc., member of the Financial Services Agency’s Business Accounting Council, and Director of the Financial Accounting Standards Foundation, Mr. Nagatomo is well-versed in finance, accounting, corporate governance,and risk management. He currently manages the consultancy firm EN Associates
Co., Ltd. and serves as an outside member of the Audit & Supervisory Board for
Nidec Corporation.

Initiatives for Strengthening Management Foundation

Nagatomo: The Company must first follow up on tenants
and owners. Foremostly, it should generously allocate its
managerial resources into conducting in-depth investigations
and carrying out repair works in order to regain their trust.

Eisuke Nagatomo — Profile

Initiatives toward Regeneration

Kodama: In January of this year ahead of the final report ofthe external investigation committee, we announced a “compliance-first” management policy and we are currently consideringa performance appraisal system for proactively evaluating how
the employees follow this policy. That said, the identificationof other law violations, namely discrepancies in heat insulationmaterial in building walls and ceiling construction defects,
prompted us to discuss how we could overhaul the Company’s
management structure in order to regain the trust of stakeholders. As a result, we redesigned the management framework sothat it will now be subject to stricter external examination. That
involved tweaking the internal-external balance of the Board of
Directors by reducing the number of internal directors by three
and adding two more outside directors.
We also established the Compliance Management
Headquarters, which are independent of our business divisions, and appointed the general manager as our CLO (Chief
Legal Officer). Furthermore, we made the decision to appoint
an outside director to the chair of the Compliance Committee. I
believe these changes will vastly improve the quality, volume,and speed of information that we, as outside directors, areable to acquire.
In terms of structure, I think these reforms have now given
us a necessary and sufficient framework. Now it all hinges
on how we put our heart and soul into it and whether we canmake it function effectively. In fact, we cannot solve everything in a single day—I think we must persistently address ourissues in a step-by-step manner.
And even though we have had an internal reporting system
in place, this time it failed to serve its purpose. Why was
this so? Considering that the construction defects can betraced back to more than 20 years ago, the attitude that “ithas nothing to do with me” might have spread throughout theCompany. Or maybe employees do not properly understandhow the system works? If that is the case, then we definitely
cannot realize substantive reforms no matter how manysystems we put in place. I believe it is vital that we entrencha compliance-first approach by having all employees carry asense of ownership.

Not only must President Miyao, as leader of the management
team, take the initiative to sincerely explain the Company’s
progress on those tasks, it is important that all officers andemployees work together on implementing initiatives forreform. In particular, I think the members of the management
team must focus on gaining an understanding of the actual
situation for themselves by visiting sites and listening to theopinions of employees. After all, companies cannot exist without their employees. Each and every employee serves as theCompany’s backbone, rather than simply being cogs in a bigger
cogwheel. Based on this awareness, it’s times like these when
all employees can band together to overcome a crisis, whichis also the very thing that strengthens relationships of trust
among officers and employees. No matter what system you
put in place, it will end up being a pie in the sky unless yourhuman resources—the driving force—trust each other andshare the same ambitions. At the same time, every officer or
employee must bear in mind that their individual actions canhave an influence on the Company’s reputation.
Given that the confidence placed in Leopalace21 by society at large has now been damaged, from a sustainable
management point of view, a sincere response to external

For Regaining the Trust

Compliance-first initiatives

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

stakeholders by all employees is essential, irrespective ofwhen these problems arose or whichever department wasinvolved. Genuine reform comes from where employees standin the shoes of tenants or owners and transform corporate
culture to the one under which employees take the gratitude
and smiles of customers as their own enjoyment at day-today work. I think that’s something that can cultivate a senseof ownership among all employees. And of course, ensuring
sustainability should be the primary objective.
As for compliance and risk management system designed
to prevent a reoccurrence of such issues, the key point is how
fast critical information from all branches and offices in Japanand overseas can reach the central management team. On
top of this, a framework must be in place that lets all officers, including outside directors, know about and share risk
information so they can quickly formulate countermeasures.
In other words, the absolute requirement is a system thatfacilitates the smooth flow of (1) information collection andanalysis, (2) information sharing, and (3) actual response. And
so that the steps taken to prevent reoccurrence do not end up
being just stopgap measures, I think you have to make surethat everyone in the Company really understands the intent
and significance of those measures.
In addition, employees tend to view on-site audits as
fault-finding missions. They therefore become defensive andare reluctant to release information. It’s vital that auditors
aim to communicate smoothly with employees in the field sothey know that auditors are essentially the eyes and ears of

the President and that their job is to solve on-site operational
concerns in order to make the Company even better.
Miyao: As Mr. Nagatomo has emphasized, even the investigation report of the external investigation committee initiallypointed out the need for a radical reform of our corporate
culture. This is the result of the Company which became
acclimatized to a vertically organized top-down structure
and I seriously take to heart the fact that our cross-checking
functionality was mostly ineffective because there was little
interest in what was going on in other departments. So now
the management team, including myself, is intent on attending each regional small meeting to directly meet with our
employees in the field and to ensure all employees understandthe importance of a customer-oriented mindset and compliance-first approach.
Nagatomo: In corporate brand management, you should
constantly be aware of whether or not your actions are ofvalue to the customer. In other words, you should aim to be thecompany indispensable to its customers. You can always findan answer in the field, where your customers are. Neglecting
the field site is the biggest risk for management, which is why
a style of management that is always integrated at a customer
level is necessary. Accordingly, and even though I have said
this already, the management team, which includes both internal and outside officers, must actively meet with employees in
the field and hear what they have to say.
Another thing to keep in mind is the need to check whether
management’s messages are getting through to employees
correctly. The top-down transmission of information quite
often results in the misunderstanding of the real intention of
the message and only empty words are conveyed, just likea telephone game. Simply believing that the message gets
through is not good enough. This might be why we tend to see
more corporate scandals these days. I think managers must
be vigilant in their efforts to speak directly to their employees.
This is the most important aspect in sharing business ethics.
Kodama: As outside directors, we totally agree about theimportance of on-site dialogue and the five of us split up andattend all of the regional small meetings. At these meetings,
not only do we stress the compliance-first policy, but we doLeopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

reward employees for their hard work by squarely focusing on
those efforts go unnoticed, and ask that they do not forget totake pride in their work even during these tough times. We also
request outside Audit & Supervisory Board members to engage
in dialogue with employees when they visit to conduct audits.

Kodama: While it’s difficult for outside directors to get theopportunity to speak directly with owners and tenants mainly
owing to our independence, we instead have the chance
every month to go through all the submissions delivered to thesuggestion box as well as the issues that come through theinternal reporting system. We also periodically check whether
any unnoticed risk information is lurking in the enquiries submitted to the call centers.

Data Compilation

Miyao: We pioneered the market with one-room type units
equipped with furniture and electrical appliances and wecurrently have 570,000 such rooms under management
nationwide. As a long-term management partner, we enjoy
a relationship with the owners of these units—so much sothat I think we are both indispensable to each other, like thetwo wheels on an axle. For this reason, we have hitherto heldowner briefing sessions throughout Japan every quarter. At
these sessions, business division managers used to report on
our management policies and financial results and also share
information and exchange opinions with owners.
Currently however, all members of the management team,including myself, are attending owner briefing sessions rightacross Japan to explain the situation. At these meetings
many owners strongly encourage us to engage in sustainable
management so that we can properly offer our support during
the long-term period (20-30 years) of managing apartments.
As such, I’m acutely aware of the significance of our responsibility to all apartment owners.

We are also making sure that we provide conscientious
explanations to tenants, especially regarding safety. That said,
around 60% of our apartments are utilized as company-leased
housing or dormitories under corporate contracts, so for theseproperties we are making every effort to listen to the opinions and grievances of tenants indirectly when we visit thecontracting companies to explain the situation to their humanresources or general affairs departments.

Initiatives for Strengthening Management Foundation

Following up on tenants and owners

Initiatives toward Regeneration

Nagatomo: I get the impression that both of you, along withall the other officers, are making every effort to actively
talk to employees on the ground. I also think it would be agood idea to strengthen dialogue with a system that further
expands on the opinions exchanged at regional small meetings. I think this could be a way to solve a lot of the various
on-site concerns and problems, not just those related tocompliance. I often hear that stronger cross-sectional collaboration has meant a company no longer needs to outsourcea certain operation, or that labor shortage problems wereameliorated by encouraging efficient personnel placement. By
listening to employees on the ground and having the management team act as a go-between to facilitate cross-company
interaction, I think sectionalism should gradually disappear.

25

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Corporate governance trends
Nagatomo: I would also like to add something else regarding
my views on compliance within a corporate governance framework. The term “compliance” is generally interpreted as theact of obeying the law, but this fails to capture the essence ofthe term. It should be interpreted as “complying with another’s
wish” to reflect the etymology of the word. In the case of
Leopalace21, “another” therefore refers to not only tenants
and owners, but also shareholders, business partners, employees, society, and all other stakeholders. Compliance should
be viewed as a form of management that meets the expectations of all stakeholders with sincerity rather than the simple
perspective of adherence to laws and regulations. Companies
in which this policy is well-entrenched and understood by
all officers and employees naturally possess a high level ofintegrity and are much vaunted in society. In turn, employees
carry out their duties positively with a sense of pride, thereby
enhancing the corporate value of the company.

Corporate value is generated from the significance ofexistence in the presence of integrity. Investment practices
focused on the evaluation factors of ESG (environment, social,and governance) are currently sweeping the world. But in thecapital markets, the environmental and social factors makeno sense if they are disconnected from long-term economic
value. Based on this thinking, the governance factor is what

keeps corporate activities in order. In fact, G shouldn’t be eventalked about in the same sentence as E and S. In other words,
the direction a company takes should “comply with another’swish,” or put differently, its management philosophy becomesanchored to good governance. As a result, in addition toshaping such a framework, it is key that a company shares its
values, which is where its main focus should lie.
Right now, corporate governance in the US is at a major
turning point. The hitherto shareholder-first approach to
governance is now giving way to the idea of stakeholders first.
Hence, a new era is dawning in which the old Japanese styleof governance known as sanpo-yoshi (three-way satisfaction)
will likely gain favor. This certainly reflects the notion of “complying with another’s wish” and you could say that it is a signof the capital markets beginning to favorably assess companies based on the idea that they are of benefit to society.
When I deliver lectures about governance, I often like todraw a comparison to the knight’s code of chivalry. That is,“be without fear in the face of your enemies” (risk taking), “bebrave and upright that God may love thee” (integrity), “speak
the truth always, even if it leads to your death” (information
disclosure), and “safeguard the helpless and do no wrong”(justice and fairness). These oaths are a useful reference inthe sense that they bespeak the values that corporate governance ought to represent, such as an ethical norm, approach
to risk taking, and having integrity.
Miyao: Our mission statement proclaims a policy of increasing
value for society as a whole. But when looking at the problems
at hand, these words come under fire as being superficial, towhich we have no words of reply. Our mission statement is
the premise of all our actions and we must consider its words
on every occasion. There is no doubt that we must do morethan just communicate this simple message—we must makean effort to consider its meaning with all employees in various roles and come to have a shared recognition. This is thestarting point of a sense of ownership that both of you regard
as important. In reforming our corporate culture, we must
constantly ask ourselves what is the purpose of the Company
I work for, how do I relate to the Company’s raison d’être(existential value), and what can I do on a personal level? I
think making our Company a corporate group which is always
conscious of these questions will lead to a genuine reform ofcorporate governance.

Leopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

Expectations of capital markets

Miyao: I feel that all of our stakeholders, along with thecapital markets, would like us to disclose a roadmap outlining
how we intend to resolve the issue of construction defects
and get earnings back on track. Housing is indispensable topeople’s livelihoods and under normal circumstances in thismarket, Leopalace21—which pioneered unique one-room typeunits—should be seizing the numerous opportunities affordedby an aging population and other changes of the times. But ourpriorities right now are removing everything that harms theorganization, so it is extremely irritating and disappointing to
be unable to provide a detailed roadmap at this stage.
On the basis of our careful investigations, we will allocate all of our managerial resources towards resolving the
problems as quickly as possible. All officers and employees
are working together and doing their best to provide a highly
probable future outlook for our stakeholders at the earliest
possible time.

Initiatives for Strengthening Management Foundation

Kodama: The Company does business with nearly 28,000
land owners, while individual customers and many corporate
customers use our apartments. For this reason, I think we must
keep a positive outlook that everything we do now is for the
future of the Company and in that sense, our on-site employees currently guaranteeing the quality of every single building
with integrity deserve our full support.

Initiatives toward Regeneration

Nagatomo: No progress will be made on resolving the current
problem simply by meeting the criteria of the specified administrative agencies and completing the repair works from asense of obligation. Not only the capital markets, but society
at large expects Leopalace21 to learn a lot from this seriesof construction defects and lower its downside risks in the
future. It also wants to see the Company engage in sound risktaking for the next stage of growth. In other words, the market
is keen to see the Company strengthen its sustainability andstart to move forward stronger than ever before. Conversely, if
the Company keeps caught in a negative mindset, the motivation of its employees will gradually deteriorate. To avoid this
scenario, I think management should keep its sights set onbuilding a new Leopalace21 and share the idea that an honest
approach is now required if such a dream is to be realized.

27

Data Compilation

28

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9Compliance

Establishment of Compliance Management Divisionframeworks, building and operating information management
systems, and validating legal compliance of the Group’s new
businesses, services, and products.
In order to further strengthen our compliance and risk management system, the Compliance Management Headquarters
was established to oversee the operations of the ComplianceManagement Division in April 2019. The general managerof the Compliance Management Headquarters was also
appointed Chief Legal Officer (CLO).

In February 2019 we established a Compliance Management
Division for the purpose of drastically overhauling the
Leopalace21 Group’s compliance system and replacing it witha more robust structure.
The Compliance Management Division is comprised of theCompliance Management Department, the Construction Legal
Department, and the Legal Affairs Department. It is mainly
tasked with drastically overhauling the Group’s complianceand risk management system, planning and drafting new

Compliance and Risk Management System
Audit &
Supervisory Board

Audit & Supervisory
Board members

Board of Directors

Directors

President & CEO

President & CEO

Risk Management Committee

Compliance Committee

General manager & CLO

Head office
Officerin charge

Head officeCompliance Management Headquarters
Officerin charge

Division manager Compliance Management Division

Compliance Management Department
Management
Management
Planning
Headquarters
Headquarters

Compliance
Planning
Section

Risk
ComplianceManagement
SectionSectionConsultation andcoordination regarding
controls

Training
Planning
SectionMonitoring of controls

Construction Legal
Department
Construction
Legal
SectionInspection
Section

Legal Affairs
Department

Legal Affairs
SectionBranches Inspection Inspection
Section also
SectionInternal
audit

established atmajor branches

Internal
audit

Auditing
Department

Process inspections
Internal
audit

Business divisions
Subsidiaries
and affiliates

Business divisions

Construction Management
Department

Reviewing Compliance Committee Operations
As part of our review into how the Leopalace21 Group’s
Compliance Committee functions and operates, we recently
specified that the Committee would now be the highest bodywithin the Group’s compliance framework.

Furthermore, we made the decision to appoint an outside
director to serve as chair of the Compliance Committee withthe goal of strengthening check-and-balance functions of theCompany’s executive organs.

Leopal ace21 I nt egr at ed R epor t 201929

Message from the Chair of the Compliance Committee

For Regaining the Trust

We are currently weathering a storm that was caused by ourCompany’s corporate culture; namely, the disregard of compliance and the mismatch of information between the management team and customer-facing employees. Of the multitude ofcompanies in Japan, we are experiencing firsthand the notionthat sustained growth is unachievable if we do not recognize
the importance of corporate governance and compliance.
Following the collapse of Lehman Brothers and the ensuing
global financial crisis, we certainly made a conscious effort tobolster our governance and compliance practices, but it has
become clear that it did little to change our corporate culture.
Hence, we now need to construct an even more advanced compliance system. Our biggest mission is to ensure that each andevery employee is on board with our compliance-first approach.

Initiatives toward Regeneration

Tetsuji Taya
Chair of Compliance Committee

Mayumi Hayashima
General Manager of Compliance Management Headquarters
and Chief Legal Officer

Data Compilation

The final report of the external investigation committee regarding the problem of construction defects stressed that theCompany has been conscious of not rocking the boat. As generalmanager of the Compliance Management Headquarters, I believe
my most important duty is to eradicate this corporate cultureof not exposing risks. Obeying the law is the minimum standard
for a corporate citizen and considering that we have lost thetrust of our stakeholders, we cannot be content with simply
upholding this minimum standard—we must aim to be acceptedby society and contribute value. So how can we achieve soundand sustainable corporate management? A more open corporate
culture generated by the free and open-minded exchange of
opinions and a switch from a top-down to a bottom-up approach.
The management team must endeavor to identify potential risks
in the field, while employees should not be afraid to report any
bad news to their managers immediately. As such, we will makeevery effort to foster a sense of ethics and responsibility among
all employees, show respect for the personalities of employees,
and nurture human capital that respects diverse values.

Initiatives for Strengthening Management Foundation

Message from the General Manager of the Compliance Management Headquarters

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Risk Management

Risk Management
In order to grasp and manage Company-wide risks andstrengthen our risk management framework, we have put inplace a Risk Management Committee as an advisory bodyto the Board of Directors. The President and CEO serves aschair of this Committee, while the general managers of theManagement Planning Headquarters and the ComplianceManagement Headquarters serve as vice-chairs. Other members of the Committee comprise external experts such as
lawyers. The Committee not only monitors risk management

status, but also plans and implements training sessions andworks to mitigate or prevent risks from materializing.
The Risk Management Committee regularly meets once amonth and whenever the chair determines that an extraordinary meeting is required. Furthermore, the general managerof the Compliance Management Headquarters reports on
the status of risk management to the Board of Directors on aquarterly basis.

Review of Risk Management Methods
Currently, the Risk Management Committee mainly responds
to risk events that have already materialized, but going forward, its role will be to carry out cross-sectional management
and monitoring of Company-wide risks. We therefore decided
that in addition to dealing with risk events that have alreadyoccurred, the Committee will identify potential risks and thendiscuss and examine the effectiveness of countermeasuresand the level of action required.

We also decided to proactively identify potential risks in the
Company’s business divisions by screening issues that employees have escalated to the Compliance Management Divisionand by holding regular meetings with each business division.
In this way, we can carry out effective risk management andcrisis response practices depending on the severity of risk.

Risk Management Committee• Discuss and determine levelof response and the need for
additional responses,
instruct improvements, etc.

• Report critical risks, etc.

Compliance Management Division• Identify and report on
potential risks• Risk assessment and criticalrisks identification• Report if risks (crises) arise• Discuss response policy andmeasures• Formulate and report on
measures for potential andexplicit risks• Provide feedback on resultsof the Risk Management
Committee’s discussions

Business divisions• Detect potential risks from cases
brought to the ComplianceManagement Division• Extract potential risks by holding
regular meetings with businessdivisions, etc.
• Analyze potential and explicit
risks (crises) that were detected
and revealedLeopal ace21 I nt egr at ed R epor t 2019

Initiatives toward Regeneration

The strengthening of corporate governance is absolutely
necessary for maintaining our competitive advantage, but its
importance is usually talked about only when earnings haveslumped or a scandal breaks. Unfortunately, that’s exactly what
has happened to Leopalace21. The recent construction defects
issue has made us realize once again how important corporate
governance is. At Leopalace21, we position risk management
at the very center of corporate governance. In order to grasp
and manage Company-wide risks, we have put in place a Risk
Management Committee as an advisory body to the Board of
Directors not only to conduct risk management, but also to
mitigate risks or prevent them from occurring at all. The Tokyo
Stock Exchange’s Principles of Corporate Governance for Listed
Companies state that “...to effectively protect the rights andinterests of all these interested parties, the transparency ofcorporate activities must be secured through the timely andaccurate disclosure of information.” As Risk Management
Officer, my duty is to ensure timely information disclosure to not
only our shareholders, but all of our stakeholders, including owners, tenants, and employees, so that we might once again earn
their trust. This is a declaration of our commitment.

Risk Management Officer

Higher-Level Risk Analysis and Assessment

Data Compilation

the current situation; (3) recognizing the risks that could arise
from changes in the business environment; and (4) utilizing
past case examples at Leopalace21 and other companies.
In October 2019, the management team came together tostart identifying risk as part of a risk management training
session. We plan to hold another management training session
in January 2020 during which we will carry out risk analyses
and assessments and share information.
We have been criticized for ignoring the interests of society
and stakeholders and engaging in self-righteous businessactivity. The influential business thinker Peter Drucker coined
the phrase “culture eats strategy for breakfast” to suggest that
corporate culture is far more important than business strategy.
And even if you come up with a strategy, it is worthless unlesscarried out. We believe risk management to be similar, which
is we think reforming the Company’s underlying corporate
culture is so important.

Initiatives for Strengthening Management Foundation

Seishi Okamoto

As part of our efforts to strengthen our compliance and risk
management system, we are further developing our risk
review agenda so we can identify and evaluate potential risks,
not just risks that have already materialized. We intend to takeour risk assessments to the next level by not just responding
to risks after the fact, but actually preventing them fromoccurring. This stems from our deep remorse of the recent
construction defects issue, which made us acutely aware of
the need to change how we recognize and respond to risk.
In the Leopalace21 Group, we define risk as a factor thatcan cause unexpected losses and possibly damage the Group’s
capital position. In accordance with our risk management
regulations, we report on and manage the following six typesof risk: strategy risk, credit risk, market risk, liquidity risk,
operational risk, and reputational risk.
And when identifying risks we employ the following four
processes: (1) examining the factors that hinder the achievement of goals; (2) recognizing the gap between our vision and

For Regaining the Trust

Message from the Officer in charge of Risk Management

31

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L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Directors and Audit & Supervisory Board Members

Directors (As of June 30, 2019)

President and CEO
GM of Business Operation Headquaters

Director, Managing Executive Officer, Chief ofEmergency Headquarters for Construction Defects

Director, Managing Executive Officer,
GM of Management Headquarters

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

Apr. 1988 Joined Leopalace21 Corporation
Nov. 2003 Deputy Manager of the Financial Department
Apr. 2010 General Manager of the Management Planning Department
May 2012 General Manager of Business Operation Headquarters
Apr. 2013 Administrative Officer
May 2014 Executive Officer
Jun. 2019	Managing Executive Officer (current)
Chief of Emergency Headquarters for Construction
Defects (current)

Apr. 1984 Joined The Kyowa Bank, Ltd. (now Resona Bank, Ltd.)
Apr. 2004 General Manager of Kitakogane Branch, Resona Bank, Ltd.
Oct. 2006 General Manager of Senjyu Branch, Resona Bank, Ltd.
Oct. 2009	General Manager of the 1st Corporate Division in
Katsushika Area, Resona Bank, Ltd.
Apr. 2013	Seconded to Leopalac21 Corporation, General Managerof the Financial Department
Apr. 2014	Joined Leopalace21 Corporation, General Manager of
the Financial Department
Apr. 2015 Administrative Officer
Apr. 2016 Executive Officer
Jun. 2019	Managing Executive Officer (current)
GM of Management Headquarters (current)

Director, Managing Executive Officer,
GM of Management Planning Headquarters

Director, Executive Officer, GM of ComplianceManagement Headquarters, CLO* *CLO: Chief Legal Officer

Apr. 1986	Joined The Sumitomo Bank, Ltd. (now Sumitomo Mitsui
Banking Corporation)
Oct. 2006	Deputy Manager of Tohoku Corporate Division,
Sumitomo Mitsui Banking Corporation
Apr. 2012	General Manager of Koiwa Corporate Division,
Sumitomo Mitsui Banking Corporation
Apr. 2014	General Manager of Retail Review Department,
Sumitomo Mitsui Banking Corporation
Apr. 2018	Assistant to Director of Head Office, Sumitomo Mitsui
Banking Corporation
Seconded to Sumitomo Mitsui Debt Collection Company
Jun. 2018	Joined Sumitomo Mitsui Debt Collection Company Director
Jun. 2019	Joined Leopalace21 Corporation
Managing Executive Officer (current)
GM of Management Planning Headquarters (current)

Apr. 1996 Joined Leopalace21 Corporation
Apr. 2009	Leasing Business Division, Leasing Business the 3rd
Sales Department, Deputy Manager of East Japan
Corporate Division
Jul. 2010	Leasing Business Division, General Manager of East
Japan the 2nd Corporate Division
Apr. 2014 GM of Corporate Business Promotion Headquater
Apr. 2015 Administrative Officer
Apr. 2018 Executive Officer (current)
Jun. 2019	GM of Compliance Management Headquarters, CLO(current)

Outside Director

Outside Director

Outside Director

Apr. 1970	Joined The Dai-Tokyo Fire & Marine Insurance Co., Ltd.
(now Aioi Nissay Dowa Insurance Co., Ltd.)
Apr. 2010	Representative Director, Executive Officer, MS&AD
Insurance Group Holdings, Inc.
Oct. 2010	Representative Director, Vice Chairman of the Board of
Directors, Aioi Nissay Dowa Insurance Co., Ltd.
Jun. 2011	Director, Vice Chairman of the Board of Directors, Aioi
Nissay Dowa Insurance Co., Ltd.
Jun. 2012 Senior Advisor, Aioi Nissay Dowa Insurance Co., Ltd.
Jun. 2015 Retired from Aioi Nissay Dowa Insurance Co., Ltd.
Jun. 2016 Outside Director, Leopalace21 Corporation (current)

Apr. 1987 Joined The Fuji Bank, Limited (now Mizuho Bank, Ltd.)
Jun. 1998 Joined Merrill Lynch Securities Co., Ltd.
Apr. 2003	Managing Director, Industrial Revitalization Corporationof Japan
Apr. 2007	Board Member & Managing Director, Industrial Growth
Platform, Inc. (current)
Jun. 2010 Outside Director, Leopalace21 Corporation (current)

Apr. 1984 Joined Recruit Co., Ltd.
Apr. 2006 Joined Tokyo Electric Power Company, Incorporated
Nov. 2007	Joined TEPCO PARTNERS Co, Inc. on loan Managing Director
Jun. 2012	President and Representative Director, TEPCO PARTNERS Co, Inc.
Jun. 2015	Outside Director, Leopalace21 Corporation (current)
President and Representative Director, SHiDAX BEAUTYCARE MANAGEMENT CORPORATION
Apr. 2017	President and Representative Director, Hasegawa Social
Works Co., Ltd. (now HITOWA Social Works Co., Ltd.)
Jun. 2019	Managing Executive Officer (Responsible for Work Style
Reform), JDC Corporation (current)

Bunya Miyao

Seishi Okamoto

Tadashi Kodama

Shigeru Ashida

Katsuhiko Nanameki

Mayumi Hayashima

Tetsuji Taya

Yoshiko Sasao

Leopal ace21 I nt egr at ed R epor t 201933

For Regaining the Trust

Outside Director

Outside Director

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

Apr. 1971 Joined Kyodo News
Jun. 2007	Administrative Officer, General Manager of theManagement Planning Department and General
Manager of the President’s Office, Kyodo News
Jun. 2010 Director and Senior Vice President, Kyodo News
Jun. 2011 President and CEO, Kyodo News
Jun. 2014 Counselor, Kyodo NewsMar. 2016	Executive Chairman, Kyodo Public Relations Co., Ltd.
(currrent)
Jun. 2019 Outside Director, Leopalace21 Corporation (current)

Hisafumi Koga

Initiatives toward Regeneration

Yoshitaka Murakami

Initiatives for Strengthening Management Foundation

Audit & Supervisory Board Members (As of June 30, 2019)

Full-time Audit &Supervisory Board Member

Full-time Audit &Supervisory Board Member (Outside)

Audit & Supervisory Board Member(Outside)

Audit & Supervisory Board Member(Outside)

Jun. 1983 Joined JAPAN LIFE Co., Ltd.
May 1987 Joined Leopalace21 Corporation
Apr. 2007	General Manager of Leasing Inspection
Unit, Leasing Business Division
Jul. 2010	General Manager of Area Strategies
Department
Apr. 2012 General Manager of Auditing Department
Nov. 2015	Audit & Supervisory Board Member,Morizou Co., Ltd. (current)
Jun. 2016	Full-time Audit & Supervisory Board
Member, Leopalace21 Corporation(current)

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

Apr. 1966	Joined Sendai Regional Taxation Bureau,
National Tax Agency
Jul. 2006	Assistant Regional Commissioner(Fourth Large Enterprise Examination),
Tokyo Regional Taxation Bureau, National
Tax Agency
Aug. 2007	Established Masahiko Nakamura Certified
Tax Accountant Office
Representative, Masahiko Nakamura
Certified Tax Accountant Office (current)
Jun. 2010	Audit & Supervisory Board Member,
Leopalace21 Corporation (current)

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

Atsunori Nasu

Jiro Yoshino

Masahiko Nakamura

Takao Yuhara

Data Compilation

34

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

CEO Message

In allocating all available
managerial resources to resolve
the problem of construction
defects as soon as possible,
we aim to make a fresh startunder the banner of a new
Leopalace21.
Bunya Miyao
President and CEO

Introduction
Leopalace21 is known for its one-room type units equippedwith furniture and electrical appliances and approximately
60% of these properties are leased by corporate customers.
We take pride in having been able to supply the rental market with important social infrastructure to mainly meet thedemand for corporate housing. However, in the light of ourconstruction defects in violation of the Building Standards Act,
we deeply regret not being able to fully live up to the expectations of our stakeholders, such as the safety of tenants andthe confidence of property owners.
My critical mission now is to resolve the construction
defects issue as soon as possible. In our mainstay Leasing
Business, we have currently halted the recruitment of new

tenants for properties subject to top-priority investigations
and we are allocating all of our managerial resources to ongoing investigations and repair works. As a result, occupancy
rates and profits have seen a decline for some time, but I am
committed to producing a recovery as soon as possible. I will
also devote myself wholeheartedly to the establishment of a
new compliance framework.
What is Leopalace21’s raison d’être (reason for existence)?
In other words, what is the purpose of our existence in society? We intend to go back to the starting point and reconfirm
with all employees the importance of carrying on a businessthat contributes to society by supplying and managing rental
housing to meet customers’ needs.

Leopal ace21 I nt egr at ed R epor t 2019

We were unable to prevent the construction defects problem
over years, which was no normative behavior as a construction company dealing with apartment buildings. The factshows just how vulnerable our internal controls were. In fiscal
year ending March 31, 2020, a new management team under
my leadership was entrusted with a major role of rebuilding
Leopalace21. We were confronted by the collapse of the bubble economy soon after I joined the Company and I played apart in negotiating with financial institutions so that we could
overcome the management crisis of excessive liabilities. When
we faced financial difficulties triggered by Lehman Brothers,
I was placed in charge of corporate planning. At that time, I
took the lead to formulate a comprehensive business reconstruction plan. I therefore hope to utilize my in-depth experience in rebuilding the Company and I will put my heart andsoul into regaining the trust of our stakeholders and getting
earnings back on track as soon as possible.

