Leopalace21 : Notice Concerning Holding of an Extraordinary General Meeting of Shareholders and the Company's Board of Directors' Opinion on the Shareholders' Proposals

Appointment of Two (2) Directors

Dismissal of Ten (10) Directors Appointment of Three (3) Directors

FOR IMMEDIATE RELEASE

	January 27, 2020
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 Concerning Holding of an Extraordinary General Meeting of Shareholders and the

Company's Board of Directors' Opinion on the Shareholders' Proposals

Leopalace21 Corporation (Headquarters: Nakano, Tokyo; President and CEO: Bunya Miyao; the "Company") announced in its "Notice Concerning Shareholders' Demand for Calling an Extraordinary General Meeting of Shareholders" dated December 27, 2019, that it received a demand in writing to call an extraordinary general meeting of shareholders (the "Demand for Calling") from two of the Company's shareholders (the "Requesting Shareholders"). Further, the Company announced in its "Notice Concerning Deciding on a Record Date for Voting Rights in an Extraordinary General Meeting of Shareholders" dated January 6, 2020, that it began to examine the propriety of holding an extraordinary general meeting of shareholders in late February to early March of 2020 for which the record date for voting rights is January 24, 2020 (the "EGM"); the Company announces that it passed the following resolution at the Board of Directors Meeting held today concerning the date, venue and agendas for discussion of the EGM as well as the Company's Board of Directors' opinion on the shareholders' proposal.

Particulars

1. Date, Venue and Agendas for Discussion of the EGM

1. Date and Time
   Thursday February 27, 2020, 10 a.m.
2. Venue
   Bellesalle Shibuya First
   Please note that the venue is different from the 46th Ordinary General Shareholders' Meeting (held on June 27, 2019); when attending the meeting, please refer to the "Location Map for the Venue" provided in the notice of calling.
3. Agendas for Discussion

Proposed Agenda No. 1 (Company's proposal)

Proposed Agenda No. 2 (Shareholders' proposal)

Proposed Agenda No. 3 (Shareholders' proposal)

2. Main points of the Agendas and Outline of the Reasons for the Proposal

1. Company's Proposal

Main Points of the Agenda

Proposed Agenda No. 1 (Company's proposal): Appointment of two directors

Appointment of two directors (Candidates: Mr. Kazuyasu Fujita, Mr. Yutaka Nakamura)

Outline of the Reasons for the Proposal for Proposed Agenda No. 1

The Company received a proposal from the Requesting Shareholders concerning the appointment of three directors as stated in the Proposed Agenda No. 3. In the shareholders' proposal regarding the candidates for the directors,

Mr. Fukushima and Mr. Nakashima are named as candidates for outside directors; however, as stated below, Mr. Fukushima and Mr. Nakashima are directors (i.e., executives; not outside directors) of the Requesting Shareholders, who are major shareholders of the Company; as such, these two candidates do not meet the independency standard for outside directors of the Company.

Therefore, in accordance with the purport of the policy that had been decided earlier (i.e., the policy to submit a proposal that a majority of the directors should be outside directors in the Ordinary General Shareholders' Meeting which is scheduled to be held in June 2020), for the purpose of reinforcing its corporate governance, the Company decided to propose Mr. Kazuyasu Fujita and

Mr. Yutaka Nakamura as candidates for the directors, as they meet the independency standard for outside directors of the Company, and based on their knowledge and experience, have a deep understanding of handling issues the Company is facing, such as corporate revitalization and business reorganization, as well as quality management and environmental control concerning construction work. The Company considers that, as opposed to the candidates for directors in the shareholders' proposal, Mr. Kazuyasu Fujita and Mr. Yutaka Nakamura would be able to contribute to the benefit of the stakeholders including all the shareholders and not merely for a part of major shareholders, taking into consideration the characteristics of the Company's business, and therefore are suitable to be outside directors of the Company.

If both Mr. Kazuyasu Fujita and Mr. Yutaka Nakamura are appointed as directors, the Board of Directors of the Company will consist of 12 directors: five executive directors and seven outside directors; accordingly, the majority of the directors will be outside directors.

Please refer to Appendix 1 for the details of the main points of the Proposed Agenda No. 1 and the reasons for the proposal.

1. Shareholder's Proposal
   Main Points of the Agenda
   Proposed Agenda No. 2 (Shareholders' proposal)
   Dismissal of ten directors (Bunya Miyao, Shigeru Ashida, Katsuhiko Nanameki, Seishi Okamoto, Mayumi Hayashima, Tadashi Kodama, Tetsuji Taya, Yoshiko Sasao, Yoshitaka Murakami, and Hisafumi Koga)
   Proposed Agenda No. 3 (Shareholders' proposal)
   Appointment of three directors (Candidates: Masahiro Ohmura, Hironao Fukushima, and Fuminori Nakashima)
   Outline of the Reasons for the Proposal for Proposed Agendas No. 2 and No. 3
   Current management team (i) allows improper information disclosure like repeated major downside revision of earnings forecasts subsequent to the parting wall defects and the like (hereinafter "Construction Defects Problem") in the apartment buildings which the Company developed and sold, (ii) announced delayed completion plan of the Construction Defects Problem soon after the announcement of original plan which demonstrated lack of managing capability to resolve the Construction Defects Problem, and (iii) generated deficit in the amount available for distribution to the shareholders because of the acquisition of the treasury shares between May and August, 2018, for which all the current directors

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are responsible for compensation. Because of the described reasons, the Requesting Shareholders have no longer confidence in the current directors to manage the Company and therefore demand to remove the current ten directors and newly appoint the three directors instead. The Requesting Shareholders believe it should be beneficial for the shareholders to approve the proposed resolutions to increase the shareholder value and therefore demanded the extraordinary general meeting of shareholders.

