ES-CON JAPANOur Name Represents Our Core Functions
ES-CON was coined from a combination of “real estate” and“constellation.” All people connected by ES-CON JAPAN produce
powerful lights of various colors creating a beautiful harmonythat shines brightly into the future—we aspire to be a “constellation in the real estate industry.” Japan is the realm in which
the company operates. Thus the name of ES-CON JAPAN Ltd.
was adopted.

Annual Report 2022
For the year ended December 31, 2022
https://www.es-conjapan.co.jp/english/

ES-CON JAPAN Annual Report 2022

To Our Shareholders

Committed to Building a Bright Future for Japan
ES-CON JAPAN Ltd. (“ES-CON JAPAN”) develops a comprehensive selection of real estate assets including
retail, logistics, office and hotel, while primarily focusing on high-value condominiums and other residential
properties. We at ES-CON JAPAN are committed to creating a new future for Japan by realizing ideal lifestyles
and towns that envision the happiness and future of residents.

Corporate Philosophy
How should we live each day? How should we participate in society? And through this participation, what
fruits can we bear for society that translate into the happiness we each pursue? To answer these questions, ourmanagement style seeks to provide a foundation upon which employees can earnestly build toward individual
self-realization while aiding and encouraging one another.

Table of Contents
Corporate Philosophy ................................................................................. 1
To Our Shareholders ................................................................................... 2
Financial Highlights / Dividend Policy .................................................. 3
Segment Overview ....................................................................................... 4
Overview and Progress of Medium-Term
Management Plan ........................................................................................ 5
Interview of President Takatoshi Ito ...................................................... 8
Regional Projects Bearing Fruit
ES CON FIELD HOKKAIDO Opened in March 2023 ! ........................ 15
Promotion of Multipurpose Development and
Urban Development ................................................................................. 17
Multifaceted Development Business Operation
as a Comprehensive Developer ..............................................................19
Stable Growth of Condominium Business ..........................................20
Overseas Business .....................................................................................22
ESG Initiatives ..............................................................................................23

1

Thank you for your continued support and patronage.
In Fiscal 2022, the third year since the outbreak of the novel coronavirus (COVID-19) pandemic, Japanesepeople were forced to live a lifestyle different from before, and disadvantages were seen both in terms of living
and economy. However, as people’s efforts to cope with changes brought about by the virus have borne fruits
and the virus rampage has gradually subsided, society is returning to a normal state.
Among such circumstances, in 2022, with fund raising through a third-party allotment of new shares to
Chubu Electric Power Co., Inc. (“Chubu Electric Power”) in April 2022, we became a consolidated subsidiaryof Chubu Electric Power. This provided flexibility to our financing options by improving our creditworthinessand generated various other synergies.
With the basic policy of “Transformation” and “Rapid Progress” stated in our Fourth Medium-Term
Management Plan “IDEAL to REAL 2023” (Fiscal 2021 - Fiscal 2023), which we formulated in February
2021, the ES-CON JAPAN Group pursued establishment of business foundations able to withstand unexpected changes in economic conditions and simultaneously aimed to diversify and expand business domains.
As a result, Fiscal 2022 was a year in which our business steadily evolved primarily in the sales of condominiums, logistics facilities and revenue-generating real estate.
In Fiscal 2023, the final fiscal year of the Fourth Medium-Term Management Plan, ES-CON JAPAN will
aim to achieve “Rapid Progress” through Group-wide efforts and by further accelerating the urban development centered on ES CON FIELD HOKKAIDO, the new stadium of Hokkaido Nippon Ham Fighters
opened in March, as well as the development of the surrounding area of Kita-Hiroshima Station West Exit, theclosest station to the stadium, by taking advantage of the increased recognition of ES-CON JAPAN.
We will continue to develop our business in a multifaceted manner, while meeting the expectations of all
stakeholders and contributing to the revitalization of regional society as the “life developer.”
We ask for your continued support.

Business Improvement Order Issued to
ES-CON ASSET MANAGEMENT ............................................................. 28
Management: Directors, Auditors and Executive Officers ............ 29
Management Policy / Direction and Corporate Governance ...... 31
Company Overview ................................................................................... 34
Property Lineup ......................................................................................... 35
Financial Section
Management Discussion and Analysis ............................................... 39
Consolidated Balance Sheet .................................................................. 43
Consolidated Statement of Income and Consolidated
Statement of Comprehensive Income ................................................ 45
Consolidated Statement of Changes in Equity ................................ 46
Consolidated Statement of Cash Flows ............................................. 47
Notes to Financial Statements .............................................................. 48
Investor Information ................................................................................ 81

Forward-looking Statements

Takatoshi Ito

The earnings outlook and other forward-looking statements contained in this document are based on information currently available tothe management of ES-CON JAPAN and certain assumptions that are thought to be reasonable by ES-CON JAPAN. Accordingly, actual
business performance and other results may differ materially. ES-CON JAPAN assumes no obligation to update any forward-looking
statements in this report as a result of new information or future events.

President andRepresentative Director
ES-CON JAPAN Ltd.

2

ES-CON JAPAN Annual Report 2022

Financial Highlights

Segment Overview

We achieved increases in sales and profit year on year due to steady progress in condominium sales business andother factors. We will aim to achieve record-high profits and steady improvement of performance in Fiscal 2023
as a term for “Rapid Progress.”
Net Sales

Operating Income(Unit: million yen)

(Unit: million yen)

RecordHigh

110,000

15,492

Profit Attributable to
Owners of Parent
16,20099,43177,308

Fiscal
2020

Fiscal2021

7,250

10,381

Fiscal2022

Fiscal2023(plan)

Fiscal
2020

9,400

7,663

12,20279,017(Unit: million yen)

Fiscal2021

Dividend Policy
ES-CON JAPAN views the returning of profits
to its shareholders as one of its main tasks, and makes
it a basic policy to continuously return profits toshareholders in a stable manner corresponding to
its growth potential after comprehensively taking
into consideration performance, replenishmentof internal reserves, and dividend trends, etc. We
introduced the progressive dividend policy* in
the Second Medium-Term Management Planand has continued to implement it in the Fourth
Medium-Term Management Plan.

5,961

Fiscal2022

Fiscal2023

Fiscal
2020(plan)

Fiscal2021

Fiscal2022

Fiscal
2023

38

38

(plan)(Unit: yen)
Dividend per share
Dividend
payout ratio
32

15
25.5%

Fiscal
2016

36

38

38
56.3%

50.0%

18
30.2% 30.2%

33.9%

22.0%
Fiscal2017

Fiscal2018

Fiscal
2019

Fiscal
2020

Fiscal2021

Fiscal2022

Real Estate Sales Business

Real Estate Leasing Business

Real Estate Planning Agency andConsulting Business

Net Sales

Net Sales

Net Sales

86,531 million yen

11,824 million yen

1,074 million yen

Segment Income

Segment Income

Segment Income

17,006 million yen

4,716 million yen

228 million yen

Within the real estate sales business, the number of delivered units in the condominium business increased by
165 units year on year to 1,185 units (record-high) due to the favorable progress in sales, and net sales increased
by 13.4 billion yen year on year to 58.5 billion yen.
Other than the condominium business, we sold various properties including sales of logistics facilities, aswell as sales of detached houses at its subsidiary ES-CON Home, contributing to the business results.
As a result, in the real estate sales business, net sales were 86,531 million yen (up 23.0% year-on-year) andsegment income was 17,006 million yen (up 30.4% year-on-year).
In the real estate leasing business, we focused on leasing activities and the property management businesstoward a more stable revenue structure, and through factors such as the full-year contribution to profit by the
Picasso Group, which we made a subsidiary in October 2021, as well as the opening of “MUJI” store in “tonarie Minami-Senri Annex” in April 2022 as the store boasting the largest sales floor area in the Kansai region, we
achieved net sales of 11.8 billion yen and segment income of 4.7 billion yen.
As a result, net sales were 11,824 million yen (up 46.2% year-on-year) and segment income was 4,716
million yen (up 39.9% year-on-year).
In the real estate planning agency and consulting business, proactive efforts were made in such aspects as
selling permanent use rights of Ryomon columbarium and entrustment with planning, consulting and otherservices by making the best use of planning and multifaceted business-building abilities, resulting in net salesof 1,074 million yen (up 81.4% year-on-year) and segment income of 288 million yen (segment income of 516
million yen in the previous fiscal year).

Fiscal2023(plan)

Third Medium-Term
Management Plan

Fourth Medium-Term
Management Plan*A dividend policy that sets the dividend per share (DPS) for the previous fiscal year as the lower limit and “does not decrease the dividend amount, butmaintain or increase the dividend amount” in principle.

3

4

ES-CON JAPAN Annual Report 2022

Overview and Progress of Medium-Term Management Plan
Progress of the Fourth Medium-Term Management Plan“IDEAL to REAL 2023” (Fiscal 2021 – Fiscal 2023)

(Unit: Million yen)

Fiscal 2021

Basic Policy(announced
Jan. 2022)

vs.
initialplan

Percentage

99,431

100,000

-569

-0.6%

46,000110,000

70,33486,53187,300

-769

-0.9%

—

94,80045,05058,53259,300

-768

-1.3%

—

61,900

1,020

1,185

1,200

-15

-1.3%

—

1,164

25,28327,99928,000

-1

0.0%

—

32,900Real estate leasing business

8,090

11,824

11,600

224

1.9%

—

14,200Real estate planning agency
and consulting business

592

1,074

1,100

-26

-2.4%

—

1,000

Operating income

10,381

15,492

14,000

1,492

10.7%

6,000

16,200Ordinary income

9,099

14,012

12,200

1,812

14.9%

5,200

14,200

Profit attributable to owners ofparent

5,961

7,250

8,300

-1,050-12.7%

3,400

9,400

Actualresults

79,017

Real estate sales businessCondominium sales
Condominium units soldBasic Policy: Transformation and Rapid Progress

Other sales

Transformation

Rapid Progress• Proactive investment in long-term revenue-generating real estate and improvement of balance
sheet structure• Transform the focus of management from flows
to stock• Demonstrating synergies within the Chubu
Electric Power Group• Achieving net sales of 110 billion yen and operating income of 16 billion yen (in the final fiscal
year of the medium-term management plan)&

BS and profit
structuralreforms

Performance Trends Over the Past 10 Years
We pursue establishment of robust business foundations capable of withstanding any economic conditions andsimultaneously aim to maximize corporate value and further increase returns to shareholders. In addition, we
will further enhance organizational capabilities to achieve sustainable growth in 2024 and beyond.
(Unit: Billion yen)

Further rapid
progress throughtransformation

Sales
Operating profit

BS structure/
profit structurereforms

72.1
Listing on
TSE First
Section

18.8

27.7

44.7

77.3

99.4

79.0
Made asubsidiary of
Chubu Electric
Power

54.3

110.0

34.3

Listing on
TSE Prime
Market

2.8

4.0

4.6

7.0

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

11.5
Fiscal 2018

Fiscal 2019

12.2
Fiscal 2020

10.3
Fiscal 2021

15.4
Fiscal 2022

In the first fiscal year, Fiscal 2021, we secured stable revenue by reinforcing real estate leasing business throughefforts such as making the Picasso Group our subsidiaries. However, in Fiscal 2022, despite sales and profit
increases, as a result of steady progress in the real estate sales business and other factors, profit was lower thanplanned when compared with the previous fiscal year.
We plan to achieve our highest goals of 110 billion yen in sales and 16.2 billion yen in operating income in
Fiscal 2023, the final fiscal year of the medium-term management plan.

New record-high profits

38 yen38 yen38 yen—Rapid progress

38 yen(plan)—

Management Targets
In Fiscal 2021, the first fiscal year of the medium-term management plan, progress was made ahead of schedulein transforming the revenue structure, by making the Picasso Group a subsidiary, as described above.
The share of profits from leasing in FY2022 reached 21.5% (4.5 points lower than initially planned), thanks
to strong progress in the real estate sales business. ➊This transformation of the revenue structure will continue in FY2023.

Fiscal 2023
(initial plan)

Initial plan Initial plan
(Q2)
(full year)

Policy of gradually increasing dividends to continue

16.2

Performance Plan

5

Dividend per share

New recordhigh profits

12.9

Fiscal 2023

Initial plan(full year)

Actualresults
Sales

1. Establishing business foundations able to withstand unexpected changes in economic conditions
2. Simultaneously change the revenue structure and expand business domains

Fiscal 2022

Fiscal 2020

Fiscal 2021

Actualresults

Actualresults

Share of profits from leasing *1

14.2%

Return on equity (ROE)

21.2%

Return on invested capital (ROIC)

Fiscal 2022
Actualresults

Fiscal 2023
Plan

Initial planvs. Initialplan(Announced
Mar. 2022)

21.2%➊ 21.5%

26.0%

-4.5%

30.0%

11.8%

11.3%

13.0%

-1.7%

13.0%

6.6%

3.2%

4.6%

4.0%

0.6%

4.0%

Equity ratio

25.8%

24.8%

25.0%

23.0%

2.0%

21.0%

Share of long-term earnings
from real estate *2

9.5%

20.6%

19.5%

21.0%

-1.5%

23.0%

Net assets [billion yen]

38.6

62.6

64.1

67.3

-3.1

72.0

➔

*1. Share of profits from leasing: Leasing segment profits/segment total profits (excluding adjustments)*2. Share of long-term earnings from real estate: Real estate generating leasing revenues recorded as noncurrent assets/net assets

6

ES-CON JAPAN Annual Report 2022

Investment Plan
• Gross investment of over 220 billion yen during three-year period of the medium-term management plan. ➊• Cumulative investments in 2021-2022 progressed almost as initially planned, due to making the PicassoGroup a subsidiary and other factors. ➋• Investment of 88 billion yen in 2023, the final fiscal year of the medium-term management plan. ➌Three-Year Cumulative Investment (2021-2023)

(Unit: billion yen)Interview ofPresident Takatoshi Ito

Threeyear
cumulative
Initial plan(1)+(2)(2)
vs. Plan Percentage

Cumulative
Fiscal 2021 to Fiscal 2022

Fiscal2021

Fiscal2022

Actualresults

Actualresults

Actualresults
(1)

Plan

95.9

36.9

➋ 132.9

125.0

7.9

6.3%

➌ 88.0➊ 220.9

Investment in revenue-generating
real estate

76.7

10.8

87.6

70.0

17.6

25.2%

65.7

153.3

Investment in development ofrevenue-generating real estate

5.6

3.6

9.3

15.0

-5.6

-37.6%

10.0

19.3

Investment in medium-term
revenue-generating real estate*

33.7

5.6

39.4

35.0

4.4

12.7%

33.7

73.1

Investment in long-term
revenue-generating real estate

37.3

1.5

38.8

20.0

18.8

94.1%

22.0

60.8

Investment in other development

19.1

26.1

45.2

55.0

-9.7

-17.6%

22.3

67.5

Amount recovered

4.8

6.5

11.3

11.3

0

0.3%

18.7

30.0

Net investment amount

91.1

30.4

121.6

113.7

7.8

6.9%

69.3

190.8

Gross investment

Building to Realize
Sustainable GrowthFiscal2023

ES-CO N J A PA N L td .

(Announced
Jan. 2023)*Rental revenue-generating real estate acquired while leased and intended for sale after increasing its value.