Taking all possible measures for
quality assurance

Data Compilation

We ensure quality assurance by investigating a total of 39,085
buildings so that tenants and owners across Japan can havepeace of mind. In the investigations, every attention in paid so
as not to overlook parting walls defects, the origin of a seriesof construction deficiencies, and other issues related to theinsultation material of the parting walls, exterior wall specifications, and fire-resistant ceilings.
That said, the progress of investigations and repair works
are falling behind schedule because the scope of investigations widened depending on the nature of the defects andthe cooperation of tenants is also needed. We are therefore
allocating all available managerial resources, mainly byincreasing the number of dedicated employees, with the goalof resolving the construction defects problem as quickly as
possible. Furthermore, because the repair works are being
carried out in consultation with the approximately 480 specified administrative agencies across Japan, instead of having
uniform measures developed at the Company’s head office,we now operate a system under which measures are devisedin 16 local centers in charge of respective regions acrossJapan and the head office approves those measures in termsof legal compliance.

Initiatives for Strengthening Management Foundation

In consolidated results for fiscal year ended March 31, 2019,
net sales came to 505.2 billion yen (–4.8% YoY). They areowing to the fact that new tenant recruitment was halted forproperties subject to top-priority investigations until the completion of investigations and repair works. Operating profit
totaled 7.3 billion yen (–67.8% YoY) and recurring profit 7.0
billion yen (–68.4% YoY). We recorded a 68.6 billion yen net
loss attributable to shareholders of the parent company as aresult of posting a 54.7 billion yen for provision of reserve forlosses related to repairs and loss related repairs, a 9.6 billion
yen for provision of reserve for apartment vacancy loss, anda 7.5 billion yen of impairment loss on the sale of apartments
in extraordinary losses. We deeply apologize once again to all
the stakeholders.
An independent external investigation committee looked
into the root cause of the construction defects issue. The committee revealed that in the midst of tough business conditionsin the early 1990s after Japan’s bubble economy burst, (1) the
Company’s top priority was to recover from the financial difficulties and expand the construction subcontracting business,(2) the company ran things on its way with the leadership of
too much authoritative top management, (3) the employees
had poor sensitivity to legal risks in the lack of compliance andfailed to hold a sense of ownership in quality assurance, and(4) in the construction process control, there were insufficientconstruction supervision and execution management in place.
We took the four-pointed analysis seriously as each point was
painfully true.
We are deeply ashamed of not being able to change the
top-down approach in the corporate culture, and taking
actions ahead of a mature planning which led to insufficient
sense of compliance. We regrettably failed to foster thenotion of contributing to society, Leopalace21’s raison d’être.

Initiatives toward Regeneration

Assumption of office as President

For Regaining the Trust

Summary of earnings

35

36

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Independent and fair “outside scrutiny”
has greatly improved our management
oversight function.

Working to prevent reoccurrences—Rebuilding our governance and compliance system—
In heeding the recommendations of the external investigationcommittee and not suffering from the same mistakes, we haveformulated three main Company-wide recurrence-prevention
measures: (1) drastically reforming our corporate culture; (2)rebuilding our compliance and risk management systems; and(3) reviewing our construction business framework.
In particular, we acknowledge that the point made by thecommittee that our corporate culture has adhered to thepolicies of our management team rather than legal complianceor construction quality is a serious problem that shakes thefoundations of our Company’s existence. Our corporate culture
should be one that is customer-oriented and compliance-first.
Even within the previous management team, the notion was
raised that a top-down corporate culture was out of stepwith the times and that the Company should aspire to adopt
a bottom-up approach. In spite of this, our inability to breakaway from that outdated system was ultimately exposed by the
problem of construction defects. Accordingly, the management
team took seriously to heart the fact that it was responsible forcausing significant losses and as already mentioned, a shake-upof the Board of Directors took place with the number of internal
directors being reduced from seven to five. At the same time,
we increased the number of outside directors from three tofive in an effort to eradicate self-complacency and significantly
beef up management oversight with independent and fairoutside scrutiny so that we can properly fulfil our corporate
responsibilities as a member of society.
Moreover, in order to entrench an enduring compliancefirst policy within the organization, we established a newCompliance Management Division to validate the legal
compliance of our various businesses and products and also

to build and operate information management systems. We
then established the Compliance Management Headquarters,a higher level organization with increased internal controlling
power and appointed the Headquarters’ general manager as
Company’s CLO (Chief Legal Officer) with a strong authority.
Add to this, we plan to improve compliance on a practical level—something we aim to achieve by providing more
opportunities that facilitate mutual understanding throughmanagement-employee dialogue, developing an open corporate culture, and enhancing compliance training for each operational process with a focus on which laws need to be applied.

—Reviewing construction business processes—
It was also pointed out by the external investigation committee that in our construction business where the defects
problem occurred, not only did we fail to check the legal
compliance of new products during their development, execution management was dependent on self-inspections andarchitects were hardly involved in the construction supervision
process. In light of this, we have decided to subdivide operational processes when developing new products, includingchanges to materials used, and carry out more detailed examinations that also include legal compliance checks. We havealso employed a system of incorporating checks at each stageof construction and on-site inspections by architects into
the construction management process. Construction cannot
proceed to the next stage unless these checks and inspections
have been completed. Furthermore, through the reorganizationof the Compliance Management Division, we have also put inplace a system whereby we carry out inspections and provide
technical instructions to the overall construction process,including the parties outside of our business divisions andconstruction contractors.

Leopal ace21 I nt egr at ed R epor t 2019

President and CEO
September 2019

Data Compilationof a new Leopalace21.

Bunya Miyao

Initiatives for Strengthening Management Foundation

we make a fresh start under the banner

We are Japan’s number one provider of social infrastructure
centering on one-room type rental housing. As an entity driven
by our flexible way of thinking to solve people’s housing problems, we have thus far provided services of high added-valuethat leverage our unique strengths to meet the diversified
needs of rental housing.
New rental housing construction starts have declined forthe second year running owing to tighter lending criteria forapartment loans and the dropout of demand for strategies toreduce inheritance tax, while the number of vacancies in therental housing market is increasing. That said, Japan’s graying
population with fewer children, labor shortages, more foreign
tourists, and other changes in the business environment areproviding tailwinds for one-room type rental housing in a number of ways. In this business climate, I believe our Company’s
underlying strength and its potential.
For this reason, we are committed to taking all possible
measures to ensure that the construction defect investigations
and repair works are completed without issue. We will aim to
not only regain the confidence of society we used to have, butalso earn a higher level of trust as we make a fresh start underthe banner of a new Leopalace21. I kindly ask for the understanding of all our stakeholders.

Initiatives toward Regeneration

We aim to earn a higher level of trust as

Earning a higher level of trust

For Regaining the Trust—Changing the mindset of officers and employees
through dialogue—
In this way we are implementing fundamental measures in linewith the recommendations of the external investigation committee to overhaul our organization and structures with the goal of
preventing reoccurrences. However, unless they are effective,
they will carry little meaning. Of all things, we, as officers andemployees of the Company, must change our way of thinking.
To begin with, a customer-oriented mindset means not being
egocentric. We should be thinking altruistically as much as possible so that this time we can be sure to transform our corporate
culture by giving primary consideration to our mission statementof “increasing value for society as a whole,” which links to theCompany’s raison d’être. Only when our stakeholders can reallyfeel that we have achieved this will we be able to say withconfidence that Leopalace21 has been reborn.
As a first step, all members of the management team, including myself, are currently attending owner briefing sessions indifferent locations to apologize, explain the situation, and listen
directly to the various opinions of property owners. At the sametime, we are also actively organizing regional small meetings
to encourage dialogue between the management team andemployees, which I touched upon above. At these meetings,
the opinions of management are put aside so that we can hear
what employees on the ground are really thinking because they
are the ones that best understand the feelings of owners andtenants. On top of this, we intend to periodically run employee
awareness surveys so we can improve the way we verify
whether a compliance-first policy has taken root or whether theright kind of corporate culture is being developed.
It has also been pointed out that with the exception ofinternal recruiting, hardly any personnel movement between
departments is one factor behind the decline in the sense ofownership regarding product quality issues among officers
and employees and explains why check-and-balance functions
did not exist. In response, we will consider reviewing ourjob rotation policy so that we may enliven the movement of
employees between departments, deepen their understandingof knowledge of other departments, and create an organization in which more information is shared.

37

38

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Initiatives for Strengthening Relationships
with Existing Owners

Property owner briefing sessions
We periodically hold property owner briefing sessions acrossJapan in order to facilitate interaction between owners andLeopalace21 employees.
The President and other officers visit each region to attend
these sessions and explain in detail the circumstances
behind the discovery of the construction defects, how the
Company is addressing the concerns of owners and tenants,
the investigation progress for all of our apartments, anddetails of financial results.
Some 4,200 property owners attended the briefings held
throughout Japan in March 2019. We will continue to explain
the situation sincerely to property owners at these meetings.

Property owner briefing sessions in FY2018
Sessions held in FY2018
Total

517

Attendees in FY2018

16,526 people

Hokkaido &Tohoku49
Hokuriku &Joshinetsu

32

Chugoku &Shikoku

Kanto

50

218

*A total of 517 property owner briefing sessions were held during the period April 2018 toMarch 2019.

Chubu
Kinki

47

54
Kyushu &Okinawa

67

Representative opinions of property owners (partial excerpts from briefing session questionnaires)
Regarding construction defects

About financial resultsI want to hear sincere explanations
until all owners are satisfied. It seems
Leopalace21 is now seen as a bad company. I hope it can regain the trust lost.

E arnings will suffer up ahead if thisscandal lingers on. As an owner it ispointless complaining, but I wonder how
the shareholders feel.

I understand the explanations about thebuildings, but I’d like to hear more detailed
explanations about how Leopalace21
intends to rebuild its brand image.

I ’d like Leopalace21 to seriously implement
measures to prevent a reoccurrence andget earnings back on course. I think making
an effort to regain trust is most important.

I was very concerned after the widespread TV news coverage, but I’m more
informed now as it seems Leopalace21 isserious about explaining the situation.

I ’m concerned earnings will be hit hardas occupancy rates decline due toharmful rumors.

Opinions about management
P lease take responsibility and get
Leopalace21 back on its feet.
F or the sake of the tenants and owners,
please fulfill your responsibilities properly and wholeheartedly.
K eep doing a reliable job as before. As
owners, we will do our best to help.

Leopal ace21 I nt egr at ed R epor t 201939

For Regaining the Trust

Opinions expressed by property owners regarding the problem of construction defects
plans, the impact on management, and accountability. Many
opinions concern their insecurity and expectations toward our
future management and our approach to responsibility. Goingforward, we will endeavor to dispel these concerns and renew
relationships of trust.

Press releases........................................... 60.98%

Disaster response....................................... 1.03%

Company as a whole................................. 14.84%

Lease management..................................... 0.96%

Employees................................................... 6.39%

Class L services........................................... 0.73%

Property owner briefings............................. 4.19%

Hotels & resort............................................ 0.66%

Renewal of building lease contracts.......... 4.04%

Future Support services.............................. 0.29%

Tenant management................................... 3.01%

Life-stage Support services........................ 0.22%

Property value improvement measures...... 1.25%

Next generation / business succession...... 0.22%

Initiatives toward Regeneration

We regularly organize informal meetings with property owners
and we have heard a lot about the doubts and concerns they
have regarding the construction defects. Roughly 61% of all
the opinions relate to matters in our press releases. They
can be broken down to the investigation status and future

Land use...................................................... 1.18%

In today’s environment of an increasingly competitive
rental housing market, enhancing the value of a rental
property in order to attract tenants is crucial. Property
owners too face numerous changes when managing
apartments over the long term, such as business succession by the next generation. At Leopalace21 we run
events and offer consultation services so owners canbenefit from the advice of experts like tax accountants.

Our most notable services include Future Support andLife-stage Support. For owners of older properties,
we take into consideration factors such as market
conditions and building management circumstancesand propose various solutions that address not justlease management continuity, but also the concerns ofproperty owners.

Initiatives for Strengthening Management Foundation

Offering proposals to owners of older properties

As of March 31, 2019
Composition
ratio

No. ofunits undercontracts

No. ofvacancies

Occupancy
rate

3,038

37,024

6.44%

36,104920

97.52%

5-10 years

6,010

85,07214.80%

77,7797,293

91.43%

11-15 years

15,398

270,82947.12%

231,347

39,48285.42%

16-20 years

8,775

136,60723.77%

106,580

30,02778.02%

21-25 years

2,695

35,788

6.23%

24,113

11,67567.38%

26 years or older

840

9,478

1.65%

8,795

683

92.79%

Total

36,756

574,798

100.00%484,718

90,08084.33%

Data Compilation

Less than 5 years old

No. ofbuildings

No. ofunits undermanagement

40

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Improving Satisfaction among Foreign
National Tenants

The number of foreign workers in Japan continues to increase owing to improvements in employment conditions, the government’s
support for taking in highly skilled foreign workers and students, and the 2019 enforcement of amendments to the Immigration
Control Act. Accordingly, we expect to see an even greater rise in the number of foreign national tenants in Japan up ahead.
At Leopalace21, we intend to strengthen our framework for accepting foreign national tenants and actively provide general living
support services.

Foreign workers at all-time high for sixth year in a row
The number of foreigners working in Japan continues to riseyear on year—in 2018 there were 1,460,463 foreign workers,
the highest figure recorded since 2007 when reporting of
foreign workers by employers became mandatory.
A breakdown of this figure shows that permanent residents
and Japanese descent accounted for 33.9% of all foreign
workers, followed by holders of restrictive permission outside
original scope (international students) of 23.5%, technicalinterns (21.1%), and those whose professional or technical skills
afford them resident status (19.0%).
By nationality, Chinese accounted for the largest percentage (26.6%) of all foreign workers, followed by Vietnamese(21.7%) and Filipinos (11.2%). The rate of increase in workers
from Vietnam over the last few years has been remarkable,
as seen by a year-on-year rise of more than 30%. Technicalinterns make up a large percentage (over 40%) of workers
from this country.

Foreign workers hit record high for sixth consecutive year
Total: 1,460,463 people

150 (10,000 people)

Highly skilled workers

120

Specified activities
Technical interns
Holders of restrictive
permission outside
original scope

90

60

30

Permanent residents
0

’12

’13

’14

’15

’16

’17

’18

*Notification of Status to Foreign Workers of the Ministry of Health, Labour and Welfare
as of end-October“Unknown” category omitted

Expected to take in nearly 350,000 foreign workers in next five years
following the enforcement of amendments to Immigration Control Act
A new resident status of “Specified Skilled Worker” visa
came into effect in April 2019 under the amended Immigration
Control Act. This means more foreign workers in not justhighly-specialized occupations but manual labor jobs can now
be recognized as foreign residents.
The residency status of “Specified Skilled Worker No.1”
applies to foreigners possessing skills that require considerable knowledge or experience who have completed up to five
years of technical intern training or confirmed by examination
to possess such skills and proficiency in the Japanese language. The “Specified Skilled Worker No.2” status applies topeople with proficient skills and their status of residence canbe renewed every 1–3 years. Up to 345,150 foreigners are
expected to enter Japan over the next five years to work in
the 14 sectors the No.1 status has been designed for, including
nursing care, construction, and agriculture.

Estimated foreign worker influx
SectorNumber of people
Nursing care
50,000–60,000
Building cleaning
28,000–37,000
Material processing
17,000–21,500
Industrial machinery manufacturing
4,250–5,250
Electrical and electronic information
3,750–4,700
Construction
30,000–40,000
Shipbuilding and ship machinery
10,000–13,000
Automobile maintenance
6,000–7,000
Aviation
1,700–2,200
Accommodation
20,000–22,000
Agriculture
18,000–36,500
Fisheries
7,000–9,000
Food and beverage manufacturing26,000–34,000
Food services
41,000–53,000
Total
262,700–345,150*Government estimates based on the Notification of Status of Foreign Workers to the Ministryof Health, Labour and Welfare (as of end-Oct 2017)

Leopal ace21 I nt egr at ed R epor t 201941

For Regaining the Trust

Call center support in 5 languages, etiquette seminars, networking events
Visits to GSC by nationality (FY2018)
Nationality

Vietnam..................... 52.0%
China......................... 16.4%
South Korea.............. 12.7%
Taiwan......................... 5.8%
English-speaking countries.................................... 3.5%
Nepal........................... 1.6%
Other........................... 7.9%

Total(people)YoY

Vietnam854+11.3%

China

269-38.7%South Korea

209+104.9%Taiwan96+5.5%

English-speaking
countries57-40.6%

Nepal

27+92.9%

Other

130+56.6%

Total visitors

1,642

+3.1%

Initiatives toward Regeneration

Anchored by the activities of our Global Support
Center (GSC) in Shinjuku, we are working tostrengthen our framework for accepting foreign
national tenants. Major activities include seminars
about proper etiquette necessary to live in Japan,
hands-on garbage sorting practice and networking
events like New Year parties and career support
meetings. Through these initiatives we hope to build
relationships of trust with tenants and improve theiretiquette. We also provide call center support services
over the phone in 5 languages of English, Chinese,
Korean, Portuguese, and Vietnamese to address any
matters tenants wish to discuss.

As part of our initiatives on diversity, we are ramping
up the employment of a global workforce. As of theend of March 2019, 220 foreign national employees
are working at Leopalace21.
Moreover, with the goal of creating a comfortableworking environment in the future, we are currently
conducting a workplace environment survey on ourforeign national employees. We are also holding
round-table discussions on the topic of empowering
foreign national employees and hearing directly fromthem about what they find satisfying or challenging.

Leopalace21 Employees

Nationality

Total

Full-time

Contract

China

67

61

2

South Korea

59

54

Vietnam41

22

Taiwan11

11
12

Myanmar13

Philippines

12

Nepal

6

North
Korea
(10,000
people)150

2Brazil5

4

Malaysia

2

2

Sri Lanka

1

Peru

1

1

Total
90

220

175

120

Part-time
4
5

14

5
1

5

7

6

Total: 21,460,463 people
1Highly skilled workers
1

Specified activities
21

Technical
24 interns
Holders of restrictive
permission outside
original scope

Growth in foreign national tenants

60

Foreign national tenants in Japan are increasing year
after year. As of March 2019, the number of foreign
nationals leasing an apartment stood at 19,519. The
number has more than doubled in ten years. Of thisfigure, tenants from China account for the largest
percentage, followed by Vietnam and other Southeast
Asian countries, and then South Korea and Taiwan. Of
note is the dramatic increase in Vietnamese tenants,
which has risen by more than 120 times over the last
10 years. They therefore account for the majority oftenants from Southeast Asia.

Changes in the number of foreign national tenantsPermanent residents

Initiatives for Strengthening Management Foundation

Leopalace21 initiatives

Foreign national employees on the rise30

20,000 (people)
0

’12

’13

’14

’15

’16

’17

’18

10,0005,000

0’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3

Data Compilation

15,00042

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Business Overview

At a Glance
Leasing Business

44P

Development Business

46P

Segment Overview
This business is involved in leasing rooms in properties we manage basedon our master lease system. One rental agreement we offer allows usage
fees to be paid on a monthly basis, the other, the monthly agreement,
requires upfront payment of usage fees. We seek to secure tenants using
our direct offices, franchise sales offices, cooperative real estate agentsand other means, in order to raise occupancy rates by offering a richer arrayof services that improve tenant satisfaction. We also conduct solar power
generation business to earn profits from selling the electric power generated from solar panels installed on leased rooftops of the apartments.

Main Group Companies

Corporate housing
services

Rent guarantee
services

Leasing management Short-term home contents
services (South Korea)
insurance for tenants

Tenant reference
services

Real estate agency(Vietnam)Real estate agency(Thailand)

Real estate agency(Indonesia)

Real estate agency(Philippines)

Investment consulting

Power generation
business

Power producer
and supplier

Relocation
management

Real estate agency(Cambodia)

This business engages in construction of mainly apartments and realestate development. We are working to bolster our product competitiveness, offering products designed from a perspective of female tenants
who are the major customers of our specialty of 1-room type units andthose for young people as well. Outside of apartments, we are expanding
the construction of commercial properties and elderly care facilities. We
also plan to further diversify into the construction of custom-built homes
and residences for entire-building sale. Morizou Co., Ltd., our subsidiarycompany, develops custom-built homes made of Kiso hinoki cypress,and Life Living Co., Ltd., another subsidiary company of ours, develops
designer-brand condos of the “Branche” series in order to make the best
proposals for utilizing land.

Main Group Companies

Morizou Co., Ltd.
Homes made of Kiso hinoki cypress

Real estate development

Custom-built homes

Net sales
composition ratio

Net sales
composition ratio

84.4%

11.7%

‘19/3 FY2018‘19/3 FY2018

Sales Trend

Results of FY2016 (ended March 31, 2017) and after are adjusted to new segments

450 (Billions of yen)

100 (Billions of yen)
75

300

50
150

25
0

0

’16/3
FY2015’17/3
FY2016’18/3
FY2017’19/3
FY2018’16/3
FY2015’17/3
FY2016’18/3
FY2017’19/3
FY2018Key Data

Occupancy Rates

Master Lease Apartment Completions (during ’19/3 FY2018)

94 (%)

Chugoku region

92

18 apartment buildings, 4.7%

90

Tohoku region

88

25 apartment buildings, 6.6%

86

Kyushu/Okinawa

38 apartment buildings, 10.0%

84

Apr May Jun‘16/3 FY2015

JulAug Sep Oct Nov Dec Jan Feb Mar‘17/3 FY2016‘18/3 FY2017‘19/3 FY2018

Chubu region

39 apartment buildings, 10.2%

Other

11 apartment buildings, 2.9%

381

apartment
buildings

Tokyo metropolitan area

196 apartment buildings, 51.4%
Kinki region

54 apartment buildings, 14.2%

Leopal ace21 I nt egr at ed R epor t 201948P

Hotels, Resort & Other Businesses

49P

For Regaining the Trust

Elderly Care Business

43

Segment Overview

Main Group Companies

Main Group Companies

Azu Life Care Co., Ltd.

Resort businessTravel agency services

Elderly care

Net sales
composition ratio

Net sales
composition ratio

2.7%

1.2%

Special subsidiary company‘19/3 FY2018

Sales Trend‘19/3 FY2018

Results of FY2016 (ended March 31, 2017) and after are adjusted to new segments

15 (Billions of yen)

12 (Billions of yen)

10

8

5

4

0

Initiatives for Strengthening Management Foundation

Hotels, Resort and Other Businesses are involved in the managementof domestic hotels, management and operation of resort facilities on
the island of Guam, travel agency services, clerical agency services andother businesses.

Initiatives toward Regeneration

Under the brand name “Azumi En,” our network of community-based nursing care businesses spanned 87 locations mainly in the Kanto region as ofMarch 31, 2019. We manage fee-based nursing homes, centers offering
day services and short stays, and group homes as well as businesses
offering home visits by nursing care staffs and in-home nursing care
support and other services. We are especially focusing on operations suchas day services and short stays for the care receivers to visit and use.

0

’16/3
FY2015’17/3
FY2016’18/3
FY2017’19/3
FY2018’16/3
FY2015’17/3
FY2016’18/3
FY2017’19/3
FY2018Elderly Care Facilities Occupancy Rates (Annual Average)

Guam/Domestic Hotels Occupancy Rates (Annual Average)

100 (%)

100 (%)

75

75

50

50

25

25

0

0

’16/3
FY2015Day services’17/3
FY2016
Short stays’18/3
FY2017
Private nursing homes and other’19/3
FY2018’16/3
FY2015’17/3
FY2016

Guam Resort

Domestic hotels’18/3
FY2017’19/3
FY2018

Data Compilation

Key Data

44

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Business Overview

Leasing Business
SWOT
Analysis• Contracts with individuals sluggish• Decline in occupancy rates owing toconstruction defects issue• Weaker brand power owing toconstruction defects issue• No.1 in studio (one-room type)apartments management• Apartments equipped with furniture,electric appliances, Internet, and IoT• Corporate contracts make up approx.
58% of total contracts

Strengths
Opportunities

S W
O T

• Working-age population living alone
expected to remain unchanged in next
20 years• Three major metropolitans areas
continue to enjoy net population influx• Increase in corporate recruiting due tolabor shortages• Growing number of Japanesecompanies entering ASEAN market

Threats• Declining population• Consistent increases in rental housing
vacancies across Japan• Geopolitical risks in ASEAN

Performance

Operating Income (Loss) and Average Occupancy Rates(%) 9630 (Billions of yen)

Weaknesses

20

92

10

88

0

84

-50

80

’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3* ’18/3 ’19/3

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Operating income (loss) (left axis)
Average annual occupancy rate (right axis)

Fiscal 2018 net sales in the Leasing Business came to 426,388
million yen (–2.1% YoY) and operating profit totaled 14,987
million yen (–42.5% YoY). Occupancy rates and profit were
weakened by the halting of tenant recruitment for properties
subject to top-priority investigations in connection with theconstruction defects issue, despite our efforts to provide
extensive added value, such as industry-first computerizedlease agreements and security systems in partnership withleading security firms. As a result, the number of units undermanagement at fiscal year-end was 574,798 (+4,126 YoY), theoccupancy rate was 84.33% (–9.39 points YoY), and the average annual occupancy rate for the year was 88.34% (–2.25
points YoY).

*Figures for FY2016 (ended March 31, 2017) and after are adjusted to new segments.

Business Conditions and Issues
Rental Housing Vacancy Numbers and Rates (Japan)
5,000 (Thousands of units)(%) 25

4,000

20

3,000

15

2,000

10

1,000

5
0

0

1983

1988

1993

1998

2003

2008

2013

2018

Vacancy number (rental and for-sale) (left axis)
Vacancy rate (right axis)
Source: “Housing and Land Survey” (Ministry of Internal Affairs and Communications)(FY)

The number of new construction starts in the rental housing
market continued to decline from last year due to changes inthe business environment, including tighter lending criteria
for apartment loans and the dropout of demand for strategies
to reduce inheritance tax. The number of construction starts
for properties no larger than 30m2—our target market—also
declined for the first time in six years, while the number ofvacant houses for rent continues to increase, which suggeststhat a recovery in nationwide demand is unlikely. In this environment, we believe a differentiation strategy is key; specifically, a concentrated supply of properties in areas where weanticipate high occupancy rates in the future and the provisionof value-added services leveraging our unique strengths.
We also recognize that in addition to taking steps to prevent
tenant leaving, we must adopt other measures, such as carrying out proper maintenance and management of properties,
normalizing rents and subleasing rents based on market rates,
and reviewing routine property management tasks.

45

Leopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

Progress of measures related to the Medium-term Management Plan (FY2017-FY2019)
Sales
500 (Billions of yen)
400

421.3

435.5

426.3

’17/3

’18/3

’19/3

300
200
100
0

Operating Income / Operating Margin
30 (Billions of yen)24(%) 10

26.0

23.0

18

6.0

5.5

12

8
6

14.9
3.5

6

4
2
0

0

’17/3
Operating income (left axis)

’18/3

’19/3

Operating margin (right axis)“my DIY”
Even rental properties can be customized to one’s liking. The number of contracts
for our “my DIY” service, which allows tenants to change the wallpaper on 1 wall
for free, has already reached 44,951. This fiscal year, we held various contests andaimed to have tenants personalize and form greater attachments to their rooms.
New smartphone app for tenants “&Leo”
We have developed a new smartphone app, &Leo, which combines all the great features of our previous apps
LEONET APP and LEO LIFE. This new app lets users view their lease contract information, change various
registered information, and even confirm their safety and receive disaster information during times of disasteremergencies. It also offers tenant-only benefits, such as special discounts and recommended services.

Data Compilation

Promoting “smart” apartments
Leo Remocon enables tenants to use their smartphones to operate home appliances remotely. Even air
conditioning and other functions can be controlled from outside. This service is provided as standard on all
newly constructed residences completed since October 2016. Moreover, Leo Lock, a smart lock key that canlock and unlock the front door using a smartphone, has been provided as standard on properties completed
since October 2017.

Initiatives for Strengthening Management Foundation

Key Products and Services

Security systems
With “24-hour, 365-day safety and security” as our motto, we have partnered with two major
nationwide security companies to install security systems in properties we manage. The numberof security systems installed has now exceeded 300,000. In June 2017, we acquired the “Excellent
Security Rental Apartment” certification.

Initiatives toward Regeneration

Looking at the Leasing Business environment during the periodof our Medium-term Management Plan, despite a decrease in
the total number of households, the number of single-personhouseholds in our target cohort of the working-age population (aged 15–64) will trend sideways for the next 20 years
or so, while the 3 major metropolitan regions of Japan—ourtarget regions—continue to enjoy a net population inflow. In
addition, Japan’s labor shortage means companies are continuing to hire workers and we therefore expect to see growing demand for dormitories and company residences. In thiskind of business environment, we intend to further enhance
our presence as a one-stop solutions provider that can meetthe varied needs of corporate clients by harnessing our key
strength of approximately 570,000 units under management.
At the same time, we will encourage long-term tenancies,
restrain tenant vacancies, and look to attract foreign students.
We continued to implement initiatives based on thisapproach in fiscal 2018 and as a result, the number of units
under contract by foreign national tenants grew to roughly
35,000, which equates to 7.3% of all units under contract. We
intend to further boost the number of foreign national tenants
up ahead by expanding our global workforce and providing
better living support services to foreigners new to Japan.

46

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Business Overview

Development Business
SWOT

Analysis• High-quality, high-value-added
products (including strong soundinsulation)• Still gathering know-how outside of• Reduced construction costs throughlow-rise apartment buildings
industrialization and direct control on• Inadequate construction
construction specialists
management system•D iversification of constructions, including• Weaker brand power owing to
not only apartments, but also elderly
construction defects issuecare facilities, buildings with commercial
facilities, and custom-built homes
Strengths
Opportunities

S W
O T

• Major increase in people subject toinheritance tax due to tax revision• Stable trends in smaller (up to 30m2)
new rental housing construction starts(Buildings) 4,000

30

3,000

20

2,000

10

1,000

0

0

-10

-1,000’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3* ’18/3 ’19/3

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Operating income (left axis)
Number of building completions (right axis)*Figures for FY2016 (ended March 31, 2017) and after are adjusted to new segments.

Number of New Rental Housing Starts
500 (Thousands of units)
400
300
200
100
0

’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3

30m2 or lessThreats• Construction demand peaking toward2020 Tokyo Olympics and Paralympics
with rising construction costs• Rental property vacancies increasing
across Japan

Performance

Operating Income, Trend in Building Completions
80 (Billions of yen)

Weaknesses

more than 30m2

Source: Statistics on New Housing Starts, Ministry of Land, Infrastructure, Transport and Tourism

Owing to a downturn in building construction contracts dueto the external environment surrounding apartment construction, total orders received in fiscal 2018 in the Development
Business amounted to 64,495 million yen (–15.0% YoY) and net
sales came to 58,992 million yen (–23.0% YoY) for an operating
loss of 995 million yen. We are working to improve profitability
by focusing our efforts on winning orders in Japan’s 3 major
metro areas where we anticipate continued population growthand high occupancy rates in the future, introducing high-quality, cutting-edge strategic products, expanding construction
variations to optimize ideal land usage, and reviewing productprices and supply channels. Nevertheless, orders and earnings
decreased in fiscal 2018 on the impact of media reports concerning apartment construction and apartment loans.