Please refer to Appendix 1 for the details of the main points of the agendas and the reasons for the proposal for Proposed Agendas No. 2 and No. 3.

3. Opinions of the Board of Directors of the Company on the Shareholders' Proposals

The Board of Directors of the Company is opposed to Proposed Agenda No. 2 and

Proposed Agenda No. 3 pertaining to the shareholders' proposals(collectively, "the Shareholders' Proposals") for the following reasons:

1. In light of the Company's current situation, its highest priority is to recover the occupancy rate and its business results by swiftly resolving the Construction Defects Problem and to work on recurrence prevention measures. For early recovery of its credibility in society and business results which were damaged due to the Construction Defects Problem, the Company organized a new management system through its current management team appointed at the Ordinary General Shareholders' Meeting last year and is in the middle of sincerely working on the highest-priority issues mentioned above, particularly on the completion of an all- building investigation and repair works. It is true that the resolution of the Construction Defects Problem is taking time due to its significance larger than expected; however, the Company considers that improvements are steadily being made.
   In the Shareholders' Proposals, it is pointed out that the current management team is unable to resolve the Construction Defects Problem; however, the Requesting Shareholders have not provided any specific proposals to promptly resolve the Construction Defects Problem.
   The current management is qualified to resolve the highest-priority issues in the Company's current situation, as it has been sincerely handling and steadily making progress in the Construction Defects Problem, and the Company believes that the proposed appointment and dismissal is unnecessary; therefore, it is opposed to the Shareholders' Proposals.
2. According to the Shareholders' Proposals, there is one candidate for executive director. That candidate is not familiar with the Company's particular and specific business, and as mentioned in the above, the Shareholders' Proposals do not specifically provide how the highest-priority issues in the Company's current situation should be addressed; as such, it is obvious that business operations would become dysfunctional.
   The Company considers that the fact that the Requesting Shareholders are causing a hindrance to the Company's business operations by demanding that an extraordinary general meeting of shareholders be held during the busiest season of the Company's leasing business proves that they do not understand the essence of the Company's business.
   Moreover, there are concerns that management by the directors proposed in the Shareholders' Proposals may have a harmful influence on tenant recruitment, which consist of mainly corporate contracts, and may result in apartment owners

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leaving or damage to trust relationships with business partners and financial institutions.

Further, in view of the Requesting Shareholders' past investment methods and the process to the Shareholders' Proposals, it is highly likely that the Requesting Shareholders proposed the Shareholders' Proposals not with the aim to promote corporate value of the Company seriously but to carry out a "dismantling-type acquisition" of the Company to further their own interests as major shareholders and that the corporate value of the Company would be damaged, which would become a disadvantage to many stakeholders, including the general shareholders.

The Company's current management team is handling the highest-priority issues centered on the Construction Defects Problem, taking into consideration all the stakeholders, including the shareholders, tenants and apartment owners; therefore, the Company is opposed to the Shareholders' Proposals, whose sole purpose is to further their own interests as major shareholders.

Please refer to Appendix 3 for the details of Board of Directors' opinions on the proposal.

End

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Appendix 1

Main Points of the Agendas Proposed by the Company (Proposed Agenda No. 1)

and Reasons for the Proposal

1. Proposed Agenda No. 1 (Company's Proposal)

Main Points of the Agendas

Appointment of two directors (Candidates: Kazuyasu Fujita and Yutaka Nakamura)

Candidate	Name	Career summary, positions	in	other
No.	(Date of Birth)	companies, and	important	concurrent
		holding of positions
1	Kazuyasu Fujita	April 1965
	(June 24, 1946)	Joined	the	Osaka	Prefectural
		Government
		November 1970
		Joined Toyo Shutter Co., Ltd.
		October 1999
		Business	Administration	Manager,
		Toyo Shutter Co., Ltd.
		June 2000
		Director	of	Business	Promotion
		Department	and		Purchasing
		Manager, Toyo Shutter Co., Ltd.
		June 2002
		President		and	Representative
		Director, Toyo Shutter Co., Ltd.
		April 2006
		President		and	Representative
		Director and Executive Officer for
		General	Supervision, Toyo	Shutter
		Co., Ltd.
		June 2010
		Special Adviser, Toyo Shutter Co.,
		Ltd.
		June 2011
		Resigned from Toyo Shutter Co., Ltd.
		September 2011
		Established Management Consulting
		Partners Inc., (Current) President and
		Representative		Director,

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		Management Consulting Partner, Inc.
		(Important concurrent holding of positions)
		President	and	Representative
		Director,	Management	Consulting
		Partner, Inc.
2	Yutaka Nakamura	April 1981
	(September 28,	Joined National	Housing	Materials
	1958)	Co., Ltd. (now Panasonic Homes Co.,
		Ltd.）
		October 2002
		Manager,	Quality	& Environmental
		Promotion	Department,	Panasonic

Homes Co., Ltd.

