LEOPALACE21 : Consolidated Financial Statements (Japanese Accounting Standard, for the six months ended September 30, 2017)

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 14, 2017

Scheduled Date of Commencement of Dividend Payments: December 11, 2017

Supplemental Explanatory Material Prepared: Yes Results Briefing Held: Yes

1. Results for the Six Months ended September 30, 2017 (April 1, 2017 through September 30, 2017)

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, 2017 Six months ended September 30, 2016	Million yen 258,740 255,190	% 1.4 1.0	Million yen 13,987 11,337	% 23.4 6.0	Million yen 13,827 10,742	% 28.7 8.1	Million yen 9,488 9,688	% -2.1 15.3

   (Note) Comprehensive income in the six months ended September 30, 2017: 8,365 million yen (183.0%); six months ended September 30, 2016: 2,955 million yen (-67.6%)

   Net income per share	Diluted net income per share
   Six months ended September 30, 2017 Six months ended September 30, 2016	Yen 36.68 36.85	Yen 36.66 36.85

3. Consolidated financial position

4. Total assets		Net assets		Equity ratio
   As of September 30, 2017	Million yen		Million	yen	%
   	324,989	156,151	48.0
   As of March 31, 2017	337,828	158,870	47.0

   (Reference) Shareholders' equity as of September 30, 2017: 155,918 million yen; as of March 31, 2017: 158,713 million yen

5. Dividend Status

   Dividend per share
   End of Q1	End of Q2	End of Q3	End of FY	Annual
   FY ended March 31, 2017	Yen	Yen	Yen	Yen	Yen
   	―	10.00	―	12.00	22.00
   FY ending March 31, 2018	―	10.00
   FY ending March 31, 2018 (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, 2018 (April 1, 2017 through March 31, 2018)

   (The percentage figures for full year indicate rate of gain or loss compared with the previous FY, while those for the interim

   period indicate rate of gain or loss compared with the same term in 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, 2018	Million yen 540,000	% 3.7	Million yen 23,500	% 2.6	Million yen 22,500	% 0.6	Million yen 14,200	% -30.4	Yen 54.89

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

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.11 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.: None

13. Changes in accounting policies other than (i) above: None

14. Changes in accounting estimates: None

15. Restatements: None

17. Total number of outstanding shares (common stock)

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

    As of September 30, 2017: 263,443,915 shares, As of March 31, 2017: 267,443,915 shares

19. Total treasury stock at term end

    As of September 30, 2017: 11,331,580 shares, As of March 31, 2017: 4,569,920 shares

20. Average number of outstanding shares during the period

21. As of September 30, 2017: 258,694,691 shares, As of September 30, 2016: 262,874,348 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 these financial statements in accordance with the Financial Instruments and Exchange Act are not 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.5 "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 10, 2017.

    【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 5

26. Consolidated Financial Statements 6

27. Consolidated Balance Sheets 6

28. Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income 8

    Consolidated Statements of Operations 8

    Consolidated Statements of Comprehensive Income 9

29. Consolidated Cash Flow 10

30. Notes Regarding Consolidated Financial Statements 11

31. (Notes Regarding the Premise of the Company as a Going Concern) 11

    (Notes Regarding Significant Changes in Shareholders' Equity) 11

    (Application of Accounting Methods Specific to the Preparation of Quarterly Consolidated Financial Statements) 11

    (Segment Information) 12
32. Business Results
33. Analysis of Business Results

34. (Million yen)

    Net sales	Operating profit	Recurring profit	Net income attributable to shareholders of the parent
    Six months ended September 30, 2017	258,740	13,987	13,827	9,488
    Six months ended September 30, 2016	255,190	11,337	10,742	9,688
    Difference	3,549	2,649	3,085	(199)

    During the subject six months, the domestic economy showed gradual progression supported by improvements in employment and income, as well as corporate profits.

    Although apartment construction remains a popular strategy to reduce inheritance tax, new housing starts of leased units has decreased year-on-year for four consecutive months since June, decreasing 1.7% year-on-year during the subject six months. 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") announced the Medium-term Management Plan "Creative Evolution 2020", aiming to create corporate and new social value with the basic policy of "Supporting continuous growth of core businesses in ways that further increase corporate value while constructing a base for growth areas".

    As a result, consolidated net sales for the subject six months came to 258,740 million yen (up 1.4% year-on-year). Operating profit was 13,987 million yen (up 23.4% year-on-year), recurring profit was 13,827 million yen (up 28.7% year-on-year), and net income attributable to shareholders of the parent was 9,488 million yen (down 2.1% year-on-year).

    Results by reportable segment are as follows.

    Effective as of the first quarter, the methods of reportable segment categorization was changed. The figures in the table below are presented for comparison with the same period of a year ago, after they are reclassified according to the revised methods of reportable segment categorization and common expense allocation.

    (Actual figures by segment) (Million yen)

    Net sales			Operating profit
    Six months ended September 30, 2016	Six months ended September 30, 2017	Difference	Six months ended September 30, 2016	Six months ended September 30, 2017	Difference
    Leasing Business	210,159	217,439	7,280	12,512	16,058	3,546
    Development Business	35,061	32,024	(3,036)	1,479	974	(504)
    Elderly Care Business	5,649	6,293	644	(854)	(745)	108
    Hotels, Resort, & Other Business	4,320	2,982	(1,338)	66	(168)	(235)
    Adjustments	－	－	－	(1,865)	(2,130)	(265)
    Total	255,190	258,740	3,549	11,337	13,987	2,649

    (i) Leasing Business

    In the Leasing Business, to establish stable occupancy, the Group providing wealth of value-added life to their tenants such as "my DIY" (formerly known as "Room Customize") which enable tenants to arrange their rooms, providing an internet services "LEONET" website for tenants, and security system installations in alliance with large security companies, as well as further strengthening sales for corporate customers and increase foreign tenants by refining customer support. In addition, the Group develops and manages service apartments and service offices in ASEAN countries.

    The occupancy rate at the end of the second quarter was 90.21% (up 1.90 points from the end of the same quarter last year) and the average occupancy rate for the period was 90.20% (up 1.84 points year-on-year).

    The number of units under management at the end of the second quarter was 570 thousand (increasing 2 thousand from the end of the previous fiscal year), the number of direct offices was 189 (no change), and the number of franchise offices was 117 (decreasing 2 from the end of the previous fiscal year).

    As a result, net sales amounted to 217,439 million yen (up 3.5% year-on-year), and operating profit was 16,058 million yen (up 28.3% year-on-year).