Business Conditions and Issues
Despite signs of improvements in corporate earnings, employment and income conditions, the environment surrounding theDevelopment Business was unfavorable as a result of media
reports concerning apartment construction and apartment
loans. New rental housing construction starts declined for thesecond year running and construction of properties no larger
than 30m2—our area of expertise—also declined for the firsttime in six years. Japan’s rental housing market is currently
saturated when assessed at the national level. In this environment, we have stopped taking new orders in fiscal 2019 sothat we can focus all of our energy on dealing with the problem of construction defects.
Still, with a view to future growth, we will strive tostrengthen product appeal by incorporating the perspectivesof tenants into product development, beef up the seismic
capacity of our products, and take steps to improve soundinsulation and security.

47

Leopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

Progress of measures related to the Medium-term Management Plan (FY2017-FY2019)

14.9

5.5

12

3.5

6

4
2
0

0

’17/3
Operating income (left axis)

’18/3

Sales
100 (Billions of yen)

80.3

80

58.9

40
20
0

’17/3

’18/3

’19/3

Operating Income / Operating Margin
6.0 (Billions of yen)

(%) 9

5.7
7.2

4.0

6

3.6
4.8

2.0

3

-1.0

0

0

-1.7

-2.0

’17/3

’19/3

Operating margin (right axis)

76.5

60

Operating income (left axis)

’18/3

-3

Initiatives toward Regeneration

Sales Looking at the Development Business environment during theof yen) of our Medium-term Management Plan, new rental
500 (Billionsperiod
435.5 for properties
housing421.3
construction starts
426.3no larger than
400
30m2 declined for the first time in six years and the number
300
of vacant houses for rent continued to consistently increase.
As a result, intensification of market competition will be
200
unavoidable, but we will continue to supply high-quality, high100
value-added products and services in our quest to become the0partner of choice among customers. In March 2012 we started’17/3’18/3construction’19/3
acceptingnon-apartment
contracts to erectbuildings for businesses, such as social welfare facilities andchild-care
We alsoengage in business matching withOperating
Incomecenters.
/ Operating
Marginlandowners
in
the
field
of
buildings
with commercial
facilities.
30 (Billions of yen)(%) 10Moreover, with the goal26.0
of improving our after-sales services,24823.0 events at which owners can talk with professionwe organize
618
als like external tax accountants
and financial planners.
6.0

’19/3

Operating margin (right axis)

MIRANDA
With “decorative” as its key concept, MIRANDA is a rental housing brand filledwith new ideas that impress potential tenants with “admiration” and “sparkle” andinvites fresh thinking about living spaces that come with unique added value.
CLEINOWith fine-tuned floor plans, equipment, and specifications based on extensive
market surveys, CLEINO-branded designs enable considerable flexibility inmatching the styles and ideas of prospective residents and making their lives evenmore comfortable.

Branche (Life Living Co., Ltd.)With an emphasis on design and function, Branche rental apartment buildings are compact and canbe constructed efficiently on small and odd-shaped lots as little as 165 square meters. Here, we
employ the patented “TEN-FOUR CUBE Construction Method” enabling us to incorporate 4 stories
in a 10-meter-high building, which would be normally limited to 3 stories using regular construction
method, giving it significantly higher expected returns in rent.

Data Compilation

Custom-built houses made of Kiso hinoki cypress (Morizou Co., Ltd.)
Based on flexible designs, custom-built homes are made with the highest-quality kiso-hinoki wood.
In addition to durability of such wood, these homes are designed to last 100 years thanks toinnovative features, such as a ventilation system that prevents degradation and reinforcement
against earthquakes.

Initiatives for Strengthening Management Foundation

Key Products and Services

48

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Business Overview

Elderly Care Business
Performance
In the Elderly Care Business, through which we operate the
Azumi En network of nursing care facilities, net sales in fiscal
2018 totaled 13,922 million yen (+8.7% YoY). Occupancy rates
remained steady thanks to initiatives aimed at improving customer satisfaction and as a result the operating loss improvedby 749 million yen year on year to 846 million yen. In positioning the Elderly Care Business as a growth strategy business,
we have expanded our facilities in recent years. As of March
31, 2019, we operated 87 facilities including newly opened
four facilities in fiscal 2018.

Business Conditions and Issues
Conditions in the Elderly Care Business are mixed. On the one
hand, the population of people requiring care is rising, so themarket for related services is expected to continue growing.
On the other hand, the number of facilities for seniors is
also increasing, giving rise to intense competition within theindustry, in addition to difficulties in attracting care personnel.
Under these circumstances, we will target to achieve profitability at an early stage by increasing utilization rates andenhancing operational efficiency.

SWOT
Analysis• Operation of 87 facilities in Kanto
and Chubu regions• Addressing various needs,
including day service, short stay,and other fee-based nursing homes

Strengths
Opportunities• People aged 65 and over to reachabout 30% of total population
by 2025• High labor-cost burden

S W
O T

Weaknesses
Threats

Key Products and Services• R educed nursing care fees
following review of nursing careinsurance system

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

(Number of facilities) 100

1

50

0

0

-1

-2

’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Operating income (loss) (left axis)
Number of nursing care facilities (right axis)

Azumi EnAs of March 31, 2019, we managed 87 “Azumi En”
facilities in the Kanto and Chubu regions. Services at eachfacility include fee-based homes for seniors that offer
support for their daily lives in a family-like atmosphere;group homes with daily-living support through meticulous
nursing care; and day and short-stay services where
elderly people living in their own homes can accessservices for temporary stays.

Leopal ace21 I nt egr at ed R epor t 201949

Business Overview

Hotels, Resort and Other Businesses
In fiscal 2018, sales in our Hotels, Resort and Other
Businesses amounted to 5,919 million yen, up 0.2% from theprevious year, and operating loss was 1,346 million yen, a loss
increase of 500 million yen. In October 2017, we opened a newannex of Hotel Leopalace Sapporo, doubling the number ofrooms from 86 to 195. Outside of Japan, the occupancy rateof Leopalace Resort Guam decreased as a consequence ofreports on North Korea’s missile launch in August 2017.

For Regaining the Trust

Performance

Business Conditions and Issues

SWOT
Analysis• Business synergies withstakeholders

Opportunities

S W
O T

• Japan: Hotel industry booming due
to economic growth and inboundtourist demand• Guam: Stable for Japanese travelers;South Korean market showing
remarkable growth

Weaknesses
Threats• Decreasing foreign visitors to Japandue to yen’s appreciation• Burden of regular investments torenew facilities

Operating Income (loss)
0 (Billions of yen)-1

-3

’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3* ’18/3 ’19/3

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018*Figures for FY2016 (ended March 31, 2017) and after are adjusted to new segments.

Leopalace Hotels
We currently operate four Leopalace Hotels in Japan(Sapporo, Sendai, Nagoya, and Hakata). Aimed atboth long-term and short-term stays, these hotels run
restaurants under the
direct management of
Leopalace21 and provide
free laundry facilities.
*Hotels in Sapporo, Sendai, andHakata are scheduled to be sold at
the end of October, 2019.

Leopalace Resort Guam
Leopalace Resort Guam is fully equipped with sports
facilities that meet international standards. Its swimming
pool has been certified as a JOC-authorized swimmingcompetition center and its golf courses are certified
by the Japan Golf Association to host training camps.
Furthermore, the resort’s
Medallion Rooms havebeen awarded the highest
hotel grade of L by theJapan Travel Bureau.

Data Compilation-2

Key Products and Services
Initiatives for Strengthening Management Foundation

Strengths• Inadequate marketing to generalcustomers other than stakeholders

Initiatives toward Regeneration

In the Hotels & Resort Business, we are working to stabilize
our performance by encouraging apartment owners and corporate rental customers to use our facilities and thus improve
occupancy rates.

50

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Initiatives for Strengthening Management Foundation

Leopalace21’s ESG Management

Based on our corporate philosophy of “creating new value,” Leopalace21 promotes ESG activities to meet the
expectations of a range of stakeholders and develop a sustainable society in line with the needs of the times.

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

Leopalace21’s Basic CSR Action Policy
The Company has established a Basic CSR Action Policy with 5 themes in response to the needs of our stakeholders, social and environmental problems, and the requirements of ISO26000 and other standards and guidelines, and has been steadily taking actions. Based on compliance and corporate governance that support ourbusinesses, we intend to implement CSR activities in accordance with the policy, with the aim of “creating newvalue” together with all of our stakeholders.
Tenants
Apartment owners
Client companies Facility users
Compliance

Local
communities

GovernanceSocialCorporate GovernanceEngaging in sound, constructive
communication with stakeholders
Providing high-quality services andsupporting affluent living

Basic CSR Action Policy

Creating pleasant work environments anddeveloping diverse human resources

Creating
new value

Contributing to local communities

Employees

Environment

Creating an environmentally friendly society

Corporate Ethics Charter

Corporate Philosophy

Investors and shareholders
Global environment

Leopal ace21 I nt egr at ed R epor t 2019

Basic CSR Action Policy

SocialP52

Creating
pleasant work
environments
and developing
diverse humanresources
P54

P56

Goal 10

Reduce inequality within and among countries

Goal 11Make cities and human settlements inclusive,
safe, resilient and sustainable

Goal 13

Take urgent action to combat climate change and its impacts

Goal 3

Ensure healthy lives and promote well-being for all at all ages

Goal 5

Achieve gender equality and empower all women and girls

Goal 8Promote sustained, inclusive and sustainable economic growth,
full and productive employment and decent work for all

Goal 4

Ensure inclusive and equitable quality education andpromote lifelong learning opportunities for all

Goal 10

Reduce inequality within and among countries

Goal 11Make cities and human settlements inclusive, safe, resilient andsustainable

Basic CSR Action Policy

Environment

Creating anenvironmentallyfriendly society
P58

Governance

SDGs to which We Aim to Contribute

Goal 3

Ensure healthy lives and promote well-being for all at all ages

Goal 7

Ensure access to affordable, reliable, sustainable andmodern energy for all

Goal 13

Take urgent action to combat climate change and its impacts• Toward a Stronger Corporate Governance System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  P18
• Basic Approach to Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  P20
• Board Members’ Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  P21
• Corporate Governance Dialogue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  P22
• Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  P28
• Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  P30
• Directors and Audit & Supervisory Board Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  P32Engaging in sound,constructive
communication
with stakeholders
P60

SDGs to which We Aim to Contribute

Goal 17

Strengthen the means of implementation andrevitalize the global partnership for sustainable development

Data Compilation

Basic CSR Action Policy

Initiatives for Strengthening Management Foundation

Contributing
to localcommunities

SDGs to which We Aim to Contribute

Initiatives toward Regeneration

Providing highquality services
and supporting
affluent living

For Regaining the Trust

The SDGs aim to address challenges in a range of fields, many of which overlap with the Company’s initiatives
that contribute to society through our businesses. Under our independently developed 5 themes of the BasicCSR Action Policy, the Company has identified activities that contribute to the relevant SDGs. In this way, we
promote actions under the ESG (Environment, Social, Governance) framework with a view to realizing our longterm vision.

51

52

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Basic CSR Action Policy

Providing High-Quality Services andSupporting Affluent Living
Amid the growing diversity of rental housing needs in an increasingly diverse society, we offer tenants living spacesthat are comfortable and pleasant via new lifestyle proposals.

Our Basic View: Lifestyle Diversification
Attendant with shifting family composition reflecting the twin demographic trends of a growing elderly cohort and a low fertility rate and changing times, the number of single-person households continues to grow. At Leopalace21, we are responding
to social needs arising from the growing diversity of lifestyles, and we see such changes as offering opportunities to develop
products and services in tune with the times.

Examples of Our Initiatives

1

Launch of Online Tenancy Application System

With the introduction of an online tenancy application systemprovided by IT firm ITANDI, Inc., we have established a system
whereby prospective tenants can apply for any of our rental
properties in Japan without having to visit a branch office.
The use of an online system for prospective tenants to directly
fill out application forms for any of our roughly 570,000 properties under management listed on our website is the largest
and first such initiative in the industry. The computerizationof application forms shortens input time, prevents errors, andimproves operational efficiency. Going forward, we aim to2further promote operational efficiency and work on improving
customer satisfaction.

Online Tenancy
Application System

Living Support for Foreign National Tenants

We opened a Global Support Center (GSC Shinjuku*) toprovide dedicated in-branch support services to foreign
customers currently living in our apartments. Our employees,
including 15 foreign national staff members, offer a reassuring
and comfortable living environment to foreign customers fromthe time they become tenants through to the time they leaveby providing general living support in their native language.
Services include various explanations upon moving in to theapartment and consultation regarding various issues that may
arise during their tenancy. We will continue to implement
initiatives aimed at maintaining and improving quality of life
for foreign tenants.
*We also opened a GSC in Nagoya in June 2019.

Etiquette seminar for foreign tenantsLeopal ace21 I nt egr at ed R epor t 2019

53

Main Activities and Targets the CSR Committee Oversees
SDGs

Restatement
as ISO26000
Core Subjects

FY2018 Targets

FY2018 Results

Selfassessments

FY2019 Targets

Devise and market
products that takesurroundings into accountSecurity system
Security camera

6,599 rooms
1,417 buildings

5,375 rooms
1,009 buildings

4,442 rooms
920 buildings

Reduce incoming calls
ratio to service centers

Incoming call ratio (monthly avg.) vis-à-vis
total no. of tenants
Below 8.0%

6.40%

Below 6.0%

23 events

12 events

70 locations

87 locations

50 locations

2,500

1,936

2,600

Support schools andstudents via industryacademia-government
cooperation

6. Consumer
issuesIndustry-academia-government
partnership planning

Install parcel delivery
lockers
Develop support system
for rising number offoreign tenants

Etiquette seminar participants

18 events

For Regaining the Trust

Main Activities(Global Support Center)3: Attainment below 120% but above 100%

: Attainment below 100% but above 70%: Attainment below 70%

Provision of Housings with High-security Systems

4

More than 100 PUDO Stations Installed, the Most in the Real Estate Industry

Data Compilation

Since 2016 we have continued to install open-type parcel
delivery lockers known as PUDO Stations (provided by Packcity
Japan). As of December 2018, we had installed these lockers
at more than 100 of our properties. More and more people are
shopping online but unable to be at home during designatedparcel delivery times owing to changing lifestyles. A nearby
PUDO Station locker resolves this problem. They are also
helping to alleviate the issue of labor shortages at delivery
companies. We will continue to install more of these lockers
up ahead in an effort to improve customer convenience andfind solutions to problems faced by society.

Initiatives for Strengthening Management Foundation

To meet the needs of tenants and property owners who seek
homes with strong security systems, the Company has tied up
with the leading security service companies, SECOM CO., LTD.
and SOHGO SECURITY SERVICES CO., LTD., to install security
systems in 310,000 rooms, which make up a majority of properties under our management. We are also boosting our security
measures by becoming the first in the industry to introduce a
cloud-based security camera service at our rental properties.
Furthermore, all apartments of the Company’s core
MIRANDA and CLEINO brands have acquired the “Excellent
Security Rental Apartment” certification, a program established by the Japan National Crime Prevention Association and
the Center for Better Living that certifies apartments whichmeet their security criteria.

Initiatives toward Regeneration: Attainment above 120%

Open-type parcel delivery lockers

54

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Basic CSR Action Policy

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

Our Basic View: Diversifying Work Styles and Human Resources
At Leopalace21, we think people from a wide range of backgrounds with diverse perspectives, enable us to respond to diversifying social needs, contribute to the creation of new value, and contribute in a major way to our growth. We aim to create
workplaces where employees with diverse backgrounds find it easy to work together effectively and can apply their skills andtalents on the job.

Examples of Our Initiatives

1

Leopalace21 won women’s empowerment excellence award by the Tokyo
Metropolitan Government

The Tokyo Metropolitan Government presents awards to companies, organizations, and individuals in recognition of their efforts
to further the empowerment of women with the goal of realizing asociety in which all women can lead diverse lifestyles according totheir own ambitions and capabilities. Leopalace21 was presented
with an award for excellence in the industry category in recognition of our initiatives on supporting a work-life balance and careerplanning for female employees mainly thanks to the introduction of
our so-called “Come Back” rehiring system, which makes it easy
for employees who have left the Company due to a major life eventto return to work at a later time. We will continue to enhance thework-life balance of female employees with the aim of realizing asociety in which women can play more active roles.

32

Leopalace21 selected in
top 100 telework pioneers

As a company actively introducing or making use of teleworking, Leopalace21 was selected as one of the top 100 telework
pioneers for fiscal 2018 by Japan’s Ministry of Internal Affairs
and Communications. We introduced a telework system in2016 and have since encouraged employees (with the exception of some business divisions) to adopt flexible working
styles, whether it be mobile working or remotely working fromhome. As a result, the number of overtime hours worked by
Leopalace21 employees has declined for the third straight
year. We will continue to actively implement this initiativewith the aim of creating a pleasant working environment.

Launch of 11-hour minimum work-interval system

We have introduced a work-interval system mainly to protect
the health of our employees and ensure a proper work-lifebalance. The Japanese government has set a target of getting
at least 10 percent of companies to launch a work-interval
system by 2020, a policy that we were quick to throw our
support behind. We decided on an interval period of at least
11 hours, in line with the standard of similar systems alreadywidely implemented in Europe. Under our system, employeesthat fail to rest for at least 11 hours on 10 or more days in themonth can voluntarily meet with an occupational physician andreceive guidance. Over the longer term, this interval period will
become mandatory and help to encourage work-style reforms
by further reducing the number of overtime hours worked.

Leopal ace21 I nt egr at ed R epor t 201955

Main Activities and Targets the CSR Committee Oversees
SDGs

Restatement
as ISO26000
Core Subjects

FY2018 Targets

FY2018 Results

Selfassessments

FY2019 Targets

Accommodate diverse
working styles

Paid vacation day usage rate70%

76.80%

70%

Planned human resources
development

No. of training participants
A total of 3,441 persons

2,322 persons

1,090 persons

2. Human rights
Disabled employee ratio
3. Labor practices

2.20%

2.23%

2.20%

Diversity forumHeld

4 times

4 times

2 times

Health forum

Held

2 times

2 times

FinishHire diverse humanresources: Attainment above 120%

Promoting the use of paternity leave*In recognition of these initiatives, Leopalace21 has been accredited with the “Platinum Kurumin” certification for achieving apaternity leave ratio of equal to or more than 13%.

6

Healthcare-focused management initiatives

Selected as a 2019 outstanding healthand productivity management organization (White 500) for third year runningwith maximum 5-star rating

As a frontrunner in healthcare-focused management and basedon our health and productivity management declaration, we
actively promote a healthcare-focused management strategy
because we believe the mental and physical health of eachand every employee to be the driving force behind innovation.
Accordingly, our initiatives have been recognized for the thirdyear running with our selection in the White 500 as an organization having outstanding health and productivity management.

7

Launch of mentor program for new employees

In fiscal 2019 we launched a mentor program for new
employees. The objectives of this program are to nurture new
employees and retain them with the Company through regularmeetings with a mentor. Cloud-based tools are utilized fordaily self-reflection and support is provided by other employees in order to assist the autonomy of new employees.

Data Compilation

In 2018 we newly created a Healthcare Promotion Office andimplemented measures aimed at preventing lifestyle diseases.
For example, we have raised awareness about the importanceof exercise and encouraged employees to participate in club
activities or commute to work wearing sneakers. We have also
implemented group specified healthcare guidance sessions.
Moreover, we are also actively taking steps to improve ourworkplace environment with the use of stress checks. We will
step up our efforts on healthcare-focused management with thegoal of reducing the number of smokers in the Company, lowering the rate of obesity to 25% (26.9% last year), raising thepercentage of employees exercising regularly to 65% (63.9%
last year), lowering the percentage of mental health sufferers
to 0.5% (0.7% last year), and boosting readership of Wellness
Letter, our in-house newsletter about health and well-being.

5: Attainment below 70%

Initiatives for Strengthening Management Foundation

Owing to our “Welcome Baby Registration System” and otherschemes that encourage employees to take paternity leave,
30% of male employees whose spouse gave birth during theperiod October 1, 2016 through September 30, 2017 started
taking paternity leave before October 1, 2018. This is well
above the government’s target of 13% by the year 2020. Our
goal up ahead is to boost employee motivation and productivity by creating a workplace environment in which individual
employees can fully unleash their capabilities and potential.

: Attainment below 100% but above 70%

Initiatives toward Regeneration

4: Attainment below 120% but above 100%

For Regaining the Trust

Main Activities

56

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Basic CSR Action Policy

Contributing to Local Communities
Together with local communities, we are continuing our activities in our immediate surroundings as a company
providing living space with the aim of creating places where people can live in peace.

Our Basic View: Our Businesses Help Local Communities to Sustain Social Cohesion
With more people living in dense cities and the rural countryside becoming depopulated, connections within communities are
becoming more tenuous, and these trends have given rise to many problems such as elderly people dying alone and increased
crimes targeting children. At Leopalace21, we are promoting initiatives to contribute to local communities through our businesses and employees and hands-on interaction with local communities, an important stakeholder group. We think such contributions will build confidence in our operations in local communities. Our aim is to become a welcomed, trusted company.

Examples of Our Initiatives

1

Signing of agreement on creating a society where crime is less likely to occur
with Gunma Prefectural Police

In February 2019 we entered into an agreement with the
Gunma Prefectural Police regarding the building of a society
where crime is less likely to occur. This agreement aims tosuppress crime and reduce the number of damages from criminal activities by having both the police and private companies
collaborate on keeping watch over the community at large. We
are doing our utmost to foster a sense of crime prevention byraising awareness of crime among our rental property tenantsin Gunma and having Leopalace21 employees that work in theprefecture attend training sessions.
Signing ceremony

2

Certificate of appreciation from Foundation for MultiMedia Communications

We live in a society where smartphones and the internet are
ubiquitous and improving information literacy among children
and teaching them how to use the internet safely and securely
is a growing concern. Since August 2017, Leopalace21 has
attended “e-Net Caravan” instructor accreditation courses
hosted by the Foundation for MultiMedia Communications
and we actively organize and implement e-Net user education
courses. While few instructors actually give lectures evenafter taking the accreditation course, we have organized morethan 30 lecture sessions nationwide and in fiscal 2018 wedelivered more than five lectures in the Tohoku region. We willcontinue to carry out these activities up ahead with the aim ofboosting information literacy.

Certificate of gratitude presentation ceremony

Leopal ace21 I nt egr at ed R epor t 201957

Main Activities and Targets the CSR Committee Oversees
SDGs

Restatement
as ISO26000
Core Subjects

Contributions fromproperty owners

595,000 yen“Leo Miles” donated
1,091 point packages
1,100 point packages

950 point packages

1,824,728 yen

2,000,000 yen

1 Event organization: 1
Sponsor: 6
4

FinishSports promotion

Event organization:
Sponsor:

650,000 yen

2,000,000 yen: Attainment below 100% but above 70%: Attainment below 70%

Leopalace21’s environmental protection activities recognized on
Plastics Smart -for Sustainable Ocean- campaign website

Plastics Smart campaign website
http://plastics-smart.env.go.jp/en/case/?id=380

Data Compilation

At the 2018 Pink Ribbon Festival—an event promoting theimportance of early detection, diagnosis, and treatment ofbreast cancer—we set up a booth on the day of the Smile
Walk in Tokyo, a charity event, to promote awareness andunderstanding of breast cancer and urge more women toundergo checkups. Since 2016 we have supported the Pink
Ribbon Festival and going forward we will continue to take partin activities that contribute to the empowerment of women
together with society.

We hope to contribute to regional environmental conservation
through this initiative in the future.

Initiatives for Strengthening Management Foundation

Supporting the 2018 Pink Ribbon Festival

Initiatives toward Regeneration: Attainment below 120% but above 100%In the three years since 2016, a total of 33 of our employees
have participated in 10 of the regular Kamo River cleanup
hikes. This riverside cleanup event is held four times a year by
a volunteer group comprising local Kyoto residents. In 2018,
our commitment to participating in this activity was featured
on the “Plastics Smart” campaign website. This campaign
was launched by Japan’s Ministry of the Environment for the
purpose of backing collaborative initiatives aimed at resolving
the problem of marine plastic waste in the world’s oceansorganized by individuals, local governments, NGOs, corporations, research institutes, and many other different entities.

4

5 persons per site394,349 yen

Donation
7. Community
involvement

FY2019 Targets

Number of participating branches 170
Number of participants
700persons

Donation3

Selfassessments

1 timeCleanup campaign by property
management members
1time

Donations from“volunteer” vending
machines: Attainment above 120%

FY2018 Results

No. of cleanup events at construction
4.36 persons per sitesites
5 participants per site

Implement cleanup
campaigns
Support for UNHCR(UN agency
supporting refugees)

FY2018 Targets

For Regaining the Trust

Main Activities

58

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Basic CSR Action Policy

Creating an Environmentally Friendly Society
Recognizing the large impact our business activities have on the global environment, we remain steadfast in our
pursuit of low-environmental-impact living space, and we are working to reduce the environmental burden thatarises from all of our business activities.

Our Basic View: Lowering Our Environmental Impact by Reducing CO2 Emissions
The Paris Agreement reached at the COP21 in Paris in 2015 adopts a long-term target to reduce greenhouse gas (GHG) emissions from human activities to effectively zero. We will fulfil our responsibility for reducing the environmental impacts. Our aim
is to be a firm that grows sustainably in harmony with society through effective resource use and the provision of value-added
goods and services that factor in environmental considerations.

Examples of Our Initiatives

1

Reducing Our Environmental Impact via Business Activities

We are working hard to reduce the environmental footprintof our business activities and in similar fashion to last year
we implemented a number of initiatives in fiscal 2018 inorder to achieve this goal. For example, we took part in thegovernment’s “Warm Biz” and “Cool Biz” campaigns (dressing
warmly in winter and dressing down in summer, respectively),2

CO2 Emissions (Scope 1, 2, 3)

We consider environmental impact monitoring to be essential
for environmental conservation activities. Since fiscal 2017,
we have been calculating CO2 emissions from electricity
and gas use as well as CO2 emissions from driving gasoline
vehicles. We also disclose CO2 emissions for Scope 3, given
CO2 Emissions from Electricity and Gas Use
20,000 (t-CO2)
15,00015,696
1,943

10,000

6,111

6,043

8,781

7,710

6,185

’17/3

’18/3

’19/3

5,000
0

14,7302,489
6,056

CO2 Emissions
from
Driving Gasoline
VehiclesHead officeand branches
Azumi En nursing
care facilities
3,000
2,000

3,615

3,490

Leopalace Hotels

3,345

1,000

3,000

0

2,000
1,000

3,615

3,490

0

’17/3

1,000 (Thousand t-CO2) 873
600

3,345

400
200
0

’17/3

’18/3

’19/3

0

’17/3

’18/3

’19/3

’18/3

CO2 Emissions (Scope 3)
800

CO2 Emissions from Driving Gasoline Vehicles
4,000 (t-CO2)

the importance of understanding the CO2 amounts emitted
in upstream and downstream business activities in order
to identify processes requiring environmental conservation
efforts. With regard to the Company’s business activities, CO2
emissions from electricity and gas use at rental housing arelarge, and therefore, providing energy-saving rental housing is
an area CO
in which
the Company can make the most contribution
2 Emissions from Driving Gasoline Vehicles
to reducing
our )environmental impact. Monitoring has further
4,000 (t-CO
3,615
3,490
3,345
revealed3,000
that the Company has also succeeded
in lowering
CO2 emissions in Scopes 1 and 2 (electricity and gas use and2,000
gasoline use) and Scope 3 in the fiscal 2018, continuing from
1,000 year.
the previous
2

16,4681,576

4,000 (t-CO2)

participated in the “Eco Green Card” program, recycled wastematerial, encouraged the use of light motor vehicles, installed
LED lighting at our facilities, launched the sale of an environmentally friendly accommodation package at Leopalace Resort
Guam, and started using digital copies of materials during
meetings.

864
52
45
18
34
4
CO2 Emissions(Scope 3) 4
1,000 (Thousand t-CO2) 873
800

799

52
18
4

781

864
45
34
4

’17/3

799

’18/3

781

600
400

’19/3

787
31
30
4
725

’19/3

Category 13200(Electricity and gas use at rental properties)
Category 3 (Electricity), 6 (Business trips), 7 (Employee commuting)0
Category 2 (Capital
goods)
Category 1 (Materials purchase)

’17/3

’18/3

Category 13 (Electricity and gas use at rental properties)
Category 3 (Electricity), 6 (Business trips), 7 (Employee commuting)
Category 2 (Capital goods)
Category 1 (Materials purchase)

E

E
(

E

C

787
31
30
4
725

’19/3

Leopal ace21 I nt egr at ed R epor t 2019

59

Main Activities and Targets the CSR Committee Oversees
Restatement
as ISO26000
Core Subjects

SDGs

FY2018 Targets

Contribute to CO2 reduction
by solar power generation*

Amount of reduction

Collect PET bottle caps
and make donations for
vaccines

PET bottle cap
CO2 reduction
Polio vaccine

Selfassessments

FY2018 Results

FY2019 Targets

23,000 t-CO2

24,365 t-CO2

23,000 t-CO2

1,400,000 caps
11,025 kg
For 1,750 people

1,054,480 caps
8,304 kg
For 1,318 people

1,200,000 caps
9,450 kg
For 1,500 people

Acquire ZEH certification forparticipating properties

ZEH certification
Confirmation application submitted

Consideration of
airtightness and ZEH
for energy saving

Develop IoT that can contribute to the environment

Develop 2 items

Development completed 1 item
Under development 2 items
Development suspended 1 item

Develop 2 items

Reduce CO2 emissions

5% reduction from FY2016

10% reduction

5% reduction
from FY2017

Develop ZEH (Net Zero
Energy House) rental
housing that contributes
to low-carbon society

4. Environment

3: Attainment below 120% but above 100%

: Attainment below 100% but above 70%

Environmental Accounting

CO2 Emissions(Scopemakes
3)
The Company
active efforts to reduce its environmen1,000 (Thousand t-CO2) 873
864
tal impact through solar power
generation.
787The right figures
52
45
800
18
34
illustrate 4the results of applying
our solar31
power generation
30
4600
4 were reduced by
to environmental accounting. CO2 emissions
400
24,365t, equivalent
to the 781
amount of CO2 absorbed
per year by
799
725
200
about 2 million 40-year-old Japanese cedar trees based on the0preliminary calculations of the Forestry Agency.
’18/3

Environmental Accounting (Related to Solar Power Generation)
Economic impact(revenue from electricity sale) 3,008 million yen

3,039 million yen
24,590t-CO2 reduction

3,011 million yen
24,365t-CO2 reduction

2,537
452

2,275
438

2,067
449

2,085

1,837

’17/3

’18/3

24,343t-CO2 reduction

Eco impact

3,000
2,000
1,000

’19/3

0

Category 13 (Electricity and gas use at rental properties)
Category 3 (Electricity), 6 (Business trips), 7 (Employee commuting)
Category 2 (Capital goods)
Category 1 (Materials purchase)

Depreciation cost

1,618
’19/3

Maintenance and other costs

Introduction of Total Waste Management System at 22 Branches Nationwide
manifests can be comprehensively managed using cloudservices. Contracts can also be signed electronically. With theestablishment of the Leopalace Waste Management Center,
we have now constructed a framework to centrally manage
the waste disposal consignment agreements that were hitherto managed separately by each branch across Japan. We
will continue to make sure we conduct proper management ofindustrial waste and streamline our operations.

