LEOPALACE21 : Notice of the interim report receipt for Additional Investigation to External Investigation Committee

PRESS RELEASE

July 8, 2019

Company Name: Leopalace21 Corporation

Representative:	Bunya Miyao, President and CEO
Code Number:	8848 (Tokyo Stock Exchange, First Section)
Contact:	Kiyoshi Arai, Executive Officer
	Tel: [phone]
	E-mail: [e-mail]

Notice of the Interim Report Receipt for Additional Investigation

to External Investigation Committee

In accordance with the press release titled "Notice of Request for Additional Investigation to External Investigation Committee", Leopalace21 Corporation has requested the external investigation committee established on February 27, 2019, to investigate the cause and formulate measures to prevent a recurrence concerning the defects in parting walls of properties designed by Leopalace21 and constructed by other companies, and the construction defects in parting walls released on May 29, 2019.

We are pleased to announce that we have received the interim report on the investigation from the external investigation committee on June 21, 2019.

We will continue to proceed with the investigation toward the final report by the external investigation committee and will cooperate fully with the investigation.

We sincerely apologize to our tenants, owners, shareholders, business partners, and all other stakeholders for their serious concerns and inconvenience.

To: Leopalace21 Corporation

June 21, 2019

External Investigation Committee

Chairperson	Tetsuo Ito, Lawyer
Member	Hiroshi Kimeda, Lawyer
Member	Norimitsu Yamamoto, Lawyer

Chapter I: Outline of the Investigation

Section 1: Background of the Investigation

On February 21, 2019, Leopalace21 Corporation (hereinafter referred to as "Leopalace21") asked Nishimura & Asahi, which has no interest in Leopalace21, to undertake investigations to clarify the causes of the defects found in apartments it had constructed in the past. Subsequently, on February 27, the establishment of the External Investigation Committee (hereinafter referred to as the "Committee") was officially resolved in a meeting of the Board of Directors of Leopalace21, and the Committee was established on the same day. The Committee investigated the abovementioned defects and reported the investigation results to Leopalace21 on May 29, 2019. (Hereinafter, the investigation undertaken by the Committee based on the request made on February 21, 2019 is referred to as the "previous investigation," and the Report on the Investigation Results about the Problems of the Construction Defects dated May 29, 2019 is referred to as the "previous report.") On June 10, 2019, another request for an additional investigation was made by Leopalace21 to the Committee to clarify the causes of defects found in the apartments designed by Leopalace21 and constructed by other companies and other defects found in the apartments constructed by Leopalace21. (Hereinafter, the investigation undertaken by the Committee based on this date's request is referred to as the "investigation.")

Section 2: Committee Structure

The Committee comprises the following three members:

Chairperson	Tetsuo Ito (Lawyer, Nishimura & Asahi)
Member	Hiroshi Kimeda (Lawyer, Nishimura & Asahi)
Member	Norimitsu Yamamoto (Lawyer, Nishimura & Asahi)

None of these members received a delegation from Leopalace21 concerning legal affairs before the previous investigation and did not have any interest in Leopalace21 as of the time when the delegation for the investigation was received. Moreover, Nishimura & Asahi, to which these members belong, and Leopalace21 had no interest in each other as of the time when the delegation for the investigation was received.

For the investigation, the Committee appointed 20 lawyers from Nishimura & Asahi, each of whom has no interest in Leopalace21, as investigation assistants.

In order to secure the independence and objectivity of the investigation, the Committee complied with the Third-party Committee Guidelines for Corporate Misconducts of the Japan Federation of Bar Associations and based on Principle 2: "Ensuring that a third-party committee (where necessary) has the necessary independence, neutrality, and expertise" in the Principles for Responding to Corporate Scandals of the Japan Exchange Regulations.