Q What was the impact of COVID-19 on
ES-CON JAPAN in 2022 and what are the potential prospects for the Company in the future?
Given the minimal impact from the outset, theeffects of COVID-19 on our housing business havebeen largely contained. The hard-hit hotel market isalso recovering. Looking ahead, we anticipate thehousing business, which had been shifting to thesuburbs, will see gradual a return to city centers. Thisis as the surge in land acquisition prices and rising
construction costs continue and COVID-19 isbrought under control.

Q Is the return to city centers due todemand from buyers who are willing to pay
higher prices for housing?
Indeed, we feel that is the trend. Presently, the7contracting rate for higher priced housing remains
high. However, the progress of property sales in city
centers is easier to predict compared to that in thesuburbs.

Q Having mentioned contract rate, what isthe current status of the Fourth Medium-Term
Management Plan “IDEAL to REAL 2023” in thisfiscal year, the final fiscal year of the plan?
In our initial plan for Fiscal 2023 (ending December2023), we announced net sales of 110.0 billion yen
and operating income of 16.2 billion yen. As of April
2023, we have achieved approximately 75% of contracts against the sales plan for the condominium
sales business in Fiscal 2023. Other business areas arealso steadily progressing with the achievement of targets in the current fiscal year. Moreover, to some extent,
we have already completed the purchase of sites thatwill contribute to Fiscal 2024 sales and we have8

ES-CON JAPAN Annual Report 2022

started purchasing properties linked to Fiscal 2025
and Fiscal 2026.
Under the Fourth Medium-Term Management
Plan revenue structure, the set themes are “transformation” and “rapid progress.” We will increase
investment in stable revenue-generating real estateby leveraging our great advantages in corporate credit
standing, including the increased ability to procure
capital, gained from becoming a consolidated subsidiary of Chubu Electric Power Co., Inc., (hereinafter “Chubu Electric Power”) in April 2021.
The progress of the investment plan for the threeyear period of the Fourth Medium-Term Management
Plan, set at 220.0 billion yen, is close to 90% at present. This progress is largely attributable to PicassoCo., Ltd. and its group companies (hereinafter the“Picasso Group”) becoming our subsidiaries in
October 2021. Furthermore, as announced in
February 2023, Shijo Omiya Building Co., Ltd.
(hereinafter “Shijo Omiya Building”), which ismainly engaged in the real estate leasing business,
will become our subsidiary in July 2023. All thismeans progress in the investment plan.
We have established a stable revenue base byacquiring assets valued at approximately 100.0 billion yen through M&As, bringing us closer to realizing the “transformation” of our revenue structurefrom a flow business to a stock business. With this,we can increase the number of development projects
we handle and connect this to accelerating progressin the future.
We intend to solidly continue on this path of sustainable growth.

Q Can you provide some examples of thesynergy achieved between Chubu Electric Powerand ES-CON JAPAN from ES-CON JAPAN becoming a consolidated subsidiary?
We have demonstrated synergy through various
projects. For instance, we established TSUNAGU
Community Farm LLC with Chubu Electric Power

9and Spread Co., Ltd. This new company has started
construction of Techno Farm Fukuroi, which willbe the world’s largest vertical farm fully utilizing artificial light and capable of producing 10 tons of lettuce per day, in Fukuroi City, Shizuoka Prefecture.
The farm is set to begin production in January 2024.
The plan is to first make this project in Fukuroi Citya success, then expand the business with second andthird projects.
Additionally, a consortium of businesses led by
Chubu Electric Power which included ES-CON
JAPAN, entered into a basic agreement for the development of the former site of Nagoya Racecourse inAugust 2022. We hope to continue our collaboration with Chubu Electric Power to realize new urban
development and promote regional revitalization.

Q The real estate industry can be divided
into building projects that are “dots” and urban
projects that are “planes” that are key to advancing regional development and revitalization. An
example of a successful “planes” development is
the mixed-use development in Tsukuba City, but
can you provide some insight into how the city
has responded to this project and how you viewthe future of real estate development?
We believe that conducting integrated commercial,
office and residential development in the mixed-use
development project in front of the Tsukuba Express
Tsukuba Station has served to facilitate regional revitalization and regeneration. The facilities previously
constructed in the high economic growth period
were rebuilt to meet the needs of today.
In terms of land readjustment projects, we areparticipating as project agent in the “Ibaraki City
Saito East District Zone C Land Readjustment
Project” in Ibaraki City, Osaka Prefecture, and the“Kawachinagano City Uwahara-Tako Land
Readjustment Project” in Kawachinagano City,
Osaka Prefecture. We also have several projects nearing the establishment of land readjustment

associations. While it is true that land readjustment
projects take time before generating revenue, wehave been working on certain projects that involve
logistics facilities, attracting new industries to theprojects, the return of domestic manufacturers andsuch for about seven or so years. These projects are
now at last leading up to association approval.
Furthermore, in terms of developing “dots” withhigh added value leveraging locational characteristics, such as “OST RESIDENCE KARUIZAWA”(completed in December 2021; with 33 units intotal) sold in units in Nagano Prefecture’s Karuizawa,
we plan to roll out new developments in other areas,such as Kanagawa Prefecture’s Hayama, going forward. We intend to keep strengthening our ability toengage in both projects that are “dots” and “planes”
in this manner, making us an even more formidable
corporate entity.

Q What is the current state of the for-salehousing market?
In the real estate industry, supply and demand are
well-balanced, with supply not necessarily growing
in volume. However, in the current situation, withissues like surging land costs and rising construction
costs as mentioned earlier, there will no longer besatisfied buyers unless products with high added
value can be provided.
Under such circumstances, rather than unduly
increasing supply volume, we are focusing on product planning, being particularly mindful of quality,
as we have always done. We intend to continue
upholding this policy.

Q How is the expansion of the “tonarie”
brand of commercial facilities progressing, particularly in the Kansai region?
On March 28, 2023, we opened “tonarie Hoshida,”
a neighborhood shopping center, in front of Hoshida

Station in Katano City, Osaka Prefecture. The development was carried out jointly by us and MIRARTHHOLDINGS, Inc., with the acquisition of approximately 3,000 tsubos (approximately 9,900 m2) of landin front of the station, as part of Toda Corporation’sland readjustment project. This commercial facility
offers a range of stores for everyday use by locals,such as a medical mall, 100-yen shop (“dollar store”)
and drugstore, in addition to the Kansai-based
supermarket “Mandai” which serves as an anchor
tenant, and is the tenth facility in our commercial
facility brand “tonarie” series.
We develop commercial facilities under the concept of “Close to the community in order to develop
together with the community. Always a good neighbor.” We will continue to develop lifestyle-focusedcommercial facilities deep-rooted in local
communities.
Also, we have a strong track record of promoting
regional revitalization projects that apply the strengthof the private sector to projects while cooperatingwith local governments and administrations rather
than relying on government subsidies in undertaking
development.
We intend to continue expanding development ofcommunity-based commercial facilities across Japanas our engine of growth by leveraging such strengths.

Q How have you been able to successfully
expand the logistics development business as
discussed over the past several years?
We are steadily expanding our logistics development
business to meet the needs of the growing e-commerce market. In particular, our efforts include
expanding our “LOGITRES” brand to meet theincreasing need for logistics facilities that also addresschanges in the environment for those working at thefacilities.
Rather than participating in competitive bids
when land costs are rising—considering that any
expensive acquisition of sites would just lead to a10

ES-CON JAPAN Annual Report 2022

situation where warehouse rent would have to beraised—we have been focusing on producing land
suitable for logistics facility development fromscratch through land readjustment projects. Our
strategy is to purchase land at appropriate prices andwork on projects where we can fully demonstrate oursite sourcing ability as a developer. We will continue
to select suitable land for development, while emphasizing communicating and working closely withexisting and prospective tenants.

subsidiary in July 2023. These companies have management policies that have thus far aligned with ourown and we have found ease and value in merging
with these companies and working with theiremployees.

Q Are there any future plans to jointly

We intend to continue to sustainably and solidly
expand the business as a comprehensive building
developer, not merely just as a housing developer but
also creating the lifestyles for those who live in our
properties as a “life developer.”In Fiscal 2022 (ended December 2022), thecolumbarium permanent use rights sales and management business operated by our subsidiary
Ryomon Co., Ltd. (“Ryomon”) failed to achieve theinitially planned sales target. We thus recorded an
impairment loss when we made a conservative revision after reviewing the plan.
Ryomon, located in an area with extremely highpotential, near Hiro-o Station in Minato Ward,
Tokyo, began sales in 2021, and is entering its thirdyear in 2023. Unfortunately, launching sales right inthe midst of the COVID-19 pandemic hindered
achievements of the planned sales targets. Nonetheless,we will continue to not only conduct various formsof advertising, but also keep providing high-quality
support services to customers who have already madepurchases with the hope to receive new referrals from
customers. We intend to continue to keep steadily
driving the business forward while further enhancing its value.
In the cafe business, we opened “Cafe Apartment
TSUKUBA” in December 2022 on the premises of“Le JADE Tsukuba Station Front,” a for-sale condominium we developed in Tsukuba City, Ibaraki
Prefecture. This marks the second such project following on from “Cafe Apartment 183,” which openedon the first floor of “Le JADE Setagaya Kinuta” indevelop logistics
companies?

properties

with

other

Well, the construction of a two-tier warehouse on
the site of approximately 10,000 tsubos (approximately 33,000 m2) is currently underway, and in thesummer of 2023, “LOGITRES Tojo II” will be completed in Kato City, Hyogo Prefecture. While wehave still not developed large-expensive five or sixtier facilities, we do remain open to the opportunity
to work on logistics development of that kind. We
are also open to possibly carrying out such a project
jointly with a company that has a proven track record
with these facilities.

Q Will ES-CON JAPAN continue to expand
its revenue and business based on M&As likethat of the acquisition of Picasso Group?
To date, we have consistently placed importance on
the relationships with the owners of the companies
we acquire and not pursued the M&As if the owners
cannot be convinced of the advantages gained
through the M&A. Rather than participating in bidding wars based solely on price, we will consider
M&As with companies that share our vision andprinciples and can bring about synergies.
In fact, we acquired the Picasso Group as a subsidiary, and plan to make Shijo Omiya Building a

11

Q Will the ES-CON Group continue toexpand into cafe, columbarium and otherbusinesses?

2016. We work in a concerted effort as a corporategroup toward regional revitalization by having agroup company operate a cafe on the premises andgoing beyond just developing the building, to also
creating the local community.
We hope the residents of our for-sale condominiums will use the cafes on the premises to hold familybirthday parties, lounge on the terrace seats during
pleasant weather in the spring, summer, or fall, andas a place to interact.
We hope our cafe business provides our condominium residents enhanced living ideals by providing a second living room. We have not set a growthtarget for the cafe business at present, but looking
ahead five years or ten years, we see boosting such
cafe development and operation capabilities as essential to enhancing the value of real estate.

Q How has ES-CON JAPAN and the realestate industry changed since you assumed theoffice of President and Representative Director
over a decade ago?
The Great East Japan Earthquake struck soon after I
became president in March 2011. The following year
saw political power returning from the Democratic
Party of Japan to the Liberal Democratic Party, andthen Prime Minister Abe launched “Abenomics,” aswell as “bold monetary easing.” The aim of thesemeasures and policies was to break the economy outof deflationary trends, but, in combination with otherfactors, they helped boost the real estate market.
However, it is presumed that the monetary easing,continued till now, will become limited in the futurewith the Bank of Japan’s governor change. Given thisthe real estate industry as a whole will likely enter a
new phase, where capital strength will be increasingly
put to the test. We intend to proactively promote
for-sale condominiums, commercial facilities, logistics facilities, rental apartments, office and otherdevelopment businesses by combining our strong
capital procurement and financing base that has beenenhanced by becoming a consolidated subsidiary of
Chubu Electric Power, and our multifaceted development capabilities reinforced over these twelve years.
With the opening of “ES CON FIELD
HOKKAIDO” in Kitahiroshima City, Hokkaido, in
March 2023, the new baseball stadium of the Hokkaido
Nippon-Ham Fighters, we expect to raise our namerecognition dramatically nationwide. We aim topursue business expansion at an even higher stage inthe future. Our goal is to become a representative
developer of Japan over the next ten years and are
confident that we have the potential to achieve this.

Q Can you share your perspective on how
companies can effectively address ESG, given
the increasing importance of ESG in driving sustainable growth and the establishment of initiatives such as the “ESG Promotion Group” by
ES-CON JAPAN in recent years?
We established the ESG Promotion Group directly
under the President’s Office and have company-wide
initiatives underway. In terms of environmental
efforts, initiatives center on developing of Net Zero
Energy House (ZEH) condominiums and adopting
standard practices in the real estate industry. Looking
forward, we aim to explore environmental initiatives
that combine our parent company, Chubu ElectricPower’s, energy management capabilities with ourreal estate business. For example, the earlier-mentioned vertical farm in Fukuroi City, Shizuoka
Prefecture, planned to operate 24 hours a day, is
expected to provide organic produce, local job creation and disaster-resilient business planning.
Currently, what needs to be done is being done,
but we have yet to be able to take any action thatwould significantly change the times. In the future,
we intend to take on projects of a large scale while
being more conscious of ESG from the conceptual
stages in places where there are urban development
needs in a manner that would be a model case for theindustry.

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ES-CON JAPAN Annual Report 2022

Meanwhile, the unstable state of material prices
caused by the Russian invasion of Ukraine continue.
A stable supply of energy is fundamental to people’s
lives. So, while there are limits to what we can do, weare engaging in corporate activities and business,always keeping in mind how we can address thematter. We intend to continue to work diligently tocreate a significant impact on society through development projects.

Q What guiding principles are emphasizedin carrying out the several projects now
mentioned?
Our corporate slogan “IDEAL to REAL” reflects theaspirations of the local community—“what would
be great to have in the area”—and our commitment
as a “life developer” to improve the lives of thepeople.
Recently, we had the pleasure of seeing many customers come on the opening of “tonarie Hoshida,” aneighborhood shopping center we developed, andreceiving positive feedback such as “it’s really great tohave a facility like this open.” Customer satisfaction
is a key guiding principle in carrying out our
projects.
Additionally, like with the opening of “ES CON
FIELD HOKKAIDO,” we believe the Company
should place the greatest importance on being
involved in projects that impress people. On top of
that, we aim to maintain a cycle of valuable projects
that generate adequate profit and solid returns to ourinvestors.

Q Congratulations on the recent opening of“ES CON FIELD HOKKAIDO.” Please update us
on the development projects in the vicinity of the
new baseball stadium and revitalization of the
JR Kitahiroshima Station West Exit Area?
The projects in the new baseball stadium’s vicinity

13

and revitalization of the JR Kitahiroshima Station
West Exit Area are making steady progress. Since“ES CON FIELD HOKKAIDO” was opened it has
been noticed not only by baseball fans but also
people from all over the country. The new baseballstadium has changed the flow of people into
Kitahiroshima City, and the commercial facilities weare developing in front of Kitahiroshima Station are
attracting attention from potential tenants. We
expect these facilities to contribute greatly to creating a lively atmosphere in the area after opening.
In other words, the completion of “ES CON
FIELD HOKKAIDO,” as the core, is attracting more
exciting projects and companies to Kitahiroshima
City. We believe that the number of supporters forco-creation spaces will continue to increase, drawing
us closer to realizing the concept of the “ballpark theworld has never seen before.”
The JR Kitahiroshima Station West Exit Area
Revitalization Project is a long-term project spanning over ten years. We see the opening of the new
baseball stadium in March 2023 as the start of urban
development. We do not think of the opening of thestadium as the end of the project; instead, we willcontinue contributing to the development ofKitahiroshima City and Hokkaido through various
projects.