October 2006

Manager of Quality, Environment & IT

Department, Panasonic Homes Co.,

Ltd.

April 2011

Councilor, Manager of Corporate

Quality & Environmental Division,

Panasonic Homes Co., Ltd.

April 2012

Senior Councilor, Manager of

Corporate Quality & Environmental

Division, Panasonic Homes Co., Ltd.

April 2018

Senior principal for Quality &

Customer Ssatisfaction, Panasonic

Homes Co., Ltd.

March 2019

Resigned from Panasonic Homes

Co., Ltd.

(Notes)

1. There are no special interests existing between the candidates and the Company.

2． Both Candidate No. 1 Kazuyasu Fujita and Candidate No. 2 Yutaka Nakamura are candidates for outside directors of the Company. Mr. Kazuyasu Fujita and Mr. Yutaka Nakamura are candidates for independent directors as stipulated in Article 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc. As the candidates

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also satisfy the independence criteria set forth by the Company, the Company deems that the independence of the candidates is also assured.

3． The reasons for appointment of each candidate.

1. Mr. Kazuyasu Fujita worked for Toyo Shutter Co., Ltd. When the said company faced a business crisis resulting from a large loss of derivatives transactions in 1999, he was appointed as Business Administration Manager. He was involved independently in the planning of proposed rehabilitation plans in accordance with thePrivateRehabilitationGuidelines and participated in negotiations with financial institutions and making business plans. Furthermore, as President and Representative Director of the said company, he implemented a seven-yearreconstruction plan and completed the reconstruction in four years, which is a shorter term by three years. Thus, he has deep experience and knowledge of corporate revitalization and business reorganization. Therefore, the Company deems that he can make a contribution based on his experience and knowledge in efforts for early recovery of the Company's social credibility and results that were damaged by the Construction Defects Problem and play a role in supervising business execution in the Board of Directors from an independent and fair viewpoint, and the Company selected him as a candidate for outside director.
2. Mr. Yutaka Nakamura worked for Panasonic Homes Co., Ltd. He consistently performed his duties of quality management and environmental management since joining said company, and as Senior Councilor, Manager of Corporate Quality & Environmental Division of said company, successfully raised the quality management and environmental management of the Company to the top level in the industry. In addition, he has experience serving in important positions of several groups in the housing industry (i.e., Chairperson of the CS Quality Committee of the Japan Prefabricated Construction Suppliers and Manufacturers Association, Chairperson of the Technical Committee of the Provision of Quality Housing Stock Association, Chairperson of the Training Planning Department of the Housing Industry Association). Thus, he has deep experience and knowledge in the field of quality management and environmental management in construction work, and he also has rich connections in the housing industry. Therefore, the Company deems that he can make a contribution based on his experience and knowledge in solving its quality management and environmental management issues that were revealed by the Construction Defects Problem and play a role in supervising business execution in the Board of Directors from an

independent and fair viewpoint, and the Company selected him as a candidate for outside director.

4. If the election of Mr. Kazuyasu Fujita and Mr. Yutaka Nakamura is approved, in accordance with the provisions of Article 427, Paragraph 1 of the Companies Act, the Company plans to enter into limited liability agreements with them limiting their liability for damages under Article 423, Paragraph 1 of the Companies Act to the minimum limit amount prescribed by laws and regulations.

Reasons for the Proposal

As advised in the "Notice Concerning a New Policy in the Board of Directors Composition Aiming to Reinforce Corporate Governance System" which is a press release dated December 16, 2019, as part of a measure to prevent recurrence of the Construction Defects Problem, the Company has already decided a policy to submit a proposal that a majority of the directors should be outside directors in the Ordinary General Shareholders'

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Meeting of the Company which is scheduled to be held in June 2020, in order to strengthen the corporate governance of the Company.

Now, the Company received a proposal from the Requesting Shareholders concerning the appointment of three directors as stated in the Proposed Agenda No. 3. In the shareholders' proposal regarding the candidates for the directors, Mr. Fukushima and Mr. Nakashima are named as candidates for outside directors; however, as stated below, Mr. Fukushima and Mr. Nakashima are executive directors and not outside directors of the Requesting Shareholders, who are major shareholders of the Company; as such, these two candidates do not meet the independency standard for outside directors of the Company.