Section 3: Purposes and Scope of the Investigation

The purposes of the investigation are, as described in Leopalace21's press release dated June 10, 2019, to confirm the facts and investigate the causes of (1) Defects where parting walls in attics were not constructed, which were found in the properties designed by Leopalace21 and constructed by other companies (hereinafter referred to as the "problems of properties constructed by other companies") and (2) Defects where parting walls in some steel structure properties constructed by Leopalace21 as fireproof buildings did not comply with the rules for fire-resistant structures as required by Article 27 and Article 61 of the Building Standards Act and the specifications concerning acoustic insulation certified by the Minister of Land, Infrastructure, Transportation and Tourism1 (hereinafter referred to as the "certification by the Minister") (hereinafter referred to as the "problems of parting wall specifications of fireproof buildings"), to consider the responsibilities of the related persons2 and to propose measures to prevent the recurrence of the defects.

In the investigation, concerning the existence of construction defects stated in (1) and (2) above, it is assumed that the results of the investigation implemented by Leopalace21 (hereinafter referred to as the "Property Investigation") are correct.

Section 4: Investigation Method

The Committee mainly (1) collected and scrutinized various drawings (general drawings, drawings for confirmation application, working drawings, work manuals, etc.) existing in Leopalace21, (2) conducted a digital forensic survey of the executives and employees of Leopalace21 and (3) carried out interviews of related persons (cumulative total: 12 persons).

Chapter II: Current Investigation Status

Section 1: Problems with properties constructed by other companies

1. Outline and trend of the problems

It has been proven that among the properties designed by Leopalace21, some of the properties for which Leopalace21 placed orders for construction with contractors rather

1. Certification by the Minister of Construction was applied for the specifications of properties constructed during and before January 2001.
2. The report does not make any judgement about the legal liability of the related persons.

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than undertaking construction for the owners (hereinafter referred to as the "properties constructed by other companies") have defects in the parting walls in the attics. Incidentally, for the sake of comparison, properties for which Leopalace21 undertook construction for the owners (became the contractor) are sometimes referred to as the "properties constructed by Leopalace21" in the following part. All the subject properties of the previous investigation are the properties constructed by Leopalace21 for which Leopalace21 undertook construction for the owners.

According to Leopalace21, the following properties include properties constructed by other companies. (The years in parentheses indicate the years when the sale of each series commenced.) At present, an accurate construction timeframe has not been identified for some properties, and it is planned to confirm from when to when each series was constructed and when defective properties were constructed.

Zairai [Conventional] (1985), Cubicle (1989), F2 (1991), S-STRUCTURE (unknown), 10TH SPECIAL (1993), Gold Nail and New Gold Nail (1994), Gold Bolt (1995), 2x4 (unknown), Gold Residence (1996), SF MAISONETTE (1999), CONGRAZIA (Steel- structure) (2000), CONGRAZIA (Wooden-structure) (2000), Hybrid (2001), VILLA ALTA (VA) (2006), HEAVY STEEL FRAME FREE (unknown), L-SECtion (2014) and MIRANDA-CLEINO (2015)

Until around the mid-1980s, Leopalace21 mainly sold ready-built detached houses and row houses, and then Mr. Yusuke Miyama had the idea of constructing loft apartments for sale and launched the business of selling ready-built apartments (hereinafter referred to as the "ready-builtapartment sales business" from the mid-1980s. In the ready-built apartment sales business, Leopalace21 purchases land properties itself, constructs apartments on the land and sells the land and apartment together to customers. In this ready-built apartment sales business, Leopalace21 used properties constructed by other companies.

As described on pages 9-10 of the previous report, for Cubicle, which was released in September 1989, and subsequent properties, Leopalace21 developed standardized houses that do not require experienced carpenters but can be assembled with the components, which are finished in plants, like a plastic model. The Company's business was converted from a ready-built apartment sales business to an apartment construction contractor (custom apartment construction) business and a leasing business for apartments that are collectively leased from the owners. Many of the properties constructed by other companies were sold before the conversion to the apartment construction contractor business. The sales volume of properties constructed by other companies decreased after the so-called burst of the economic bubble, and around the end of March 1993, the department in charge of sales of properties constructed by other companies was dissolved, and since then the sales volume of properties constructed by other companies had become very small. According to Leopalace21, the reason why the Company still has some properties constructed by other companies even after the conversion to the apartment construction

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