Q How has the weak yen and high-interest
rates overseas impacted overseas business?
Our overseas business has thus far primarily focusedon capital investment rather than development. As
for the impact of exchange rates, which were approximately 100 yen to 110 yen to the dollar at the timeof investment, we have still managed to generate foreign exchange gains. However, due to the nature of
the investment activities, not much revenue is being
made.
The recent rise in U.S. interest rates is actuallyworking in favor of Japanese companies that are
making overseas investments and investment-grade

revenue-generating real estate is on the increase. The
rising U.S. interest rates are leading to real estate
price adjustments and facilitating the release of bargain revenue-generating real estate into the market.
As a result, we do not necessarily take a pessimistic
view of the circumstances in any way but rather see
many emerging opportunities.
Notably, we formed an extremely beneficial relationship with BlackSand Capital, LLC, a local realestate firm in Hawaii. Despite rising interest rates,
we have found that our attractive properties haveconsistently led to successful contracts with owners
who intend to make actual use of their properties.
So, the plan is for us to keep securing attractive properties that align with our business by identifying
strong opportunities.
In this manner, expanding from just investment
into development is viewed as the next theme for theoverseas business.

Q How is ES-CON JAPAN responding to theadministrative disposition imposed on ES CONASSET MANAGEMENT Ltd. (“EAM”) in July 2022?
First, we sincerely apologize to all shareholders andinvestors for the concern and inconvenience causedby the administrative disposition from the Financial
Services Agency imposed on EAM. In addition topromptly responding to the matters the Financial
Services Agency pointed out, the organizational
structure has also been revamped to fundamentallyresolve the issues.
One of the main causes of the issues pointed out
about related-party transactions with ES-CON
JAPAN, EAM’s parent company, was EAM’s limited
options when buying properties, as they could only
select from their parent company at the time. To
address this, Wataru Orii has assumed the office of
EAM’s president. In addition to EAM building agreater capacity to acquire properties, earnest efforts
are being made to form a framework for products
developed by ES-CON JAPAN to be supplied at afair price while carefully considering the elements ofrelated-party transactions with ES-CON JAPAN.
To further promote improvements in the matterspointed out in this administrative disposition,
ES-CON JAPAN has established a Compliance
Office. The office will report directly to the president, and will continually conduct compliance training and clarify the management stance on legal
compliance throughout the Company and group.
The aim is to thoroughly strengthen the promotionof compliance management and ensure that there areno further matters are called into question ever again.
We will continue to support the sustainablegrowth of ESCON JAPAN REIT Investment
Corporation (“EJR”) as its sponsor company.

Q Lastly, the current fiscal year is the final
fiscal year of the Fourth Medium-Term
Management Plan. What sort of content is envisioned for the next plan that will probably beannounced during the current fiscal year?
While the business environment is one where it isextremely difficult to provide a future outlook, thebusiness of a developer is developing products over
two or three years and selling them. As for the “transformation” and “rapid evolution” of the revenue
structure, the themes of the Fourth Medium-Term
Management Plan, we have managed to secure a certain amount of revenue from stock and so the task
ahead is how to further expand this.
Strengthening organizational power is key to realizing sustainable growth. Rather than aim for immediate rapid growth, it is important to increasinglyenrich “human capital”—that is, employees or theknowledge, skills, qualities and such possessed by
employees.
We would like to become a company where
employees’ growth firmly links to the Company’s
growth within the next ten years. To that end, we
will formulate a medium-term management planthat emphasizes investment in human capital.

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ES-CON JAPAN Annual Report 2022

Regional Projects Bearing Fruit

ES CON FIELD HOKKAIDO
Opened in March 2023!

ES-CON JAPAN sympathize with the urban development plan “ballpark concept” in HOKKAIDO BALLPARK F VILLAGE (“F VILLAGE”)
which centers on a new stadium, and is the partner that realize a spacefor cocreation together with the Hokkaido Nippon-Ham Fighters.
Furthermore, we acquired the naming rights for the new stadium.
As a company that implements developments of a condominium in the
F VILLAGE “Le JADE Hokkaido Ballpark,” senior residences, and surrounding area of Kita-Hiroshima Station West Exit, which is the closest
station of the F VILLAGE, we will contribute to the regional revitalization by further accelerating urban development that look ahead 10 years
and 20 years, by taking the opening of the new stadium as an advantage.

For-Sale Condominium “Le JADE Hokkaido Ballpark”
The first project in the F VILLAGE urban development concept and theonly condominium in F VILLAGE. The property is a project in a rare
location approximately 80 meters from the outfield stands of the newstadium and also allows enjoyment of Hokkaido’s rich nature, whilebringing the ideal of “living in a ballpark” into reality.
The number of inquiries it received reached 6,000 and all 118 units
were sold out soon after the sales commenced.

© H.N.F.

© H.N.F.

Le JADE Hokkaido Ballpark

Senior Residence
Scheduled for completion in spring of 2024 as a residence for active seniors constructed alongside a medical mall.
This initiative is part of sustainable urban development to create places for multigenerational interaction and will
create housing that is blessed with nature and enables full enjoyment of sports and activities, with an aim tocontribute to the health maintenance of people of all ages from the young to the elderly and to regional healthcare.

Access Base to the Ballpark JR Kitahiroshima Station “West Exit Area Revitalization Project”
We are advancing development of the JR Kitahiroshima Station, garnering further attention as an important
point of access to F VILLAGE, “Train Station West Exit Area Revitalization Project” in Kitahiroshima City as
a partner of the project. We acquired part of the development site for the project in November 2021, and it isbeing used for three development projects: a station square in front of JR Kitahiroshima Station, an exchange
center complex comprising commercial facilities and a hotel, and a three-dimensional indoor/outdoor plazaand park. Of the development projects on the site, we aim to complete the commercial facilities, etc. in FY2024
and are pushing forward with the development in front of the station.

Senior Residence

15© H.N.F.

JR Kitahiroshima Station “West Exit Area Revitalization Project”

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ES-CON JAPAN Annual Report 2022

Promotion of Multipurpose Development and Urban Development
Multipurpose Development Integrating Commercial, Employment, and Residential Facilities

Condominium Development

Tsukuba City, Ibaraki Prefecture

Omura City, Nagasaki Prefecture• In front of Tsukuba Station, Ibaraki Prefecture, we are working to create a bustling atmosphere through the
integrated development of a complex where commerce, work, and residences intersect, consisting of “tonarie
Tsukuba Square” comprising commercial facilities and offices, and the condominium “Le JADE Tsukuba
Station Front” (Tsukuba City, Ibaraki Prefecture; 218 units in total).
• Phase 1 of “tonarie CREO” opened in May 2021, contributing to profits throughout FY2022.
• In December 2022, Cafe Apartment TSUKUBA, the second cafe/dining restaurant developed and operated
by the Group, opened on the site of out for-sale condominium “Le JADE Tsukuba Station Front.”• Participate in “Shin-Omura Ekimae City Owned Land Development Project” ES-CON JAPAN is to beengaged in development of condominiums in two blocks (174 units in total).
• We concluded a basic agreement with Omura City together with Daiwa House Industry Co., Ltd., andIzumi Co., Ltd., as a member of a business group composed of the three companies in March 2022. With
Shin-Omura Station on the Nishi-Kyushu Shinkansen line opening in September 2022, the project entails
developing condominiums, commercial facilities, etc. where residents and visitors from outside the city caninteract with each other in line with the town development policy of Omura City. ES-CON JAPAN isscheduled to be engaged in development of condominiums in two blocks.
Construction tostart in Fall 2024
Shin-Omura Station on theWest Kyushu ShinkansenLine opened in
September 2022

Delivery of
218 units ofcondominium in
Nov. 2022
Le JADE Tsukuba Station Front (condominium)

Large-Scale Urban Development
Cafe Apartment TSUKUBA (cafe/dining restaurant)

Condominium Development
Iwaki City, Fukushima Prefecture• The “Namiki no Mori City” development project, a mixed-use facility of residential, commercial and parking lot buildings together with Hoosiers Corporation (Headquarters: Chiyoda Ward, Tokyo; President andRepresentative Director: Eiichi Ogawa).
• For the residential building, development of “MID TOWER IWAKI” (216 units in total), the tallest seismic
isolation structure tower condominium in the city, is underway. The project which will carry out redevelopment to create a further bustling atmosphere around the Iwaki Station. The plan for the residential building,is to develop a next-generation condominium that
anticipates multi-generation residences under measures such as establishing residential units with barrier-free specifications (55 units), as the tallest seismic
isolation structure tower condominium in Iwaki City
named “MID TOWER IWAKI.”*Joint project with Hoosiers Corporation

17

Startedsales inNov. 2022

Suita City, Osaka Prefecture• Urban development project to develop residences, commercial facilities, etc. on the former site of National
Cerebral and Cardiovascular Center (approximately 66,000 m2).
• Joint project with Chuden Real Estate.

Development Project at the Former Site of Nagoya Horse Racing Track
Nagoya City, Aichi Prefecture• In August 2022, a consortium of businesses led by Chubu Electric Power, of which ES-CON JAPAN is amember, entered into a basic planning agreement for the development project.
• ES-CON JAPAN is scheduled to be engaged in the development of a complex commercial facility.

Start common
use subsequently
in fiscal 2027 and
after

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ES-CON JAPAN Annual Report 2022

Multifaceted Development Business Operation as a Comprehensive Developer
Real estate development and urban development rooted in local communities in major cities across Japan
Escon Kudankita Building• In November 2022, ES-CON
JAPAN constructed Escon
Kudankita Building, its first
office building in the Tokyo
metropolitan area.

Commercial
Facilities

tonarie Hoshida

Condominiums

OfficeDetails on P20

First
Project

Multifaceted

Logistics
facility• TOPAZ is a new brand of rental residence, implying the gem TOPAZ
that has been the symbol of the sun, designed to deliver an enriched environment by making the life of the residents shine beautifully. It associates
the wish for residents to enjoy the current moment of life as yourself.
Residence to express your identity and enjoy the current moment of your life

Development

TOPAZ Shin-Okachimachi

LOGITRES Chiba Research Park• We are engaged in logistics businessthrough developing the LOGITRES
brand of logistics facilities and such, inorder to address logistics needs which are
increasing along with the expansion of
e-commerce market.
• Sold two properties in 2022.

• Newly opened a community-based shopping center “tonarie Hoshida”(Katano City, Osaka) in front of Hoshida Station on the JR Gakkentoshi Line.
• It is within the “Hoshida Station North Land Readjustment Project”(implementation area of approx. 26.4 ha) area, where development ofcondominiums, detached houses, medical facilities, park and more are in
progress, leading to the expectation for future prosperity. The locational
convenience of the commercial facility is especially high in the area which
originally boasts high convenience, as it is in front of Hoshida Station.
Furthermore, as a community-based commercial facility with tenants
including a supermarket, 100-yen shop and medical complex, aim to contribute to the regional development and take root in the community.

Rentalapartment

Overseas Business
Details on P22

TOPAZ is well loved as a symbol of the sun with its clear golden color. We desire the lifeat the residence to shine beautifully like TOPAZ. Furthermore, it also implies the
Spanish word PAZ meaning peace, with the desire to create an enriched environmentthat allows everyone to live a satisfying daily life. While lifestyles becoming even morediversified, we desire to enable each person to enjoy the current moment of life as
yourself. TOPAZ was designed as a residence that makes such desire come true.

Stable Growth of Condominium Business
For the core business of condominium development, ES-CON JAPAN targets stable supply not just increasing
the number of condominium units. Recently, it has developed a wide variety of product plans that maximize
the value of the land for rare locations.

Hotel

Planned toopen in Sep.
2023

Development at Rare Locations in Central Tokyo
Park Le JADE Shirokane Residence

19

BRITANIA BANGNA KM. 39 Project

Fukuoka Prefecture Itoshima Futamigaura Project (tentative name)• We are engaged in multiple businesses overseas
while carefully assessing the impact of the spreadof COVID-19. Most recently, in December 2022,
we invested in and participated in a detachedhouse development project conducted by Britania
Public Company Limited, a subsidiary of Thaireal estate developer Origin Property PublicCompany Limited. This is our first overseas
detached house development project.

• In June 2022, ES-CON JAPAN commenced the
Fukuoka Prefecture Itoshima Futamigaura Project(tentative name) in the Itoshima Peninsula,located in the western part of Fukuoka Prefecture.
This area has convenient access to various activities, such as swimming and surfing. The projectis being undertaken in partnership withLANDIC Hotel & Resort Co., Ltd.

• Facing the beautiful row of ginkgo trees that provides the sense of thechanging seasons which is beyond the historic Sankozaka Slope, it islocated in Shirokane 4-chome with peaceful and quiet surroundingsthat make you forget it is in central Tokyo.
• All 55 units sold out (delivery in March 2023).

Le JADE Cross Chiyoda Jimbocho• It is in a location with good traffic convenience being a four-minute
walk from Jimbocho Station on the Tokyo Metro Hanzomon, Toei
Mita and Toei Shinjuku Lines as well as in walking distance from
Kudanshita Station and Suidobashi Station.
• Toho Gakkai Main Building is still used as the main building of Toho
Gakkai, founded in 1947 under the supervision of the Ministry ofForeign Affairs with an aim to develop academic studies of Eastern

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ES-CON JAPAN Annual Report 2022

culture in Japan, growth of cultures of Eastern countries and international cultural exchange. It is designated as a historically important building for the scenic development of Chiyoda Ward, Tokyo. Le JADE Cross Chiyoda Jimbocho
is a property developed in an integrated manner with Toho Gakkai Main Building in an adjacent site of the former
Tokyo Gakkai New Building (demolished in September 2021) together with an office.
• Through this mix-use development, while succeeding the historical value that Toho Gakkai Main Building has, it willrealize an ideal life distinctive in Central Tokyo.

Minato-ku Nishi-Azabu Project (tentative name)• It is located in the vicinity of several areas in Tokyo such as Minami-Aoyama, Omotesando, Hiroo and Roppongi.

Area Development Status
Le JIAS Ohashi• First condominium in Kyushu area.
• It has access to Nishitetsu Fukuoka (Tenjin) Station in a six-minutetrain ride (the quickest) and is in a location with high traffic convenience with bus transportation to Hakata and Fukuoka Airport.
• With 140 units, it was developed with the concept of living withnature in a city.

Overseas BusinessAugust 2021: Waikiki Galleria Tower, a Mixed-Use Facility in Waikiki, Hawaii
Participation and Investment in Value Enhancement Business
Invested and participated in the value enhancementbusiness of the property that was led by Black Sand
Capital, LLC, a real estate investment advisory company. Furthermore, as a business advisor to the project,
we provide advice and support on the development,
design, and operation and management of the entire
property.

September 2021: Investment in Crow Holdings Realty Partners IX, L.P.
Invested in a real estate investment fund that invests in a wide variety of real estate sectors across the U.S.,
centering on rental apartments and logistics facilities.

Grand Le JADE Shirakabe Getsuronotei/Rinzennotei• The first and second properties in Chubu area.
• Joint projects with Chuden Real Estate Co., Inc., a subsidiary of
Chubu Electric Power Co., Inc.
• A location with rare value along Shirakabe-cho Suji Street, a mainstreet of the area designated as Shirakabe/Chikara/Shumoku
Townscape Preservation Area. An area where modern Westernstyle buildings and Japanese-style buildings remain together, withthe remnants of former samurai residences inherited from Edo
Period, creating an excellent townscape.