Therefore, the Company decided to bring forward the policy that had been decided earlier and for the purpose of earlier strengthening of its corporate governance, to submit a proposal in the EGM to appoint Mr. Kazuyasu Fujita and Mr. Yutaka Nakamura, who have a deep understanding of handling issues that the Company is facing, such as quality management and environmental management in corporate revitalization, business reorganization, and construction work, as candidates for the directors, as they meet the independency standard for outside directors of the Company, and based on their knowledge and experience. The Company considers that, as opposed to the candidates for directors in the shareholders' proposal, Mr. Kazuyasu Fujita and Mr. Yutaka Nakamura would be able to contribute to the benefit of the stakeholders including all the shareholders and not merely for a part major shareholders, taking into consideration the characteristics of the Company's business, and therefore are suitable to be outside directors of the Company.

If both Mr. Kazuyasu Fujita and Mr. Yutaka Nakamura are appointed as directors, the Board of Directors of the Company will consist of 12 directors: five executive directors and seven outside directors; accordingly, the majority of the directors will be outside directors.

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Appendix 2

Main Points of the Agendas Proposed by the Shareholders (Proposed Agendas Nos. 2 and

3)

and Reasons for the Proposal

1. Proposed Agenda No. 2 (Shareholders' Proposal)

Main point of the agenda

Dismissal of ten directors (Bunya Miyao, Shigeru Ashida, Katsuhiko Nanameki, Seishi Okamoto, Mayumi Hayashima, Tadashi Kodama, Tetsuji Taya, Yoshiko Sasao, Yoshitaka Murakami, and Hisafumi Koga)

Outline of the Reasons for the Proposal

The Company's current management team has problems as described in (i) to (iii) below; due to those problems, the Requesting Shareholders no longer have confidence in the current management team to manage the Company and therefore demand to remove the current ten directors.

1. Management System Allowing Major Downside Revision of Earnings Forecasts and Improper Disclosure of Information
   After the Construction Defects Problem was discovered, the Company conducted all-building investigations and found that actions such as repairs needed to be taken; as such, the Company repeatedly made major downside revision of earnings forecast for the fiscal year ending March 31, 2019. Further, the Company made major downside revision of the earnings forecast for the fiscal year ending March 31, 2020 as well. The cause of such major downside revision is that, amongst other reasons, a large amount of reserve for loss related to repair works was accounted for as extraordinary loss due to the Construction Defects Problem.
   The Requesting Shareholders pointed out to the Company that, in light of the delay in completing the correction of the construction defects and the decreasing occupancy rate, it is doubtful that the earnings forecast can be achieved, and repeatedly requested that the Company disclose information proactively and promptly so that it will not lose its credibility due to late downside revision of business performance. Despite this request, the Company announced its last downside revision of the full-year earnings forecast on November 7, which was just before the announcement of business results for the second quarter.
   An earnings forecast is not merely a non-binding target but a realistic figure which the management team should commit to achieving; however, as stated in the above, the Company's management team made multiple downside revisions of the earnings forecast it announced one after another, and the disclosure of such revisions was made later. The main factor that caused the escalation of the Construction Defects Problem and the Company losing its credibility in society is its unclear management system that allows irresponsible downside revision of business performance and improper disclosure of information as mentioned in the above.
2. Management Team's Inability to Resolve the Construction Defects Problem
   In the Company's notice "Notice Concerning System Reinforcements of Investigations and Repairs and Acceleration of Completion of Repairs" dated March 8, 2019, the Company announced that, in accordance with the instruction

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from the Ministry of Land, Infrastructure, Transport and Tourism concerning the Construction Defects Problem, it will accelerate the completion of repair works which was originally planned to be completed by the end of October, 2019.

However, only four months after that, the Company announced in its notice "Rescheduling Completion Dates of the Investigation and Repair Work of our Defective Buildings" dated July 31, 2019 (its English version was dated August 22,2019), that due to reasons including "as the investigation progressed, the kinds of construction defects expanded…the number of buildings and places of the defects to be repaired increased significantly compared to those initially expected[,]" it will reschedule the completion date of the repair work for certain properties such as "Gold Nail[,]" which are categorized as "buildings subject to top-priority investigations[,]" to the end of June 2020. Further, the Company announced in its notice "Notice Concerning Progress of All-building Investigations Constructed by Leopalace21 and Further Course of Action for Repair Works" dated October 31, 2019, that it plans to complete the repair works for properties other than the "buildings subject to top-priority investigations" by the end of December, 2020.

As stated above, although the Company announced that it will complete the repair work by summer 2019, only four months after that, it announced that the completion of the work would be postponed for one year or more. This demonstrates nothing but the current management team's lack of management capability necessary to resolve the Construction Defects Problem.