To further promote the proper management of industrial waste
generated at new building construction sites, we introduced“GENESYS-ECO”, a total waste management system operated
by JEMS Inc. Within JEMS we established the Leopalace
Waste Management Center as an organization to centrally
manage waste disposal consignment agreements. The introduction of this system means that waste disposal businesspermits, disposal consignment contracts, and electronic
Leopalace21

Paperwork request

Information
sharing on
the system

Utilization of total waste management
cloud service GENESYS-ECO

Leopalace Waste Management Center
Electronic
manifest
Consignment
contract

Permitcertificate

Contract management service
Utilization of electronic contract system

Electronic contract service
Viewing electronic
contract information

MF issuance after
consistency check
Visualization of
MF progress management
MF: manifest

Information registration/Contract management/
Creation and issuance of monthly report/
Compliance management

Collection and disposal companies
Dramatically improved waste compliancethrough specialized BPO

Data Compilation

Viewing waste
management
electronic contract
information

も家

Cost of environmental conservation
4,000 (Million yen)

Initiatives for Strengthening Management Foundation

’17/3

4

: Attainment below 70%

Initiatives toward Regeneration: Attainment above 120%

For Regaining the Trust

Main Activities※

60

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Basic CSR Action Policy

Engaging in Sound, Constructive Communication
with Stakeholders
Through our business activities, we actively disclose information to and engage in dialogue with our stakeholders tobuild healthy, positive partnerships.

Our Basic View: Importance of Dialogue and Disclosure
We recognize that the creation of corporate value over the medium- and long-term and our sustainable growth as an enterpriseare stemming from our provision of resources and contributions to customers, business partners, local communities, employees,
shareholders, and creditors. We are working to disclose financial and non-financial information in a timely and transparent
manner to a wide range of stakeholders, including our shareholders. We aim to deliver new value through our corporate activities and continued proactive dialogue with various stakeholders.

Main Activities and Targets the CSR Committee Oversees
Main Activities

SDGs

Restatement
as ISO26000
Core Subjects

Build positive relationships withownersOffer programs for job-seeking
students to support careerdevelopment activities

7. Community
involvement

Conduct proactive IR activitie: Attainment above 120%

FY2018 Targets

FY2018 Results

Selfassessments

FY2019 Targets

Property owner briefing sessions

500 times

517 times

520 times

No. of events conducted

29 times

35 times

FinishNo. of events conducted for investors
and shareholders
22 times

19 times

4 times: Attainment below 120% but above 100%

Timely and appropriate information disclosure
In order to accurately communicate management informationand enhance understanding of and interest in our businessactivities and management practices, the Leopalace21 Groupmakes every effort to disclose information in an honest,
timely, and appropriate manner to all stakeholders, including
shareholders and investors in Japan and overseas. We also
aim to disclose information swiftly and fairly in compliancewith the fair disclosure rule prescribed in Japan’s Financial
Instruments and Exchange Act. Going forward, we will strive
to actively disclose information and engage in IR activities andalso aim to enhance corporate value by furthering understanding of our Group and establishing relationships of trust.

: Attainment below 100% but above 70%: Attainment below 70%

IR Awards
The Company was awarded the Internet IR Excellence Awardfor its website granted by Daiwa Investor Relations Co., Ltd.
in 2018 for the third consecutive year. We also received
the “Silver” score in the Gomez IR Site Ranking 2018 by
Morningstar Japan K.K.

Overview of IR Activities
Leopalace21’s primary IR activities include releasing a rangeof IR tools on our website, results briefings for analysts andinstitutional investors, individual meetings, visits to foreign
institutional investors, and tours of our facilities. We also
actively conduct IR activities for individual investors. In
addition to holding briefings for shareholders and property
owners, we disclose information on our website for individual
investors so that they can obtain a clearer understanding of
the Company, including information on the Company’s history

and market trends, 3-year plan and numerical targets, andbusiness strategies.
No. oftimes
Results briefing for analysts and institutional investors
2
Facility tour for analysts and individual investors
2
Meeting with analysts and institutional investors
173
Visit to foreign institutional investors
1
Events for investors and shareholders
19
IR activities (April 1, 2018 - March 31, 2019)

No. of people/
companies
100 people
2 people
220 companies
17 companies
1,580 peopleLeopal ace21 I nt egr at ed R epor t 201962 Ten-Year Consolidated Financial Highlights

For Regaining the Trust

Data Compilation

61

64 Consolidated Financial Highlights
67 Non-financial Highlights
68 Management’s Discussion and Analysis
72 Consolidated Balance Sheets
74 Consolidated Statements of Operations
75 Consolidated Statements of Comprehensive Income

77 Consolidated Statements of Cash Flows
79 Notes to Consolidated Financial Statements
115 Independent Auditor’s Report
116 Leopalace21 Data Compilation

Initiatives toward Regeneration

76 Consolidated Statements of Changes in Net Assets

122 Corporate Profile

Initiatives for Strengthening Management Foundation
Data Compilation

62

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Ten-Year Consolidated Financial Highlights		’10/3 FY2009’11/3 FY2010’12/3 FY2011’13/3 FY2012

620,376
342,316
237,0628,812
6,734
25,451
570,749
79,354(29,727)(47,875)
29,744(1,994)(1,324)(8,278)(23,432)(33,831)(79,075)

483,537
355,752
107,821
7,785
6,491
5,686
448,392
59,605(24,460)(30,865)
11,888(1,508)(1,973)(2,002)(18,009)(32,662)(41,742)458,220
379,091
62,913
8,845
6,228
1,142
403,572
51,278
3,369
4,052
4,290
(855)
(1,663)(2,454)
9,416
1,133
372

454,285
383,637
53,369
9,482
6,657
1,137
396,508
50,299
7,477
8,750
2,748
(742)
(1,005)(2,272)
13,161
11,154
13,398At year-end:
Total assets
Net assets
Interest-bearing debt

396,51170,97961,318298,274
32,18743,858

264,783
31,761
51,654

261,649
56,14549,026

Cash flow:
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities(12,990)(8,889)15,281(28,337)
13,143(15,890)(3,174)(3,537)
7,245

6,069
(6)
9,148

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

466.76(521.91)–

190.84(266.48)–187.502.21–

265.32
74.85–

Ratio:
Units under management
Average annual occupancy rate (%)
Orders received (Millions of yen)
Equity ratio (%)
Return on equity (ROE) (%)
Return on assets (ROA) (%)
Dividend payout ratio (%)
Debt/equity ratio (%)
Number of employees

551,77382.25
250,24717.9(72.8)
(7.8)
–
0.9
8,582

571,656
80.09
80,33810.8(81.0)
(9.4)
–
1.4
7,114

556,207
81.16
50,019
12.0
1.2
0.4
–
1.6
6,165

546,204
82.94
73,006
21.5
30.5
4.2
–
0.9
6,277

For the years ended March 31
Net sales		 Leasing Business		 Construction Business (current Development Business)
		 Elderly Care Business		 Hotels & Resort Business		 Other Businesses
Cost of sales
Selling, general and administrative expenses
Operating income (loss)
		 Leasing Business		 Construction Business (current Development Business)
		 Elderly Care Business		 Hotels & Resort Business		 Other Businesses Adjustments
EBITDA (Operating income + depreciation)
Recurring income (loss)
Net income (loss)*Attendant with changes in accounting policies at subsidiaries in the Leasing Business, consolidated accounts reported in the past have been retroactively revised, and historical data forpast fiscal years shown here reflects these retroactive revisions.
(Notes) 1. U.S. dollar amounts are translated from yen at the rate of ¥110.99 = U.S. $1, the approximate rate prevailing at March 31, 2019.
2. Return on equity (ROE) = Net income/average net assets during the fiscal year x 100
3. Return on assets (ROA) = Recurring income/average total assets during the fiscal year x 100
4. Debt/equity ratio = Interest-bearing debt/(net assets – non-controlling interests)
5. In this report, net income attributable to shareholders of the parent is stated as “net income.”
6. T he numbers for fiscal 2016 (year ended March 31, 2017), fiscal 2017 (year ended March 31, 2018), and fiscal 2018 (year ended March 31, 2019) are displayed under new business segments.
New segment of “Hotels & Resort/Other Businesses/Adjustments” is used for “Hotels & Resort Business” in the relevant fiscal years.

Reorganized Business Portfolio
Reorganized into Four Businesses, from
Five Previously
We reorganized our business portfolio so as torespond swiftly to customer needs and changes
in the business environment. The reorganization
has enabled swift decision-making, and opened
the way for us to build a structure where we can
improve both social value and our corporate value.

Until Fiscal 2016 (Year ended March 31, 2017)
Leasing Business• Corporate housing management & rental housing brokerage• Rental payment guarantees• International business

Construction Business• Custom-built homes

Elderly Care Business• Elderly care business

Hotels & Resort Business• Hotels and resort business• Travel agency services

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

Leopal ace21 I nt egr at ed R epor t 2019

(Thousands of U.S. dollars)’17/3 FY2016’18/3 FY2017’19/3 FY2018’19/3 FY2018

470,883
388,562
63,135
10,1717,571
1,442
401,51055,906
13,467
15,3642,951(610)(1,118)(3,119)19,46011,36815,730483,247
399,375
61,312
10,608
8,951
2,999
407,433
60,992
14,822
20,590211(606)(1,289)(4,084)22,55813,483
15,175

511,513
410,641
74,16010,798
11,427
4,485
422,604
67,82321,08522,8483,340(1,354)(697)(3,051)30,70019,90919,631

520,488421,342
80,321
11,536
7,287–
427,820
69,76922,89823,0095,786(1,667)(4,230)–32,23522,355
20,401

530,840
435,537
76,587
12,807
5,908–
434,762
73,14722,93026,062
3,663(1,596)(5,199)–34,65622,354
14,819505,223
426,388
58,992
13,922
5,919–
428,988
68,844
7,390
14,987(995)(846)(5,754)–
20,336
7,063(68,662)

4,551,972
3,841,687
531,509125,440
53,334–
3,865,106
620,280
66,586135,033(8,971)(7,627)(51,846)–
183,224
63,636(618,633)

288,165
103,354
37,227

308,882
124,928
44,487

327,609
144,865
50,824

337,828
158,870
49,918337,134
159,438
53,829291,790
81,33848,0472,628,981
732,842432,900

15,584(6,929)8,848

15,715(17,550)
1,747

22,104(11,087)
1,374

27,504(8,653)(14,048)

27,338(2,336)(18,354)(7,212)
7,379(15,181)(64,979)
66,485(136,779)

393.0569.38–

475.1757.73–

550.9474.68
10.00

603.7677.61
22.00

630.8458.02
22.00

331.87(278.58)–

2.99(2.51)–

548,912
84.58
81,139
35.9
19.7
4.1
–
0.4
6,758

554,948
86.57
87,395
40.4
13.2
4.5
–
0.4
7,339

561,961
87.95
86,439
44.2
14.6
6.3
13.4
0.4
7,846

568,739
88.53
87,139
47.0
13.4
6.7
28.3
0.3
7,695

570,672
90.59
75,905
47.2
9.3
6.6
37.9
0.3
7,690

574,798
88.34
64,495
27.7(57.2)
2.2
–
0.6
7,600

• Corporate housing management & rental housing brokerage• Rental payment guarantees• International business• Small-amount, short-term insurance• Solar power generation

Leasing Business• Custom-built homes• Real estate development

Development Business• Elderly care business

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

Hotels, Resort and Other Businesses

Reference: Fiscal 2018 (Millions of yen)
Net sales

Operating income (loss)

426,388

14,98758,992(995)

13,922

(846)

5,919

(5,754)

Data Compilation

From Fiscal 2017 (Year ended March 31, 2018)

Initiatives for Strengthening Management Foundation’16/3 FY2015

Initiatives toward Regeneration’15/3 FY2014

For Regaining the Trust(Millions of yen)

’14/3 FY2013

63

64

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Consolidated Financial Highlights

Net sales

Operating profit (loss)

Operating margin

7.3 billion yen

1.5 %505.2 billion yen
Down 4.8% y/y

Down 67.8% y/y(Billions of yen)(Billions of yen)

800

80

600

Down 2.9 points y/y
(%)
16

60

12

40

8

20

4

0

0

400

200

0

-40
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018-8’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Operating profit (loss) (left axis)

Operating margin (right axis)

In the fiscal year that ended March 2010 we pushed through structural reforms to rein in Construction Business operations and boost
earnings in the Leasing Business mainly in response to a decreasein occupancy rates of our properties, sluggish rent earnings, anda sharp decline in the supply of new apartments, triggered by the
global financial crisis. Net sales increased thereafter centering on
the Leasing Business and we chalked up five straight years of sales
growth. However, sales declined in fiscal 2018 due to the construction defects issue.

Much like net sales, earnings in the Leasing Business were dented
by the impact of the global financial crisis and operating profit fell
into the red for two years in a row in fiscal 2009 and 2010. Operating
profit gradually recovered thanks to progress made on Companywide
structural reforms driven by profits in the Leasing Business, and werecorded seven straight years of operating profit growth from fiscal
2011. However, operating profit declined in fiscal 2018 due to theconstruction defects issue.

Net income attributable to shareholders of the parent

EBITDA (Operating profit + depreciation)-68.6 billion yen

20.3 billion yen

14.8 billion yen in fiscal 2017

Down 41.3% y/y(Billions of yen)(Billions of yen)

30

90

20

60

10

30

0

0

-90

-30
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Just like operating profit, earnings in the Leasing Business weredented by the impact of the global financial crisis and net profit
attributable to owners of the parent fell into the red for two years
in a row in fiscal 2009 and 2010. Net profit returned to the black in
fiscal 2011 and continued to increase thereafter as progress wasmade on Companywide structural reforms, but then declined in fiscal
2017 after we booked an impairment loss and again in fiscal 2018 dueto the construction defects issue.

EBITDA—mainly the combination of operating profit and depreciation—steadily increased from fiscal 2011 owing to sustained operating profit growth on an earnings recovery and higher depreciation andamortization stemming from increased capital investments in new
businesses in the last few years, including serviced apartments in the
ASEAN region. However, EBITDA declined in fiscal 2018 due to theconstruction defects issue.

65

Leopal ace21 I nt egr at ed R epor t 2019

ROA

291.7 billion yen
Down 13.5% y/y

Net assets

2.2 %(Billions of yen)

30

400

20

200

10

Down 66.5 points y/y(Billions of yen)

(%)

200

40

150

30

100

20

50

10

0

0

0

-100

-10
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Total assets (left axis)’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

ROA (right axis)

Net assets (left axis)

ROE (right axis)

While earnings have been steadily boosted by a more robust profit
structure thanks to structural reforms, reduced interest-bearing
debt has continued to place a squeeze on our financial leverage. As
a result, ROE hovered in the 10% range from fiscal 2013 but thendipped to 9.3% in fiscal 2017 as a result of a one-off increase inimpairment losses. It then fell to –57.2% in fiscal 2018 owing to the
problem of construction defects.

Equity ratio

Interest-bearing debt (incl. Lease obligations)27.7 %

48.0 billion yen

Down 19.5 points y/y

Down 10.7% y/y(%)(Billions of yen)

50

80

40

60

30

Initiatives for Strengthening Management Foundation

ROA recovered rapidly after returning to the black in fiscal 2011
thanks to the impact of structural reforms. It roughly trended in the
5%–6% range from fiscal 2012 onwards, climbing to 6.6% in fiscal
2017, but then declined to 2.2% in fiscal 2018 owing to the problem of
construction defects.

Initiatives toward Regeneration

0-57.2 %

Down 49.0% y/y
(%)

600

ROE

81.3 billion yen

Down 4.4 points y/y

For Regaining the Trust

Total assets

40
20
20

10

0

0

When earnings remained in the red for the second straight year infiscal 2010, the equity ratio had slumped as far as 10.8%. In step withthe earnings recovery since then, however, we have endeavored toraise the equity ratio and achieve financial soundness. Accordingly,
it recovered to 47.2% in fiscal 2017, but was dragged back down to
27.7% in fiscal 2018 by the impact of the construction defects issue.

’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

We have focused on reducing and curtailing the debt ratio in consideration of repayment capacity as well as compression of liabilities
since interest-bearing debt marked 61.3 billion yen in the fiscal year
ended March 2010, the highest record in the last 10 years. These
efforts reduced our liabilities to 48.0 billion yen as of the fiscal year
ended March 2019. The debt ratio has remained low, hovering ataround 0.6 times.

Data Compilation’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

66

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9Free cash flow

Cash dividend per share

0.1 billion yen

00.00 yen

Down 99.3% y/y(Billions of yen)

(Yen)

30

40

15

30

0

20

-15

10

-30

0
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

While structural reforms have helped improve earnings and increasecash flows from operating activities mainly in the form of net income
before tax adjustments, we have curtailed the outflow of cash used
for capital investments and other investing activities. However, free
cash flow only came to 100 million yen in fiscal 2018 mainly becauseof the impact of net cash outflow from operating activities.

We resumed dividend payments in fiscal 2015 after suspending dividends for six consecutive years from fiscal 2009 when net profit fell
into the red until fiscal 2014 even after earnings had returned to theblack. The impact of the construction defects issue, however, meant
we were forced not to make dividend payments in fiscal 2018.

Units under management

Average annual occupancy rate574,798 unit

88.3 %

Up 0.7% y/y

Down 2.3 points y/y(Thousands of unit)

(%)

600

95
92

450

89
300
86
150

83

0

80
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Expanding the number of units under management directly strengthens our earnings base because we consider the recurring income
from rental housings in the Leasing Business to be our core sourceof revenue. We are striving to expand our number of units undermanagement by continuing to supply properties in areas where we
expect strong tenant demand. Our primary focus is on Japan’s 3 major
metro areas where there is ongoing population inflow. In fiscal 2018,
we increased our units under management by 4,126 from the previous
year to 574,798.

Rental housing occupancy rates tend to peak in March ahead of the
new school year and before new company recruits head off to work.
Occupancy rates then typically turn down in April, before gradually picking up again. In an effort to encourage long-term tenancy,
we have been working to enhance the value of our properties andimplementing measures to try to weaken the impact by this seasonal
cycle. As a result, the average annual occupancy rate had gradually
increased before it was pulled back down in fiscal 2018 by the impactof the construction defects issue.

Leopal ace21 I nt egr at ed R epor t 201967

Non-financial Highlights

Ratio of paid leave usage

238 person

76.8 %

Down 7.4% y/y

Up 2.7 points y/y(Person)

(%)

300

80

For Regaining the Trust

No. of employees on childcare leave

60
200
40
100

0

0

’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Under the guidance of the Japanese government, work-style reforms
for both men and women are gaining momentum. This includes thesignificance of working styles and associated changes in behavior.
To this end, we are taking steps towards developing a workplaceenvironment with systems in place to make it easier for employees torequest childcare leave, in addition to considering improvements towork-life balance, such as reducing the amount of overtime work andencouraging increased use of paid holidays. As a result, the numberof employees taking leave is increasing year after year, while thenumber of male employees taking paternity leave is also on the rise.

The dissemination of work-style reform implemented by the Company
has caused a shift in employees’ sense of value attributed to work,from one that prioritized long working hours to one that emphasizes
productivity. With efforts to promote the use of paid leave, suchas the summer and winter planned five-day annual leave and thethree-day refreshment leave, which can be used anytime throughout
the year, the paid vacation day usage rate has dramatically increased
since the fiscal year ended March 2016, and this is the fourth successive year it stayed above 70%.

Rate of workforce turnoverNo. of employees with foreign citizenship

8.6 %351 person

Up 0.5 points y/y

Up 5.1% y/y(%)(Person)

30

400

300
20

Initiatives for Strengthening Management Foundation’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Initiatives toward Regeneration

20

200
10
100

0

0
’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

The Company places utmost importance on “human resources,” andimplements employee training programs and other measures thatfacilitate all employees in expressing their diverse individuality andharnessing their capabilities. In addition to this, we aim to build
pleasant workplaces where people enjoy work as part of an effort toimprove issues with long working hours that are specific to this industry. As a result of these initiatives, we have successfully reduced
the employee turnover rate from 25.2% 9 years ago in the fiscal year
ended March 2010, to 8.6% in the fiscal year ended March 2019.

We believe that a workforce of people from a broad array of backgrounds with diverse values helps create new value and greatly
contributes to the Company’s growth. We are therefore actively hiring
foreign national employees in order to secure the personnel neededto achieve such levels of diversity. The number of non-Japaneseemployees at Leopalace21 in fiscal 2018 came to 351, which marks anearly three-fold increase from nine years ago (fiscal 2009).

Data Compilation’10/3 ’11/3 ’12/3 ’13/3 ’14/3 ’15/3 ’16/3 ’17/3 ’18/3 ’19/3
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

68

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Financial Section

Management’s Discussion and Analysis
1. Operating Environment
During the subject consolidated fiscal year, the domestic economy
showed gradual progression supported by improvements in corporate earnings and employment.
New housing starts of leased units decreased two years in arow (down 4.9% year-on-year), due to the saturation in demandfor inheritance tax reduction strategies as well as the financial
institutions’ more cautious loan approval policy in place. As thenumber of vacant houses continues to increase and recovery innationwide demand becomes difficult, achieving stable occupancy rates requires constructing apartments in areas with highdemand, in addition to providing high-quality products and services that meet tenants’ needs.
Under these conditions, Leopalace21 (the “Company”) aims toachieve targets of its Medium-term Management Plan “Creative
Evolution 2020” by creating corporate value and new social value,
under the basic policy of “supporting continuous growth of corebusinesses in ways that further increase corporate value whileconstructing a base for growth areas.” Also, in order to resolve
the problem concerning construction defects as soon as possible,
we are marshaling our corporate forces to conduct investigations
and repairs.
2. Analysis of Business Results(1) Net Sales
Company earnings deteriorated as a result of the problem related
to construction defects, and consolidated net sales for the subject
fiscal year came to 505,223 million yen (down 4.8% year-on-year).
In the Leasing Business, net sales was 426,388 million yen (down
2.1% year-on-year), and net sales in the Development Business
was 58,992 million yen (down 23.0% year-on-year).

(2) Earnings
Gross profit was 76,235 million yen (down 20.7% year-on-year),
operating profit was 7,390 million yen (down 67.8% year-on-year),recurring profit was 7,063 million yen (down 68.4% year-on-year),and net loss attributable to shareholders of the parent was 68,662
million yen (compared to a net income of 14,819 million yen in theprevious fiscal year).
This was due to extraordinary losses of 54,786 million yen
recorded as a reserve for repairs and other incidental expenses
related to construction defects, 9,684 million yen recorded as areserve for apartment vacancy loss, as well as 7,560 million yen
recorded as an impairment loss for company-owned apartments.
Company-owned apartments were sold as part of the financial
strategy set in our Medium-term Management Plan.
Operating Profit by Segment(Millions of Yen)FY2017FY2018ChangeLeasing

26,062

14,987(11,074)

Development

3,663

(995)

(4,659)Elderly Care

(1,596)

(846)

749

Hotels, Resort & Other Business(846)(1,346)(500)

Adjustments(4,353)(4,407)

(54)

Total

22,9307,390(15,539)

Change in Operating Profit(Billions of yen)

24
22
20
18

Leasing-11.07

16
14

Net Sales by Segment(Millions of Yen)FY2017FY2018ChangeLeasing435,537

426,388(9,148)Development

76,58758,992(17,595)

Elderly Care

12,807

13,922

1,115

Hotels, Resort & Other Business

5,908

5,919

11

530,840

505,223(25,616)

Total

12
10

22.90
Development
-4.66

8

ElderlyCare+0.75

Hotels,Resort &Others-0.50

Adjustments
-0.05

6
4

7.39

2
0
FY2017

24
22
20
18
16
14
12
10

FY2018

Leopal ace21 I nt egr at ed R epor t 2019

Hotels, Resort & Other BusinessNet sales of the resort facilities in Guam, hotels in Japan, andother businesses including the finance business were 5,919
million yen (up 0.2% year-on-year) and operating loss was 1,346
million yen (a loss increase of 500 million yen year-on-year).

Initiatives for Strengthening Management Foundation
Data Compilation

3. Analysis of Financial Position(1) Position of Assets, Liabilities, and Net assets
Total assets at the end of the fiscal year decreased by 45,344 million yen from the end of the previous fiscal year to 291,790 million
yen. This was mainly attributable to a decrease of 22,007 million
yen in cash and cash equivalents, 14,416 million yen in land due
to impairment losses, 4,296 million yen in leased assets (net),
2,989 million yen in deferred tax assets, and 2,163 million yen inbuildings and structures (net), despite an increase of 2,982 million
yen in real estate for sale in progress and 3,847 million yen inothers (net) in non-current assets.
Total liabilities increased by 32,756 million yen from the end of
the previous fiscal year to 210,452 million yen. This was mainly
due to a recording of 50,707 million yen in reserve for losses
related to repairs and 9,684 million yen in reserve for apartment
vacancy loss, despite a decrease of 9,313 million yen in shortand long-term advances received, 7,415 million yen in accounts
payable -other, 4,364 million yen in short and long-term leaseobligations, 3,966 million yen in bonds, and 3,117 million yen inaccounts payable for completed projects.
Net assets decreased by 78,100 million yen from the end of
the previous fiscal year to 81,338 million yen. This was mainly
attributable to a recording of 68,662 million yen in net loss attributable to shareholders of the parent, 3,025 million yen in dividend
payments, and 4,787 million yen in retirement of treasury shares.
The ratio of shareholders’ equity to assets dropped by 19.5 points
from the end of the previous fiscal year to 27.7%.

Initiatives toward Regeneration

Development BusinessIn the Development Business, we focused on supplying apartments in the three metropolitan areas where solid leasing
demand is anticipated supported by an increase in population,
while providing high quality and forefront strategic products. In
addition, we expanded construction variations to propose ideal
land use, and have begun reviewing suppliers and product prices
to improve profitability.
Life Living Co., Ltd., a subsidiary of the Company, develops
condominiums and apartments and Morizou Co., Ltd., another subsidiary provides luxury custom-built homes made of Kiso-hinoki,Japanese cypress.
As a result of orders becoming sluggish due to intensified competition in the metropolitan areas and changes in the environmentof apartment loans, orders received during the subject fiscal year
amounted to 64,495 million yen (down 15.0% year-on-year) andorders received outstanding stood at 62,367 million yen (down
2.5% from the end of the previous fiscal year).
As a result, net sales came to 58,992 million yen (down 23.0%
year-on-year) and operating loss was 995 million yen (compared toan operating profit of 3,663 million yen in the previous fiscal year).

Elderly Care Business
The profitability of the Elderly Care Business, a strategic growthbusiness, improved due to increases in the occupancy rate ofexisting facilities, and is steadily transitioning to becoming blackin the final year of the Medium-term Management Plan.
Net sales were 13,922 million yen (up 8.7% year-on-year) andoperating loss was 846 million yen (an improvement of 749 million yen year-on-year).

For Regaining the Trust(3) Segment Information
Leasing BusinessIn the Leasing Business, we provide value-added services suchas “my DIY,” which enables tenants to decorate their rooms, andsmart apartments which enable remote control of electrical appliances and door locks. We also offer security systems in alliancewith large security companies and the industry’s first electronic
leasing contract. In addition, to achieve stable occupancy rates,
we are strengthening sales towards corporate customers andincreasing support for foreign national tenants. In the ASEAN
region, we develop and manage serviced apartments and offices.
Since new tenant recruitments on properties subject to top-priority investigations are suspended until investigations and repairs
are completed, the occupancy rate at the end of the subject fiscal
year dropped to 84.33% (down 9.39 points from the end of theprevious fiscal year) and the average occupancy rate was 88.34%(down 2.25 points year-on-year). The number of units under management at the end of the subject fiscal year was 574 thousand(increasing 4 thousand from the end of the previous fiscal year).
As a result, net sales amounted to 426,388 million yen (down
2.1% year-on-year) and operating profit was 14,987 million yen(down 42.5% year-on-year).

69

70

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9Equity Ratio

4. M
 anagement Policies, Business Environment,
Key Issues to Address
Forward-looking statements in the discussion below are basedon judgments by the Company as of the end of the latest consolidated fiscal period.

(%)

50
40

36.5

30
20

17.9

10

41.0

44.7 47.0

47.2

22.2
27.7

11.1 12.8

0
’10/3

’11/3

’12/3

’13/3

’14/3

’15/3

’16/3

’17/3

’18/3

’19/3

(2) Cash Flow Position
Cash flow from operating activities was a net outflow of 7,212
million yen (compared to a net inflow of 27,338 million yen in
the previous fiscal year). This was mainly due to a loss before
taxes and minority interests of 64,840 million yen, a decrease inadvances received of 9,311 million yen, a decrease in accounts
payable of 8,125 million yen, an increase in real estate for salein progress of 3,058 million yen, and payment of 2,960 million
yen related to repairs, despite depreciation and amortizationof 12,945 million yen, impairment loss of 7,560 million yen, an
increase in reserve for losses related to repairs of 50,707 million
yen, and an increase in reserve for apartment vacancy loss of
9,6845million
yen.
0
Cash
4 0flow from investing activities was a net inflow of 7,379
million
3 0yen (compared to a net outflow of 2,336 million yen in
the previous
fiscal year). This was mainly due to proceeds from20sale of property, plant and equipment of 10,059 million yen and
10
proceeds from withdrawal of time deposits of 8,126 million yen,0
despite payment for purchase of property, plant and equipmentof 7,718 million yen and payment for deposit of fixed deposits of
1,500 million yen.
Cash flow from financing activities was a net outflow of 15,181
million yen (a decrease of 3,173 million yen in net outflow fromthe previous fiscal year). This was mainly due to payment forshare buybacks of 5,012 million yen, dividend payments of 3,025
million yen, repayment of finance lease obligations of 5,640 million yen, and repayment of debt and redemption of bonds of 1,383
million yen (after deducting proceeds from debt).
As a result, cash and cash equivalents at the end of the subject
fiscal year stood at 83,019 million yen, a decrease of 15,227 million yen from the end of the previous fiscal year.