Product Plan with High Added Value Utilizing the Locational Characteristics

March 2022: Investment in Agya Ventures Fund L.P.
To further expand ES-CON Japan Group’s business domain and create innovation through efforts such as
strengthening information gathering on promising overseas real estate tech companies.

Participation in the Detached Houses Development Project in Thailand
Invested and participated in a project to develop detached houses (the “Project”) promoted by Britania PublicCompany Limited, a subsidiary of Thai real estate developer Origin Property Public Company Limited (the“Origin”). We will continue to globally implement a multifaceted real estate business that can contribute tosociety.

OST Residence Karuizawa• While being in a highly convenient location in terms of access, with an approximate eight-minute car drive from
Karuizawa Station on the JR Hokuriku
Shinkansen, which can be accessed from
Tokyo in about an hour, it is surroundedby nature with a view of Mt. Asama.
• Won FY2022 Good Design Award.
• All 33 units in total have already beendelivered.

Kanagawa Prefecture Miura-gun Hayama-machi Project (tentative name)• A development project in a location with an expansive view of Morito Kaigan Beach.
• Product planning with highly added value fully utilizing the natural environment.

21

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ES-CON JAPAN Annual Report 2022

E nvironment

ESG Initiatives
One of our key management strategies is addressing social issues through the promotion of ESG initiatives.
Centered on the “ESG Promotion Group” and the “Health & Culture Fostering Team” designed to promotehealthy management further, we will promote company-wide efforts and focus on enhancing essential company value that cannot be measured by financial information alone.

Continuous and Proactive Development of Environmentally Friendly ZEH-Compatible Housing

ESG Management Philosophy
Under our corporate slogan of “IDEAL to REAL” (bringing ideals into reality to create a new future), we seek
to realize a sustainable society and sustainable growth by addressing social issues through the promotion of ESG
initiatives as a life developer creating ideal living, in response to changing needs over time.

*ZEH (Net Zero Energy House) is a house aiming to make theannual primary energy consumption zero by introducing renewable energy after realizing significant conservation of energy
while maintaining the quality of the indoor environment withsignificant improvement in the thermal insulation performance ofthe outer building skin as well as the introduction of a highly
efficient equipment system.

Basic Policy on ESG

Acquisition of Environmental Certifications

We strive to grow as a company that meets the requirements set by society, in compliance with laws and regulations regarding environment, social and governance (ESG), and remain committed to our promises andthrough the promotion of ESG initiatives.

GRESB Developer Assessment

Environment

SocialGovernance

We will continue to make the most of the development know-how of a general developer and proactively work on the development of environmentallyfriendly ZEH condominiums.

Le JADE Okurayama, which
won the Good DesignAward for Fiscal 2021

Le JADE Yao Sakuragaoka

Le JADE Honkawagoe
Koedo TerraceNEW

We have been participating in GRESB, an annual benchmark assessment measuring ESG considerationin the real estate sector, every year since 2018. In fiscal 2022 (January 1 – December 31, 2021), we received
a rating of 2 Stars for the GRESB Real Estate Assessment Development Benchmark as well as a GreenStar distinction for the fourth consecutive year. We will keep up proactive activities to boost ratings.

DBJ Green Building Certification➊ Creating new environmental value
through next generation urban
development and other initiatives
aimed at realizing a carbon-neutral society by 2050.

➊ Contributing to regional revitalization and promoting the creation of
local communities through urban
development to create a new andbrighter future.

➋ Promoting real estate development
and business activities that accountfor the environment above all else.

➋ Creating working environments inwhich employees can demonstrate
the best of their abilities while
engaging in rewarding work andpromoting diversity so that all
human resources can thrive.

➌ Creating environmental value andbusiness value through taking on
the challenges of new businessdomains based on environmental
themes.

➌ Contributing to solutions to social
issues in areas such as medical careand welfare in response to declining birthrates and an aging population; and supporting safe andcomfortable living in local areas.

➊ Enhancing timely, appropriate, andfair disclosure of management
information.
➋ Promoting a governance system tosecure stability, soundness, andtransparency of management.
➌ Aiming to strengthen risk management in order to respond toincreasing risks due to the expansion and diversity of businesses.
➍ Engaging in business activities basedon a respect for the human rights
of all in accordance with the
Corporate Ethics Charter.

➍ Promoting business development torealize the SDGs globally throughthe development of overseas
business.

Contribution to the realization of a sustainable society

23

DBJ Green Building Certification is a certification system established by the Development Bank of Japan (DBJ) in April
2011 to support environmentally and socially conscious real estate properties (“Green Buildings”). It supports these initiatives by evaluating and certifying socially and economically desirable properties based on a comprehensive assessment,
which includes not only their environmental performance but also their responsiveness to various stakeholder needs, suchas disaster preparedness and consideration of the community. Two of the five properties in total that have acquired certification were developed by us, while the operation and management of all five are handled by our subsidiary ES-CON
Property.

tonarie Toga-Mikita

tonarie Minamisenri

tonarie Yamato-Takada

tonarie Seiwadai

Asumigaoka Brand New Mall

CASBEE Real Estate Certification
We received the highest rank of “S” in CASBEE Real Estate Certification for “tonarie Fujimino (former Soyoca Fujimino)(Fujimino City, Saitama),” a retail facility we own, from an assessment and certification organization of CASBEE certified
by the Institute for Building Environment and Energy Conservation. Comprehensive Assessment System for Built

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ES-CON JAPAN Annual Report 2022

Environment Efficiency (CASBEE) evaluates and ranks the environmental performance of buildings. It is a system thatcomprehensively assesses the quality of a building, considering factors such as comfort, visual impact on the area, energy
savings, and the use of environmentally friendly materials and equipment. CASBEE Real Estate Assessment was developed
for the purpose of utilizing the results of the environmental assessments of buildings in CASBEE in real estate assessments. Buildings
are scored in the five assessment items of “1. Energy and greenhousegas,” “2. Water,” “3. Use of resources and safety,” “4. Biodiversity
and site,” and “5. Indoor environment,” and one of the four ratingsof “S,” “A,” “B+,” and “B” is given based on such score.

SocialDevelopment and Operation of Community-Based Commercial Facilities
We develop and operate the “tonarie” series of community-based commercial facilities in the form of neighborhood shopping centers, such as “tonarie Yamato-Takada,” “tonarie Toga-Mikita,” “tonarie Seiwadai,” “tonarie Minamisenri,” “tonarie
Utsunomiya,” and “tonarie Yokkaichi.” We will continue to engage in community-based commercial development thatwould be loved by the local people and become the pride of the area in the hope of contributing to community-building
and regional revitalization.

tonarie Fujimino“EcoAction 21” Certification

Events Involving Locals and Tenants

EcoAction 21 is an environmental management system for proactively and effectively engaging in environmental management such as the reduction of CO2 emissions. It aims for continuous actions based on a PDCA cycle. By continuously
conducting environmentally friendly management through EcoAction 21 activities, we can expect benefits on the management front, including reduction of costs and improvement in productivity, as well as enhanced corporate value, while
fulfilling our social responsibility to reduce environmental burden.

Construction and Operation of “Techno Farm Fukuroi,”a Vertical Farm Utilizing Fully Artificial Light

Blue Sky Concert (tonarie Seiwadai)

Furumai rice cake event (tonarie Yamato-Takada)Music festival (tonarie Yamato-Takada)International refugee support campaign(tonarie Yamato-Takada)

Bicycle theft prevention day campaign(tonarie Yamato-Takada)Installation of AEDs in facilities(tonarie Minamisenri, tonarie Seiwadai, tonarie
Toga-Mikita, tonarie Yamato-Takada)Free bus service for local residents operated bya nearby social welfare corporation(tonarie Seiwadai)

Letter of appreciation from Kawanishi City’s(Hyogo Prefecture) Blood Donation Promotion
Council for regular blood donation promotion
activities (tonarie Seiwadai)Monthly “Hitoyasumi Café” for caregivers andreceivers offering consultation with a comprehensive regional center (tonarie Seiwadai)Society-Enhancing Activities

As previously mentioned, we are collaborating with Chubu ElectricPower and Spread to develop Techno Farm Fukuroi, which will be theworld’s largest vertical farm utilizing fully artificial light and capable ofproducing 10 tons of lettuce per day. The three companies including
ES-CON JAPAN will solve issues in food and agricultural fields through the plant factory business while also contributing
to the realization of a sustainable and livable society and the achievement of SDGs by making efforts towards decarbonization such as the proactive use of green energy and effective use of CO2 in the process of cultivation.

Efforts to Promote the Use of Wood in 20th Asian Games Aichi-Nagoya 2026 Athletes’
Village site post- Games Project
The consortium has entered into the “Agreement on the Promotion of the Utilization of Wood in Public Buildings” with
Aichi Prefecture. We will make efforts to contribute to decarbonization through the project, such as active utilization ofwood produced in Aichi Prefecture.

Awarded Osaka Eco-Friendly Construction Award, Residential Section
In January 2022, the condominium “Le JADE Senri Aoyamadai (Suita City, Osaka Prefecture; 152 units intotal)” won the Osaka Eco-Friendly Construction Award, Residential Section for the fiscal year 2021 (hosted
by Osaka Prefecture and Osaka City). This was the first time wewon the award, which recognizes clients and designers of construction projects that are exemplary in terms of environmental
consideration of buildings under the aim of promoting the spreadof environmentally friendly buildings and raising awarenessamong residents of Osaka Prefecture.

25

Received Certification as
an “Excellent Health Management Corporation 2023”
We are promoting health management, believing that the health of our employees is the cornerstone of our businessactivities and an essential element for our sustainable growth. As a result, in March 2023, ES-CON JAPAN was certified
as an “Excellent Health Management Corporation” mainly for its efforts to promote and enhance employee health,improve work comfort, and diversity.

26

ES-CON JAPAN Annual Report 2022

GovernanceBusiness Improvement Order Issued to ES-CON ASSET MANAGEMENT

Establishment of Nomination and Remuneration Advisory Committee
In January 2020, we established the“Nomination and Remuneration Advisory
Committee” for the purpose of strengthening the independence and objectivity offunctions as well as the accountability of theBoard of Directors with regard to nomination and remuneration of directors andother matters. We have ensured fairness andtransparency in selecting directors and theircompensation.

Nomination and Remuneration
Advisory Committee
President &Representative
Director

Independent
officer

Drafts generalshareholder meeting
proposals forappointment/dismissal

Drafts appointment/
dismissal proposals
Executive officers

Independent
officerIndependent
officer

Directors and auditors

Decides draft
proposals

Individual remuneration proposals for
non-Audit Committee member directors
Officer remuneration system/
remuneration level/evaluation system

OutsideNurturing Successors
We also launched initiatives for a succession plan called the candidate successor system. We appointed a total of sevenemployed executive officers in January 2023.

Diversity of the Board of Directors
ES-CON JAPAN’s Board of Directors consists of ten members: three executive directors, three non-executive directors,
and four directors who are also members of the Audit Committee. In order to improve management supervisory functions,the three directors who are non-executive directors or three directors that are also members of the Audit Committee areoutside directors, of which five are independent outside directors. The President and Representative Director serves as theBoard chair.

Establishment of Compliance Office
In October 2022 ES-CON JAPAN established the Compliance Office directly under the President. The Compliance
Office is directly under the President and led by a Compliance Officer (Kenji Fujita, Director and Head of Management
Division), and will work to clarify management’s stance on legal compliance throughout the Company and the Groupand to thoroughly strengthen promotion of compliance management.
Board of Directors
President and Representative Director
Nomination and Remuneration Advisory Committee
Management Division President’s Office

ESG Promotion GroupE TeamS TeamLaunched in July 2021

G TeamCoordinate

Coordinate

ES-CON ASSET MANAGEMENT Ltd. (hereinafter, “EAM”), a group company of ES-CON JAPAN,
received injunctions to suspend business operations and to institute improved practices from the Financial
Services Agency on July 15, 2022. EAM submitted a report on improved practices to and accepted by the
Financial Services Agency on August 15, 2022.
EAM will, in consultation with its parent company ES-CON JAPAN and ES-CON JAPAN’s parent company Chubu Electric Power, further strengthen their legal compliance and internal control systems, as describedin the business improvement report, and endeavor to realize fair and appropriate business operations in orderto regain the trust of all stakeholders.

Health & Culture Fostering Team

Background and Details of Administrative Disposition
Business Suspension Order
Prohibition of entering into new asset management agreements and prohibition of giving management instructions concerning the acquisition of real estate (including real estate trust beneficial interests) (from July 15, 2022 to October 14,
2022)
Business Improvement Order(i) To fully explain the details of this administrative disposition to the Investment Corporation’s unitholders concerning
this matter and take appropriate measures.
(ii) In order to realize fair and appropriate business operations as a management company of investment corporation
asset, to clarify its management stance regarding compliance with laws and regulations, etc., to establish a responsible
compliance system and internal control system run by its management team, and to review its methods of business
operation to steadily achieve these objectives.
(iii) To investigate the cause of this incident and then formulate concrete measures to prevent recurrences, including
establishing an adequate framework for managing conflicts of interest, such as clarifying the internal processes forverifying the appropriateness of decision-making concerning the investment management business.
(iv) To clarify where responsibility lies, including that of management, based on the results of this inspection.
(v) To report in writing by August 15, 2022 on the state of response regarding items (i) through (iv) above and to provide
written reports as required until all the responses have been completed.
Facts Leading to the Administrative Disposition• Improper attempts to undermine the independence of a real estate appraiser• Improper real estate appraiser selection process
These were found to be in violation of the “duty of loyalty” stipulated in Article 42, Paragraph 1 of the Financial Instruments
and Exchange Act.
Accordingly, the following measures are taken.
• Change in the composition of the Board of Directors• Transition to a company with Audit and Supervisory Committee• Internal Audit Department has been reorganized into a subordinate organization of the Audit and Supervisory
Committee• Change of members of the Investment Committee and Compliance Committee

Coordinate

Related departments

27

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ES-CON JAPAN Annual Report 2022

Management: Directors, Auditors and Executive Officers

Tomohiko Egashira

Hiroto Mizobata

Masayoshi Nishitake

Kenji Fujita

Takatoshi Ito

Minoru Nakanishi

Takatoshi Ito President & Representative Director

Atsushi Kawashima Director

September
February
March
November
March
JanuaryMay
AugustJuly
November
September
July
July

2001
2006
2007
2010
2011
2012
2013
2013
2014
2014
2016
2018
2019

March
March

DecemberJanuary
October
OctoberJanuary

2019
2020
2020
2021
2022

Joined ES-CON JAPANAppointed Executive Officer
Appointed Managing Director
Appointed Head of Business Division
Appointed President and Representative Director (present post)
Appointed Head of Tokyo OfficeAppointed President and Representative Director at ES-CON PROPERTY
Appointed Head of Development Division
Appointed Director at ES-CON ASSET MANAGEMENT
Appointed President and Executive Officer at ES-CON JAPAN (present post)
Appointed Director at ES-CON LIVING SERVICE
Appointed Director at ES-CON PROPERTY
Appointed Director at One’s Own House Co., Ltd. (currently ES-CON HOME)
Appointed Director at Rise Home Co., Ltd. (currently ES-CON CRAFT)
Appointed Director at ES-CON GLOBAL WORKS
Appointed member of Nomination and Remuneration Advisory Committee at ES-CON JAPAN (present post)
Appointed Director at Ryomon Co., Ltd. (present post)
Appointed Director at Picasso Co., Ltd. (present post)
Appointed Director of FUEL Co., Ltd.