1. Management Team Generated Deficit in the Distributable Amount
   The Company passed a resolution concerning acquisition of treasury shares at the Board of Directors Meeting held May 11, 2018, and during the period from May 14, to August 23, 2018, the Company acquired treasury shares, the acquisition value of which amounts to 5 billion yen in total ("Acquisition of Treasury Shares").
   On the other hand, as stated in the above (i), the Company accounted for a large amount of reserve for loss related to repair works as extraordinary loss due to the Construction Defects Problem; because of this, the Company's distributable amount was negative as at the finalization of financial statements for the fiscal year ending March 31, 2019.
   Under the Companies Act, in cases where a stock company acquires treasury shares, when the distributable amount is negative at the time approval by the general meeting of shareholders is obtained with respect to the financial statements for the fiscal year that contains the day on which such acquisition of treasury shares was carried out, the directors who performed duties in relation to such acquisition of treasury shares would be jointly and severally liable to such stock company for payment of the smaller amount of either such negative distributable amount (i.e., the amount of deficit) or the amount of property such stock company had paid out, unless such directors prove that they did not fail to exercise due care with respect to the performance of their duties ("Deficit Compensation Liability").
   The Acquisition of Treasury Shares was resolved at a Board of Directors Meeting after March 2018, which was when the Construction Defects Problem had been discovered and the Company was in an unusual situation; accordingly, the Company's directors who cast affirmative votes regarding such resolution should have exercised more due care in relation to the execution of the Acquisition of Treasury Shares than at ordinary times.

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In addition, there are no circumstances that support the necessity or urgency of the execution of the Acquisition of Treasury Shares. Further, at the time the Acquisition of Treasury Shares was carried out, the progress of the investigation regarding the Construction Defects Problem was still at an early stage, and it is likely that the Company had not yet grasped the extent of the Construction Defects Problem and the corresponding scale of the amount of loss; taking the aforementioned situation into consideration, the Company's directors at the time the Acquisition of Treasury Shares was carried out should have adequately estimated that more problems may be detected in the course of the all-building investigations, and that this would result in a situation requiring further actions such as additional repairs.

Based on the above, it is clearly not the case that the Company's directors at that time who cast affirmative votes for the resolution on or carried out the Acquisition of Treasury Shares (four directors among the current management team, Bunya Miyao, Tadashi Kodama, Tetsuji Taya, and Yoshiko Sasao fall under this condition) "did not fail to exercise due care with respect to the performance of their duties" concerning the Acquisition of Treasury Shares, and therefore, the directors should owe the Deficit Compensation Liability.

It is extremely unusual for directors of a listed company to owe Deficit Compensation Liability after the listed company resolved and carried out acquisition of treasury shares; therefore, it is clear that the directors who caused this unusual situation are not suitable for the Company's management team.

1. Summary
   As stated in the above, the Company has not changed the unclear management system that makes irresponsible downside revisions of the earnings forecast and allows improper disclosure of information, and caused the escalation of the Construction Defects Problem, allowing its credibility in society to be damaged. Further, it has postponed the completion of repair works soon after the announcement of the original plan; it is clear that the current management team lacks the management capability necessary to resolve the Construction Defects Problem. In addition, the current management team includes four directors who are to be liable for Deficit Compensation Liability after execution of acquisition of treasury shares, which is an unusual situation for a listed company. Due to the stated reasons, the Requesting Shareholders no longer have confidence in the current directors to manage the Company, and therefore, propose the Proposed Agendas.
   With regards to the current executive officers, the Requesting Shareholders will have them continue their duties as long as no particular problems are found upon examination.

2. Proposed Agenda No. 3 (Shareholders' Proposal)

Main point of the agenda

Appointment of three directors (Candidates: Masahiro Ohmura, Hironao

Fukushima, and Fuminori Nakashima)

Candidate	Name	Career summary, positions in other
No.	(Date of Birth)	companies, and important concurrent holding
		of positions

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1	Masahiro Ohmura	April 1997
	(March 18, 1974)	Joined Shimizu Corporation
		May 2004
		Joined Sumitomo Trust and Banking
		Co., Ltd.
		February 2007
		Joined Redwood Group Japan, Co.,
		Ltd.
		August 2009
		Joined Reno, Inc.
		February 2013
		(Current) Representative Director, City
		Index Hospitality, Inc.
		(Important concurrent holding of positions)
		Representative Director, City Index
		Hospitality, Inc.
2	Hironao	April 1982
	Fukushima	Joined ORIX Corporation
	(July 13, 1959)	October 2007
		Co-Head of Investment Banking
		Division, ORIX Corporation
		September 2008
		Co-Head of Risk Management Division,
		ORIX Corporation
		October 2013
		Joined Reno, Inc.
		December 2014
		(Current) Representative Director,
		Reno, Inc.
		September 2016
		(Current) Representative Director, City
		Index, Inc.
		June 2019
		(Current) Outside Director, EXCEL Co.,
		Ltd.
		(Important concurrent holding of positions)
		Representative Director, Reno, Inc.
		Representative Director, City Index,

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		Inc.
		Outside Director, EXCEL Co., Ltd.
3	Fuminori	April 1986
	Nakashima	Registered as an attorney (Current
	(December 19,	role)
	1960)	January 2001
		Established Nakashima & Miyamoto
		Attorneys at Law (currently Nakashima,
		Miyamoto & Mizoguchi Attorneys at
		Law)
		June 2005
		Auditor, Sevenseas Holding, Inc.
		September 2008
		(Current) Director, Reno, Inc.
		June 2010
		Outside Director, Sevenseas Holding,
		Inc.
		November 2014
		(Current) Outside Director, City Index,
		Inc.
		(Important concurrent holding of positions)
		Director, Reno, Inc.
		Outside Director, City Index, Inc.
(Notes)

1. There are no special interests existing between the candidates and the Company.
2. Candidate No. 2 Hironao Fukushima and Candidate No. 3 Fuminori Nakashima are candidates for outside directors of the Company.

