LEOPALACE21 : Consolidated Financial Statements (Japanese Accounting Standard, for the six months ended September 30, 2016)

Consolidated Financial Statements (Japanese Accounting Standard) November 4, 2016 (For the six months ended September 30, 2016)

Name of Company Listed: Leopalace21 Corporation Stock Listing: Tokyo Stock Exchange Code Number: 8848 URL: http://eg.leopalace21.com/ Location of Head Office: Tokyo Representative: Position: President and CEO Name: Eisei Miyama

Name of Contact Person: Position: Director Name: Bunya Miyao Telephone: +81-3-5350-0216 Scheduled Date of Filing of Securities Report (Japanese only): November 11, 2016

Supplemental Explanatory Material Prepared: Yes Results Briefing Held: Yes

1. Results for the Six Months ended September 30, 2016 (April 1, 2016 through September 30, 2016)

2. Consolidated financial results (Amounts less than one million yen are omitted) (The percentage figures indicate rate of gain or loss compared with the same period last year)

   Net sales		Operating profit		Recurring profit		Net income attributable to shareholders of the parent
   Six months ended September 30, 2016 Six months ended September 30, 2015	Million yen 255,190 252,606	% 1.0 -	Million yen 11,337 10,692	% 6.0 -	Million yen 10,742 9,935	% 8.1 -	Million yen 9,688 8,398	% 15.3 -

   (Note) Comprehensive income in the six months ended September 30, 2016: 2,955 million yen (-67.6%); six months ended September 30, 2015: 9,128 million yen (-%)

   Net income per share	Diluted net income per share
   Six months ended September 30, 2016 Six months ended September 30, 2015	Yen 36.85 31.95	Yen 36.85 -

   (Note) Rate of gain or loss compared to the previous year are omitted, since figures are retrospectively adjusted due to changes in accounting policies.

3. Consolidated financial position

4. Total assets	Net assets	Equity ratio		Equity per share
   As of September 30, 2016	Million yen	Million yen	%	Yen
   	317,122	145,232	45.8	552.22
   As of March 31, 2016	327,609	144,865	44.2	550.94

   (Reference) Shareholders' equity as of September 30, 2016: 145,164 million yen; as of March 31, 2016: 144,827 million yen (Note) Figures as of March 31, 2016 are retrospectively adjusted due to changes in accounting policies.

5. Dividend Status

   Dividend per share
   End of Q1	End of Q2	End of Q3	End of FY	Annual
   FY ended March 31, 2016	Yen	Yen	Yen	Yen	Yen
   	―	0.00	―	10.00	10.00
   FY ending March 31, 2017	―	10.00
   FY ending March 31, 2017 (Estimate)	―	12.00	22.00

   (Note) Restatement of most recent dividend forecast: None

6. Estimation of Consolidated Business Results for the Fiscal Year ending March 31, 2017 (April 1, 2016 through March 31, 2017)

   (The percentage figures for full year indicate rate of gain or loss compared with the previous FY)

   Net sales		Operating profit		Recurring profit		Net income attributable to shareholders of the parent		Net income per share
   FY ending March 31, 2017	Million yen 528,000	% 3.2	Million yen 22,500	% 6.7	Million yen 21,500	% 8.0	Million yen 18,500	% -5.8	Yen 70.38

   (Note) Restatement of most recent consolidated business results forecast: None

   (Note) Since previous year figures are retrospectively adjusted due to changes in accounting policies, rate of gain or loss compared to the previous year are adjusted.

7. Other

9. Changes in major subsidiaries during the subject period (change in specific subsidiaries resulting in a change in the scope of consolidation): None

10. Use of accounting procedures specific to the preparation of quarterly financial statements: Yes

    (Note) Refer to P.6 "2. Matters Relating to Summary Information (Notes) (2) Application of Accounting Methods Specific to the Preparation of Quarterly Consolidated Financial Statements" for details.

11. Changes in accounting principles, procedures or reporting methods used in preparation of financial statements

12. Changes in accounting policies accompanying revision of accounting standards, etc.: Yes

13. Changes in accounting policies other than (i) above: Yes

14. Changes in accounting estimates: None

15. Restatements: None

16. (Note) For details, please refer to P.6 "2. Matters Relating to Summary Information (Notes) (3) Changes in Accounting Policy, Changes in Accounting Estimates, and Restatements."

17. Total number of outstanding shares (common stock)

18. Total number of outstanding shares at term end (including treasury stock)

    As of September 30, 2016: 267,443,915 shares; as of March 31, 2016: 267,443,915 shares

19. Total treasury stock at term end

    As of September 30, 2016: 4,569,700 shares; as of March 31, 2016: 4,569,520 shares

20. Average number of outstanding shares during the period

21. As of September 30, 2016: 262,874,348 shares; as of September 30, 2015: 262,874,485 shares

    *Indication regarding the status of auditing:

    These financial statements are not subject to auditing under the Financial Instruments and Exchange Act. The review of financial statements in accordance with the Financial Instruments and Exchange Act are completed at the time of disclosure.