2021
2023

Atsushi Kawashima

March
March

2021
2023

Hiroaki Hattori Director
March

2023

Appointed Outside Director at ES-CON JAPAN (present post)
Appointed member of Nomination and Remuneration Advisory Committee (present post)

Masayoshi Nishitake Full-Time Auditor [Director]
March

2020

Appointed Outside Director (Full-Time Auditor) at ES-CON JAPAN (present post)
Appointed member of Nomination and Remuneration Advisory Committee

Tomohiko Wakayama Auditor [Director]
March

2023

Appointed Director (Auditor) at ES-CON JAPAN (present post)

March
March
January

December
October
OctoberJanuary

2019
2020
2021
2023

Kenji Fujita Director
March

2019

January
January
March

2020
2023
2023

Appointed Director at ES-CON JAPAN (present post)
Appointed Executive Officer (present post)
Appointed Head of General Affairs Department
Appointed Head of President’s OfficeAppointed Head of Management Division (present post)
Appointed Director at ES-CON GLOBAL WORKS (present post)

Tadashi Fukuda

Appointed Outside Director at ES-CON JAPAN (present post)
Appointed member of Nomination and Remuneration Advisory Committee (present post)

August
June
March
May
AugustJuly
November
March

Joined ES-CON JAPANAppointed Executive Officer (Head of Finance and Accounting Department)
Appointed Director
Appointed Director at ES-CON PROPERTY
Appointed Head of Management Division at ES-CON JAPANAppointed Director at ES-CON ASSET MANAGEMENT
Appointed Executive Officer at ES-CON JAPANAppointed Managing Director at ES-CON JAPANAppointed Managing Executive Officer
Appointed Director at ES-CON LIVING SERVICE
Appointed Senior Managing Director at ES-CON JAPAN (present post)
Appointed Senior Executive Officer (present post)
Appointed Director at ES-CON GLOBAL WORKS
Appointed Director at Ryomon Co., Ltd. (present post)
Appointed Director at Picasso Co., Ltd. (present post)
Appointed Head of Management Planning Division at ES-CON JAPAN Ltd. (present post)

Tomohiko Wakayama

Keiko Otsuki Director

Hiroto Mizobata Auditor [Director]

2011
2012
2013
2013
2013
2014
2014
2015

Hiroaki Hattori

Appointed Outside Director at ES-CON JAPAN (present post)
Appointed member of Nomination and Remuneration Advisory Committee (present post)

Minoru Nakanishi Senior Managing Director

September 2016
March
2017

29

Keiko Otsuki

2015
2016
2020

Appointed Outside Auditor at ES-CON JAPANAppointed Outside Director (Auditor) (present post)
Appointed member of Nomination and Remuneration Advisory Committee

Tadashi Fukuda Auditor [Director]
March

2020

Appointed Outside Director (Auditor) at ES-CON JAPAN (present post)
Appointed member of Nomination and Remuneration Advisory Committee

Tomohiko Egashira Managing Executive Officer
April
January
March

2002
2016
2017

July
October
March

2018
2021
2022

Joined ES-CON JAPANAppointed Head of Development Division (present post)
Appointed Managing Executive Officer [present post]
Appointed Managing Director
Appointed Director at ES-CON PROPERTY
Appointed Director at Picasso Co., Ltd. (present post)
Appointed Director at Ryomon Co., Ltd. (present post)

Executive Officers (*indicates concurrent with directorship)

Takatoshi Ito*
Minoru Nakanishi*
Tomohiko EgashiraKenji Fujita*

Yoshiro Kato
Tadashi Tanaka
Katsushi Wakayama
Megumi Nakadozono

Akira Mizunoya
Tomohito Nakata
Hiroyuki Yamato30

ES-CON JAPAN Annual Report 2022

Management Policy
1. We will use our information networks, planning ability and product development expertise to tap theunlimited potential of real estate and create new value that thoroughly satisfies our clients.
2. We will rely on our strong defense of operations management revolving around ROA and thorough management of cash flow and risk to achieve a strong offense in management that is always one step ahead.
3. We will become an elite team of professionals with an unchanging ability to swiftly and deftly respond toa rapidly-changing society.
4. We will always show respect and gratitude to our colleagues, whether inside or outside of the company,
and build and maintain excellent collaborative relations.
5. We will prioritize compliance and governance, bolstering our internal auditing system, and form an organization with great bottom-up communication.

Direction and Corporate GovernanceCorporate Slogan
IDEAL to REAL
Ideals are the very best of what can be made real, and what we seek to be is a company that brings ideals into
reality to create a new future. Whether the ideal city, ideal residence, or ideal living environment, we use realestate development to give form to our customers’ wishes. From residence to retail, asset management to operational management, we propose and develop spaces where people naturally gather, want to go home to, andtake pride in. From ideal to real – real estate.
Corporate Philosophy
How should we live each day? How should we participate in society? And through this participation, what
fruits can we bear for society that translate into the happiness we each pursue? To answer these questions, ourmanagement style seeks to provide a foundation upon which employees can earnestly build toward individual
self-realization while aiding and encouraging one another.
Corporate Vision
To Be A Life Developer
To develop not only the buildings but also the lives of those who live in them, thinking of their happiness – thisis the kind of life developer we seek to be. Through solutions proposed by cross-departmental teams made upof the best and brightest, we create richness unprecedented in the real estate industry, connecting people withpeople and communities with the future.
Corporate Mission
To Develop “New Norm Neighborhoods”
To create community-rooted value and continue to add to it over time, building ‘small-town communities’ thatare not rural but neighborhoods that residents nevertheless take pride in, love and care for.

31

To create not just buildings but lifestyles, not just towns but interactions, that get more attractive the longer
people live there – these are the kinds of places we want to spread across Japan.
System of Corporate Governance
ES-CON JAPAN boasts an Audit Committee and a structure whereby the implementation, management,
supervision and auditing of work are overseen by the Board of Directors and the Audit Committee.
(1) Board of Directors
The Board of Directors consists of ten members: three executive directors, three non-executive directors, andfour directors who are members of the Audit Committee. (To enhance management oversight functions, six
directors of the non-executive directors and directors who are members of the Audit Committee are external
directors, of which five are independent external directors. The Board is chaired by the President andRepresentative Director.)• In principle, the Board of Directors meets at least once a month to enhance management oversight functions throughthorough deliberation and review of important matters.
• To secure speed and dynamism in business execution, the Articles of Incorporation require the delegation of decision-making on important matters of business execution to executive directors. The scope of such delegation is strictly
managed in accordance with monetary and other standards established by the Board of Directors. The state of theexecution of important delegated business matters is reported to the Board of Directors without delay.

(2) Audit Committee
To enhance management oversight functions and its independence, the Audit Committee consists of four
members, three of which are external directors. (Two of them are independent external directors and two are
full-time members.)• In principle, the Audit Committee meets once a month.
• Audit Committee members engage in the periodic exchange of perspectives with the President and Representative
Director and, if necessary, conducts interviews with members of senior management, including executive directors,
striving to ascertain the state of business execution and related issues in individual business departments.
• The full-time Audit Committee member attends important Company meetings, such as periodic meetings of theManagement Committee, of which main members are executive directors, as well as head office meetings attended byexecutive directors and core personnel of individual business departments, to share information on the state of management and progress with business plans.
• They review important documents such as circulars for approval, and collaborate with the Accounting Auditor and theInternal Auditing Office to audit the legality and validity of the directors’ performance of duties. In addition, it
strengthens governance by selecting two full-time Audit Committee members and making one of them the chief Audit
Committee member.

(3) Nomination and Remuneration Advisory Committee
The Nomination and Remuneration Advisory Committee deliberates and determines the nomination andremuneration of directors as an advisory body of the Board of Directors.
The committee shall be composed of members, of which at least more than half shall be outside directors,
and thus strengthen the independence and transparency concerning nominations and remuneration.

32

ES-CON JAPAN Annual Report 2022

Reasons for the Corporate Governance Structure
ES-CON JAPAN believes the present system and organization of corporate governance is appropriate because
it contributes to the sustainable improvement of corporate value.

Company Overview: ES-CON JAPAN Ltd.
Tokyo Head Office
20F The Okura Prestige Tower
2-10-4 Toranomon, Minato-ku, Tokyo, 105-0001 Japan
TEL: +81-3-6230-9303
FAX: +81-3-6230-9304

1. The supervision and effectiveness of the Board of Directors are strengthened by having directors who aremembers of the Audit Committee possess voting rights at Board of Directors’ meetings.
2. Delegation of important business to executive directors ensures promptness, mobility, and flexibility in
execution, preventing loss of business opportunities.

Osaka Head Office

3. Directors who are members of the Audit Committee are involved in decision-making regarding nomination and remuneration of other directors based on their right to state their opinions on the process,enhancing its transparency.

13F Meiji Yasuda Life Insurance Osaka Midosuji Building
4-1-1 Fushimimachi, Chuo-ku, Osaka, 541-0044 Japan
TEL: +81-6-6223-8050
FAX: +81-6-6223-8051

Through the above, we believe that the current structure is optimal for contributing to sustainably increasing
our corporate value.

Nagoya Office

Diagram of Corporate Governance Structure

5F Hirokoji Sakae Building
2-4-1 Sakae, Naka-ku, Nagoya-shi, Aichi, 460-0008 Japan
TEL: +81-52-218-4820
FAX: +81-52-218-4821

General Meeting of Shareholders
Audit Committee
Board of Directors

Audit Committee OfficeNomination andRemuneration
Advisory Committee

Kyushu OfficeInternal Auditing Office

9F Yasuda No. 7 Building
13-15 Kamikawabatamachi, Hakata-ku, Fukuoka, 812-0026 Japan
TEL: +81-92-283-1531
FAX: +81-92-283-1532

Accounting Auditor(s)Executive Entities
President

Hokkaido Office

Management Committee

13F Nissay Sapporo Building
4-1-1 Kita 3-jo Nishi, Chuo-ku, Sapporo-shi, Hokkaido, 060-0003 Japan
TEL: +81-11-211-1928
FAX: +81-11-211-1936

Risk Management Committee
Departments

Established: April 18, 1995
Capital: 16,519 million yen (as of end of 2022)
Revenue: 99,431 million yen (consolidated; fiscal year ended December 2022)
Number of Employees: 398 (consolidated; as of end of 2022)
255 (non-consolidated; as of end of 2022)
Businesses: Real estate sale
Real estate leasing
Real estate planning, brokerage and consultation

33

34

ES-CON JAPAN Annual Report 2022

Property Lineup
Le JADE Tsukuba Station Front(Tsukuba City, Ibaraki Prefecture) (218 units in total)[Condominium]- To realize a compact city that integrates “retail, office, and residential”
in the block in front of Tsukuba Station, it was developed in a uniform
manner with the adjacent “tonarie Tsukuba Square,” comprised of thecommunity-based shopping center “tonarie Q’t,” “tonarie MOG” and“tonarie CREO” (office floors on 4F to 6F), developed by ES-CON JAPAN.
- In a location that is a three-minute walk to Tsukuba Station, the starting
station of Tsukuba Express, via directly-connected pedestrian deck
allowing direct access to Tokyo.
- Cafe Apartment TSUKUBA, the second dining café developed and operated by the Group, newly opened within the site.

Grand Le JADE Shirakabe Rinzennotei (Higashi-ku, Nagoya City) (34 units in total)[Condominium]- A location with rare value along Shirakabechosuji street which is a main street of the area designated as “Shirakabe, Chikara and Shumokucho TownscapePreservation District,” where modern Western-style buildings and Japanese-style buildings remain together with the remnant of former samurai residences
inherited from Edo Period and excellent townscape is created.
- For a private area, it is designed to have a comfortable space by measures such as using natural stones in its entrance and indoor corridors as well as making
the ceiling height of the living and dining spaces 2,550mm and installing ceiling mounted air conditioners. The superior and comfortable living environment appropriate for the quiet residence by preparing parking spaces equivalent to 150% of the number of units in addition to concierge counter in the common area.

Le JADE bio Makuhari Hongo(Hanamigawa-ku, Chiba City) (70 units in total)

Le JADE Gifu Kogane Koen
(Gifu City, Gifu Prefecture)(38 units in total)[Renovated Condominium]- In a location with high transportation convenience interms of commuting and traveling.

[Condominium]- Reformed to a bright and open residence by renovating
the whole condominium, including the common area toprovide comfortability and functionality similar
to newly-built condominiums.

- It is in a location that combines convenience with natural environment withgreen-rich Kogane Koen Park, undergoing a large-scale renovation, in front of
the site as well as various retail storesand medical, educational and public
facilities within walking distance.
- The superior living environment witha sense of freedom full of rich views
with all residences facing the Kogane
Koen Park with three residences on one
floor and adopting an out-pole designthat keeps pillars out of the rooms aswell as a wide-span design.

Le JADE Kyoto Shijo Omiya(Shimogyo-ku, Kyoto City) (43 units in total)[Condominium]- In a location with excellent transportation convenience for accessto the center of Kyoto.
- It has an urban open exterior design by brightening the surrounding area by adopting a glass wall and white color-based exterior. In
addition, it is a high-class living space by establishing rooftop terrace as common area in addition to creating spacial room for indoor
space by adopting a design without a balcony.

Le JADE Urawa(Urawa-ku, Saitama City)(44 units in total)

Le JADE Kyoto Horikawa(Shimogyo-ku, Kyoto City) (60 units in total)[Condominium]- While having high living convenience being in the center of Kyoto with mix-use commercial facilities, public facilities and other city functions, it is in a satisfying locationthat adds a zest to the life with the familiar historic sites of Kyoto, etc.
- It produces a peaceful space by incorporating a design that has a unique sense of
Kyoto. Also, it is an open living space full of light and ventilation.

Le JADE Hirano(Hirano-ku, Osaka City) (58 units in total)[Condominium]- In a location with high transportation convenience that allows
direct access to the center of Osaka such as Tennoji Station and
Higashi-Umeda Station.
- A relaxing living space pursuing ease of living including factors
with a residential plan, having all residences facing the south, four
units on one floor, and placing green-rich plantations.

[Condominium]- It is in a location suitable forchild rearing with commercial
and traditional educational facilities nearby.
- It provides a rich life by introducing equipment and facilities
that reflect the time such as astudy with booths for remote
working and bicycle sharing.

Le JADE Takatsuki Nishimakami(Takatsuki City, Osaka Prefecture) (43 units in total)[Condominium]- In a location with high transportation convenience allowing direct access to centers ofboth Osaka and Kyoto within 15 minutes.
- It creates a comfortable living space in harmony with nature, having a play lot whereresidents can easily interact with each other in its common area, all residences facing
south, preparing 19 types of plans including such with exclusive terrace and more.

35

Le JADE Uehonmachi (Tennoji-ku, Osaka City) (56 units in total)[Condominium]- In a location that has high transportation convenience that can directly access the
major areas of Osaka, such as Namba and Tennoji, within five minutes by train.
- While the entrance approach and entrance hall adopt a chic and relaxing design, it isa living space suitable for urban hideout securing privacy.

36

ES-CON JAPAN Annual Report 2022

Le JADE Takatsuki Bessho(Takatsuki City, Osaka Prefecture) (49 units in total)[Condominium]- In a location with high transportation convenience allowing smooth
access to the centers of Osaka and Kyoto.
- It is in a favorable location that combines urban convenience andrich nature.