3． The reasons for appointment of each candidate.

1. Mr. Masahiro Ohmura has acquired knowledge of construction, real estate and finance through his work at Shimizu Corporation and Sumitomo Trust and Banking Co., Ltd. Currently, he serves as the President & CEO of City Index Hospitality, Inc., which operates aged care related businesses centered on fee-based residential homes for the elderly, and he has extensive knowledge and experience of corporate governance, economics and management, in addition to knowledge of the aged care industry. The Company operates aged care businesses as well as its main business, leasing; Mr. Ohmura's knowledge would be perfectly suited to the Company's current situation concerning the construction defects problem; accordingly, it can be expected that he would make a great contribution to the Company. Therefore, the Requesting Shareholders find him suitable to be a director of the Company and request his appointment.
2. Mr. Hironao Fukushima has successively held posts at the Investment Banking Division and Risk Management Division of ORIX Corporation; currently, he serves as the Representative Director at Reno, Inc. and City

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Index, Inc., and as an outside director at EXCEL Co., Ltd.; as such, he has appropriate knowledge and insight regarding efforts for improvement of corporate value. The Requesting Shareholders find that, by capitalizing on his knowledge and insight, and having him provide adequate advice and supervision regarding the Company's management, Mr. Fukushima can contribute to the Company, not only for the improvement of the Company's corporate value but also for the profit improvement of all stakeholders; therefore, the Requesting Shareholders chose him as a candidate for outside director.

1. Mr. Fuminori Nakashima has extensive knowledge and experience of corporate governance, economics and management. The Requesting Shareholders find that, with Mr. Nakashima's expertise as an attorney, by having him provide advice necessary for ensuring the validity and adequacy of the decision making of the Board of Directors, he can contribute to the Company, not only for the improvement of the Company's corporate value but also for the profit improvement of all stakeholders; therefore, the Requesting Shareholders chose him as a candidate for outside director.

Reasons for the Proposal

As stated in the "Reasons for the Proposal" of Proposed Agenda No. 2, the Company has not changed its unclear management system that allows improper disclosure of information, and it is clear that it lacks the management capability necessary to resolve the Construction Defects Problem. Further, the current management team includes four directors that would owe Deficit Compensation Liability. Therefore, the Requesting Shareholders no longer have confidence in the current directors to manage the Company.

The current management system is led by the same management team that was in office at the time of the acquisition of treasury shares that gave rise to Deficit Compensation Liability; further, the current management system repeatedly made downside revision of earnings forecasts and delayed disclosure of information, in addition to causing significant delay in resolving the Construction Defects Problem; as such, it is clear that the governance in the current management system is not functioning. Accordingly, it could be considered that, only an overhaul of the management team would enable transparent and proactive disclosure of information, as well as recovery of the Company's credibility in society, consequently resulting in achieving the maximization of shareholder value through earnings recovery; therefore, the Requesting Shareholders request the appointment of the three candidates stated in "Main point of the agenda" above as directors suitable for the aforementioned reasons.

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Appendix 3

Opinions of the Board of Directors of the Company on the Shareholders' Proposals

The Board of Directors of the Company is opposed to the Shareholders' Proposals. Reasons for the opposition are as follows.

1. The present management team is qualified to solve the problems of the Company, and the appointment or dismissal is unnecessary
   As announced in the "Notice Concerning Causes and Measures to Prevent Recurrence of Defects Related to Parting Walls etc. in Properties Constructed by the Company" dated May 29, 2019 (its English version was dated May 30,2019), the Company takes the Construction Defects Problem seriously and will continue to conduct investigations and repairs of buildings as soon as possible on a company-wide basis, and undertake drastic reform of the corporate culture, restructuring the compliance risk management system and review of the construction subcontracting business system as recurrence prevention measures, and regard such measures as top management priorities. In addition, the Company has developed a new management system composed of ten directors appointed at the 46th Ordinary General Shareholders' Meeting of the Company held on June 27, 2019, in order to quickly recover the credibility and business performances that have been damaged by the Construction Defects Problem and reform its management system, and has been addressing the above most important management issues sincerely, especially the completion of all-building investigations and repairs.
   In fact, because the Construction Defects Problem was such a scale more significant than expected, there were many defects found through the process of all-building investigations, and the repair expenses and the number of repairs required have increased more than originally expected, and this delayed the completion of repairs and resumption of tenant recruitment; as such, it was true that the Company had to conduct a downside revision concerning the earnings forecasts of the fiscal year ending March 31, 2019 and the fiscal year ending March 31, 2020, and to postpone the completion of repairs announced in March 2019 in July 2019, and it has to be said that the Company's lack of foresight was one of the reasons for such results.
   However, under the new management system established in late June 2019 as described above, the Company actively continues to manage the larger than expected scale of the Construction Defects Problem mainly among the following directors in the following ways: with Bunya Miyao, the president and CEO of the Company, playing a central role, each of five executive directors respectively share the roles of the GM of Business Operation Headquarters and the GM of Management Headquarters and Management Planning Headquarters, as well as the Chief of Emergency Headquarters for Construction Defects Problem and GM of Compliance Management Headquarters, roles which were newly established after the Construction Defects Problem occurred; and the remaining four independent outside directors and one outside director properly carry out their roles of supervising execution of the Company's operations from an independent and fair viewpoint, taking advantage of their respective knowledge and experience, and it is understood that progress is being made slowly but steadily (please note that the progress of the all-building investigations and repairs has been announced on the Company's webpages on a timely basis).
   In response to this, it is pointed out in the Shareholders' Proposals that the current management team is unable to resolve the Construction Defects Problem; however, the Requesting Shareholders have not provided any specific proposals to promptly resolve the Construction Defects Problem.