(1) Management Policies
Under our corporate philosophy of “creating new value,” our aims
are as follows: 1) we keep a close eye on modern-day needs,
and strive to create new value in our own unique way, throughflexible thinking and dynamic, inclusive teamwork; 2) we are only
happy if our customers are happy; we are constantly working to
improve our products, services and technologies and to grow as
a company; and 3) we provide new value throughout society as aleading company within the industry to help create a more comfortable and affluent society.
(2) Business Environment and Key Issues to Address
Regarding population trends, a factor affecting the business environment, the total number of households in Japan is expected to
decline but single-person households in the productive population(ages 15 to 64), our target cohort, is expected to trend sideways
for nearly the next twenty years. Net domestic migration to thethree major metro regions (inflows exceed outflows) will continue. Furthermore, the population aged 65 or over is expected toreach about 30% by 2025, and Japan will face various pressing
challenges of “super-aging society.”
The number of new construction starts in the rental housing
market continued to decline from last year due to changes in thebusiness environment, including tighter lending criteria for apartment loans and the dropout of demand for strategies to reduce
inheritance tax.
Under these circumstances, we continue to carry out the
Medium-term Management Plan “Creative Evolution 2020,” athree-year plan commenced in fiscal year 2017 premised on abasic policy of “support for continuous growth of core businesses
in ways that further increase corporate value while constructing
a base for growth areas.” Our aim is to create new social value
and corporate value through the execution of business strategies
spelled out below.

Leopal ace21 I nt egr at ed R epor t 2019

Financial Strategies (Create value through balance sheet
management)
Introduce ROIC*-based management:		Create value through balance sheet management and shift
away from profit-focused management, and aim to optimize
our capital composition

For Regaining the Trust		 *ROIC = Return on invested capital = net operating profit after taxes (NOPLAT) ÷
Interest-bearing debt + Net assets

Rebalance our asset holdings:
		Review asset holdings with a view to enhancing asset andcapital efficiency
Improve and strengthen distributions to shareholders:		Improve the business performance by overcoming the serious
financial impact as a result of construction defects and byrealizing fundamental reform in order to achieve appropriate
shareholder return.

Initiatives toward Regeneration
Initiatives for Strengthening Management Foundation
Data Compilation

Business Strategies (Create value via cash flow generation)
Core businesses:
	Maintain a healthy balance between our apartment supply andapartment management businesses while pursuing concentration and diversification
Growth Strategies:	Make the Elderly Care Business and International Business turninto profitability as they each carve out differing roles in viewof the shrinking domestic population
In the Leasing Business, the number of vacant rental units inJapan continues to rise. To retain competitiveness in this environment, we seek to differentiate our products by adding value inmany ways such as providing furnished apartments with furnitureand home appliances, internet service LEONET, and IoT devices
for apartments such as Leo Remocon. We have developed a newsmartphone app, &Leo, which provides tenants greater usability
in viewing their lease contract information, change various registered information, and even confirming their safety and receive
disaster information during times of disaster emergencies. It alsooffers tenant-only benefits, such as special discounts and recommended services.
The Company is expected to increase hiring as labor markets
tighten, and to ensure we capture demand for company-provided
housing, we are working to lighten the work load for corporateclients by providing one-stop service for leasing solutions via
specialized corporate sales teams set up to cater to each sector.
Moreover, we are moving into the development and operation ofserviced apartments and offices in the ASEAN region to benefit
from growth, reducing our reliance on declining-population Japan.
In the Development Business (construction contracting andreal estate development), we will concentrate on rental housing
supply in large cities where there is strong tenant demand forhigh-quality, high-value-added products and services. At the sametime, we will look to diversify our construction offering mix tocater for various needs by the landowners.
The Elderly Care Business, which we have designated as a
growth business, will strive to improve its earnings power throughefforts to optimize its workforce composition with the aim ofrestarting construction of new nursing care facilities in tandemwith the needs of an aging society.

71

72

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Financial Section

Consolidated Balance Sheets
Leopalace21 Corporation and consolidated subsidiaries
March 31, 2019 and 2018

Thousands of U.S.
dollars (Note 1)

Millions of yen

ASSETS
Current assets:
Cash and cash equivalents (Notes 3-(2), 5, 6-(2), 12-(3))
Trade receivables (Note 6-(2))
Accounts receivable for completed projects (Note 6-(2))
Operating loans (Note 6-(2))
Securities (Notes 3-(4), 6-(2), 7, 12-(5))
Real estate for sale
Real estate for sale in process
Payment for construction in progress (Note 3-(14))
Raw materials and supplies
Prepaid expenses
Other accounts receivable
OthersAllowance for doubtful accounts (Notes 3-(10), 6-(2), 11-(1))
Total current assets
Non-current assets:
Property, plant and equipment: (Notes 3-(6), 3-(24), 9, 15, 26-(3))
Buildings and structures (Notes 3-(6), 12-(3), 15, 16, 17 21)
Accumulated depreciation
Net
Machinery, equipment, and vehicles
Accumulated depreciation
Net
Land (Notes 9-(3), 16, 17)
Leased assets (Notes 3-(21), 9-(3), 24)
Accumulated depreciation
Net
Construction in progress
Other
Accumulated depreciationNet
Total property, plant and equipment
Intangible fixed assets:
Goodwill (Notes 3-(19), 26)
Others (Note 3-(7), 12-(3))
Total intangible fixed assets
Investments and other assets:
Investment securities (Notes 3-(4), 6-(1), 6-(2), 7, 12-(3),12-(5))
Long-term loans (Note 6-(2))
Bad debts (Notes 6-(2), 10)Long-term prepaid expenses (Note 3-(8), 3-(25))
Deferred tax assets (Notes 3-(20), 4-(4), 11-(1))
OthersAllowance for doubtful accounts (Notes 3-(10), 6-(2), 11-(1))
Total investments and other assets
Total non-current assets
Deferred assets:
Bond issuance cost
Total deferred assets
Total assets (Note 26)
The accompanying notes are an integral part of these statements.

2019

2018

2019

84,536
6,908
1,709
256
1,254
1,027
5,554
680
565
2,952
1,198
4,255
(142)
110,757

106,543
7,626
1,957
389
462
952
2,571
458
528
3,544
1,027
4,249
(145)
130,167

761,657
62,242
15,4002,311
11,3059,260
50,042
6,131
5,097
26,59910,79738,345(1,285)997,906

88,833(48,291)
40,542
21,414(10,228)
11,18549,221
32,178(20,446)
11,732
3,470
15,283(8,220)
7,062
123,215

93,363(50,657)
42,705
21,254(8,707)
12,54763,63831,839(15,810)
16,0285,208
10,990(7,775)3,215
143,344

800,378(435,101)
365,276
192,940(92,159)
100,780
443,478
289,925(184,219)
105,706
31,268
137,702(74,066)
63,636
1,110,147

2,324
7,250
9,575

2,886
8,102
10,98820,94265,32986,271

16,903
501
214
3,252
23,6504,333(941)
47,914
180,705

17,999
513
1,264
3,831
26,6393,969(2,023)52,194
206,527

152,295
4,521
1,935
29,305
213,082
39,042(8,480)431,7031,628,122327
327
291,790440
440
337,134

2,952
2,952
2,628,981

Leopal ace21 I nt egr at ed R epor t 2019

897
4,037
4,715
1,070
2,768
3,966
5,320
14,922
798
34,635
3,651
347
1,138
50,707
8,826
44
3,919
141,765

1,451
4,245
7,832
1,210
1,754
3,966
5,960
22,337942
39,964
4,592
389
1,158
—
—
43
4,363
100,212

8,085
36,37642,483
9,640
24,94335,73247,934
134,448
7,192
312,056
32,901
3,129
10,260456,861
79,522403
35,311
1,277,281

8,103
18,318
8,501
11,869
6,599
5
—
3,902
8,213
86
3,086
68,687
210,452

12,06916,643
12,22615,853
6,989
—
10
3,044
7,338
84
3,224
77,483
177,696

73,006
165,043
76,599106,945
59,461
46—
35,16174,006779
27,807
618,857
1,896,138

75,28245,148(38,635)(655)
81,14075,282
45,23537,839(430)
157,926

678,280
406,780(348,100)(5,903)731,057

280
(176)
(327)
(224)
404
17
81,338291,790

586
872
(341)
1,117
284
109
159,438
337,134

2,524(1,593)(2,952)(2,021)
3,647
159
732,8422,628,981

Data Compilation

2019

Initiatives for Strengthening Management Foundation

The accompanying notes are an integral part of these statements.

2018

Initiatives toward Regeneration

LIABILITIES AND NET ASSETS
Current liabilities:
Electronically recorded obligations - operating
Accounts payable (Note 6-(2))
Accounts payable for completed projects (Note 6-(2))
Short-term borrowings (Notes 6-(2), 6-(3), 12)Current portion of long-term debt (Note 12)
Bonds due within one year (Note 6-(2))
Lease obligations (Notes 6-(2), 6-(3), 12)
Accounts payable-otherAccrued income taxes
Advances received (Notes 3-(18), 11-(1))
Customer advances for projects in progress
Reserve for warranty obligations on completed projects (Notes 3-(14),11-(1))
Reserve for fulfillment of guarantees (Notes 3-(15), 11-(1))
Reserve for losses related to repairs
Reserve for apartment vacancy loss (short-term)
Asset retirement obligations (Notes 11-(1), 22)
OthersTotal current liabilities
Non-current liabilities:
Bonds (Notes 6-(2), 6-(3), 12)Long-term debt(Notes 6-(2), 6-(3), 8-(2), 12)Lease obligations (Notes 6-(2), 6-(3), 12)Long-term advances received (Note 3-(18))
Lease/guarantee deposits received
Deferred tax liabilities
Provision for Directors’ bonuses
Reserve for apartment vacancy loss (Notes 3-(12), 4-(5), 11-(1))
Liability for retirement benefit
Asset retirement obligations (Notes 11-(1), 22)
OthersTotal non-current liabilities
Total liabilities
Net assets
Shareholders’ equity:
Common stock: (Note 23)
Authorized: 500,000,000 shares in 2019 and 2018
Issued: 244,882,515 shares in 2019 and 252,682,515 shares in2018
Capital surplus
Retained earnings
Treasury stock: 1,067,510 shares in 2019 and 567,420 shares in 2018 (Note 23)
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on other securities (Notes 3-(4),11-(1))
Foreign currency translation adjustments (Note 3-(23))
Remeasurements of defined benefit plans (Note 13)
Total accumulated other comprehensive income
Share subscription rights
Non-controlling interests
Total net assets
Total liabilities and net assets

2019

For Regaining the Trust

Thousands of U.S.
dollars (Note 1)

Millions of yen

73

74

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Financial Section

Consolidated Statements of Operations
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2019 and 2018

Thousands of U.S. dollars(Note 1)Millions of yen

Net sales (Note 26)
Sales from Leasing Business
Sales from Development Business
Sales from Other Businesses
Cost of sales
Cost of sales from Leasing Business
Cost of sales from Development Business
Cost of sales from Other Businesses
Gross profit
Selling, general and administrative expenses
Advertising expenses
Sales commission expense
Transfer to reserve for bad debt
Directors’ bonuses
Salary and bonuses
Transfer to reserve for Directors’ bonuses
Retirement benefit cost
Rent expense
Depreciation and amortization
Taxes and public charges
Other
Operating profit (Note 26)
Non-operating income
Interest income
Dividend income
Valuation gains of investment securities
Foreign exchange gain
Share of profit of entities accounted for using equity method
Other
Non-operating expenses
Interest expenses
Bond issuance cost
Foreign exchange losses
Share of loss of entities accounted for using equity method
Other
Recurring profit
Extraordinary income
Gain on sales of property, plant and equipment
Extraordinary losses (Notes 16, 17)Loss on sale of property, plant and equipment
Loss on retirement of property, plant and equipment
Impairment loss
Provision of Reserve for losses related to repairs
Loss related to repairs
Provision of Reserve for apartment vacancy loss
Loss on cancellations of contracts
Loss on compensation for damage
Income before income taxes
Income taxes (Note 3-(20))
Current
Deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to shareholders of the parent (Note 27)
The accompanying notes are an integral part of these statements.

2019

2018

2019

505,223
426,388
58,992
19,842428,988363,651
44,597
20,73976,23568,844
3,008
1,978
112
997
30,134
(10)
1,809
2,727
2,731
5,221
20,132
7,390
891
113
172
185
148
1
270
1,218
748
191
—
—
278
7,063
245
245
72,1480
117
7,560
50,707
4,079
9,684
—
—
(64,840)
3,880
756
3,124
(68,720)(58)(68,662)

530,840
435,537
76,587
18,715434,762359,262
55,201
20,29896,077
73,147
4,235
2,289
51
799
33,408
10
1,844
2,769
2,679
4,965
20,09322,930
674
109
162
186
—
—
216
1,250
783
212
137
0
115
22,354
927
927
8,131
27
112
7,594
—
—
—
66
330
15,150
337
856
(519)
14,813(6)
14,8194,551,972
3,841,687
531,509
178,775
3,865,106
3,276,436
401,811
186,858
686,866
620,280
27,10917,827
1,016
8,983
271,509(92)
16,30524,576
24,60747,046
181,390
66,586
8,030
1,020
1,554
1,671
1,338
10
2,435
10,980
6,740
1,726
—
—
2,513
63,6362,212
2,212
650,049
3
1,057
68,119456,861
36,75287,255——(584,199)
34,958
6,811
28,147(619,158)(525)(618,633)

Leopal ace21 I nt egr at ed R epor t 201975

Financial Section

Consolidated Statements of Comprehensive Income
Thousands of U.S. dollars(Note 1)Millions of yen

2018

2019

(68,720)

14,813(619,158)(306)(1,045)14(4)(1,342)(70,063)(70,004)(58)

12(1,161)327
6(815)
13,997
14,003(6)(2,764)(9,418)126(41)(12,097)(631,255)(630,725)(530)

The accompanying notes are an integral part of these statements.

(Note)
Thousands of U.S. dollars(Note 1)Millions of yen

2018

2019

(442)
—
(442)
135
(306)

17
—
17
(5)
12

(3,984)—(3,984)
1,220(2,764)(1,045)—(1,045)—(1,045)(1,161)—(1,161)—(1,161)(9,418)—(9,418)—(9,418)

(216)
237
20
(6)
14

(82)
258
176
150
327

(1,953)
2,135
182
(55)
126

(4)
(1,342)

6
(815)

(41)
(12,097)

Initiatives for Strengthening Management Foundation

Net unrealized gains on other securities
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Net unrealized gains on other securities
Foreign currency translation adjustments (Note 3-(23))
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Remeasurements of defined benefit plans
Share of other comprehensive income of entities account for using equity method
Amount accrued in the fiscal year
Total

2019

Initiatives toward Regeneration

Net income
Other comprehensive income
Net unrealized gains on other securities
Foreign currency translation adjustments (Note 3-(22))
Remeasurements of defined benefit plans
Share of other comprehensive income of entities account for using equity method
Total
Comprehensive income
Comprehensive income attributable to shareholders of the parent
Comprehensive income attributable to non-controlling interests

2019

For Regaining the Trust

Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2019 and 2018

Data Compilation

76

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Financial Section

Consolidated Statements of Changes in Net Assets
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2019 and 2018

Millions of yen
Shareholders’ equity

Balance as of March 31, 2017
Dividend of surplus
Net income attributable toshareholders of the parent
Acquisition of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net change of items other thanshareholders’ equity
Total change during period
Balance as of March 31, 2018
Dividend of surplus
Net income attributable toshareholders of the parent
Acquisition of treasury stock
Retirement of treasury stock
Change in share of parent
from transactions with
non-controlling interests
Net change of items other thanshareholders’ equity
Total change during period
Balance as of March 31, 2019

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Share
Net unrealized
Total accumulated
Foreign
Total
Remeasurements
Subscription
gains onothercurrency
shareholders’of defined benefit
rightscomprehensive
othertranslation
equityplans
incomesecurities
adjustments

75,282

45,23539,923(3,660)156,779(5,675)
14,819
1

574

2,027

(668)

1,933

136

Noncontrollinginterests

Total net
assets20

158,870(5,675)(5,675)

14,81914,819(8,000)(8,000)(8,000)

2

3

3
—

(1)

(11,227)

11,228—12(1,154)

327

(815)

147

89

—

—

(2,083)

3,230

1,146

12

(1,154)

327

(815)

147

89

568

75,282

45,23537,839(430)

157,926

586

872

(341)

1,117

284

109

159,438(3,025)(68,662)(4,787)(578)(3,025)(3,025)(68,662)(68,662)(5.012)(5,012)(5,012)

4,787

—

—

(86)

(86)

(86)

(306)

(1,049)14(1,342)120(92)(1,313)—(86)(76,474)(225)(76,786)(306)(1,049)14(1,342)

120(92)(78,100)

75,28245,148(38,635)(655)

81,140

280

(176)

(327)

(224)

404

17

81,338

Noncontrollinginterests

Total net
assets989

1,436,513

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

Balance as of March 31, 2018
Dividend of surplus
Net income attributable toshareholders of the parent
Acquisition of treasury stock
Retirement of treasury stock
Change in share of parent
from transactions with
non-controlling interests
Net change of items other thanshareholders’ equity
Total change during period
Balance as of March 31, 2019

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Share
Net unrealized
Total accumulated
Foreign
Total
Remeasurements
Subscription
gains onothercurrency
shareholders’of defined benefit
rightscomprehensive
othertranslation
equityplans
incomesecurities
adjustments

678,280

407,561

340,924(3,876)

1,422,890(27,258)(618,633)(43,133)

5,288

7,861

(3,078)

10,0702,562(27,258)(27,258)(618,633)(613,633)(45,160)(45,160)(45,160)

43,133

—

—

(781)

(781)

(781)

(2,764)(9,454)126(12,092)

1,084

(830)

(11,837)—(781)(689,025)(2,027)(691,833)(2,764)(9,454)126(12,092)

1,084

(830)

(703,671)

678,280

406,780(348,100)(5,903)731,057

2,524(1,593)(2,952)(2,021)

3,647

159

732,842

The accompanying notes are an integral part of these statements.

Leopal ace21 I nt egr at ed R epor t 201977

Financial Section

Consolidated Statements of Cash Flows
Thousands of U.S. dollars(Note 1)Millions of yen

2019

2018

2019

Income before income taxes(64,840)

15,150(584,199)

Depreciation

12,945

11,726116,637

Impairment loss

7,560

7,594

68,119Loss related to repairs

4,079

—

36,752—

330—

Cash flows from operating activities:

Loss on compensation for damage
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts

560

522

5,048

(1,105)28(9,955)895(3,786)

8,068

9,684

(138)

87,255

Increase (decrease) in reserve for losses related to repairs

50,707—456,861

(285)

(271)

(2,574)

Interest expense

748

783

6,740

Foreign exchange loss (gain)

(148)

137

(1,338)Interest and dividend income

0

(10)

(185)

(186)

(1,671)

Loss (gain) on sale of property, plant and equipment

(245)

(899)

(2,209)Loss on retirement of property, plant and equipment

117

112

1,057

Decrease (increase) in accounts receivable

1,310

(252)

11,805Decrease (increase) in real estate for sale in progress(3,058)(960)(27,553)

Decrease (increase) in payment for construction in progress

(222)

60

(2,005)

Share of loss (profit) of entities accounted for using equity method

571

369

5,147

(8,125)(1,105)(73,206)

Increase (decrease) in customer advances for projects in progress

(940)

(789)

(8,475)

Increase (decrease) in advances received(9,311)(823)(83,898)

Decrease (increase) in long-term prepaid expenses
Increase (decrease) in accounts payable

Increase (decrease) in guarantee deposits received

(372)

(159)

(3,355)

Increase (decrease) in accrued consumption taxes

(890)

934

(8,022)Others(2,612)

1,220(23,541)

Subtotal(3,166)

29,600(28,525)

Interest and dividends received

465

355

4,191

Interest paid

(749)

(714)

(6,755)Reserve for losses related to repairs paid

(2,960)—(26,672)

Income taxes paid

(800)

(1,902)(7,216)

Net cash provided by operating activities(7,212)

27,338(64,979)

Initiatives for Strengthening Management Foundation(1)

Loss (gain) on valuation of investment securities

Initiatives toward Regeneration

Increase (decrease) in liability for retirement benefits
Increase (decrease) in reserve for apartment vacancy loss

For Regaining the Trust

Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2019 and 2018

The accompanying notes are an integral part of these statements.

Data Compilation

78

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Thousands of U.S. dollars(Note 1)Millions of yen

2019

2018

2019

Payment for purchase of property, plant and equipment(7,718)(11,218)(69,538)

Proceeds from sale of property, plant and equipment

10,05914,121

90,635

Payment for purchase of intangible assets(1,083)(818)(9,765)

Payment for purchase of investment securities(231)(5,966)(2,085)

Proceeds from sale of investment securities

21

22

194

Payment for purchase of shares in subsidiaries

—

(401)

—

Payment for loans

(1)

(8)

(15)

Cash flows from investing activities:

14

14

132

Payments for purchase of time deposits(1,500)(1,500)(13,514)

Proceeds from collection of loans
Proceeds from withdrawal of time deposits

8,126

5,486

73,217

Others(308)(2,068)(2,776)

Net cash provided by (used in) investing activities

7,379(2,336)

66,485

Cash flows from financing activities:
Proceeds from short-term borrowings

1,070

2,455

9,640

Repayment of short-term borrowings(50)(1,250)(450)

Proceeds from long-term debt

3,960

4,303

35,678

Repayment of long-term debt

(2,397)(1,268)(21,597)

Repayment of finance lease obligations(5,640)(4,953)(50,818)

Payment for redemption of bonds(3,966)(3,966)(35,732)

Payment for purchases of treasury stock(5,012)(8,000)(45,160)

Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation

(112)

—

(1,009)

(8)

(3)

(72)

Dividends paid to non-controlling interests

—

2

—

Cash dividends paid

(3,025)(5,675)(27,258)

Net cash provided by (used in) financing activities(15,181)(18,354)(136,779)

Proceeds from exercise of stock options

Effect of exchange rate changes on cash and cash equivalents

(213)

(166)

(1,924)

Net increase (decrease) in cash and cash equivalents(15,227)

6,480(137,198)

Cash and cash equivalents at beginning of year

98,246

91,766885,187

Cash and cash equivalents at end of year (Note 5)

83,01998,246

747,988

The accompanying notes are an integral part of these statements.

Leopal ace21 I nt egr at ed R epor t 201979

Financial Section

Notes to Consolidated Financial Statements(2) Cash and cash equivalents
For the purpose of the statements of cash flows, the Company considers all highly liquid investments with insignificant risk of change
in value and maturities of generally three months or less as cash
equivalents. These include cash on hand, demand deposits at banks
and highly liquid short-term investments with negligible risk of fluctuation in value and maturities of less than three months.
(3) Inventories
Real estate for sale and real estate for sale in process are primarily
stated at cost (presented in net book value less write-down when
profitability declines) determined by the specific identification method.
Costs on construction contracts in progress are primarily statedat cost determined by the specific identification method.
Raw materials and supplies are primarily stated at cost(presented in net book value less write-down when profitability
declines) determined by the last purchase price method.

Data Compilation

3. Summary of Significant Accounting Policies(1) Consolidation
Names of significant subsidiaries (26 in total)
Leopalace Leasing Corporation
Plaza Guarantee Co., Ltd.
Leopalace Power Corporation
Leopalace Energy Corporation
ASUKA SSI
Enplus Inc.
Leopalace Trust Co.,LTD
Leopalace21 Business Consulting (Shanghai) Co.,Ltd.
LEOPALACE21 VIETNAM CO.,LTD.
Leopalace21 (Thailand) CO.,LTD.
Leopalace21 (Cambodia) Co.,Ltd.
LEOPALACE21 PHILIPPINES INC.
PT.Leopalace Duasatu Realty
Leopalace21 Singapore Pte. Ltd.
Life Living Co.,Ltd.
Morizou Co.,Ltd.
Azu Life Care Co.,Ltd.
Leopalace Guam Corporation
WING MATE CO.,LTD.
Leopalace Smile Co.,Ltd.

Initiatives for Strengthening Management Foundation

2. Going concern assumption
There are no issues applicable to the going concern assumption.

Among the subsidiaries listed above, Leopalace Trust Co.,LTD
is newly consolidated in the current fiscal year, considering its
materiality.
The accompanying consolidated financial statements as ofMarch 31, 2019 include the accounts of the Company and its 26(25 as of March 31, 2018) subsidiaries and one associated company Woori & Leo PMC Co., Ltd. in equity method (together, “theCompanies”). Associated companies over which the Company
exercises significant influence in terms of the operating andfinancial policies have been included in the consolidated financial
statements in equity method. Investments in one associate (1 asof March 31, 2018) have been included for the year ended March
31, 2019. All significant intercompany balances and transactions
have been eliminated.
The balance sheet dates of Leopalace Guam Corporation,
Leopalace Guam Distributing Corporation, and 14 other subsidiaries are all the same for being December 31. For the consolidated
entities whose fiscal year ends different from that of the Company
but within 3 months, their financial results are used in the preparation of consolidated financial statements. When significant
transactions occur to those subsidiaries between their fiscal year
ends and the Company’s fiscal year end, those transactions arenecessarily adjusted to consolidate. Additionally, MORIZOU Co.,
Ltd. a consolidated subsidiary whose balance sheet date was theend of February, the financial statement results of which havebeen applied in the consolidated financial statements after necessary adjustments in previous periods. From the current fiscal year,
the balance sheet date of MORIZOU Co., Ltd. has been changed
to March 31. Because of this change, the 13-month period fromMarch 1, 2018 to March 31, 2019 has been consolidated by adjusting through the consolidated statements of income.

Initiatives toward Regeneration

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of
Leopalace21 Corporation (“the Company”) have been preparedin accordance with the provisions of Financial Instruments andExchange Act of Japan, its related accounting regulations and in
conformity with accounting principles generally accepted in Japan,
which are different in certain respects, as to application and disclosure requirements from International Financial Reporting Standards.
The accompanying consolidated financial statements have beenreformatted and translated into English (with certain expanded disclosure) from the consolidated financial statements of the Company
prepared in accordance with accounting principles generally accepted in Japan and filed with the Financial Services Agency as requiredby the Financial Instruments and Exchange Act of Japan.
The translation of the Japanese yen amounts into U.S. dollars
is prepared solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2019, which was
110.99 yen to US$1.00. Such translation should not be construed
as a representation that the Japanese yen amounts have been,
could have been, or could in the future be, converted into U.S.
dollars at this or any other rate of exchange. Certain amounts inthe previous year’s financial statements have been reclassified toconform to the current fiscal year’s presentation.
Figures are rounded down to the nearest 1,000,000 yen or $1,000.

For Regaining the Trust

Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2019 and 2018

80

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(4) Securities
Held-to-maturity debt securities are stated at amortized cost(straight-line method).
Other securities with available fair values are stated at fairvalue at the end of the fiscal year of each consolidated companies.
Other securities without available fair values are stated at cost by
the moving-average method.
Unrealized gains or losses on these securities are reported, netof income taxes, as a separate component of net assets. Cost of
securities sold is computed using the moving-average method.
Investments in silent partnership are reported in the equity
method, based on the latest financial statements available as at theclosing dates stipulated by the respective partnership contracts.
(5) Derivative financial instruments and hedge accounting
1. Accounting principles
		 Fair value
2. Derivative transactions are accounted in using hedge
accounting.
		 (a) Hedge accounting method			The interest rate swaps that meet criteria are recognized
and included in interest expense or income.
		 (b) Hedging instrument and hedged items
			 - Hedging instrument Interest rate swaps
			 - Hedged items
Long-term debt
		 (c) Hedge policy			Interest rate swaps are utilized as a hedge against possible future interest rate increases, in amounts within theliability being hedged.
		 (d) Method used to evaluate the effectiveness of the hedge			As of the consolidated balance sheet date, evaluation on
effectiveness of interest rate swaps that meet special
accounting treatment criteria is omitted.
(6) Property, plant and equipment (except for leased assets)
Property, plant and equipment for rent of the Company and domestic consolidated subsidiaries are stated at cost. Depreciation iscomputed generally on the straight-line basis. The useful lives are
principally from 22 to 47 years for buildings and structures for rent.
Property, plant and equipment other than above of theCompany and domestic consolidated subsidiaries are stated atcost. Depreciation is computed generally by the declining-balancemethod. However, buildings (excluding facilities attached to buildings) obtained on or after April 1, 1998, and facilities attached tobuildings and structures obtained on or after April 1, 2016, aredepreciated by the straight-line method. The useful lives are principally from 15 to 50 years for buildings and structures, 17 years

for machinery, equipment and vehicles, and 5 to 10 years for tools,
furniture and fixtures.
Property, plant and equipment of the consolidated overseas
subsidiaries are depreciated by the straight-line method basedon the local GAAP. The useful lives are principally from 20 to 40
years for buildings and structures and from 3 to 5 years for tools,
furniture and fixtures.
(7) Intangible assets
Software for internal use is amortized on a straight-line basis overthe estimated useful life of 5 years.
(8) Long-term prepaid expenses
Long-term prepaid expenses are amortized evenly over a period
mainly from 3 to 5 years.
(9) Bond issuance cost
Bond issuance costs are amortized evenly until maturity.
(10) Allowance for doubtful accounts
The Companies maintain an allowance for doubtful accounts toreserve for potentially uncollectible receivables. A provision forgeneral doubtful receivables is provided by applying a certain
reserve percentage of the receivables based on experience frompast transactions. A specific reserve is recorded for the estimatedamount to be uncollectible based on the customers’ financial condition or other pertinent factors.
(11) Liability for retirement benefit
In conjunction with the calculation of retirement benefit obligations,the method for attributing projected retirement benefits for theperiod up to the current fiscal end is based on a straight-line basis.
Actuarial gains/losses, which are prorated according to thestraight-line method over a specified period (5 years) within the
average remaining service years of employees at the time ofaccrual, are amortized starting from the next fiscal year of therespective accruals. Unrecognized actuarial gains/losses areposted after tax effects, as the cumulative amount of adjustments
attributed to accumulated other comprehensive income in the net
assets. Certain consolidated subsidiaries have adopted a simplified method of calculation with liability for retirement benefits
and retirement benefits expense. Under this simplified method,
retirement benefit obligation is deemed to be equal to the amountwhich would be required to pay if all eligible employees voluntarily
retire at the end of the fiscal year.
(12) Reserve for apartment vacancy loss
Reserve for vacancy losses on apartment units managed undermaster lease agreements is calculated according to the projected
loss that could incur during a reasonably estimable period to prepare for the risk of increasing vacancies. It is based on estimatedLeopal ace21 I nt egr at ed R epor t 2019(13) Reserve for losses related to repairs
To reserve for the losses related to repairs, an estimated amountof provision is recorded based on the defect rate, etc.