Le JADE Takatsuki Minamimatsubara The Front(Takatsuki City, Osaka Prefecture) (74 units in total)[Condominium]- In a location with high transportation convenience that allows direct access to centersof both Osaka and Kyoto.
- Convenient living space with a rich common area such as a conversation lounge thatcan be used as a workspace, a play lot with artificial grass that can be used for exercise
by children and a pleasant chat between residents.

Le JADE Gifu
(Gifu City, Gifu Prefecture)(54 units in total)

Le JADE Kakegawa Ekimae(Kakegawa City,
Shizuoka Prefecture)(83 units in total)[Condominium]- It is located in a place with high transportation
convenience with high rarity being within
five-minute walk from Gifu Station on the JR
Tokaido Main Line and Takayama Main Line,
which is a main terminal station in Gifu
Prefecture, as well as Meitetsu Gifu Station on
the Meitetsu Nagoya Main Line andKakamigahara Line.

[Condominium]- In a favorable location with excellent transportation convenience
using train as well as car allowing
smooth access to Nagoya and Tokyo
in addition to area within Shizuoka.
- The living space with a strong preference for adopting spacious designs
in which furniture can be easily allocated by out-pole design that keeps
pillars out of all unit rooms.

- The surrounding area falls under an urgent
urban renewal area, and is an area where further development is expected in the future as
station front redevelopment and other redevelopments of the block are planned in the future.

Le JADE Kyoto Higashinotoin(Shimogyo-ku, Kyoto City) (42 units in total)

Le JADE Kawagoe
The Residence(Kawagoe City, Saitama
Prefecture) (23 units in total)

Grand Clare Ichinomiya(Ichinomiya City, Aichi Prefecture)(41 units in total)[Condominium]- In a location with excellent transportation convenience to various directions
allowing direct access to major stations
in central Tokyo such as Shinjuku andShibuya, as well as being a five-minutedrive by car to Kawagoe Interchange ofthe Kan-Etsu Expressway.

[Condominium]- In a living environment suitable for child rearing with various
commercial facilities including large commercial facility, supermarket, home improvement store and low-price volume seller
as well as elementary and junior high schools, cram school,park, sports facilities and more nearby.

- In a favorable living environment thatenjoys extraordinary view being close tokura storehouse townscape with theremnant of Edo Period while having highliving convenience with large commercial facilities and other supermarkets
and drug stores in the surrounding area.

- The exterior view and entrance represents high quality with
subdued coloring. The comfortable living space pursuing easeof living by efforts such as realizing abundant lighting and ventilation by adopting allocation plan of having all residences
facing the south as well as wide-span design (with some
exceptions).

[Condominium]- In an attractive living environment fully providing Kyoto’s flavor.
- The living space with strong preference that creates a sense of exclusivity tolive in Kyoto by adopting lattices and split curtains in gate approach to create
Japanese taste.

Le JADE Yao Sakuragaoka(Yao City, Osaka Prefecture) (72 units in total)[Condominium]- In a living environment suitable for child rearing with facilities such as
educational and medical institutions and parks nearby in addition to thelarge commercial facility being within a one-minute walking distance.
- It has acquired ZEH-M Oriented certification for excellent heat insulation
and reduction of annual primary energy consumption, and realizes reduction of utilities fee in an environmentally friendly manner.

37

Le JADE Times Core Kawagoe(Kawagoe City, Saitama Prefecture) (56 units in total)[Condominium]- In a location with high transportation convenience suitable for accessto major stations in Tokyo.
- The living space with strong preference even in details of various
places including realization of spacial room and sense of freedom withresidential plan of having four residences on one floor and all residences
being corner units.

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ES-CON JAPAN Annual Report 2022

Financial Section
The Management Discussion and Analysis, Financial Statements and Notes to Financial Statements contained in this report are outside
the scope of the auditing procedures under the Financial Instruments and Exchange Act of Japan, and have not been audited. However,
the original financial data and descriptions in Japanese used as the base for the translation of this English version have been audited.

Operating Results
In the real estate sales business, we achieved steady progress in condominium sales while selling revenue-generating realestate, etc. In the real estate leasing business, we made the Picasso Group our subsidiaries to secure stable earnings bystrengthening the leasing business. In the real estate planning agency and consulting business, we leveraged our strengthin planning to focus on non-asset, high-margin businesses.
Sales

Operating Income/Ordinary Income(Unit: million yen)Management Discussion and Analysis

54,32554,325

72,106
72,10699,431
99,43177,30877,30879,01779,017

FiscalFiscal2020
2020

FiscalFiscal2021
2021(Unit: Operating
million yen)
IncomeOperating
IncomeOrdinary Income
Ordinary Income

12,912
11,810 12,202
12,912
11,561
11,164
10,498
11,810 12,202
11,561
11,164 10,381
10,498
9,099
10,381
9,099

15,492
15,492
14,012
14,012

Overview
In the fiscal year ended December 2022 (Fiscal 2022), despite concerns over the impacts of the spread of COVID-19,
thanks in part to the easing of movement restrictions and the development of anti-COVID-19 measures, the Japanese
economy saw steady progress towards the normalization of economic and social activities and has been on a mild recovery
trend centered on domestic demand.
In the real estate industry, as work-style reform and new ways of living, including teleworking, become widespread, themarket remains robust thanks to stable housing demand as well as the effect of underlying support, including the continuation of monetary easing policy. On the hand, we continue to clearly see rising construction costs due to soaring raw
material prices, delivery delays of materials due to the shortage of components, intensifying competition over acquisitionof properties and increasing acquisition costs, etc., and the situation still requires close attention to the effect of these on
the market.
Amid highly unpredictable business circumstances, we aim for sustainable growth by building a firm management basethat can withstand any economic environment to maximize corporate value under the fourth medium-term management
plan “IDEAL to REAL 2023” (the three-year period from Fiscal 2021 to Fiscal 2023) formulated in February 2021 withthe theme of “Transformation and Rapid Progress.”
As to business performance for Fiscal 2022, the second year of the fourth medium-term management plan, sales weregenerally as planned due in part to strong sales of condominiums in the mainstay condominium business with net sales
standing at 99,431 million yen (down 0.6%), operating income at 15,492 million yen (up 10.7%), and ordinary income
at 14,012 million yen (up 14.9%), all compared with the initial plan. However, due in part to an extraordinary loss
recorded in relation to Ryomon Co., Ltd., profit attributable to owners of parent was 7,250 million yen (down 12.6%),
failing to meet the target.
ES CON FIELD HOKKAIDO, the new stadium for the Hokkaido Nippon-Ham Fighters in Kitahiroshima City,
Hokkaido, commenced operations in March 2023. ES-CON JAPAN is participating in the urban development concept
in the large-scale development area called HOKKAIDO BALLPARK F VILLAGE (total development area: approx. 36.7
ha; hereinafter “F VILLAGE”) centered on the stadium, and has been working on the development of “Le JADE Hokkaido
Ballpark” condominium (Kitahiroshima City, Hokkaido Prefecture; 118 units in total have been sold out early), which isdue to be delivered in the same month upon launch of the stadium, and senior residences. Furthermore, we are also conducting development as a project partner for the “Train Station West Exit Area Revitalization Project” in the area around
JR Kitahiroshima Station to create a gateway to F VILLAGE, including a rotary in front of the station. We will continue
to contribute to regional revitalization through our business, thereby achieving sustainable growth.

39

FiscalFiscal2018
2018

FiscalFiscal2019
2019

Net Income Attributable to Parent
7,226
7,226

8,155
8,155

7,663
7,663

FiscalFiscal2022
2022(Unit: million yen)

FiscalFiscal2018
2018

FiscalFiscal2019
2019(Unit: yen)

5,961
5,961

7,250
7,250

FiscalFiscal2019
2019

FiscalFiscal2020
2020

FiscalFiscal
2021
2021

Net Assets
Net Assets
IncomeNet Income 490.08

400.47400.47

FiscalFiscal2022
2022

Results by Segment

FiscalFiscal2018
2018

490.08119.17119.17

FiscalFiscal2019
2019

563.07563.07111.94111.94

FiscalFiscal2020
2020

Activities including selling condominiums and revenue-generating real estate resulted in net sales of 86,531 million yen(up 23.0%) and segment income of 17,006 million yen (up30.4%), all compared with the previous fiscal year.

Real estate leasing business

FiscalFiscal2022
2022

657.50657.50691.87691.87

76.04
76.04

67.48
67.48

FiscalFiscal2021
2021

FiscalFiscal2022
2022

Sales Distribution Ratio by Segment
0.7%

Real estate sales business

FiscalFiscal
2021
2021

Per Share Information

105.98105.98

FiscalFiscal2018
2018

FiscalFiscal
2020
2020

10.2%

1.1%
11.9%

Fiscal2021

89.0%

Fiscal2022

87.0%Real Estate Sales Business

Focus was placed on leasing activities and the property manReal Estate Leasing Business
Real Estate Planning Agency and Consulting Businessagement business in view of enhancement of asset value,
including increase in rental income of owned revenue-generating real estate, resulting in net sales of 11,824 million yen (up 46.1%) and segment income of 4,716 million yen (up39.8%), all compared with the previous fiscal year.

40

ES-CON JAPAN Annual Report 2022

Real Estate Sales Business

Real Estate Leasing Business(Unit: million yen)

(Unit: million yen)

Net Sales
Segment Income(Unit: million yen)

Net Sales
Segment Income

86,531
71,485

Real Estate Planning Agency andConsulting Business
Net Sales
Segment Income

11,824

1,074

Overview of Consolidated Balance Sheet

Fiscal 2021 (as of December 31, 2021) Total assets: 252,771
Assets:

17,006

8,090

13,039

5,527

4,716
152

3,372

2,381

592

228

Non-current assets: 75,830
Property, plant and equipment:
Intangible assets:
Investments and other assets:

70,334

14,257(Unit: million yen)

Net assets: 62,628
Liabilities andnet assets: Shareholders’equity: 62,445

295

Current assets: 176,859
52,7788,275
14,776

Non-current liabilities: 87,619

Fiscal2021

Fiscal2022

Fiscal
2020

Fiscal2021

Fiscal2022

Fiscal
2020

Fiscal2021

Current liabilities: 102,523
3,589
82,912—

Total assets increased by 10,958 million yen
Fiscal2022

Fiscal 2022 (as of December 31, 2022) Total assets: 263,729
Assets:Real estate planning agency and consulting business
Proactive efforts were made in such aspects as entrustment with planning, consulting and other services by making the bestuse of planning and multifaceted business-building abilities, resulting in net sales of 1,074 million yen (81.3% from theprevious fiscal year) and segment income of 228 million yen (segment loss of 516 million yen in the previous fiscal year).

Non-current assets: 72,327
Property, plant and equipment:
Intangible assets:
Investments and other assets:

Net assets: 64,144
Liabilities andnet assets: Shareholders’equity: 65,813

Analysis of Financial Position

Current assets: 191,357
52,1397,774
12,413

Cash and deposits:
Real estate for sale:
Real estate for sale in process:Non-current liabilities: 143,894

Long-term loans
payable: 132,810

35,721
4,804
138,968
Current liabilities: 55,690
Short-term loans payable:
Current portion of
long-term loans payable:
Current portion of bonds:

10,061
26,193—

Assets, Liabilities and Net Assets

Status of Cash Flows

Assets at the end of Fiscal 2022 increased by 10,958 million yen compared with the end of Fiscal 2021 to 263,729 million
yen. This was mainly attributable to cash and deposits and inventories increasing by 2,054 million yen and 12,813 million
yen, respectively, and property, plant and equipment decreasing by 3,502 million yen.
Liabilities increased by 9,441 million yen compared with the end of Fiscal 2021 to 199,585 million yen. This was mainly
attributable to long-term loans payable and short-term loans payable increasing by 6,030 million yen.
Net assets increased by 1,516 million yen compared with the end of Fiscal 2021 to 64,144 million yen. This was mainly
attributable to cash dividends paid of 3,669 million yen, while recording profit attributable to owners of parent of 7,250
million yen. As a result, the equity ratio was 25.0% (in contrast to 24.8% at the end of Fiscal 2021).

Cash and cash equivalents (“net cash”) in Fiscal 2022 increased by 2,045 million yen compared with the end of the previous fiscal year to 35,604 million yen (33,559 million yen at the end of the previous fiscal year). The following outlines the
cash flows and the factors of changes in cash flows in Fiscal 2022.

Total Assets/Net Assets
Total Assets
Net Assets

109,747

252,771

132,696

Cash flows from operating activities
Cash flows from operating activities in Fiscal 2022 amounted to net cash provided by operating activities of 1,501 million
yen (net cash used in operating activities of 10,810 million yen in the previous fiscal year). This was mainly attributable to
the recording of profit before income taxes of 10,290 million yen, despite the increase in inventories of 11,104 million yen
and income taxes paid of 3,040 million yen.

Interest-bearing Liabilities(Unit: million yen)

41

33,667
7,541
123,419

Short-term loans payable:
Current portion of
long-term loans payable:
Current portion of bonds:

Long-term loans
payable: 76,533-516
Fiscal2020

Cash and deposits:
Real estate for sale:
Real estate for sale in process:263,729(Unit: million yen)

163,034

149,423
70,661

27,35933,546

38,627

Fiscal2018

Fiscal
2019

Fiscal2020

62,62864,144

Fiscal2021

Fiscal2022

Fiscal2018

85,019Fiscal2019

169,065

98,506

Cash flows from investing activities
Cash flows from investing activities in Fiscal 2022 amounted to net cash used in investing activities of 1,620 million yen(net cash used in investing activities of 29,721 million yen in the previous fiscal year). This was mainly attributable topurchase of investment securities of 513 million yen and purchase of non-current assets of 2,033 million yen.

Cash flows from financing activities

Fiscal
2020

Fiscal2021

Fiscal2022

Cash flows from financing activities in Fiscal 2022 amounted to net cash provided by financing activities of 2,144 million
yen (net cash provided by financing activities of 50,293 million yen in the previous fiscal year). This was mainly attributable to proceeds from and repayments of long-term loans payable and short-term loans payable amounting to net proceedsof 6,030 million yen and payment of cash dividends of 3,668 million yen.