    *Explanation on the proper use of the business forecasts, and other special notices: (Note on the business forecasts and other forward-looking statements)

    The business forecasts and other forward-looking statements contained in this report are based on information currently available to the Company and on certain assumptions that Leopalace21 has judged to be reasonable. Readers should be aware that a variety of factors might cause actual results to differ significantly from these forecasts.

    For assumptions of business forecasts and notes on the proper use of these forecasts, please refer to P.6 "1. Business Results (3) Explanation Concerning Business Forecasts and Other Forward-looking Statements."

    (Method for the acquisition of supplemental explanatory material)

    Supplemental Explanatory Material on quarterly financial statements is scheduled to be posted on the Company's web site on November 4, 2016.

    【Table of Contents】
22. Business Results 4

23. Analysis of Business Results 4

24. Analysis of Consolidated Financial Position 5

25. Explanation Concerning Business Forecasts and Other Forward-looking Statements 6

26. Matters Relating to Summary Information (Notes) 6

27. Changes in Significant Subsidiaries during the Second Quarter under Review 6

28. Application of Accounting Methods Specific to the Preparation of Quarterly Consolidated Financial Statements 6

29. Changes in Accounting Policy, Changes in Accounting Estimates, and Restatements (Changes in accounting policies) 6

30. Consolidated Financial Statements 7

31. Consolidated Balance Sheets 7

32. Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income 9

    Consolidated Statements of Operations 9

    Consolidated Statements of Comprehensive Income 10

33. Consolidated Cash Flow 11

34. Notes Regarding Consolidated Financial Statements 12

35. (Segment Information) 13

    1. Business Results

    The accounting policy concerning revenue recognition has been changed from the previous quarter, and previous figures have been retrospectively adjusted. Please refer to P.6 "2. Matters Relating to Summary Information (Notes) (3) Changes in Accounting Policy, Changes in Accounting Estimates, and Restatements" for details.

    (1) Analysis of Business Results

    (Million yen)

    Net sales	Operating profit	Recurring profit	Net income attributable to shareholders of the parent
    Six months ended September 30, 2016	255,190	11,337	10,742	9,688
    Six months ended September 30, 2015	252,606	10,692	9,935	8,398
    Difference	2,584	645	806	1,289

    During the subject six months, the domestic economy showed gradual progression supported by improvements in employment and income, despite the standstill in corporate earnings and individual consumption.

    Apartment construction remains a popular strategy to reduce inheritance tax, and new housing starts of leased units has trended strongly as recovery from the negative effects of the consumption tax increase has progressed. On the other hand, as the number of vacant houses continues to increase and recovery in nationwide demand becomes difficult, achieving stable occupancy rates requires constructing apartments in areas with high demand, in addition to providing high-quality products and services that meet tenants' needs.

    Under these conditions, the Leopalace21 Group (the "Group") aims to achieve targets of the Medium-term Management Plan "EXPANDING VALUE," by building a solid management structure focusing on the core businesses, made up of Leasing and Construction. In addition, the Group aims to establish new businesses that will contribute to future growth.

    As a result, consolidated net sales for the subject first half came to 255,190 million yen (up 1.0% year-on-year). Operating profit was 11,337 million yen (up 6.0% year-on-year), recurring profit was 10,742 million yen (up 8.1% year-on-year), and net income attributable to shareholders of the parent was 9,688 million yen (up 15.3% year-on-year).

    (Actual figures by segment) (Million yen)

    Net sales			Operating profit
    Six months ended September 30, 2015	Six months ended September 30, 2016	Difference	Six months ended September 30, 2015	Six months ended September 30, 2016	Difference
    Leasing Business	203,887	207,416	3,528	12,499	11,750	(748)
    Construction Business	35,344	34,278	(1,065)	395	1,513	1,118
    Elderly Care Business	5,371	5,649	277	(575)	(843)	(267)
    Hotels & Resort Business	5,538	4,299	(1,239)	(301)	(116)	185
    Others	2,464	3,546	1,082	511	804	293
    Adjustments	-	-	-	(1,835)	(1,770)	65
    Total	252,606	255,190	2,584	10,692	11,337	645

    (i) Leasing Business

    The occupancy rate at the end of the second quarter was 88.31% (up 0.61 points from the end of the same quarter last year) and the average occupancy rate for the period was 88.36% (up 0.80 points year-on-year).

    In the Leasing Business, to establish stable profits led by occupancy improvement, the Group implemented measures to promote longer rent periods such as expanding tenant services including "my DIY" (formerly known as "Room Customize") and providing a website for tenants, as well as further strengthening sales for female and corporate customers by security system installations. In addition, the Group aims to increase foreign tenants by refining customer support.

    The number of units under management at the end of the second quarter was 565 thousand (increasing 3 thousand from the end of the previous fiscal year), the number of direct offices was 189 (no change from the end of the previous fiscal year), and the number of franchise offices was 120 (decreasing 10 from the end of the previous fiscal year).

    As a result, net sales amounted to 207,416 million yen (up 1.7% year-on-year), and operating profit was 11,750 million yen (down 6.0% year-on-year).