(15) Reserve for fulfillment of guarantees
In order to reserve for losses due to its rent obligation guarantees
business, the Company’s consolidated subsidiary, Plaza Guarantee
Co., Ltd., records the amount of loss expected based on the rate ofpast guarantee fulfillments.
(16) Reserve for Directors’ compensation
The estimated amount of bonus payments relevant to the consolidated fiscal year is accrued to cover the payment of bonuses to directors.

(18) Advances received
With respect to advances received, such as rent, the Company
reports the portion corresponding to more than a year in “longterm advances received” under “non-current liabilities,” and the
portion corresponding to a year or less in “advances received”
under “current liabilities.” This allows the Company to moreclearly present the characteristics and actual transactions of theCompany’s leasing business.

(20) Income taxes
Income taxes comprise corporate, inhabitant and enterprise taxes.
The asset and liability approach is used to recognize deferred(23) Foreign currency financial statements
The assets and liabilities of consolidated overseas subsidiaries
are translated into Japanese yen at the spot exchange rates as ofeach balance sheet date, and income and expenses are translated
at the average exchange rates of the fiscal year. Foreign currencytranslation adjustments resulting from the translation of assets,
liabilities and net assets are reclassified into foreign currencytranslation adjustments and non-controlling interests.
(24) Interest capitalization
Leopalace Guam Corporation, a consolidated subsidiary, of whichinterest paid on borrowing for real estate development businessfor the development period capitalized into acquisition cost of
property, plant and equipment.
Capitalized interests included in carrying value of property,
plant and equipment were 329 million yen ($2,964 thousand) as ofMarch 31, 2019.
(25) Consumption taxes
National and local consumption taxes are basically excluded fromtransaction amount. However, transaction amounts of Asuka SSI,a consolidated subsidiary, include national and local consumption
taxes. The nondeductible portion of consumption taxes on thepurchase of assets is recorded as long-term prepaid expenses andamortized evenly over 5 years.
(26) Earnings per share
Basic earnings per share of common stock is computed by net
income available to common shareholders divided by the weighted-average number of common stock outstanding for the period.
Diluted earnings per share of common stock reflects the potential dilution that could occur if securities or other contracts to issuecommon stock were converted or exercised into common stock or
resulted in the issuance of common stock.

Data Compilation(19) Amortization method and period of goodwill
The Company has adopted a policy whereby goodwill is amortizedon a straight-line basis over the period in which the economic
benefits are expected to be realized. However, if the amount is
negligible, it is amortized at once when it takes place.

(22) Foreign currency transactions
All monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the spot exchange
rates as of each balance sheet date. The foreign exchange gains
and losses from translation are recognized in the consolidated
statements of operations.

Initiatives for Strengthening Management Foundation(17) Revenues and costs of construction contracts
In recognizing construction revenues and costs of constructionsin process, the percentage-of-completion method is applied tosuch contracts in which the outcome of the construction activity
is deemed certain by the end of the fiscal year ended March 31,
2019, while the completed contract method is applied to other constructions. Progress rate of construction is estimated based on themethod of the ratio of actual cost incurred to total estimated cost.

(21) Leased assets
Leased assets are depreciated by the straight-line method overthe lease-term of respective assets as their useful lives with noresidual value.

Initiatives toward Regeneration(14) Reserve for warranty obligations on completed projects
Reserve for warranty obligations on completed projects is accrued
to reserve for execution of warranty obligations under defectliabilities in the future. It is calculated using the percentage of thepast execution of warranty obligations on the completed projects.

tax assets and liabilities for the expected future tax consequencesof temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes.

For Regaining the Trust

losses resulting from current rental income and expected futureoccupancy rates for each rental property managed by the leasing
business division of the Company.

81

82

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

4. Additional Information(Unapplied Accounting Standards, etc.)• Accounting Standard for Revenue Recognition (ASBJ Statement
No.29 issued on March 30, 2018 by Accounting Standards Boardof Japan)• Implementation Guidance on Accounting Standard for Revenue
Recognition (ASBJ Statement No.30 issued on March 30, 2018
by Accounting Standards Board of Japan)(1) Summary
The International Accounting Standards Board (IASB) and
Financial Accounting Standards Board (FASB) jointly developed
the converged accounting standards for revenue recognition andannounced “Revenue from Contracts with Customers” (IFRS 15 in
IASB and Topic 606 in FASB) in May 2014. IFRS 15 is effective forannual reporting periods beginning on or after 1 January 2018 andTopic 606 is effective for annual reporting periods beginning on orafter December 15, 2017. Accounting Standards Board of Japan(ASBJ) then developed and announced ASBJ Statement No.29
and ASBJ Guidance No.30 to progress with the change.
ASBJ developed the accounting standards for revenue recognition by adopting the basic rules in IFRS 15, for the basic policythat is to be consistent with IFRS 15 and to take advantage of thefinancial compatibility with IFRS 15. Additionally, considering theaccounting practices that Japan has carried out so far, substitutive
treatments have been supplemented the new standard without
affecting the financial comparability.
(2) Effective date
The new standards will be effective from the beginning of the fiscal
year ending March, 2022.
(3) Impact of the application of the relevant accounting standards
The impact of the application of Accounting Standard for Revenue
Recognition on consolidated financial statements is currently
being evaluated.
(4) Changes in presentation
The “Partial Amendments to the Accounting Standard for Tax

Effects Accounting” (ASBJ No. 28, February 16, 2018; hereinafter,“Partial Amendments to the Tax Effects Accounting Standard”) isapplied from the beginning of the current fiscal year. The deferred
tax assets are presented in the category of investments and otherassets, the deferred tax liabilities are reclassified to the categoryof non-current liabilities, and the tax effects accounting notes
have been changed to reflect the reclassification.
As a result, deferred tax assets under current assets decreased
by 8,494 million yen and deferred tax assets under investments
and other assets increased by 8,494 million yen in the consolidated balance sheets for the previous fiscal year.
The amount of deferred tax assets and deferred tax liabilitiesof the same taxpayer have been offset, therefore the total assets
have decreased by 122 million yen compared to the amount before
the change.
In addition, in the note to the tax effect accounting, reflection of“Accounting Standard for Tax Effect Accounting” stated in “Note 8(excluding the total amount of valuation allowance)” and “Note 9”,
which are stipulated in Paragraphs 3 to 5 of the Partial Amendments
to the Tax Effect Accounting Standard, have been added.
However, the details related to the previous consolidated fiscal
year are not prepared in accordance with the transitional treatment stipulated in Paragraph 7 of the Partial Amendments to theTax Effect Accounting Standard.
(5) Reserve for apartment vacancy loss
Previously, all reserve for apartment vacancy loss was recorded in
non-current liabilities due to the inability to accurately calculate theamount to be used within one year. However, due to the impact of
the construction defect issue, the reserve is recorded as current liabilities because it is expected to be used within one year.
The provision for apartment vacancy loss was previously includedin the cost of sales of the leasing business, but in the current
consolidated fiscal year, occupancy rate is expected to decline andloss will be incurred due to the suspension of tenants offering in
the wake of the construction defect issue. The loss is recorded as
an extraordinary loss because it is a temporary and large-scaleloss that does not occur in ordinary business activities.

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

Millions of yen

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

2019

2018

2019

84,536(1,517)
83,019106,543

761,657(13,668)
747,988(8,297)
98,246

Leopal ace21 I nt egr at ed R epor t 2019

Initiatives for Strengthening Management Foundation(d) S upplementary explanations on fair value of financial
instruments
Fair value of financial instruments are measured based on
the quoted market price, or reasonably assessed value if aquoted market price is not available.
Fair value of financial instruments whose quoted market
price is not available is calculated based on a fluctuating
factor, and the value might differ if different assumptions
are used. Contract sums, etc. in notes to derivative contracts do not represent the volume of market risk on derivative contracts.

Initiatives toward Regeneration(b) Nature and extent of risks arising from financial instruments
Operating receivables and loans outstanding are exposed tocredit risk.
Foreign currency denominated debts and credits originated in conjunction with overseas business development are
exposed to exchange risk.
Securities are mainly held-to-maturity securities andshares of the companies with which the Company has a business or capital alliance, and those securities are exposed tomarket risk and credit risk associated with the issuers.
Almost all electronically recorded obligations, accounts
payable, and accounts payable for completed projects
which are operating liabilities are scheduled to be paid
within one year.
Loans payable, corporate bonds, and lease obligations
related to finance lease transactions are mainly for the purpose of raising funds necessary for investment in facilities,
and the longest repayment date is 13 years subsequent to
the fiscal year end.
The derivative contracts represent interest-rate swap
transactions designed to hedge against the risk of future fluctuations in interest rates on borrowings, etc. Interest rate
swap transactions used by the Company are exposed to risksof fluctuations in the market interest rate. For details on
hedge accounting with respect to hedging instruments,
hedged items, hedging policy and the method for evaluating
hedging effectiveness, please refer to the aforementioned “3.
(5) Derivative financial instruments and hedge accounting”.

(c) Risk management for financial instruments
Credit risk management for operating receivables and loans
outstanding follows the “Receivables management rules”.
While each business division manages the extension of credit to its customers, it is also organized for early detection andloss reduction of accounts where collection is doubtful due
to worsening credit or similar problems.
Regarding securities and investment securities, theCompany periodically investigates and understands theshare price and the financial condition of the share issuingorganization. In addition, for items other than held-to-maturity securities, the Company considers the relationship withthe trading partner companies and constantly re-evaluates
its holdings.
The basic policy of derivatives trading is determined by
the board of directors, and the execution and administrationof derivatives transactions are conducted in accordance with
the Company’s “Derivatives Trading Management Rules”.
The derivatives trading management situation is periodicallyreported to the board of directors for comprehensive risk
management. The Company’s counterparties for derivative
contracts are highly creditworthy financial institutions inJapan, and therefore it does not assume the risk of counterparty default on these contracts.
Trade payables and debts are exposed to liquidity risk,
but this risk is monitored by various means such as the
preparation of a monthly financial plan by each company in
the Companies.

For Regaining the Trust

6. Financial Instruments(1) The financial instruments and related disclosures(a) Policy for financial instruments
The Companies are mainly involved in raising funds (mostlybank borrowing and corporate bond issuance) needed forplanned capital investments. Temporary excess funds areinvested in highly secured financial assets, and short-termworking capital is raised by borrowing from the bank. The
Companies conduct derivative transactions primarily for the
purpose of avoiding interest rate and exchange rate risks,and have a policy not to conduct speculative trading.

83

Data Compilation

84

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(2) Fair value of financial instruments
The carrying value on the consolidated balance sheet and fair value of financial instruments as of March 31, 2019 and 2018 as well as the differences between these values are described below. Financial instruments whose fair values appear to be extremely difficult to determine are notincluded in the table. (See Note (b))
Millions of yen

March 31, 2019(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts *(i)Net(5) Long-term loans
Allowance for doubtful accounts *(i)Net(6) Bad debts
Allowance for doubtful accounts *(i)
Net
Total
(1) Electronically recorded obligations(2) Accounts payable and accounts payable for completed projects(3) Short-term borrowings(4) Bonds *(ii)(5) Long-term debt *(ii)(6) Lease obligations
Total

Carrying value

Fair value

Difference

84,536
8,617
3,518
256
(27)
229
501
(91)
409
214
(214)
—
97,311
897
8,752
1,070
12,06921,086
13,821
57,69784,536
8,617
3,534

—
—
16

269

39

409

—

—
97,367
897
8,752
1,070
12,102
21,30913,66957,801

—
55
—
—
—
33
222
(152)
103

Millions of yen

March 31, 2018
(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts *(i)Net(5) Long-term loans
Allowance for doubtful accounts *(i)Net(6) Bad debts
Allowance for doubtful accounts *(i)
Net
Total
(1) Electronically recorded obligations(2) Accounts payable and accounts payable for completed projects(3) Short-term borrowings(4) Bonds *(ii)(5) Long-term debt *(ii)(6) Lease obligations
Total
Derivative transactions

Carrying value

Fair value

Difference

106,543
9,584
4,018
389
(43)
346
513
(96)
417
1,264
(1,253)
10
120,920
1,451
12,078
1,210
16,035
18,39818,18667,359—106,543
9,584
4,032

—
—
13

410

64

417

—

10
120,998
1,451
12,0781,210
16,063
18,531
18,21867,552
—

—
78
—
—
—
28
133
32
193
—

Leopal ace21 I nt egr at ed R epor t 2019

March 31, 2019

Fair value

Difference

761,657
77,64331,696
2,311
(243)
2,067
4,521
(827)
3,693
1,935
(1,935)—876,758
8,085
78,8609,640
108,739
189,987
124,533
519,845

761,657
77,64331,843

—
—
146

2,424

356

3,693

—

—
877,261
8,085
78,8609,640
109,042
191,992
123,159
520,780

—
503
—
—
—
303
2,005
(1,373)935

Notes:(a) M atters concerning the calculation method for the fair value of financial instruments, securities, and derivative transactions
AssetsCash and cash equivalents
Trade receivables and accounts receivable for completed projects
These assets are stated at carrying amount as they are settled in the short-term and their fair values approximate their carrying amount.

Initiatives for Strengthening Management Foundation*Notes:(i) Operating loans, long-term loans and bad debts have deductions of their respective allowance for doubtful accounts, which are recorded separately.
(ii)	As of March 31, 2019 and 2018, bonds due within one year of 3,966 million yen ($35,732 thousand for 2019) and 3,966 million yen, and current portion of long-term debt of 2,768 million yen ($24,943 thousand for 2019) and 1,754million yen are included in bonds and long-term debt, respectively.

Initiatives toward Regeneration(1) Cash and cash equivalents(2) Trade receivables and accounts receivable for completed projects(3) Securities and investment securities(4) Operating loans
Allowance for doubtful accounts *(i)Net(5) Long-term loans
Allowance for doubtful accounts *(i)Net(6) Bad debts
Allowance for doubtful accounts *(i)
Net
Total
(1) Electronically recorded obligations(2) Accounts payable and accounts payable for completed projects(3) Short-term borrowings(4) Bonds *(ii)(5) Long-term debt *(ii)(6) Lease obligations
Total

Carrying value

For Regaining the Trust

Thousands of U.S. dollars

85

Securities and investment securities
Shares are stated at the stock exchange quoted price; bonds are stated at either the stock exchange quoted price or the price presented by transacting financial institutions.
For notes to securities by holding purposes, please refer to “7. Securities”.

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

Data Compilation

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

86

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Liabilities
Electronically recorded obligations
Accounts payable and accounts payable for completed projects
Short-term borrowings
These liabilities are stated at carrying amount as they are settled in the short-term and their fair values approximate their carrying amount.
Bonds
Bonds issued by the Company are privately offered, and their fair value is stated at the net present value, which is calculated by discounting the principal with interest by the discount rate (i.e. the current market interest rate in consideration of residual value and credit risk).
Long-term debt,
Lease obligations
These liabilities are stated at the net present value, which is calculated by discounting the principal with interest by the discount rate(i.e. the estimated interest rate for new borrowings or lease transaction).
Derivative transactions
Please refer to “8. Derivative Transactions”.
(b) Financial instruments whose fair values appear to be extremely difficult to recognize
Thousands of
U.S. dollars

Millions of yen

Item

2019

2018

2019

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

4,510
70
6,424
870
2,764
14,640

4,507
88
6,424
875
2,549
14,444

40,637631
57,881
7,846
24,907
131,904

As they have no market value, and as it is understood that it is extremely difficult to estimate their future cash flow, the above financial
instruments are not included in “Assets: Securities and investment securities”.
(c) The scheduled redemption amount of monetary claims and investment securities with maturity subsequent to fiscal year end
Millions of yen

March 31, 2019
Cash and cash equivalents
Trade receivables and accounts receivable forcompleted projects
Securities and investment securities
Held-to-maturity debt securities(1) Government and municipal bonds(2) Corporate bonds
Other securities with maturities(1) Government and municipal bonds(2) Bonds (Corporate bonds)(3) Others
Operating loans
Long-term loans
Bad debts
Total

Due within 1 year

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after
10 years

84,536

—

—

—

8,617

—

—

—

400
—

400
—

500
—

—
—

852
—
—
109
11
—
94,526

150
5,600
—
104
23
—
6,277

—
—
—
26
16
—
542

—
824
870
16
451
214
2,377

Leopal ace21 I nt egr at ed R epor t 2019

Due within 1 year

Due after 5 years
through 10 years

Due after
10 years

106,543

—

—

—

9,584

—

—

—

(1) Government and municipal bonds

420

800

100

—

(2) Corporate bonds

—

—

—

—

March 31, 2018
Cash and cash equivalents
Trade receivables and accounts receivable forcompleted projects

For Regaining the Trust

Millions of yen

Due after 1 year
through 5 years

87

Securities and investment securities
Held-to-maturity debt securities

Other securities with maturities
40

1,002

—

—

(2) Bonds (Corporate bonds)

—

5,600

—

824

(3) Others

—

—

—

875

Operating loans

122

213

33

19

Long-term loans

9

32

12

459

Bad debts
Total

—

10

—

1,253

116,720

7,658

146

3,431

Due within 1 year

Due after 1 year
through 5 years

Initiatives toward Regeneration(1) Government and municipal bonds

Thousands of U.S. dollars

March 31, 2019

Due after 5 years
through 10 years

Due after
10 years

761,657———

77,643

—

—

—

3,603

3,603

4,504

—

—

—

—

—

Securities and investment securities
Held-to-maturity debt securities(1) Government and municipal bonds(2) Corporate bonds
Other securities with maturities
7,676

1,351

—

—

(2) Bonds (Corporate bonds)—

50,454—

7,426(3) Others

—

—

—

7,846

(1) Government and municipal bonds

Operating loans

985

944

236

144

Long-term loans

101

207

148

4,063

Bad debts
Total

—

—

—

1,935

851,667

56,562

4,889

21,417

Initiatives for Strengthening Management Foundation

Cash and cash equivalents
Trade receivables and accounts receivable forcompleted projects

Data Compilation

88

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(3) Scheduled repayment amount of bonds payable, long-term debt, lease obligations, and other interest-bearing debt subsequent
to fiscal year end is as follows:
Millions of yen

March 31, 2019

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Short-term borrowings

1,070

—

—

—

—

—

Bonds

3,966

3,066

3,066

1,971

—

—

Long-term debt

2,768

2,660

2,639

2,438

1,396

9,182

Lease obligations

5,320

4,267

3,029

1,060

144

—

Total

13,124

9,993

8,735

5,469

1,541

9,182

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Millions of yen

March 31, 2018
Short-term borrowings

1,210

—

—

—

—

—

Bonds

3,966

3,966

3,066

3,066

1,971

—

Long-term debt

1,754

1,640

1,501

1,475

1,424

10,602

Lease obligations

5,960

4,966

3,911

2,664

683

—

Total

12,890

10,573

8,478

7,206

4,079

10,602

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 4
through 5 years

Due after
5 years

Thousands of U.S. dollars

March 31, 2019

Due after 3
through 4 years

Short-term borrowings

9,640

—

—

—

—

—

Bonds

35,732

27,624

27,62417,758——Long-term debt

24,94323,96923,78521,968

12,58582,734

Lease obligations

47,93438,44527,297

9,555

1,300

—

Total

118,251

90,03978,70649,282

13,88682,734

Leopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

7. Securities(1) On March 31, 2019 and 2018, information with respect to held-to-maturity debt securities for which market prices are available
is summarized as follows:

89

Millions of yen

March 31, 2019

Consolidated balance
sheet amount

Fair value

Difference

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
1,325

16

—

—

—

Others

—

—

—

1,309

1,325

16

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Subtotal
Securities whose consolidated balance sheet amount does notexceed their acquisition cost:

Others———Subtotal

—

—

—

Total

1,309

1,325

16

Initiatives toward Regeneration

1,309

Corporate bonds

Government and municipal bonds

Millions of yen

Consolidated balance
sheet amount

Fair value

Difference

Securities whose consolidated balance sheet amount exceeds theiracquisition cost:
Government and municipal bonds

1,334

1,348

13

Corporate bonds

—

—

—

Others

—

—

—

1,334

1,348

13

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Subtotal
Securities whose consolidated balance sheet amount does not exceed
their acquisition cost:

Others———Subtotal

—

—

—

Total

1,334

1,348

13

Initiatives for Strengthening Management Foundation

March 31, 2018

Data Compilation

90

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Thousands of U.S. dollars

March 31, 2019

Consolidated balance
sheet amount

Fair value

Difference

11,797

11,944

146

—

—

—

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

—

—

—

11,797

11,944146

Government and municipal bonds

—

—

—

Corporate bonds

—

—

—

Others———Subtotal———

11,797

11,944146

OthersSubtotal
Securities whose consolidated balance sheet amount does notexceed their acquisition cost:

Total(2) Investment securities classified as other securities as of March 31, 2019 and 2018 are as follows:
Millions of yen

March 31, 2019

Consolidated balance
sheet amount

Acquisition cost

Difference

862

460

402

965

959

6

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

—

—

—

Others———OthersSubtotal

—

—

—

1,827

1,419

408

342

347

(4)

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

38

38

(0)

Corporate bonds

—

—

—

Others———Others———Subtotal

380

385

(4)

Total

2,208

1,804

403

Note:
March 31, 2019
4,510 million yen of unlisted shares, 70 million yen of unconsolidated subsidiary shares and associates, 6,424 million yen of unlisted bonds(subordinate corporate bonds), 870million yen of subordinate beneficiary rights to loans and account receivable in trust, and 2,764 million
yen of investments in silent partnership, are not included in the other securities given above, because they have no fair value and assigningthem fair market prices is recognized to be extremely difficult. The Company acquired the unlisted bonds (subordinate corporate bonds) andthe subordinate beneficiary rights to loans and accounts receivable in trust, as a result of the securitization of non-recourse apartment loansthat financial institutions had loaned to clients as funds for paying construction charges to the Company.

Leopal ace21 I nt egr at ed R epor t 2019

March 31, 2018

Consolidated balance
sheet amount

Acquisition cost

Difference

1,314

460

854

1,006

992

13

For Regaining the Trust

Millions of yen

91

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

—

—

—

Others———Subtotal

—

—

—

2,321

1,452

868

323

346

(22)

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

38

38

(0)

Corporate bonds

—

—

—

Others———Others———Subtotal

362

384

(22)

Total

2,683

1,837

846
Initiatives for Strengthening Management Foundation

Note:
March 31, 2018
4,507 million yen of unlisted shares, 88 million yen of unconsolidated subsidiary shares and associates, 6,424 million yen of unlisted bonds(subordinate corporate bonds), 875 million yen of subordinate beneficiary rights to loans and accounts receivable in trust, and 2,549 million
yen of investments in silent partnership, are not included in the other securities given above, because they have no fair value and assigningthem fair market prices is recognized to be extremely difficult. The Company acquired the unlisted bonds (subordinate corporate bonds) andthe subordinate beneficiary rights to loans and accounts receivable in trust, as a result of the securitization of non-recourse apartment loansthat financial institutions had loaned to clients as funds for paying construction charges to the Company.

Initiatives toward Regeneration

OthersData Compilation

92

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Thousands of U.S. dollars

Consolidated balance
sheet amount

Acquisition cost

Difference

7,770

4,144

3,626

8,697

8,642

55

Corporate bonds

—

—

—

Others———March 31, 2019
Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Stock
Bonds:
Government and municipal bonds

—

—

—

16,46812,787

3,681

3,087

3,129

(42)

Government and municipal bonds

343

346

(3)

Corporate bonds

—

—

—

Others———Others———Subtotal

3,430

3,476

(45)

Total

19,89916,263

3,635

OthersSubtotal
Securities whose consolidated balance sheet amount does notexceed their acquisition cost:
Stock
Bonds:

Note:
March 31, 2019$40,637 thousand of unlisted shares, $631 thousand of unconsolidated subsidiary shares and associates, $57,881 thousand of unlistedbonds (subordinate corporate bonds), $7,846 thousand of subordinate beneficiary rights to loans and accounts receivable in trust, and$24,907 thousand of investments in silent partnership, are not included in the other securities given above, because they have no fair value
and assigning them fair market prices is recognized to be extremely difficult. The Company acquired the unlisted bonds (subordinate corporate bonds) and the subordinate beneficiary rights to loans and accounts receivable in trust, as a result of the securitization of non-recourse
apartment loans that financial institutions had loaned to clients as funds for paying construction charges to the Company.
(3) Proceeds from sales of other securities and gain or loss on these sales for the years ended March 31, 2019 and 2018 are summarized as follows:
March 31, 2019
None
March 31, 2018
None(4) Investment in associates included in investment securities of the consolidated balance sheet is as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Investment securities (stocks)

70

88

631

Of which, investment in joint venture

70

68

631

Leopal ace21 I nt egr at ed R epor t 201993

For Regaining the Trust

8. Derivative Transactions(1) Derivative transaction not subjected to the application of hedge accounting
March 31, 2019
None
March 31, 2018
None

March 31, 2018
Hedge accounting method

Exceptional accounting
treatment for interest rate
swaps

Type of transaction

Interest rate swaps, floatingreceived rate and fixed paidrate

Major hedged item

Contract value, etc.

Contract value, etc.
lasting longer than
one year

Millions of yen

Millions of yen

8—

Fair value

Long-term debt—*

9. Main Properties(1) Breakdown of major plants, properties, and equipment are as follows:
Thousands of
U.S. dollars

2019

2018

2019

Residential properties for rent

17,13434,549154,376

Domestic hotels

13,034

13,707

117,434

Head office and branches

28,76029,004259,130

Leopalace Resort Manenggon Hills Guam

26,632

26,426

239,950

Leopalace Power (solar power systems)

10,08813,08890,892

Initiatives for Strengthening Management Foundation*Note:
The fair value of interest rate swaps subject to exceptional accounting treatment is included in the fair value of the corresponding long-term
debt because they are recognized together with hedged long-term debt.

Millions of yen

Initiatives toward Regeneration(2) Derivative transaction subjected to the application of hedge accounting
March 31, 2019None(2) Due to acceptance of national subsidies, the following reduction entry amount is deducted from the acquisition cost of relevant assets:
Thousands of
U.S. dollars

Millions of yen

2018

2019

155

155

1,396

Data Compilation

Machinery, equipment, and vehicles

2019

94

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(3) The Companies recognize impairment loss on the following asset groups for the years ended March 31, 2019 and 2018:
March 31, 2019
PurposeCategory

Rental assets (Apartment buildings Buildings and Structuresand others, 113 units)
Land

Impairment loss

Location

Millions of yen

Thousands of
U.S. dollars

938

8,457

6,621

59,661

7,560

68,119

Odawara-shi, Kanagawa etc.

Total

The Companies recognize each property in domestic rental
assets as a unit, and group the overseas assets by managerial
accounting segmentation.
The Companies wrote down book value of rental assets

planned to be sold to recoverable amount and recognized the
reduced values as impairment losses.
Recoverable amount of rental assets are measured in net
realizable value.

March 31, 2018
PurposeCategory

Rental assets (Apartment buildings Buildings and Structuresand others, 319 units)
Land

Impairment loss

Location

Millions of yen

Minami-ku, Kyoto, etc.

587
6,848

Rental assets (Furniture and appli- Leased assets, etc.
ances equipped in apartments)
Inactive non-current assets(one land)

Land

118

Higashi Kagawa-shi, Kagawa

Total

The Companies recognize each property in domestic rental
assets as a unit, and the group overseas assets by managerial
accounting segmentation.
The Companies wrote down book value of rental assets
planned to be sold, rental assets whose profitability seriously
declined and inactive non-current assets to recoverable amount

39
7,594

and recognized the reduced values as impairment losses.
Recoverable amount of rental assets are measured in thehigher of their values in use or their net realizable values. Valuein use is computed by discounting its future cash flows at 3.9%,
while net realizable value is determined based on publicly
appraised value.

10. Bad Debts
Bad debts are claims as stipulated under Article 32, Paragraph 1, and Item 10 of the Regulation concerning Financial Statements. Bad debts
on March 31, 2019 and 2018 consist of the following:Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Claims in the process of bankruptcy

—

1,039

—

Bad debts

70

97

636

Others

144

127

1,299

Total

214

1,264

1,935

Leopal ace21 I nt egr at ed R epor t 2019

Thousands of
U.S. dollars

Millions of yen

2019

33.935
15,526
7,294
4,096
3,897
775
601
573
494
463
393
307
253
239
188
139
110
105
99
57
55
605
70,216(23,985)(22,324)(46,309)23,90734,435—
14,762
3,779
932
1,598
722
650
668
443
400
537
359
307
237
136
288
117
150
589
96
618
61,832——(34,747)
27,084

305,754
139,890
65,72436,90735,116
6,984
5,422
5,167
4,457
4,179
3,549
2,768
2,285
2,160
1,697
1,259
997
951
894
519
498
5,453
632,641(216,103)(201,136)(417,240)
215,400

(112)
(123)
(26)
(262)
23,644

(157)
(259)
(28)
(445)
26,639(1,011)(1,114)(238)(2,364)
213,036

Data Compilation*Notes:(i)	The valuation allowance increases by 11,562 million yen from the previous fiscal year. The main increases are 14,187 million yen which
derives from the temporary differences due to the reserve for losses related to the repairs induced by the parting walls and other construction defect issues and 12,274 million yen in valuation allowance for loss carryforwards due to a decline in taxable income from thenext fiscal year. The main decreases are 3,979 million yen due to tax recognition of impairment losses for prior years related to theCompany-owned properties sold by the Company in a lump sum, and 10,312 million yen due to a decrease in the effective statutory tax
rate of consolidated subsidiary Leopalace Guam Corporation from 34% to 21%.