42

ES-CON JAPAN Annual Report 2022

Consolidated Balance Sheet(Unit: million yen)

Fiscal 2021

(as of December 31, 2021)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Notes and accounts receivable - trade, and contract assets
Real estate for sale
Real estate for sale in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
VehiclesAccumulated depreciation
Vehicles, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Deferred assets
Share issuance cost
Total deferred assets
Total assets

43(Unit: million yen)

Fiscal 2022

Fiscal 2021

(as of December 31, 2022)

33,667835—
7,541
123,419
11,396(0)
176,859

35,721
—
1,096
4,804
138,968
10,766(1)
191,357

23,312(1,516)
21,7956(6)
030,840
2
(0)
2
－—
377
(238)
139
52,77822,734(2,353)
20,3809(9)
031,535
2
(1)
1
109
395
(283)
112
52,139

8,217
57
8,275

7,696
77
7,774

6,186
2,467
227
5,932
(37)
14,77675,830

6,279
2,475
352
4,827
(1,521)
12,41372,327

81
81
252,77145
45
263,729

Liabilities
Current liabilities
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Accounts payable - other
Income taxes payable
Advances received
Deposits received
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Provision for directors’ share-based benefits
Provision for share-based benefits
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

Fiscal 2022

(as of December 31, 2021)(as of December 31, 2022)

3,589
82,912
0
2,468
1,653
6,058
5,634
205
102,523

10,061
26,193
0
4,702
3,258
5,201
5,416
856
55,69076,533
2
8,056
135
57
270
2,564
87,619190,143

132,810
1
7,916
186
109
271
2,598
143,894
199,585

16,51912,39634,745(1,216)62,445

16,51912,42438,326(1,457)65,813

371
(36)
334
0
(152)
62,628
252,77179
13
93
0(1,761)64,144
263,72944

ES-CON JAPAN Annual Report 2022

Consolidated Statement of Income andConsolidated Statement of Comprehensive Income
Consolidated Statement of Income(Unit: million yen)

Fiscal 2021

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Advertising expenses
Sales commission
Directors’ compensations
Salaries and allowances
Provision for directors’ share-based benefits
Provision for share-based benefits
Commission fee
Taxes and dues
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Cancellation income
Foreign exchange gains
Share of profit of entities accounted for using equity method
Other
Total non-operating income
Non-operating expenses
Interest expenses
Amortization of share issuance cost
Share of loss of entities accounted for using equity method
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on reversal of subscription rights to shares
Gain on sale of shares of subsidiaries and associates
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Loss on compensation for damage
Provision of allowance for doubtful accounts
Impairment losses
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitLoss attributable to non-controlling interests
Profit attributable to owners of parent(from January 1, 2022
to December 31, 2022)

79,01758,42920,58899,431
72,823
26,607

3,498
1,091
271
2,146
—
12
540
801
1,843
10,206
10,381

3,180
1,110
256
2,574
50
55
620
874
2,393
11,115
15,492

10
101
37
73
54
25
303

1
130
48
287
—
9
478

1,463
27
－—－
95
1,585
9,099

1,895
36
16
9
1,957
14,012

0
0
－—
0

—
0
205
205

0
－—
－—
－—
0
9,099
3,147
180
3,328
5,770
(190)
5,961

0
682
1,483
1,760
3,927
10,290
4,782
(133)
4,648
5,641
(1,608)
7,250(Unit: million yen)

Fiscal 2021

45

Fiscal year ended December 2021 (from January 1, 2021 to December 31, 2021)

Fiscal 2022

(from January 1, 2021
to December 31, 2021)

Consolidated Statement of Comprehensive Income

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

Consolidated Statement of Changes in Equity

Fiscal 2022

Accumulated othercomprehensive income

Shareholders’ equity

Valuation ForeignTotal
difference
currency
Capital Capital Re­tained Trea­share­
onavail­
sury holders’ able-for- transla­
stock surplus earnings sharestion
equitysale
adjust­securities ment
Balance at beginning of current period

6,284

2,088

31,429(Unit: million yen)

(1,348) 38,454

153

Sub­
Total
NonTotalaccumu­ scription controlling net
rightstolatedinterests assets
other sharescompre­hensiveincome

(18)

134

1

37 38,627

Changes of items during period
Issuance of new shares

10,235 10,235

20,47020,470

Dividends of surplus(2,645)(2,645)(2,645)

Profit attributable to owners of parent

5,961

5,961

5,961

205

205

Disposal of treasury shares

73

132

Net changes of items other thanshareholders’ equity

218

(18)

199

(0)

(190)

9

Total changes of items during period

10,235 10,308

3,316

132 23,991

218

(18)

199

(0)

(190) 24,000

Balance at end of current period

16,519 12,396

34,745(1,216) 62,445

371

(36)

334

0

(152) 62,628

Fiscal year ended December 2022 (from January 1, 2022 to December 31, 2022)

(Unit: million yen)

Accumulated othercomprehensive income

Shareholders’ equity

Valuation ForeignTotal
difference
currency
Capital Capital Retained Trea­share­ on avail­ transla­surystock surplus earnings shares holders’ able-fortion
equitysale
adjust­securities ment
Balance at beginning of current period 16,519 12,396 34,745 (1,216) 62,445

371

(36)

Sub­
Total
NonTotalaccumu­ scription controlling net
lated rights to interests assets
other sharescompre­hensiveincome3340(152) 62,628

Changes of items during period
Dividends of surplus(3,669)(3,669)(3,669)Profit attributable to owners of parent

7,250

7,250

7,250

52

79

79

(293)

(293)

(293)

Disposal of treasury shares

27

Purchase of treasury shares by theshare-based payment benefits trust(from January 1, 2021
to December 31, 2021)(from January 1, 2022
to December 31, 2022)

5,770

5,641

Net changes of items other thanshareholders’ equity

218
(8)

(292)
22

Total changes of items during period

(9)

27

199
5,970

(241)
5,399

6,161
(190)

7,008
(1,608)

Balance at end of current period

(292)

50

(241)

(0)

(1,608) (1,851)(241) 3,367

(292)

50

(241)

(0)

(1,608) 1,516

16,519 12,424 38,326 (1,457) 65,813

79

13

93

0

(1,761) 64,144

—

27

3,581

46

ES-CON JAPAN Annual Report 2022

Consolidated Statement of Cash Flows(Unit: million yen)

Fiscal 2021

(from January 1, 2021
to December 31, 2021)

47

Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment losses
Amortization of goodwill
Amortization of long-term prepaid expenses
Amortization of share issuance cost
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for directors’ share-based benefits
Increase (decrease) in provision for share-based benefits
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)Share of loss (profit) of entities accounted for using equity method
Loss (gain) on sale of shares of subsidiaries and associates
Loss on compensation for damage
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in trade receivables and contract assets
Decrease (increase) in inventories
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable - other
Decrease/increase in consumption taxes receivable/payable
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of investment securities
Proceeds from withdrawal of investment securities
Purchase of shares of subsidiaries and associates
Proceeds from sale of shares of subsidiaries and associates
Purchase of non-current assets
Proceeds from sales of non-current assets
Proceeds from purchase of shares of subsidiaries resulting inchange in scope of consolidation
Purchase of shares of subsidiaries resulting in change in scope of
consolidation
Payments of loans receivableCollection of loans receivable
Repayments of guarantee deposits received
Proceeds from guarantee deposits received
Proceeds from divestments
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of bonds
Repayments of lease obligations
Repayments of installment payables
Proceeds from issuance of common shares
Proceeds from disposal of treasury shares
Purchase of treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities
Translation differences on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Fiscal 2022

(from January 1, 2022
to December 31, 2022)

9,099
706
－—
237
27
27
(0)
－—
10
(111)
1,463
(73)
(54)
－—
－—
(0)
0
107
－—
(19,306)
(894)
366
(416)
3,575
439
(1,221)169(5,848)181(1,723)(3,419)(10,810)

10,290
1,256
1,760
522
24
36
1,484
50
52
(132)
1,895
(287)
16
(205)
682
—
0
—
(259)
(11,104)
(16)
1,408
859
(857)
(840)
59
39
6,737
133
(2,328)(3,040)
1,501

(15)
18
(2,265)0－—－—(4,763)
121

(4)
2
(513)
294
(603)
699
(2,033)
46

－—

316

(24,070)

—

(8)
647
(1,120)
1,732－—(29,721)

(117)
1
(769)
1,060
1
(1,620)6,539(5,857)111,250(79,320)
(230)
(1)
(5)
20,361203－—(2,645)50,293(1)
9,760
23,79833,55911,929(2,956)110,273(113,215)
—
(0)
—
—
76
(293)
(3,668)
2,144
19
2,045
33,55935,604

Notes to Financial Statements
1. Organization
ES-CON JAPAN Ltd. (“ES-CON JAPAN” or “the Company”) is a Japanese real estate company established in 1995. It
conducts planning, development and sales of for-sale condominiums, retail properties and other properties; leasing of
owned properties; property management services; for-sale condominium management services; consignment, planning,brokerage and consulting services for real estate-related matters; and real estate investment advisory services. ES-CON
JAPAN was listed on the second tier of the Tokyo Stock Exchange in 2015, and successfully rose to the first tier in June
2016. With a capital increase implemented through third-party allotment with Chubu Electric Power Co., Inc. (hereinafter “Chubu Electric Power”) as the allotee on April 5, 2021, ES CON JAPAN became a consolidated subsidiary of Chubu
Electric Power. Concerning the transition to the new market segments scheduled for April 4, 2022, at Tokyo Stock
Exchange, Inc., the Company has decided to make a transition to the Prime Market.

2. Basis of Presentation
The accompanying consolidated financial statements of ES-CON JAPAN and its consolidated subsidiaries (the “Group”)
are a translation of the financial statements that have been prepared in accordance with the provisions set forth in the
Financial Instruments and Exchange Act of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the applicationand disclosure requirements of International Financial Reporting Standards.
The Company’s accounting period is a twelve-month period, which ends at the end of December each year. Unless otherwise specified, amounts have been rounded down to the nearest million yen in the accompanying financial statements andthe notes thereto. As a result, the total shown in the financial statements and notes thereto do not necessarily agree withthe sum of the individual account balances.

3. Summary of Significant Accounting Policies(1) Consolidation

The Company has eleven consolidated subsidiaries as of December 31, 2022, as follows:
ES-CON Property Ltd.
ES-CON Asset Management Ltd.
ES-CON Living Service Ltd.
ES-CON Home Ltd.
ES-CON Craft Ltd.
ES-CON Global Works Ltd.
Picasso Co., Ltd.
Yuki Sangyo Co., Ltd.
FUEL Inc.
Ryomon Co., Ltd.
ESCON JAPAN THAILAND CO.,LTD.
FUEL Inc., which the Company made its subsidiary by acquiring its shares in the fiscal
year ended December 2022, was included in the scope of consolidation. Meanwhile, thesix companies of Venus Corporation Co., Ltd., Cubic Co., Ltd., Santa Co., Ltd., Hirano
Bussan Co., Ltd., Aria Co., Ltd. and Eikaku Y.K. are no longer consolidated subsidiaries
48

ES-CON JAPAN Annual Report 2022

due to an absorption-type merger conducted with Picasso Co., Ltd. as the surviving company and the six companies as absorbed companies.
Of these consolidated subsidiaries, the accounting period of ESCON JAPAN (Thailand)CO., LTD. ends on November 30. In preparing the accompanying financial statements,
its financial statements as of the date are used, while making necessary adjustments formaterial transactions that took place between December 1 and December 31, the day forsettlement of consolidated accounts.
Furthermore, ESCON USA LLC, ESCON USA II LLC, ESCON USA III LLC and
ESCON USA IV LLC are not included in the scope of consolidation as they are small
companies and their total assets, net sales, net income/loss (equivalent to the Company’s
equity interest) and retained earnings (equivalent to the Company’s equity interest), etc.
do not pose any material impact on the consolidated financial statements.
(2) Equity-method affiliates

The Company has two equity-method affiliates, as follows:
BRITANIA BANGNA KM.39 CO.,LTD.
TSUNAGU Community Farm LLC
BRITANIA BANGNA KM.39 CO.,LTD., of which shares the Company acquired in thefiscal year ended December 2022, was included in the scope of equity-method
accounting.
ORIGIN KNIGHTSBRIDGE THEPHARAK CO., LTD., which had been an equity-method affiliate in the fiscal year ended December 2021, has been excluded from thescope of equity-method accounting as the Company transferred its shares.
Furthermore, ESCON USA LLC, ESCON USA II LLC, ESCON USA III LLC,
ESCON USA IV LLC, and Nishiguchi Building Management Co., Ltd. are not includedin the scope of equity-method accounting as their net income or loss (equivalent to theCompany’s equity interest) and retained earnings (equivalent to the Company’s equity
interest), etc. do not pose any material impact on the consolidated financial statements
and they are of little importance as a whole.

(3) Valuation standard andmethod for significant
assets1) Securities
Other securities
Securities other than shares, etc. without fair value are stated using the market pricemethod (valuation difference is directly charged to shareholders’ equity, and selling costs
are calculated by using the moving-average method).
Shares, etc. without fair value are stated by the cost method using the moving-average method.
However, equity interests in silent partnership, etc. are stated at their net asset value. As
for income and losses from silent partnership, etc., the net amount of income or losses
equivalent to the equity interests are recorded as net sales or cost of sales, respectively,
with the relevant investment securities set as corresponding accounts.
2) Inventories
Real estate for sale is stated using the cost method (the value on the balance sheet is calculated using the method of reducing book value due to a decline in profitability).
Real estate for sale in process is stated using the cost method at net asset value (the valueon the balance sheet is calculated by using the method of reducing book value due to a
decline in profitability).

49(4) Depreciation method forsignificant depreciable
assets1) Property, plant and equipment (excluding leased assets)
The declining-balance method is applied.
However, the straight-line method is applied to buildings (excluding facilities attached tobuildings) acquired on or after April 1, 1998 and facilities attached to buildings andstructures acquired on or after April 1, 2016.
2) Intangible assets (excluding leased assets)
Software for internal use is amortized using the straight-line method over the useful lives(5 years) estimated by the Company.
Trademarks are amortized using the straight-line method over 10 years.
3) Leased assets
For finance leases without any transfer of ownership of leased assets, the straight-line
method is adopted with a residual value of zero, deeming the lease period to be equal tothe useful lives of the assets.

(5) Standards for recording
significant allowances

1) Allowance for doubtful accounts
To prepare for expected losses from bad debts, such as notes and accounts receivable –trade and loans receivable, the Company records estimated uncollectible amounts basedon the historical loan loss ratio for general accounts receivable, and by considering individual collectibility for certain specific receivables such as doubtful accounts receivables.
2) Provision for directors’ share-based benefits
To prepare for granting the Company’s shares to its directors based on its share-based
benefit rules for directors, the Company records estimated amount of share-based benefit
obligations as of the end of the consolidated fiscal year as a provision.
3) Provision for share-based benefits
To prepare for granting the Company’s shares to its employees based on its share-based
benefit rules, the Company records estimated amount of share-based benefit obligations
as of the end of the consolidated fiscal year as a provision.

(6) Recognition of material
revenues and expenses

Standards for revenue recognition
The details of main performance obligations in major businesses concerning revenues
generated from contracts between the Company and its customers and the ordinary time
to fulfil said performance obligations (ordinary time to recognize revenues) are as
follows.
[Real estate sales business]
In the Real estate sales business, the Company has the obligation to deliver the relevant
properties based on real estate sales contracts with its customers. As the performanceobligation is satisfied at a certain time when the property is delivered, the Company recognizes revenues at the time of the said delivery.
[Real estate leasing business]
For real estate lease revenues, the Company recognizes revenues pursuant to the
Accounting Standard for Lease Transactions (ASBJ Statement No. 13). With regard to the50

ES-CON JAPAN Annual Report 2022

performance obligations to provide services, including property management services,
attached to lease contracts, the Company recognizes revenues at the time when the provision of services is completed or throughout the contract period, depending on thedetails of respective contracts.

[Significant Accounting Estimates]
1. Inventory Valuation(1) Amount recorded on the financial statements for the fiscal year ended December 2022
Fiscal 2021

[Real estate planning agency and consulting business]
Of the Real estate planning agency and consulting business, the real estate planning
agency business has the obligation regarding conclusion of contracts and delivery of therelevant properties based on the agency contracts with the customers. As the performanceobligation is satisfied at a certain time when the property is delivered, the Company recognizes revenues at the time of the said delivery.
(7) Standards for conversionof significant assets or
liabilities denominatedin foreign currencies into
Japanese yen

Monetary claims and monetary liabilities denominated in foreign currencies are translated into Japanese yen at the spot exchange rate on the date of closing of accounts, withtranslation differences included in the statements of income. As for the consolidated
overseas subsidiaries, etc., assets and liabilities are translated into Japanese yen at the spot
exchange rate on the date of their closing of accounts, while revenues and expenses aretranslated into Japanese yen at the average period-average exchange rate. The translationdifferences are included in foreign currency translation adjustment and non-controllinginterests under net assets on the balance sheet.