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Based on the above circumstances, it is considered that there is no need to appoint or dismiss directors at this time, because it is appropriate by the current directors of the Company to continue their duties to solve the problems of the Company arising from the Construction Defects Problem, and because they are now sincerely addressing how to solve the issues. Accordingly, the Company is opposed to the Shareholders' Proposals.

The Requesting Shareholders also pointed out as one of the reasons for the proposal of the Shareholders' Proposals that, concerning the Acquisition of Treasury Shares executed from June 14, 2018 to August 23, 2018 by the Company, the directors in office at that time should be liable for deficit compensation; however, regarding this point, as the Company announced in the "Notice of Receipt of Audit & Supervisory Board Members' Opinion on the Responsibility of Directors in the Purchase of Treasury Stock for the 46th Fiscal Periods" dated July 31, 2019, the Company has received an opinion from the Company's Audit & Supervisory Board Members to the effect that, based on the recognition and status of consideration of the Company's directors at that time and the background leading to the cause of the deficit, it reached the conclusion that the Company's directors are not liable for deficit compensation and damages in relation to executing the Acquisition of Treasury Shares; therefore, it will not pursue the liability of the directors. Accordingly, the current directors will not be liable for not only deficit compensation but also damages concerning the Acquisition of Treasury Shares, and it is considered that there is no doubt as to the eligibility of the directors.

1. If the Shareholders' Proposals are approved, it is highly likely that the corporate value of the Company would be tarnished and that it would become a disadvantage to many stakeholders including general shareholders
2. 1. If the Shareholders' Proposals are approved, it is highly likely that the corporate value of the Company would be tarnished and that would become a disadvantage to many stakeholders including general shareholders
      If the Shareholders' Proposals are approved in the EGM, all the ten directors who are familiar with the Company's individual specific business would be dismissed, and instead, three candidates including Mr. Ohmura who are not considered to be familiar with the Company's specific individual business (the "Proposed Candidates") would take office as the Company's directors. Moreover, since Mr. Fukushima and Mr. Nakashima are the candidates for outside directors, the business of the Company would be handled by only Mr. Ohmura, who is acting as a member of the investment companies of the ex-Murakami Fund Group, which includes the Requesting Shareholders (collectively, the "Murakami Fund Group"); however, as described in the above (1), it is completely unrealistic for all the business shared by the current five executive directors (the GM of Business Operation Headquarters, the Chief of Emergency Headquarters for Construction Defects Problem, the GM of Management Headquarters and Management Planning Headquarters, and the GM of Compliance Management Headquarters) to be handled by only Mr. Ohmura; further, management of the Company by the Murakami Fund Group may have a harmful influence on tenant recruitment, which consists of mainly corporate contracts, and may result in apartment owners leaving or damage to trust relationships with business partners and financial institutions. In addition, Mr. Fukushima and Mr. Nakashima would play the role of the management oversight of the Company as outside directors; however, since both of them are the directors (and are not the outside directors), i.e., the executive officers of the Requesting Shareholders which are major shareholders of the Company, both of them do not meet the independence standards of outside officers of the Company. In addition, from their career history, it is not clear that they have experience and knowledge about the Company and its industry, and they cannot be considered to be persons who would contribute to issues such as resolving the Construction Defects Problem and functional recovery of the

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construction department. Also, because both Mr. Fukushima and Mr. Nakashima are acting as members of the Murakami Fund Group, it is not expected that they would be able to play the role of supervising the management of the Company from a fair and independent viewpoint as the current four independent outside directors of the Company currently do, nor can it be expected that they would playing the role of supervising the management of the Company from a fair viewpoint as the current five outside directors of the Company currently do.