Initiatives for Strengthening Management Foundation2018

Initiatives toward Regeneration

Deferred tax assets:
Loss carried forward for tax purposes *(ii)Reserve for losses related to repairs
Impairment loss
Retirement benefit liability
Reserve for apartment vacancy loss
Accrued bonuses
Advances received
Elimination of unrealized gain
Allowance for doubtful accounts
Excess amortization on software
Reserve for fulfillment of guarantees
Asset adjustments
Advances from customers
Deposits received
Loss on valuation of real estate for sale
Asset retirement obligations
Accounts payable - other
Reserve for warranty obligations on completed projectAccrued enterprise tax
Loss on valuation of property, plant and equipment
Sales promotion cost
Others
Sub total
Valuation allowance for tax loss carryforwards *(ii)Valuation allowance for deductible temporary differences
Less: valuation allowance *(i)Total deferred tax assets
Deferred tax liabilities:
Reserve for special depreciation
Net unrealized gain on other securities
Fixed asset retirement expenses
Total deferred tax liabilities
Net deferred tax assets

2019

For Regaining the Trust

11. Income Taxes(1) Significant components of deferred tax assets and liabilities as of March 31, 2019 and 2018 are as follows:

95

96

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(ii) Loss carryforwards for tax purposes and deferred tax assets carried forward by due date.
Millions of yen

Due within
1 yearDue after 1
through 2 years

Due after 2
through 3 years

Due after 3
through 4 years

Due after 4
through 5 years

Due after
5 years

Total

Tax loss carryforwards *(i)

4,715

7,200

4,599

640

881

15,89933,935

Valuation allowance(4,715)(4,499)(2,289)

(640)

(826)

(11,013)(23,985)

Deferred tax asset

—

2,700

2,309

—

54

4,885

9,950 *(ii)Due after 1
through 2 years

Due after 2
through 3 years

Due after 4
through 5 years

Due after
5 years

Total

March 31, 2019

Thousands of U.S. dollars

March 31, 2019

Due within
1 yearDue after 3
through 4 years

Tax loss carryforwards *(i)42,48164,87041,436

5,766

7,937

143,247

305,748

Valuation allowance(42,481)(40,535)(20,623)(5,766)(7,442)(99,225)(216,100)Deferred tax asset—

24,32620,803—486

44,012

89,647 *(ii)*Notes:(i) Tax loss carryforwards are calculated by multiplying the statutory tax rate.
(ii)	Deferred tax assets of 9,950 million are recorded for tax loss carryforwards of 33,935 million (the amount multiplied by the statutory tax
rate).The Company does not recognize a valuation allowance for such tax loss carryforwards to the extent that it is deemed recoverable
based on projected future taxable income.
(2) Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate for the years
ended March 31, 2019 and 2018 are as follows:
2019

2018

—

30.9%

Effect from decrease in valuation reserve—(37.9%)

Entertainment and other expenses not deductible for income tax purposes

—

7.5%

Per capital portion of inhabitants taxes

—

1.6%

Tax deduction based on Tax Credits for Salary Growth—(0.1%)

Others—0.2%

Actual effective tax rate

—

2.2%

Effective statutory tax rate
Adjustments:

Note:
It is not applicable because of negative taxable income of the current fiscal year.

Leopal ace21 I nt egr at ed R epor t 2019

Thousands of
U.S. dollars

Millions of yen

2018

2019

Short-term borrowings

1,070

1,210

9,640

Current portion of long-term debt, with average interest rate of 0.94%

2,768

1,754

24,943Current portion of lease obligations, with average interest rate of 3.04%

5,320

5,960

47,934Long-term debt, due 2019 to 2031, with average interest rate of 1.39%

18,318

16,643

165,043

Long-term lease obligations, due 2019 to 2022, with average interest rate of 2.69%

8,501

12,226

76,599Total

35,97837,794

324,160

Note:
The average interest rates above are calculated in weighted average in terms of the fiscal year-end balance of the borrowings and debts.
Please note, however, that the current portion of lease obligations and lease obligations (net of the current portion) are recorded in the consolidated balance sheet in the amount before deducting the interest portion from total lease liabilities for certain consolidated subsidiaries,
and that such lease obligations are not included in the calculation of the average interest rate.

Initiatives toward Regeneration

2019

For Regaining the Trust

12. Short-term Borrowings and Long-term Debt
(1) Short-term borrowings, long-term debt and lease obligations on March 31, 2019 and 2018 consist of the following:97(2) The amounts of long-term debt and lease obligations (excluding their current portion) scheduled for repayment in five years
from fiscal year ended March 31, 2019 are as follows:
Millions of yen
Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

Long-term debt

2,660

2,639

2,438

1,396

Lease obligations

4,267

3,029

1,060

144

Thousands of U.S. dollars
Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

Long-term debt

23,96923,78521,968

12,585

Lease obligations

38,44527,297

9,555

1,300

(3) Assets pledged as collateral for short-term borrowings and long-term debt on March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Cash and cash equivalents

105

17

952

Buildings and structures

63

—

570

Machinery, equipment, and vehicles

113

—

1,019

Others

767

669

6,919

55

55

496

116

131

1,047

Total

1,221

872

11,003

Data Compilation

Investment securities
Others (investments and other assets)

Initiatives for Strengthening Management Foundation

Due after 1 through 2 years

98

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(4) Liabilities with collateral at March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Current portion of long-term debt

79

27

720

Long-term debt

714

704

6,433

Total

793

731

7,153

Note:
Within the assets pledged as collateral, cash and cash equivalents and investment securities are pledged as collateral for investees of consolidated subsidiaries and lenders of client’s housing loans, and there are no liabilities with collateral.
(5) Securities and investment securities which have been deposited with the Legal Affairs Bureau on March 31, 2019 and 2018 are
as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Deposit for housing construction warranty

1,122

1,104

10,110

Advanced payment certificate in accordance with Payment Services Act

628

628

5,658

Deposit for operation stipulated in Building Lots andBuildings Transaction Business Act

136

98

1,226

Deposit for business security under the Insurance Business Act

120

120

1,083

Deposit for housing defect warranty

109

109

983

Guarantee deposits based on the Trust Business Act

25

—

225

Others4238(6) Bond balances on March 31, 2019 and 2018 consist of the following:Thousands of
U.S. dollars

Millions of yen
Company name

Issuance date

Name of bond

2019

2018

2019

Leopalace21 Corporation 13th unsecured straight bondOctober 31, 2014

900
(900)

1,800
(900)

8,108
(8,108)

Leopalace21 Corporation 14th unsecured straight bondSeptember 30, 2015

6,069
(1,666)

7,735(1,666)

54,680(15,010)

Leopalace21 Corporation 15th unsecured straight bondSeptember 30, 2015

5,100
(1,400)6,500(1,400)45,950(12,613)

Total—

12,069(3,966)

16,035(3,966)

108,739(35,732)—

Note:
Figures in parentheses represent the current portion.
Company nameName of bondInterest rate (%)

Collateral

Date of maturity

Leopalace21 Corporation

13th unsecured straight bond

0.21

None

October 31, 2019

Leopalace21 Corporation

14th unsecured straight bond

0.13

None

September 30, 2022

Leopalace21 Corporation

15th unsecured straight bond

0.63

None

September 30, 2022

Leopal ace21 I nt egr at ed R epor t 2019

Millions of yen

Due within 1 year

Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

3,966

3,066

3,066

1,971

—

Due after 4 through 5 years

For Regaining the Trust(7) The amount of bonds maturity in 5 years from the consolidated balance sheet date are as follows:

99

Thousands of U.S. dollars

Due within 1 year

Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

35,732

27,624

27,62417,758reference to job level and length of service.
Also, retirement allowances may be paid with a premium for
retired employees.
Certain consolidated subsidiaries have adopted a simplified
method in calculating the liability for retirement benefits and retirement benefit liabilities expense. Since the amounts are immaterial,
it is included in following notes based on the general rule.

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Beginning balance of retirement benefit obligations

12,338

11,295111,170

Service cost

1,401

1,359

12,623

Interest cost

63

55

574

Actuarial gains and losses accrued

59

82

538

(648)

(459)

(5,838)Retirement benefits paid
OthersClosing balance of retirement benefit obligations

—

5

—

13,215

12,338

119,067

Initiatives for Strengthening Management Foundation(2) Defined benefit pension plan(a) List of adjustments between the balances of retirement benefit obligations at the beginning and end of year are as follows:

Initiatives toward Regeneration

13. Retirement Benefit Plans(1) Outline of retirement benefit plans
The Companies have an unfunded defined benefit pension plan
and a defined contribution pension plan to provide for employees’
retirement benefits. The defined benefit plan is a lump-sum retirement distribution plan (unfunded, but certain plans are funded as
the Companies have adopted a retirement benefit trust for the
lump-sum retirement distribution plan), and the amounts of retirement benefits are provided mainly based on accumulated points in—(b) List of adjustments between the balances of pension assets at the beginning and end of year are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

Beginning balance of pension assets

5,000

—

45,049

Expected return on plan assets

158

—

1,428

Actuarial gains and losses accrued

(157)

—

(1,415)

Securities contribution to retirement benefits trust

—

5,000

—

5,001

5,000

45,061

Closing balance of pension assets

Data Compilation

2019

100

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(c) List of adjustments between the closing balances of retirement benefit obligations and pension assets and the liabilities andassets related to the retirement benefit posted in the consolidated balance sheet are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Funded retirement benefit obligations

13,215

12,338

119,067

Pension assets(5,001)(5,000)(45,061)

8,213

7,338

74,006———

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

8,213

7,338

74,006

Liability for retirement benefit

8,213

7,338

74,006

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

8,213

7,338

74,006

Unfunded retirement benefit obligations(d) Retirement benefit expenses and breakdown amounts are as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost

2019

2018

2019

1,401

1,359

12,623

63

55

574

Expected return on plan assets

(158)

—

(1,428)

Amortization of actuarial gain or loss

237

258

2,135

Retirement benefit expenses related to the defined benefit plan

1,543

1,673

13,905Interest cost(e) Items posted as the remeasurements of defined benefit plans (before tax effects) are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Actuarial gains/losses

(20)

(176)

(182)

Total

(20)

(176)

(182)

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

Millions of yen

2019

2018

2019

Unrecognized actuarial gains/losses

472

492

4,255

Total

472

492

4,255

2019

2018

92%
6%
—
2%
100%

—
—
100%
—
100%

(g) Matters concerning pension assets are as follows:(1) Major components of pension assets
Bonds
SharesCash and cash equivalents
OthersTotal

Note:Total of pension assets is equal to the securities contribution to retirement benefits trust from the lump-sum retirement distribution plan.

Leopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust(2) Method of determining the long-term expected rate of return
The expected long-term rate of return on pension assets is determined considering the allocation of the pension assets expected currently
and in the future and the long-term rates of return which are expected currently and in the future from the various components of the pension assets.

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

2019

2018

0.03 – 0.97%
2.17%

0.03 – 0.97%
3.17%

14. Stock Options(1) Stock option expenses recorded relating to stock options:Thousands of
U.S. dollars

Millions of yen

Selling, general and administrative expenses

2019

2018

2019

100

128

901

Title and numberof grantees

Type and numberof stock options*
Grant date
Vesting conditions

Exercise period* Note:Reported by converting to the number of shares2017 Stock Option

2018 Stock Option

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

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

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

Common stock:
252,700 shares
August 18, 2016

Common stock:282,800 shares
September 14, 2017

Common stock:348,000 shares
September 14, 2018

Not applicable vesting
conditions are specified

Not applicable vesting
conditions are specified

Not applicable vesting
conditions are specified

Not applicable period ofservice is specified
From August 19, 2016 toAugust 18, 2046

Not applicable period ofservice is specified
From September 15, 2017
to September 14, 2047

Not applicable period ofservice is specified
From September 15, 2018
to September 14, 2048

Data Compilation

Vesting period

Executive officers(excluding Directors) andemployees of Leopalace21
Corporation, and Directors
and employees ofsignificant subsidiaries
33 people
Common stock:71,000 shares
August 17, 2009
Continuous services fromthe grant date (August 17,2009) to the end of vesting
period (August 17, 2011)
From August 17, 2009 toAugust 17, 2011
From August 18, 2011 toJune 27, 20192016 Stock Option

Initiatives for Strengthening Management Foundation(2) Outline of stock options and activities are as follows:(a) Outline of stock options:2009 Stock Option

Initiatives toward Regeneration(3) Defined contribution pension plan
The necessary contribution amount for the defined contribution plan was 597 million yen ($5,387 thousand) and 557 million yen for the year
ended March 31, 2019 and 2018, respectively.

102

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(b) Stock option transactions:
Number of stock options as of the fiscal year ended March 31, 2019 are reported by converting to the number of shares.
Number of stock options:2009 Stock Option

2016 Stock Option

2017 Stock Option

2018 Stock Option

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

—

—

—

—

Granted———348,000

Forfeited

—

—

—

—

Vested———348,000

Outstanding

—

—

—

—

Vested (number of shares)
Previous fiscal year-end

62,000252,700

282,800—

Vested———348,000

Exercised

—

—

—

—

Forfeited

—

—

—

—

62,000252,700

282,800

348,000

Outstanding

Price information (yen):2009 Stock Option

2016 Stock Option

2017 Stock Option

2018 Stock Option

Exercise price

826

1

1

1

Average stock price at exercise

—

—

—

—

Fair value at the grant date

277

547

528

332

(3) Estimate method of fair value of stock options:2018 stock options granted in the fiscal year ended March 31, 2019 are valued using the Black-Scholes option pricing model and the assumptions are as follows:
2018 Stock Option

Expected volatility *(i)Expected life of option *(ii)Expected dividends *(iii)
Risk-free interest rate *(iv)54.561%15 years
22 yen per share
0.365%

Notes:(i) Estimated based on the actual stock prices in a period of 15 years from September 2003 to September 2018.
(ii)	The expected life of option could not be estimated rationally due to insufficient data. Therefore, it was estimated assuming that theoptions are exercised at the middle point of the exercise period.
(iii)	Based on actual dividends for the fiscal year ended March 31, 2018.
(iv)	Yield of the Japanese government bond, corresponding to period of the expected life of option.
(4) Estimate method of the number of stock options vested:
Due to the difficulty in rationally estimating the actual number of stock options that will be forfeited in the future, the actual number of forfeited stock options is adopted in the estimate.

Leopal ace21 I nt egr at ed R epor t 2019

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

242

915

2,184

Machinery, equipment, and vehicles

2

9

26

Other (Property, plant, and equipment)

0

1

0

245

927

2,212

Buildings and structures

Total

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Buildings and structures

0

—

0

Machinery, equipment, and vehicles

0

—

0

Land

0

27

0

Others (Property, plant and equipment)

0

0

0

Total

0

27

0

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

82

82

744

Construction in progress

0

—

0

Land

3

—

28

Buildings and structures

Others (Property, plant and equipment)

9

30

87

Others (Intangible assets)

21

—

196

Total

117

112

1,057

Initiatives for Strengthening Management Foundation

17. Loss on Retirement of Non-current Assets
Loss on disposal of non-current assets for the years ended March 31, 2019 and 2018 are as follows:

Initiatives toward Regeneration

16. Loss on Sale of Non-current Assets
Loss on sale of non-current assets for the years ended March 31, 2019 and 2018 are as follows:

For Regaining the Trust

15. Gain on Sale of Non-current Assets
Gain on sale of non-current assets for the years ended March 31, 2019 and 2018 are as follows:

103

18. Loss related to repairs
Repair costs and incidental expenses are incurred as repair work to the defect properties constructed by the Company. Loss related to
repairs is recorded from the current fiscal year.

20. Loss on compensation for damage
The Company compensated removal costs of buried objects in land sold in the past, and the amount was recorded as compensation for damage only in the fiscal year ended March 2018.

Data Compilation

19. Loss on cancellations of contracts
Tenant rent guarantee contracts were cancelled due to rental assets being sold, and the Company paid for the period not yet elapsed and theamount was recorded under loss on cancellations of contracts only in the fiscal year ended March 2018.

104

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

21. Rental Properties
The Companies possess rental apartments in major cities and regions
throughout Japan. Some subsidiaries possess rental residences andoffice buildings, in addition they develop and possess serviced apartments. For the years ended March 31, 2019 and 2018, income arisingfrom these rental properties are 1,902 million yen ($17,145 thousand)and 2,773 million yen, and impairment losses are 7,560 million yen($68,114 thousand) and 7,476 million yen, respectively.
Furthermore, the changes in book value of rental properties
during the year ended March 31, 2019 and 2018, and the fair value
as of March 31, 2019 and 2018 are as follows:

March 31, 2019
Millions of yen

Balance as of April 1, 2018

Increase/(Decrease)

Balance as of March 31, 2019

Fair value as of March 31, 2019

44,769(17,732)

27,03633,760March 31, 2018
Millions of yen

Balance as of April 1, 2017

Increase/(Decrease)

Balance as of March 31, 2018

Fair value as of March 31, 2018

61,745(16,975)

44,76949,516

March 31, 2019
Thousands of U.S. dollars

Balance as of April 1, 2018

Increase/(Decrease)

Balance as of March 31, 2019

Fair value as of March 31, 2019

403,367(159,770)

243,596

304,179Note:(i)	Book values recorded on the consolidated balance sheets are the amount after deducting accumulated depreciation and accumulated
impairment loss from acquisition cost.
(ii)	For the years ended March 31, 2019 and 2018, the main decreases are due to the sale of rental properties in 9,556 million yen ($86,104
thousand) and 12,739 million yen, and impairment losses in 7,560 million yen ($68,114 thousand) and 7,476 million yen, respectively.
(iii) Fair value as of the end of the current consolidated fiscal year is calculated by the Company mainly based on “Real-estate appraisal standards”.

22. Asset Retirement Obligations
Disclosure is omitted due to immateriality in the consolidated financial statements.
23. Supplemental Information to the Statement of Changes in Net Assets(1) Main changes in net assets for the year ended March 31, 2019(a) Shares issued and treasury stocks for the year ended March 31, 2019 are as follows:
SharesType of shares

April 1, 2018

Increase

Decrease

March 31, 2019

Shares issued
Common stock *(i)252,682,515—

7,800,000

244,882,515

Total

252,682,515—

7,800,000

244,882,515

Treasury stock
Common stock *(ii),(iii)

567,4208,300,090

7,800,000

1,067,510

Total

567,4208,300,090

7,800,000

1,067,510*Notes:(i)	The 7,800 thousand shares decrease in common stock issued is due to the retirement of treasury stock resolved at the meeting of Board of Directors.
(ii)	The 8,300 thousand shares increase in treasury stock is due to the 8,300 thousand shares acquisition resolved at the meeting of Board of
Directors, accompanied with the purchase of 0 thousand shares less than one unit.
(iii) The 7,800 thousand shares decrease in treasury stock is due to the retirement of treasury stock.

Leopal ace21 I nt egr at ed R epor t 2019

Number of shares issued upon exercise of SARs

Outstanding as of March 31, 2019

Class of sharesissued upon exerciseof SARs

April 1, 2018

Increase

Decrease

March 31, 2019

Millions of yen

Thousands of
U.S. dollars

SARs as stock option

—

—

—

—

—

404

3,647

Total

—

—

—

—

—

404

3,647

Type

For Regaining the Trust(b) Stock acquisition rights (SAR) and treasury share acquisition rights for the year ended March 31, 2019 are as follows:

105(c) Matters concerning dividends for the year ended March 31, 2019 are as follows:- Dividends paid:

June 28, 2018
General shareholders’meeting

Class of shares

Dividends per share

Millions of yen

Thousands of
U.S. dollars

Yen

U.S.dollars

3,025

27,25812

0.10

Common stock

Record date

Effective date

March 1, 2018

June 29, 2018

- There are no dividends with record dates in the current consolidated year but with effective dates in the next year:

Initiatives toward Regeneration

Total amount of dividends
Resolution(2) Main changes in net assets for the year ended March 31, 2018(a) Shares issued and treasury stocks for the year ended March 31, 2018 are as follows:
SharesApril 1, 2017

Increase

Decrease

March 31, 2018

Shares issued
Common stock *(i)267,443,915—

14,761,400

252,682,515

Total

267,443,915—

14,761,400

252,682,515

Treasury stock
Common stock *(ii),(iii)

4,569,920

10,761,900

14,764,400

567,420

Total

4,569,920

10,761,900

14,764,400

567,420*Notes:(i)	The 14,761 thousand shares decrease in common stock issued is due to the retirement of treasury stock resolved at the meeting of Board of Directors.
(ii)	The 10,761 thousand shares increase in treasury stock is due to the 10,761 thousand shares acquisition resolved at the meeting of Boardof Directors, accompanied with the purchase of 0 thousand shares less than one unit.
(iii)	The 14,764 thousand shares decrease in treasury stock is due to the retirement of treasury stock.

Initiatives for Strengthening Management Foundation

Type of shares(b) Stock acquisition rights (SAR) and treasury stock acquisition rights for the year ended March 31, 2018 are as follows:
Outstanding as ofMarch 31, 2018

Number of shares issued upon exercise of SARs
April 1, 2017

Increase

Decrease

March 31, 2018

Millions of yen

SARs as stock option

—

—

—

—

—

284

Total

—

—

—

—

—

284

Data Compilation

Class of sharesissued upon exerciseof SARs

Type

106

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9(c) Matters concerning dividends for the year ended March 31, 2018 are as follows:- Dividends paid:
Resolution

Class of shares

Total amount of dividends

Dividends per share

Millions of yen

Yen

Record date

Effective dateJune 29, 2017
General shareholders’ meeting

Common stock

3,154

12

March 31,2017

June 30,
2017

November 10, 2017
Board of Directors’ meeting

Common stock

2,521

10

September 30,
2017

December 11,
2017- Dividends with record dates in the current consolidated year but with effective dates in the next year:
Resolution

June 28, 2018
General shareholders’ meeting

Class of shares

Common stock

Total amount of dividends

Millions of yen

3,025

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

Source of dividend

Retainedearnings

Dividends per share

Yen

12

Record date

Effective date

March 31, 2018

June 29, 2018

(2) Operating lease transactions
Future minimum lease payments related to non-cancelable operating leases subsequent to March 31, 2019 and 2018 are as follows:

Millions of yen

March 31, 2019
Due within one year
Due after one year
Total

Future lease payments Prepaid lease payments

235,191(234,998)
99,333(98,866)
334,525(333,864)

1,032(1,032)
1,740(1,740)2,773(2,773)Differences

234,159(233,965)
97,593(97,125)
331,752(331,091)

Millions of yen

March 31, 2018
Due within one year
Due after one year
Total

Future lease payments Prepaid lease payments

236,656(236,522)
119,977(119,764)
356,633(356,286)

1,126(1,126)
2,218(2,218)3,344(3,344)

Differences

235,529(235,395)
117,759(117,546)
353,289(352,942)

Thousands of U.S. dollars

March 31, 2019
Due within one year
Due after one year
Total

Future lease payments Prepaid lease payments

2,119,037(2,117,295)
894,978(890,765)
3,014,016(3,008,061)

9,306(9,306)
15,681(15,681)
24,987(24,987)

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

Differences

2,109,731(2,107,989)
879,297(875,084)
2,989,028(2,983,073)

Leopal ace21 I nt egr at ed R epor t 2019

Thousands of
U.S. dollars

Millions of yen

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

2018

2019

505

589

4,554

3
509

3
593

33
4,587

The Development Business operations comprise the construction
subcontracting of apartments, detached houses and developmentof condominiums and others. The Elderly Care Business operates
elderly care facilities. The Hotels, Resort and Other Business operates hotels and resort facilities etc.

(3) Information Regarding Sales, Profits and Losses, Assets, and other Items by Reportable Segment for the years ended March
31, 2019 and 2018 are as follows:
Millions of yen
Reportable segment

March 31, 2019

Consolidated
Total

505,2233,859
509,083
11,798
181,487—(3,859)(3,859)(4,407)110,303505,223—505,2237,390
291,790

1,480

10,7452,200

12,945

1,614

8,878

909

9,788

Development
Business

Elderly Care
Business

Hotels, Resort, &Other Business Segment Total

426,388226
426,615
14,987
96,77058,992
1
58,993(995)
25,854

13,922—
13,922
(846)
3,587

5,919
3,632
9,551
(1,346)55,274

8,940

219

104

7,068

154

40

Data Compilation

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

Adjustments

Leasing
Business

Initiatives for Strengthening Management Foundation(2) C alculation Method for Sales, Profits and Losses, Assets,
and other Items by Reportable Segment
The accounting methods for reportable segments are in accordance to accounting policies adopted in the preparation of consolidated financial statements. The reportable segment profits(losses) represent operating profits (losses). Inter-segment sales
and transfers are based on prevailing market prices.

Initiatives toward Regeneration

26. Segment Information(1) Overview of Reportable Segments
The Company’s reportable segments are the components for which
separate financial information is available, and whose operating
results are reviewed regularly by the board of directors in order todetermine allocation of resources and assess segment performance.
The Company comprises four segments, the Leasing Business,
Development Business, Elderly Care Business and Hotels, Resort
and Other Businesses.
The Leasing Business operations comprise the leasing andmanagement of apartment buildings and other properties, repair
work, broadband internet service, rent obligation guarantee, thecompany residence agency business, solar power generation business, and small-amount short-term insurance business and others.

2019

For Regaining the Trust

25. Guarantee Obligations
Guaranteed obligations as of March 31, 2019 and 2018 are as follows:

107

108

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Notes:(i) Breakdown of adjustments is as follows:
Segment profit (loss)
Inter-segment eliminations
Corporate expenses*
Total

Millions of yen

Thousands of
U.S. dollars(166)(4,240)(4,407)(1,503)(38,208)(39,711)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are not part of reportable segments.
Adjustments in segment assets (110,303 million yen, $991,875 thousand) consist mainly of surplus operating funds, long-term investment
capital, and assets, which do not belong to reportable segments.
Adjustments in the increase of property, plant, and equipment, and intangible assets (909 million yen, $8,198 thousand) consist of capital
expenditures which do not belong to reportable segments.
(ii) Segment profit (loss) is adjusted to operating profit on the consolidated statements of operations.
Millions of yen
Reportable segment
March 31, 2018

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

Adjustments

Consolidated
Total

530,840
3,738
534,578
27,283
192,327—(3,738)(3,738)(4,353)
144,807

530,840—
530,840
22,930337,134

1,278

9,526

2,199

11,726

5,369

19,787637

20,424

Leasing
Business

Development
Business

Elderly Care
Business

Hotels, Resort, & Segment Total
Other Business

435,537131
435,669
26,062
112,393

76,58765
76,652
3,663
19,572

12,807—
12,807(1,596)
3,553

5,908
3,541
9,449
(846)
56,808

7,946

195

106

14,207

117

93

Notes:(i) Breakdown of adjustments is as follows:
Segment profit (loss)
Millions of yen

Inter-segment eliminations
Corporate expenses*
Total

(243)
(4,109)(4,353)*Corporate expenses consist mainly of general administrative expenses for administrative departments that are not part of reportable segments.
Adjustments in segment assets (144,807 million yen) consist mainly of surplus operating funds, long-term investment capital, and assets,
which do not belong to reportable segments.
Adjustments in the increase of property, plant, and equipment, and intangible assets (637 million yen) consist of capital expenditures which
do not belong to reportable segments.
(ii) Segment profit (loss) is adjusted to operating profit on the consolidated statements of operations.

Leopal ace21 I nt egr at ed R epor t 2019

March 31, 2019

Consolidated
Total

4,551,972
34,775
4,586,748
106,298
1,635,166—(34,775)(34,775)(39,711)
993,815

4,551,972—
4,551,972
66,5862,628,981

13,341

96,813

19,824

116,637

14,54579,995

8,198

88,193Development
Business

Elderly Care
Business

Hotels, Resort, & Segment Total
Other Business

3,841,687
2,037
3,843,725
135,033
871,886

531,50913
531,523(8,971)
232,946

125,440—
125,440(7,627)32,32453,33432,72486,059(12,134)
498,00980,551

1,978

942

63,688

1,394

367

Related information
1. Products and services
Information concerning products and services is omitted, since similar information is reported in “26. Segment Information”.

(2) Plant, property, and equipment
March 31, 2019
Millions of yen
Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

93,654

26,632

1,170

1,555

202

123,215

March 31, 2018
Millions of yen
Japan

Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

113,867

26,426

1,231

1,645

172

143,344

Initiatives for Strengthening Management Foundation

2. Geographic area
(1) Sales
Information concerning sales by geographic area is omitted, since more than 90% of sales reported in the consolidated statement of operations are generated in Japan.

Initiatives toward Regeneration

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

Adjustments

Leasing
Business

For Regaining the Trust

Thousands of U.S. dollars
Reportable segment

109

March 31, 2019
Thousands of U.S. dollars
Trust territory of U.S.A. Guam

Kingdom of Thailand

Kingdom of Cambodia

Other

Total

843,809239,954

10,541

14,0181,822

1,110,147

3. Major customers
Information concerning sales to major customers is omitted, since no sales to any particular customer exceed 10% of sales reported in the
consolidated statement of operations.

Data Compilation

Japan

110

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Information concerning impairment loss on non-current assets by reportable segments
March 31, 2019
Millions of yen

Leasing BusinessImpairment loss

7,560

Development Business Elderly Care Business—

Hotels, Resort, &Other Business

Adjustments

Consolidated total

—

—

7,560

Hotels, Resort &Other Business

Adjustments

Consolidated total

—

39

7,594

Hotels, Resort &Other Business

Adjustments

Consolidated total——

68,119Hotels, Resort, &Other Business

Adjustments

Consolidated total

—
—

—
—

560
2,324

Hotels, Resort, &Other Business

Adjustments

Consolidated total

—
—

—
—

522
2,886

Hotels, Resort, &Other Business

Adjustments

Consolidated total

—
—

—
—

5,048
20,942—

March 31, 2018
Millions of yen

Leasing BusinessImpairment loss

7,554

Development Business Elderly Care Business——

March 31, 2019
Thousands of U.S. dollars

Leasing BusinessImpairment loss

68,119Development Business Elderly Care Business——Information concerning goodwill amortization and unamortized balance by reportable segments
March 31, 2019
Millions of yen

Leasing Business

Goodwill amortization
Balance45
173

Development Business Elderly Care Business

515
2,151

—
—

March 31, 2018
Millions of yen

Leasing Business

Goodwill amortization
Balance7219Development Business Elderly Care Business

515
2,666

—
—

March 31, 2019
Thousands of U.S. dollar

Leasing Business

Goodwill amortization
Balance407
1,559

Development Business Elderly Care Business

4,640
19,382——

Information concerning gain on negative goodwill by reportable segments
For the years ended March 31, 2019 and 2018
Not applicable.

Leopal ace21 I nt egr at ed R epor t 2019

Yen

Net assets
Net income attributable to shareholders of the parent
Basic
DilutedU.S. dollars

2019

2018

2019

331.87630.842.99(278.58)
—

58.02
57.93

(2.50)—

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

(68,662)—(68,662)
246,473

14,819—14,819255,412(618,633)—(618,633)
2,220

—
—
406
—
New stock acqui- New stock acquisisition rights (620) tion rights (620)——For the year ended March 31, 2019(a) Unconsolidated subsidiaries and associates
None(b) Directors and major individual shareholders
Capital stockThousands of
U.S. dollars

Business or position

Percentage of shareownership

—

—

—

—

—

Toshiko Miyoshi

—

—

—

—

—

Attribute

Name

Transaction

Millions of yen

Thousands of
U.S. dollars

Account

Directors andclose relatives

Kei Ishida

17

160

Directors andclose relatives

Toshiko Miyoshi

26

234

Directors andclose relatives
Directors andclose relatives

Address

Kei Ishida

Real estate
brokerage, etc.
Leasing of landand building
Balance

Transaction amount

Leasingbrokeragecommissions
Leasing ofapartments

Relation

Millions of yen

Thousands of
U.S. dollars

Accounts payable

0

0

—

—

—

Data Compilation

Millions of yen

Name

Initiatives for Strengthening Management Foundation—

28. Related Party Transactions
The following tables set forth related party transactions for the years ended March 31, 2019 and 2018.

Attribute

Initiatives toward Regeneration(2) Basis of computation of basic and diluted net income per share for the years ended March 31, 2019 and 2018 is as follows:

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

For Regaining the Trust

27. Amounts per Share(1) The following tables set forth the net assets and net income per share of common stock for the years ended March 31, 2019and 2018.

111

112

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Notes:(i) Consumption taxes are not included in amounts.
(ii) Conditions on real estate brokerage and leasing of land and building are the same as those on transactions with third parties.
(iii) Kei Ishida is a close relative of Eisei Miyama, Director of the Company.
(iv) Toshiko Miyoshi is a close relative of Tadahiro Miyama, Director of the Company.
(v) Both Eisei Miyama and Tadahiro Miyama retired as Directors at the Ordinary General Meeting of Shareholders held on June 27, 2019.
For the year ended March 31, 2018(a) Unconsolidated subsidiaries and associates
None(b) Directors and major individual shareholders
Attribute

Name

Address

Directors andclose relatives

Toshiko Miyoshi—

Attribute

Name

Transaction

Toshiko Miyoshi

Leasing ofapartments

Directors andclose relatives

Capital stock
Millions of yen

Business or position

Percentage of shareownership

Relation——

Leasing of landand building—

Transaction amountAccount

Millions of yen

26

Prepaid expenses

BalanceMillions of yen—

Notes:(i) Consumption taxes were not included in amounts.
(ii) Conditions on leasing the apartments are the same as those on transactions with third parties.
(iii) Toshiko Miyoshi is a close relative of Tadahiro Miyama, Director of the Company.

29. Business Combinations
Business Combination under common control(1) Acquisition of additional shares of a subsidiary:(a) Name of the acquired company and its business activities:
Name of the acquired company Enplus Inc.
Business activities

Relocation management business(b) Effective date of the business combination:
March 28, 2019(c) Legal structure of the business combination:
Stock acquisition from non-controlling interests(d) Name of the company subsequent to the business combination
No change(e) Other Summary of Transactions:
The percentage of voting rights of the additional sharesacquired was 31.6%, and the percentage of voting rights
held by the Company was 98.3%.The purpose of this acqui-sition is to speed up decision-making and accelerate thesynergy effect by enhancing the Company’s control over theCompany’s shares. For this purpose, the Company accepts
the acquisition of shares from non-controlling shareholders.

Leopal ace21 I nt egr at ed R epor t 2019categorized as transactions with non-controlling interest shareholders under common control.

For Regaining the Trust(2) Accounting method:
Based on the “Accounting Standard for Business Combination”
and “Guidance on Accounting Standard for Business
Combinations and Business Divestitures”, the transactions are

113(3) Additional acquisition of subsidiary’s shares:
Acquisition cost of the acquired company and its details
Consideration for the acquisition (cash)
Acquisition costThousands of
U.S. dollars

112
112

1,009
1,009

Millions of yen

Thousands of
U.S. dollars

86

781

(4) Changes in the Company’s equity related to transactions with non-controlling interests
Major factors affecting capital surplus:
Additional acquisition of shares of consolidated subsidiaries
Amount of capital surplus decreased by transactions with non-controlling interests

Initiatives toward Regeneration

Millions of yen

30. Other
The following tables set forth quarterly information for the year ended March 31, 2019.
First quarter

Second quarter

Third quarter

Full-year

129,268

255,479

376,366

505,233(881)(7,611)(44,608)(64,840)

Net income attributable to shareholders of the parent (Millions of yen)(957)

(5,819)(43,989)(68,662)

Net income per share (yen)(3.80)(23.36)(177.85)(278.58)

First quarter

Second quarter

Third quarter

Full-year(3.80)(19.75)(156.55)(101.19)First quarter

Second quarter

Third quarter

Full-year

Net sales (Millions of yen)
Income before income taxes (Millions of yen)Accounting period

Net income per share (yen)Cumulative period

2,301,820

3,390,995

4,551,972(7,940)(68,579)(401,913)(584,199)

Net income attributable to shareholders of the parent(Thousands of U.S. dollars)(8,625)(52,434)(396,341)(618,633)

Net income per share (dollars)(0.03)(0.21)(1.60)(2.51)First quarter

Second quarter

Third quarter

Full-year(0.03)(0.18)(1.41)(0.91)Net sales (Thousands of U.S. dollars)

Accounting period

Net income per share (dollars)

31. Subsequent Events
Not applicable

Data Compilation

1,164,690

Income before income taxes (Thousands of U.S. dollars)

Initiatives for Strengthening Management Foundation

Cumulative period

114

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

32. Contingent Liabilities
On April 27, 2018, the Company announced that there were partial
discrepancies between construction certificate documents and theactual construction of apartment series “Gold Nail” and “New GoldNail” (hereinafter referred to as the “Nail Series”), constructed by
Leopalace21 between 1994 and 1995.
The Company also declared that the Company would takeresponsibility for investigating all its product properties and carryout repair work to the properties with defects as the contractor.
In addition, on May 29, 2018, the Company announced thatpart of its six apartment series, “Gold Residence, New Silver
Residence, New Gold Residence, Special Steel Residence, Better
Steel Residence, and Con Grazia” (hereinafter referred to as the“6 Series”) constructed from 1996 to 2009, were considered tohave the possibility of violation with the Building Standards Law inJapan. The Company also stated that investigation and repair work
would be carried out to the properties in question.
For the series other than the “Nail Series” and “6 Series” with
top priorities in the investigation, it was confirmed that part of thetarget properties were in defects due to the inadequate construction supervision.
After that, On February 7, 2019, the Company announced thatduring the all-building investigation, the parting walls and exterior walls of part of the three collective housing products “Gold
Residence, New Gold Residence, and Villa Alta” constructed from1996 to 2001 were constructed with foamed urethane, rather thanglass wool described in the design blueprint. For those properties in
defect assumed not conforming to the notification of the Ministry ofLand, Infrastructure, Transport and Tourism (hereinafter referred as“MLIT”) nor the statutory specifications stipulated by the Ministerof Land, Infrastructure, Transport and Tourism. The Company alsoaffirmed in the announcement that upon reporting to the MLIT, therepair work was to implement to meet the statutory specifications.
In the process of continuing the all-building investigation, it
was confirmed that the fire-resistant structures in parting walls of
the steel-framed properties constructed by the Company were notconforming to statutory specifications recognized by the Ministerof Land, Infrastructure, Transport and Tourism. As a result, while
reporting to the MLIT, the repair work to match the statutory speci-

fications was announced to be implemented on May 29, 2019.
In June 2018, the Company launched Emergency Headquarters
for Parting Wall Construction Defects, with the President and CEO
acting as Chief of Headquarters, uniting the whole company torespond to construction defect issues. The all-building investigation of the properties constructed by the Company is underway.
For properties whose defects have been confirmed by the investigation, we are progressively conducting the repair work, while
coordinating with the tenants and owners of the properties
Regarding the progress of the repair work, the “Nail Series”
has almost completed the repairs and has resumed recruitment. In
response to MLIT’s instructions, the Company resolved to continue
devoting its utmost efforts to complete. After finishing the investigation of targeted properties in top-priority, series other thantargeted properties in top-priority investigations are progressively
under investigation. For the repair method and repair work, theCompany plans to decide after the negotiation with owners andthe specific administrative agency.
As a result of these events, at the end of the current consolidated fiscal year, the Company reasonably estimated the amountof such expenses in accordance with the terms and conditions
that differ from properties constructed by the Company, such as
the repair method, repair unit price, the necessity and method oftenant’s relocation, and recorded the reserve for losses related
to repairs, in order to reserve for the incurrence of repair work
costs and incidental expenses related to the defects of properties
constructed by the Company (such as the expenses to compensate
for the vacancies of other companies’ management properties, thetenant’ relocation, and the investigation)
However, as all-building investigation is ongoing, additional
repair work costs and incidental expenses may exceed the reserve
for losses related to repairs, if the prerequisites for calculating thereserve for losses related to repairs change.
Accordingly, depending on the investigation, progress of therepair work and so forth from the next fiscal year, there may be an
impact on the company’s consolidated financial results due to theadditional reserve for losses related to repairs.

115
Leopal ace21 I nt egr at ed R epor t 2019

For Regaining the Trust

Initiatives toward Regeneration

Initiatives for Strengthening Management Foundation

Data Compilation

116

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Leopalace21 Data Compilation
External Environment
Number of New Housing Starts
In the year ended March 2019, the number of new housing starts
increased by 0.7% year on year. Meanwhile, rental housing starts
declined following on from the previous year, falling by 5.0% year on
year to 390,093 units. Starts of rental units less than 30 square meters
aimed mainly at single-person households also declined, falling by 7.5%
year on year to 72,862 units.
Number of Households
The number of households in Japan is
expected to decline from 2025 due to thenation’s trends of aging population and low
fertility rate. On the other hand, the numberof single-person households is expected tocontinue increasing steadily.

(1,000 units)

Rental housing
Of which, rental units under 30m2
Other
Total

FY2016FY2017FY2018

427
76
547
974

410
79
536
946

390
73
563
953

Source: N ew housing starts statistics, the Ministry of Land, Infrastructure, Transport,
and Tourism(1,000 households)

2005

2010

2015

2020

2025

2030

2035

(forecast)(forecast)(forecast)(forecast)

Single-person households
14,457 16,785 18,418 19,342
Of which, under age 25
2,178 2,060 2,021 2,009
Of which, age 25-34
2,971 2,999 2,987 2,830
Of which, age 35-64
5,444 6,745 7,157 7,479
Of which, age 65 or older 3,865 4,980 6,253 7,025
Married couples
9,637 10,269 10,758 11,101
Married couples with children 14,646 14,474 14,342 14,134
Single-parent with children
4,112 4,535 4,770 5,020
Others6,212 5,779 5,044 4,510
Total
49,063 51,842 53,332 54,107

19,960
1,879
2,795
7,774
7,512
11,203
13,693
5,137
4,123
54,116

20,254
1,781
2,705
7,809
7,959
11,138
13,1185,141
3,833
53,484

20,233
1,681
2,558
7,577
8,418
10,96012,465
5,074
3,583
52,315

Source: January 2013 estimates on the number of households and forecasts, the National Institute of Population and Social Security Research

Number of Vacant Homes in Japan
Amid the concentration of populations incities, the number of vacant homes is growing, especially in rural areas. The number ofvacant properties in Japan available for rentor sale stands at 4,600,000 units, or one infive homes, according to the most recent
Housing and Land Survey, published in fiscal
2018, and is becoming a social problem.

1988

1993

1998

2003

2008

2013

2018

Number of vacant houses
for rent or sale (1,000 units)

2,336

2,619

3,520

3,978

4,476

4,600

4,604

Tenancy (1,000 units)

14,015 15,691 16,730 17,166 17,770 18,519 19,065

Ratio of vacant dwellings
(%)

14.3

14.3

17.4

18.8

20.1

19.9

19.5

Source: Housing and Land Survey, the Ministry of Internal Affairs and Communications

Leasing Business Data
Apartment Rooms under Management
As of March 31, 2019, apartments undermanagement—the earnings foundation for
our Leasing Business—numbered 574,798,
rising for the sixth consecutive year. The
growth rate in our focus regions of Kanto(Tokyo metro area and Kita-Kanto), Chubu,
and Kinki remained high and accounted foraround 70% of the total number.

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

FY2016FY2017FY201814,08835,27040,553
165,590
40,63988,08680,71538,798
14,67150,329568,739

13,93235,43440,321
168,313
40,09587,91680,362
38,945
14,671
50,683570,672

13,90935,65240,494
170,358
40,00388,19480,861
39,208
14,691
51,428574,798

Leopal ace21 I nt egr at ed R epor t 2019

Individuals
Students
Total

Average annual
occupancy rate

Of which, maintenance related
Of which, complaints or claims
Tenant response rates from Internet (new contracts only)

FY201888.3(%)

Hokkaido
TohokuKita-Kanto
Tokyo metro area
Hokuriku-Koshinetsu
Chubu
Kinki

End-FY2018

End-FY2017

84.7
94.1
87.2
92.6
90.0
91.1
91.3
93.8
89.9
93.9
91.7

69.0
84.8
80.3
86.0
79.1
85.1
83.1
88.0
84.3
87.6
84.3

87.1
94.5
90.7
94.2
92.7
94.5
93.8
93.1
91.8
96.1
93.7

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

FY2016FY2017FY2018

308
189
119
1,589

307
189
118
1,546

302
189
113
1,494

FY2016FY2017

279,609
10,223
530,804
373,062
125,734
32,00845,673

296,564
12,778515,750
361,678
121,672
32,40045,971FY2018308,944
14,364387,398
254,334
106,508
26,55630,009

Data Compilation

Of which, inquiries

57.9
33.7
8.4
100.0

90.6

End-FY2016

Total

Services centers, no. of incoming calls

280,643
163,318
40,757484,718

FY2017

88.5

Kyushu-Okinawa

Security cameras installed (cumulative, buildings)

57.8
33.4
8.8
100.0

(%)

Shikoku

Security systems installed (cumulative, rooms)

309,062
178,643
47,142534,847

FY2016

Chugoku umber of Leasing Sales Offices andN
Sales Personnel
The Leasing Business is forging ahead with building a
network balanced between directly managed leasing
sales offices and franchisee-run offices. We continue
to optimize our sales force, which totaled 1,494 people as of March 31, 2019, down 3.4% year on year.

56.4
34.6
9.0
100.0

Initiatives for Strengthening Management Foundation

Fiscal Yearend Occupancy Rates by Region
The occupancy rate declined in all regions of Japandue to the effects of the problem of construction
defects. In particular, the Hokkaido region wasaffected significantly, with the occupancy rate falling by 18 points from a year earlier. The occupancy
rate also fell considerably in both the HokurikuKoshinetsu and Kinki regions, down 14 points and 11
points, respectively.

293,824
180,61746,857521,298

Corporations

FY2018Units%

FY2017
Units%

Initiatives toward Regeneration

Average Annual Occupancy Rate
Both the year-end occupancy rate and the averageannual occupancy rate declined, affected by the
problem of construction defects. The year-end
occupancy rate in the year under review fell 9.4
points from a year earlier, while the average annual
occupancy rate fell 2.3 points from a year earlier.

FY2016Units%

For Regaining the Trust

Leases by Contract TypeWe are strengthening our marketing efforts aimed
at corporations, where we can expect stable, longterm income. As of March 31, 2019, the numberof corporate contracts for apartments stood at
280,643 units, down 9.2% from a year earlier due tothe effects of the problem of construction defects.
Nevertheless, the composition ratio was 57.9%,
accounting for more than 50% of our lease portfolio
for the sixth consecutive year.

117

118

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Development Business Data
OrdersIn fiscal 2018, orders stood at 64,495 million yen
as a result of the impacts of measures for curbing
apartment orders, due to efforts being focusedon resolving the problem of construction defects,
among other factors. By building category, however,orders were strong for stores and buildings withcommercial space, increasing by 39.1% year on year
to 1,934 million yen.

(Millions of yen)

FY2016FY2018FY2017

Building categories
Apartments

79,42469,71256,859Elderly care facilities

2,377

706

931

562

1,390

1,934

4,763

4,097

4,771

Stores & commercial space
Custom-built homes*

13

0

0

87,13975,90564,495

Solar power systems
Total*Subsidiary Morizou

Apartments Completions
The number of apartment buildings completed infiscal 2018 declined by 32.7% year on year to 381.
Due to the impacts of measures for curbing apartment orders, completions of mainstay two-story
models decreased, along with completions of allbuildings with three and four stories. Two-story
buildings accounted for approximately 70% of our
total completions.

Apartment Completions by Region
The number of apartment completions is declining in
Kita-Kanto, Tokyo metro area, Hokuriku-Koshinetsu,
Chubu, Kinki, Chugoku, and Kyushu-Okinawa due tothe impacts of measures for curbing orders.

 ales Offices Accepting Construction
S
Orders, Sales Personnel
The long-term outlook for demand for apartment
construction is to decline nationwide. In this environment, our strategy is to concentrate our sales
offices and personnel in regions where strong
demand can be expected.

(Buildings)

FY2016FY2018FY2017

Two stories

485

376

260

Three stories

154

160

99

Four stories or more

24

30

22

Total

663

566

381

(Buildings)

FY201627

TohokuFY2018FY201725

20

Kita-Kanto

21

13

9

Tokyo metro area

366

317

196

Hokuriku-Koshinetsu

5

1

0

Chubu

42

43

39

Kinki

101

79

54

Chugoku

33

32

18

Shikoku

9

2

2

Kyushu-Okinawa

59

59

38

Total

663

566

381

FY2016FY2018FY2017

Sales offices responsible forconstruction orders (offices)

60

60

35

Sales personnel responsible forconstruction orders (personnel)

566

530

475

Leopal ace21 I nt egr at ed R epor t 2019

Number of Facilities
The Elderly Care Business has expanded its networkof facilities, mainly in the Tokyo metropolitan area.
Positioning this segment as a growth business, weare further expanding the network, including the
Chubu region, with a focus on facilities offering day
services and short stays.

(Facilities)

FY2016

Utilization Rate
The utilization rate at fee-based homes forseniors and group homes as well as short stays
remained high, exceeding 90%. We are focusing
on temporary-type offerings, notably day services
and short stays, and the utilization rate for both
improved as already stated.

FY2018FY2017

Fee-based homes

21

21

21

Day services, Short stays

53

60

64

Group homes

2

2

2

Total

76

83

87

For Regaining the Trust

Elderly Care Business Data

119

(Utilization rate, %)FY2016FY2018FY2017

72.5

72.8

72.6

Short stays

87.6

90.2

93.6

Fee-based homes &group homes

93.0

88.8

91.6

Initiatives toward Regeneration

Day services

Hotels and Resort Business Data

(Utilization rate, %)

2016

2018

2017

No. of visitors to Guam*(thousands)

1,536

1,545

1,549

No. of visitors to Leopalace
Resort Country Club (users)

50,00047,00045,000No. of stakeholder visitors(people who stayed, recreational
facility users)

47,00055,00046,000(30.0%of the total)(53.4%of the total)(53.6%of the total)

2016

Leopalace Resort Guam

55.9

2017

50.7

2018

43.2

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

Leopalace Hotels
Leopalace21 operates business hotels across Japan. We encourage usage of these hotels by stakeholders, including corporateclients on business trips.

FY2017FY201875.0——

Sapporo

90.4

83.6

82.2

Sendai

78.1

77.8

76.4

Nagoya

80.9

79.6

78.8

Okayama

75.9

—

—

(Utilization rate, %)HakataNo. of stakeholder stays(persons)

94.8

94.9

94.9

11,168

11,788

11,707(7.1%of the total)(8.6%
of the total)(7.4%
of the total)

Data Compilation* Hotel Leopalace Asahikawa and Okayama were sold in August 2016. Hotel Leopalace Sapporo,
Sendai, and Hakata are expected to be sold at the end of October 2019.

FY2016

Asahikawa

Initiatives for Strengthening Management Foundation

Leopalace Resort Guam
Leopalace Resort Guam, a resort operated in Guam, continues to improve profitability throughefforts to encourage usage by the Company’s stakeholders, including corporate clients.

120

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Social Key Performance Indicators
The Company engages in the respective CSR initiatives under the leadership of the CSR Committee chaired by the CSR officer,
working together with divisions and departments. Meeting 4 times a year, the CSR Committee receives reports on the progress of the initiatives that comport with the five themes of the Basic CSR Action Policy, based on the quarterly quantitative
targets set by each division and department, and moves initiatives to the next phase of the PDCA cycle. Key topics and KPIs
are approved by the CSR Committee, and these are periodically reported to the Board of Directors. Furthermore, this year, theCSR Executive Committee was newly established as a superior body of the CSR Committee. It meets twice a year to establish
CSR policies, set medium- to long-term targets, as well as approve and check the progress of yearly plans.

Governance
FY2016FY2018FY2017

3
1
455
370
31
54

Outside directors
Female directors
Directors’ compensation (millions of yen)
Directors (excludes outside directors)
Audit & Supervisory Board members (excludes outside ASB members)
Outside directors and ASB members

3
1
595
495
19
80

3
1
655
563
19
71

Employee Composition (Parent company)

No. of employees
No. of regular employees
No. of temporary hires
Average age
Average cumulative years of service

FY2018Men

Total

FY2016
Men

Women

Total

FY2017
Men

Women

Total

6,541
6,086
455
36 years,
3 months
8 years,
3 months

4,551
4,335
216
37 years,
4 months
9 years,
5 months

1,990
1,751
239
33 years,
10 months
5 years,
6 months

6,494
5,998
496
36 years,
11 months
8 years,
11 months

4,509
4,265
244
38 years,
0 months
10 years,
2 months

1,985
1,733
252
34 years,
5 months
6 years,
1 months

6,331
4,395
5,833
4,142
498
253
37 years, 38 years,
7 months 7 months
9 years, 10 years,
7 months 10 months

1,936
1,691
245
35 years,
2 months
6 years,
7 months

Total

FY2016
Men

Women

Total

149
144
81.7%
10.9%
7.9%

176.7
18.2
188
257
74.1%
8.1%
12.5%

Women

Work-life Balance (Parent company)

Total number of working hours per month
Overtime work hours per month
No. of employees with reduced working hours
No. of employees on childcare leave
Rate of paid leave usage
Rate of workforce turnover
Ratio of new hires

178.4
20.0
154
149
72.2%
7.1%
7.5%

5
5
68.4%
5.4%
7.0%

FY2017
Men

Women

Total

FY2018
Men

Women

176
177
82.5%
12.2%
10.3%

173.0
15.0
199
238
76.8%
8.6%
19.1%

11
55
74.4%
7.2%
18.2%

188
183
82.6%
12.0%
20.3%

12
80
70.6%
6.3%
14.6%

Diversity (Consolidated (excluding Guam), Parent company + Leopalace Smile for disabled employees)
FY2016Total

No. of disabled employees (annual average)% of disabled employees (annual average rate)
No. of mandatory retirees that have been rehired*
No. of employees with foreign citizenshipNo. of foreign national managers
Number of people newly employed
Gender ratio for new hires
No. of managers
Gender ratio for managers

158.6
2.14%
27
299
19
915
100.0%
1,622
100.0%

Men

25
108
14
436
47.7%
1,535
94.6%

FY2018FY2017
Women

Total

2
191
5
479
52.3%
87
5.4%

159.7
2.17%
22
334
20
722
100.0%
1,707
100.0%

Men

Women

Total

Men

Women

3
210
5
395
54.7%
104
6.1%

161.9
2.23%
31
351
25
725
100.0%
1,758
100.0%

24
144
20
336
46.3%
1,648
93.7%

7
207
5
389
53.7%
110
6.3%

19
124
15
327
45.3%
1,603
93.9%

* Employees who reach the mandatory retirement age can be rehired on a different contract.

Support for Employees Seeking to Obtain Qualifications
FY2016

No. using support for obtaining qualifications
No. using support system for obtaining specified qualifications
No. in program for language skills improvement
No. awarded an incentive payment for obtaining Takken qualification

1,003
875
21
56

“Takuchi tatemono torihiki shi” or “Takken”: This qualification recognizes those who passed a test on Japanese Building Lots and Building Transaction Business Act.

FY2018FY2017

742
651
16
75

368
245
15
108

Leopal ace21 I nt egr at ed R epor t 2019

Efforts to Reduce our Environmental Impact

Real estate broker
Rental property manager
General insurance solicitor (basic course/fire insurance course)
Architect (first-class, second-class)
Building construction management engineer (1st Grade, 2nd Grade)
Certified skilled worker of financial planning (1st Grade, 2nd Grade)
Land surveyor, Assistant land surveyor
Care worker
Care support specialist
Home-visit care worker (1st Grade, 2nd Grade)

846
506
1,171
428
333
271
37
690
186
398

Labor Safety and Health

Accidents requiring time off work
Accidents not requiring time off work

FY2017FY2018

37
16
21

44
3
41

55
14
41

Stakeholder Communication Initiatives

FY2017FY201816,46915,696

14,730

Head office and branches

8,781

7,710

6,185

Azumi En nursing care facilities

6,111

6,043

6,056

Leopalace hotels

1,576

1,943

2,489

3,615

3,490

3,345

873,167

864,448786,510Category 1 (purchased materials)

51,99244,81031,263Category 2 (capital goods)

17,892

34,127

29,835

4,337

4,409

4,338

Category 13 (electricity and gas
use by rental housing)

798,946

781,102724,543

No. of buildings with solar powersystems

12,987

12,995

12,998CO2 emissions from vehicle gasoline(t-CO2)
Scope 3 CO2 emissions (t-CO2)

Category 3 (electricity-related)
Category 6 (business travel)
Category 7 (employee commuting)

FY2017FY2018

231

424

517

No. of buildings with systems
installed by LP21 Group

4,495

4,494

4,483

21

22

19

182,443

182,591

182,604

28

35

35

Solar power generation capacity(kW)

67,10067,10067,000FY2016FY2017FY201855,04055,08455,08814,143
Of which, in vicinity of existing properties
1,939
Of which, in vicinity of construction sites
12,204
Total sum of donations (thousands of yen) 2,509

14,013
3,037
10,976
2,378

6,142
—**
6,142
3,754

24,343

24,59024,365444

417

No. of property owner briefing sessions
No. of IR events(meetings for individual investors, etc.)
Career-support activity programs

Community Contributions
No. of cleanup campaign participants

No. joining observation tours and OTJ
training at Leopalace Smile*571*	Leopalace Smile Co., Ltd. is a special subsidiary set up to employ the disabled under Article 44of the Act for Employment Promotion etc. of Persons with Disabilities.
**	Cleanup campaign was held all together in the management center of 170 branches once in fiscal 2018.

Capacity of systems installed by
LP21 Group (kW)CO2 reduction via solar power
generation (t-CO2)
Reduction via systems installed by
LP21 Group (t-CO2)

Initiatives for Strengthening Management Foundation

FY2016

Initiatives toward Regeneration

No. of labor accidents

FY2016FY2016CO2 emissions from electricity andgas use (t-CO2)

For Regaining the Trust

Certified Employees (as of March 2019)121

Data Compilation

122

L eopalac e21 Integ r a t e d R e p o r t 2 0 1 9

Corporate Profile
Corporate Data (As of March 31, 2019)

Members of Board of Directors and Auditors (As of June 30, 2019)

Company Name:
Leopalace21 Corporation

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

Head Office:2-54-11 Honcho, Nakano-ku, Tokyo
TEL: +81-3-5350-0001 (Main Line)
Established:
August 17, 1973
Paid-in Capital:
75,282.36 million yen
Operations:	Construction, leasing and sales of apartments, condominiums,
and residential housing; development and operation of resort
facilities; hotel business; broadband business; and elderly carebusiness, etc.
Number of Employees:
7,600 (consolidated basis)
6,331 (non-consolidated basis)

Bunya Miyao
Shigeru Ashida
Katsuhiko Nanameki
Seishi Okamoto
Mayumi Hayashima
Tadashi Kodama
Tetsuji Taya
Yoshiko Sasao
Yoshitaka Murakami
Hisafumi Koga

Audit & Supervisory Board Members
Full-time Audit & Supervisory Board Member			
Atsunori Nasu
Full-time Audit & Supervisory Board Member (Outside)			Jiro Yoshino
Audit & Supervisory Board Member (Outside)			Masahiko Nakamura
Audit & Supervisory Board Member (Outside)			
Takao Yuhara

Major Shareholders (Top10) (As of March 31, 2019)
Thousands ofSharesPercentage of
Outstanding Shares

1 Ardisia Investment, Inc

10,6004.35

2 Reno, Inc

7,875

3.23

3 RBC ISB S/A DUB NON RESIDENT/TREATY RATE UCITS-CLIENTS ACCOUNT

7,090

2.91

4 JPMorgan Securities Japan Co.,Ltd.

6,643

2.72

5 BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)

6,211

2.55

6 Stockholding Association for Leopalace21’s Business Connection

5,662

2.32

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

5,652

2.32

8 BNYN AS AGT/CLTS 10 PERCENT

5,097

2.09

9 STATE STREET BANK AND TRUST COMPANY 505103

4,945

2.03

10 EUROCLEAR BANK S.A./N.V.

4,901

2.01

Shareholders

Note1: Of the shares listed above, those held in trust accounts as part of trust bank operations are as follows:
The Master Trust Bank of Japan, Ltd. (Trust Account) 4,783 thousand shares
Note2: The above shareholding ratios are calculated excluding treasury stock.

Stock Information (As of March 31, 2019)

Shareholder Composition (As of March 31, 2019)

Number of Shares:
Authorized:
500,000,000
Outstanding:
244,882,515■ Financial Instruments
Business Operators

Number of Shareholders:
66,820
Listing:First Section of the Tokyo Stock Exchange(Security code: 8848)
Administrator of Shareholder Registry:
Sumitomo Mitsui Trust Bank

7.70 %■ Business Firms andOther Legal Entities

10.49 %■ Financial Institutions

14.73 %■ Treasury Stocks

0.44 %■ Individuals
and Other

27.68 %■ Foreign
Corporations
38.96 %

123

Leopal ace21 I nt egr at ed R epor t 2019

Total Number ofManaged Rooms

Number of Franchised Sales Offices
Number of Directly Managed Sales Offices

Number of Managed Rooms

574,798 units
Total Number of
Directly Managed Sales Offices

2
9
Hokkaido Region

13,9093
5,833
2
Okinawa Region

182 offices
Total Number ofFranchised Sales Offices

113 offices

8
13

40,003

Initiatives toward Regeneration

Tohoku Region

10
11
Kinki Region

Chugoku Region

61535,652

Hokuriku/Koshinetsu
Region10
25

80,861
39,208For Regaining the Trust

Number of Apartment Rooms under Management and Domestic Leasing Sales Offices by Region (As of March 31, 2019)5

40,49414

Kita-Kanto Region

55
Shikoku Region

14,691

88,19433
49

170,358
Chubu Region

Kyushu Region

Metropolitan Area

Share Price and Trading Volume (As of March 31, 2019)
Trading Volume

Share Price(Thousand shares)

1,200

2,000,000

900

1,500,000

600

1,000,000

300

500,000

0

0

Apr.
2018

May

Jun.

Jul.

Aug.

Sept.

Oct.

Nov.

Dec.

Jan.
2019

Feb.

Mar.

Data Compilation(Yen)

Initiatives for Strengthening Management Foundation

16
15

45,59515
24

Leopalace21 Corporation
2-54-11 Honcho, Nakano-ku, Tokyo 164-8622, Japan
TEL: +81-3-5350-0001 (Main Line)
http://eg.leopalace21.com/©Leopalace21 Corporation 2019
Printed in Japan