It is obvious that the abrupt change of all the members of the management team, while the Company is handling an urgent response to investigations and repairs associated with the Construction Defects Problem, would create remarkable confusion and would cause significant adverse effects on the business by itself; but moreover, if the Proposed Candidates take office as the Company's directors, it is obvious that the business operations would become dysfunctional as described above, and that it would become impossible to correct the situation when the management seeks only to further the interests of the major shareholders. In this case, only the profits of the Requesting Shareholders are intended to be realized, and the interests of other shareholders will be harmed. In addition, management of the Company by the Murakami Fund Group will result in serious damage to the whole of the Company's business, especially the leasing business, which is its mainstay, due to a downturn of tenant invitation, most of which is a corporate contract, defection of property owners, and loss of the relationship of trust with business partners and financial institutions, and then many stakeholders, including rental housing residents, rental housing owners, subcontractors, and employees, may suffer serious damage. Given that the Requesting Shareholders dare to demand that the Company hold the EGM at a time which is the Company's busiest season for rental offers, the Company has to say that they do not understand the real nature of the Company's business and also do not consider the damage to its business value at all.

As described above, the details of Shareholders' Proposals themselves suggest furthering purely personal interests of the Requesting Shareholders through sacrificing the interests of stakeholders other than the Requesting Shareholders; therefore, the Company is opposed to the Shareholders' Proposals also from such point of view.

1. In view of the Requesting Shareholders' past investment methods and the process to the Shareholders' Proposals, it seems that the Requesting Shareholders proposed the Shareholders' Proposals aiming not to promote the Company's corporate value seriously but to further their own (i.e. the major shareholders') interests
   It is a well-known fact that, while all the Requesting Shareholders belong to the Murakami Fund Group, the Murakami Fund Group has also repeated this method of acquiring shares of companies on a large scale in the past by advocating for the reinforcement of corporate governance, to put various pressures on the companies' management teams. In addition, there was also a case where the Murakami Fund Group sent in a director recommended by the Murakami Fund Group itself to a company, repeated unrealistic demands such as demanding a high standard of return to shareholders, and resulted in the company being delisted. Moreover, there are several examples in the past where the Murakami Fund Group conducted a so-called"dismantling-type acquisition" by selling off of a company's assets by the piece in whole or in a part after acquiring the right of management of the company.
   Based on the above past investment activities by the Murakami Fund Group, it is considered to be obvious that the purpose of the Shareholders' Proposals is not to

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carry out promotion of the mid-to-long-term corporate value of the Company, but to further purely personal interests through sacrificing the interests of stakeholders including other shareholders.

In fact, the Requesting Shareholders began acquiring the Company's shares from around March 2019, after the discovery of the Construction Defects Problem, and has continued further acquisition of shares through putting pressure on the Company by statements hinting at dismantling the Company in the course of meetings and letter exchanges with the Company from April 2019 onwards and through statements made as if they had a motive to obtain the rights to control the Company. In addition, in the meeting with the Company in December 2019, the Requesting Shareholders mentioned that it would be reasonable to even dismantle the Company through the aforementioned examples which can be said to be the best examples of the "dismantling-type acquisition" recently carried out by the Murakami Fund Group.

Moreover, the Requesting Shareholders made proposals to the Company such as suggesting publishing information to begin considering drastic reforms including business sprits, etc., for the purpose of improvement of the corporate value of the Company, and if the Company did not respond to their proposals, they said that they would file a demand in writing to call an extraordinary general meeting of shareholders. After the discovery of the Construction Defects Problem, the Company has recognized the necessity of drastic reform of the management including the alliance in parallel with handling investigations and repairs, etc. as well as taking action to establish measures to prevent recurrence, and the Company decided to proactively consider publishing information about the situation voluntarily, so that the stakeholders could consider the details, because it was thought that the Company having policies to consider drastic reform of the management would contribute to restoring trust with stakeholders. However, while the Requesting Shareholders requested to be involved in the consideration process of the above drastic reform proposals, the Company declined such request because it was thought that the reforms led by some major shareholders contradicted the common interests of the stakeholders, including all shareholders. Immediately after the Company declined the proposal, it received the demand in writing from the Requesting Shareholders to call the EGM.

As described above, in the situation where the Company is busy dealing with the Construction Defects Problem, based on the fact that the Requesting Shareholders even mentioned the examples of the "dismantling-type acquisition" that the Requesting Shareholders actually implemented through further acquisition of shares by taking advantage of such opportunity and hinting at dismantling the Company or obtaining the rights to control the Company, and that the Requesting Shareholders' request to be involved in the management reforms as major shareholders is virtually the same as in these examples, etc., it is highly likely that the Requesting Shareholders intend to carry out a "dismantling-type acquisition" of the Company through the Shareholders' Proposals. Looking at the extremely forceful nature of their action to immediately demand to call the EGM for the purpose of dismissal, etc., of all the directors of the Company because the Company did not accept the Requesting Shareholders' request, it has to be said that it is obvious that the Requesting Shareholders have no intention to carry out promotion of the mid-to-long-term corporate value of the Company. The Company is opposed to the Shareholders' Proposals because if such "dismantling-type acquisition" is implemented, it is highly likely that the interests of many stakeholders including all shareholders other than the Requesting Shareholders will be sacrificed.

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