(8) Method and period ofamortization of goodwill

Goodwill is amortized regularly for over a reasonable period of up to 20 years, with theuseful life estimated individually.

(9) Scope of funds in the
consolidated statementof cash flows

The funds (cash and cash equivalents) in the consolidated statement of cash flows consistof cash on hand, deposits that can be withdrawn at any time, and short-term investmentswith a maturity of 3 months or less from the date of acquisition, which are readily convertible to cash and bear only an insignificant risk of changes in value.

(10) Other significant items
fundamental topreparing the financial
statements

1) Share issuance costs
Share issuance costs are amortized utilizing the straight-line method over three years.
2) Accounting for consumption taxes
Non-deductible consumption taxes are recorded as expenses for the relevant consolidated
fiscal year.
3) Accounting principles and procedures adopted in cases when provisions of relevant
accounting standards are not clear
With regard to recording of advertising expenses, etc., selling expenses including advertising expenses that accrued before delivery of products in the condominium sales businessshall be recorded as prepaid expenses, to be expensed in a lump-sum at the time of delivery, in order to appropriately match cost with revenue in the condominium sales
business.

51

Real estate for sale
Real estate for sale in process
Valuation loss

(Unit: million yen)

Fiscal 2022

(as of December 2021)(as of December 2022)

7,541

4,804

123,419

138,968－—322(2) Information on the nature of significant accounting estimates for identified items
Real estate for sale, etc. is estimated using the specific identification method under the cost approach (the method to
reduce the book value due to lower profitability). Valuation loss of inventories are recorded when the net realizable value
calculated based on sales plans, etc. falls below the acquisition cost. The net realizable value is obtained by deducting
estimated additional construction cost and estimated direct selling expenses from anticipated sales value.
The important assumptions in estimating the net realizable value are the estimates of sale price, cost of completed workand direct selling expenses in for-sale condominium projects, and the estimates of NOI (Net Operating Income) andcapitalization rate in income-generating real estate projects. As for the impact of the COVID-19 pandemic, the Company
anticipates that the impact on the real estate market conditions is limited, although it will continue over a long term.
Furthermore, if the net realizable value of for-sale real estate, etc. drops significantly due to such factors as future economic
trends, interest rate trends and worsening of the real estate market conditions, it may cause a material impact on thefinancial statements of the following fiscal year and thereafter through recording of valuation loss of inventories.

2. Valuation of Assets Related to Columbarium Business(1) Amount recorded on the financial statements for the fiscal year ended December 2022
Fiscal 2021

(Unit: million yen)

Fiscal 2022

(as of December 2021)(as of December 2022)

3,968

2,183

—

1,760

2,400

2,400

Allowance for doubtful accounts

—

1,483

Provision of allowance for doubtful accounts

—

1,483

Investments and other assets, Other (long-term prepaid expenses)
Impairment losses
Long-term loans receivable(2) Information on the nature of significant accounting estimates for identified items
With regard to the sales of permanent use of columbarium conducted by Ryomon Co., Ltd., a consolidated subsidiary, thebusiness continued to post an operating loss due to the impact of the spread of COVID-19 infection, and there are signsof impairment for non-current assets and delays in collection of long-term loans receivable at the company.
Judgement whether to recognize impairment loss has been made based on the future cash flows in accordance with thebusiness plans prepared on the premise of the current business environment, and the Company considered that future cash
flows before discount will fall below the book value of non-current assets. Accordingly, the Company reduced the bookvalue to a collectible amount and recorded the reduced amount as impairment losses. The collectible amount is based on
the use value, and is calculated by discounting future cash flows to the present value. In addition, cash-flow plans of the52

ES-CON JAPAN Annual Report 2022

borrowers have been investigated based on the said business plans, and the Company recorded the estimated uncollectible
amount as allowance for doubtful accounts.
Anticipated sales volume and the sale price have been estimated on the premise that, as a material assumption of the saidbusiness plans, the impact of the spread of COVID-19 will continue going forward.
Furthermore, the estimated future cash flows based on the business plans are highly uncertain, and if they need to berevised due to such factors as future economic trends, interest rate trends and changes in the business environment, it may
cause a material impact on the financial statements of the following fiscal year and thereafter through additional recordingof impairment loss and allowance for doubtful accounts.

(Changes in Accounting Policies)[Unapplied Accounting Standard and Implementation Guidance]
Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31,
June 17, 2021)(1) Overview
The Implementation Guidance has determined the handling of the fair value measurement for mutual funds and its notes,
as well as the handling of the notes on the fair value of equity investment in associations, etc. that are recorded on thebalance sheet at the net amount equivalent to equity interest.
(2) Scheduled date of adoption
The Company will adopt the Implementation Guidance from the beginning of the fiscal year ending December 2023.

(Application of Accounting Standard for Revenue Recognition, etc.)
The Company has applied the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan[ASBJ] Statement No. 29, issued on March 31, 2020), etc. from the beginning of the fiscal year ended December 2022,
and decided to recognize revenue at the amount expected to be received in exchange for the promised goods or services
when control of the goods or services is transferred to the customer. Accordingly, the Company has changed the method
to recognize revenues for certain transactions in which the Company or its domestic consolidated subsidiaries are deemed
to be an agent in providing goods and services to customers. While the Company previously recognized the gross amountof consideration received from the customer as revenues, it now recognizes revenues at the net amount after deducting theamount paid to suppliers from the amount received from the customer.
The Company has applied the Accounting Standard for Revenue Recognition, etc. in accordance with the transitional
treatment stipulated in the proviso of Paragraph 84 of the said Standard. The cumulative effect amount, when applying
the new accounting policy retrospectively prior to the beginning of the fiscal year ended December 2022, was adjusted toretained earnings at the beginning of the fiscal year under review, and the Company has applied the new accounting policy
to the balance at the beginning of the fiscal year. The arrangement has not affected the balance of retained earnings at the
beginning of the fiscal year under review. The impact of the adoption of the Accounting Standard on financial statements
is immaterial.
Pursuant to the application of the Accounting Standard for Revenue Recognition, etc., “Notes and accounts receivable trade,” which were presented under “Current assets” on the consolidated balance sheet for the previous fiscal year, havebeen included in “Notes and accounts receivable - trade, and contract assets” from the fiscal year ended December 2022.
Furthermore, in accordance with the transitional treatment stipulated in Paragraph 89-2 of the Accounting Standard for
Revenue Recognition, amounts for the previous fiscal year have not been reclassified based on the new presentation
method. Moreover, in accordance with the transitional treatment stipulated in Paragraph 89-3 of the Accounting Standard
for Revenue Recognition, the note related to Revenue Recognition for the previous fiscal year is not shown.

(Application of Accounting Standard for Fair Value Measurement, etc.)
The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019),
etc. from the beginning of the fiscal year ended December 2022, and decided to adopt the new accounting policies set
forth by the said Accounting Standard, etc. going forward in accordance with the transitional treatment as stipulated in
Paragraph 19 of the Accounting Standard for Fair Value Measurement and Paragraph 44-2 of the “Accounting Standard
for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019). Note that the application has not affected the consolidated financial statements.
In addition, in the notes to “Financial Instruments,” the Company has decided to provide notes on matters related tobreakdown of fair values of financial instruments by level. However, in accordance with the transitional treatment as
stipulated in Paragraph 7-4 of the Implementation Guidance on Disclosures about Fair Value of Financial Instruments(ASBJ Guidance No. 19, July 4, 2019), the notes related to the previous fiscal year are not described.

53(3) Impact of the application of the accounting standard, etc.
The adoption of the Implementation Guidance on Accounting Standard for Fair Value Measurement poses no impact on
the consolidated financial statements.

(Additional Information)(Board Benefit Trust for Executives)(1) Overview of the transaction
1) The Company passed a resolution to introduce the performance-based stock reward system (the “System”; The trust
established based on the trust agreement concluded with Resona Bank, Limited for the System is referred to as “board
benefit trust for executives”) at the Annual General Meeting of Shareholders held on March 20, 2015, with an aim tofurther clarify the relationship between remuneration for the Company’s directors (excluding directors who are Audit
and Supervisory Committee Members, external directors and nonexecutive directors) and (authorized) executive managing officers (the “Directors, etc.”; hereinafter referred to as the same unless otherwise specified) and the Company’s
operating results and share price, with the Directors, etc. not only benefiting from a rise in share price but also sharing
the same risks as shareholders in relation to a fall in share price, thereby increasing awareness of contribution to themedium- to long-term improvement of operating results and enhancement of corporate value. Furthermore, theCompany passed a resolution for continuation and partial revision of the System for the Directors, etc. at the Annual
General Meetings of Shareholders held on March 26, 2020 and March 26, 2021.
The System after the revision is an incentive system by which the Company contributes money to a trust with the trust
acquiring shares of the Company with the said money as capital, and shares of the Company and the fair market valueof shares of the Company are granted to the Company’s Directors, etc. through the trust in accordance with the operating results achievement rate, etc. pursuant to the officer stock ownership regulations set by the Company. The sharesof the Company will be granted to the Director, etc. of the Company when said Director, etc. retires from all positions
such as director in principle.
Under the System, for a set period of three fiscal years from the fiscal year ended December 2021 to the fiscal year
ending December 2023 as well as each subsequent period of three fiscal years, the Company will contribute money up
to 330 million yen (110 million yen per fiscal year multiplied by the number of target fiscal years) to the trust.
2) Total number of shares to be granted to the Directors, etc.
• Resolution passed at the Annual General Meeting of Shareholders held on March 20, 2015
Upper limit of funds for acquisition of shares (for the five fiscal years from the fiscal year ended December 2015 to
the fiscal year ended December 2019): 240 million yen

54

ES-CON JAPAN Annual Report 2022

• Resolution passed at the Annual General Meeting of Shareholders held on March 26, 2020
Upper limit of funds for acquisition of shares (for the three fiscal years from the fiscal year ended December 2020 tothe fiscal year ended December 2022, and each subsequent period of three fiscal years): 330 million yen• Resolution passed at the Annual General Meeting of Shareholders held on March 26, 2021
Upper limit of funds for acquisition of shares (for the three fiscal years from the fiscal year ended December 2021 to
the fiscal year ending December 2023, and each subsequent period of three fiscal years): 330 million yen
3) Scope of persons who are eligible to receive beneficiary rights and other rights under the System
The Directors, etc. of the Company who have acquired the right to receive shares based on the officer stock ownershipregulations.
(2) Residual shares of the Company in the trust
Residual shares of the Company in the trust are recorded as treasury shares under net assets using the book value in thetrust (excluding the amount of incidental expenses). The book value of the treasury shares and the number of shares is 347
million yen and 851,000 shares for the previous fiscal year, and 347 million yen and 851,000 shares for the fiscal year
ended December 2022.

4. Notes to Consolidated Balance Sheet(1) Of Notes and Accounts Receivable - Trade, and Contract Assets, the Amount of Claims Accrued From
(Unit: million yen)Contracts With Customers
Fiscal 2022

(as of December 31, 2022)

Accounts receivable - trade353(2) Of Advances Received, the Amount of Contract Liabilities

(Unit: million yen)

Fiscal 2022

(as of December 31, 2022)

Contract liabilities

4,795(3) Unconsolidated Subsidiaries and Affiliates

(Unit: million yen)

Fiscal 2021

(Share-Based Payment Benefits Type ESOP Trust)(1) Overview of the transaction
The Company passed a resolution to introduce a share-based payment benefits-type ESOP (the “System”; the trust established based on the trust agreement concluded with Resona Bank, Limited for the System is referred to as “share-based
payment benefits-type ESOP trust”) at the board of directors meeting held on March 20, 2015, with an aim to further
enhance the benefit program for its employees and raise their motivation and morale for improving the share price andoperating results. Furthermore, the Company passed a resolution for continuation and partial revision of the share-based
payment benefits-type ESOP trust for employees at the board of directors meeting held on June 30, 2022.
The System after the revision is a system by which the Company contributes money to a trust for a new period of sevenfiscal years from the fiscal year ended December 2022 to the fiscal year ending December 2028 and the period of the sevenfiscal years after the elapse of the period, with the trust acquiring shares of the Company with the said money as capital,and shares of the Company are granted to the ES-CON JAPAN Group’s employees who have satisfied certain requirements through the trust, pursuant to the stock ownership regulations set by the Company.
(2) Residual shares of the Company in the trust
Residual shares of the Company in the trust are recorded as treasury shares under net assets using the book value in thetrust (excluding the amount of incidental expenses). The book value of the treasury shares and the number of shares is 57
million yen and 225,700 shares for the previous fiscal year, and 347 million yen and 573,400 shares for the fiscal year
ended December 2022.

(Changes in Purpose of Holding)Due to change in the purpose of holding, a part of property, plant and equipment amounting to 1,405 million yen (782million yen in buildings and structures and 623 million yen in land) was transferred to real estate for sale in process during
the fiscal year ended December 2022.

55

Investment securities (equity capital)
Investment securities (shares)

Fiscal 2022

(as of December 31, 2021)(as of December 31, 2022)

1,261
1,281

1,872
1,326

(4) Pledged Assets and Secured Debts
Assets provided as collateral are as follows:

(Unit: million yen)

Fiscal 2021

Fiscal 2022

(as of December 31, 2021)(as of December 31, 2022)

Cash and deposits
Real estate for sale
Real estate for sale in process
Buildings and structures
Land
Property, plant and equipment (Other)Cancelled shares of consolidated subsidiaries

40
5,204
89,6405,156
13,21437
30,53940
1,729
124,835
19,842
31,483
109
—

Total

143,832

178,041

Debts secured by the above assets provided as collateral are as follows:

(Unit: million yen)

Fiscal 2021

Fiscal 2022

(as of December 31, 2021)(as of December 31, 2022)

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable

2,429
77,22068,3108,689
22,658
121,536

Total

147,960

152,884

56

ES-CON JAPAN Annual Report 2022

(5) Guarantee Obligations(4) Breakdown of Loss on Retirement of Non-Current Assets

The Company guarantees obligations of the following affiliate for its borrowings from financial institutions.


Fiscal 2021

(Unit: million yen)

Fiscal 2021

(as of December 31, 2021)

TSUNAGU Community Farm LLC

387(from January 1, 2021
to December 31, 2021)

Fiscal 2022

(as of December 31, 2022)

2,376(6) Commitment Line Agreement
The Company has executed a commitment line agreement with three banks in order to conduct financing in a flexible
manner as needed while securing financing stability. The balance of unused commitment line based on this agreement is
as follows.
(Unit: million yen)
Fiscal 2021

Fiscal 2022

(as of December 31, 2021)(as of December 31, 2022)

Credit limit
Balance of used commitment line

15,5003,550

25,5002,706

Difference

11,95022,794

The amounts of revenues arising from contracts with customers are presented in the “Notes (Segment Information)” section of the Consolidated Financial Statements.

(2) The value of inventories at the end of the fiscal year is the amount after reducing book value due to a
decline in profitability, and the following valuation loss of inventories are included in cost of sales.
(Unit: million yen)
Fiscal 2021

(from January 1, 2021
to December 31, 2021)

Cost of sales—

Fiscal 2022

(from January 1, 2022
to December 31, 2022)

Fiscal 2022

(from January 1, 2022
to December 31, 2022)

Buildings and structures
Property, plant and equipment (Other)
Intangible assets (Other)

—
0
0

0
0
—

Total

0

0

(5) Impairment Losses
The ES-CON Japan Group recorded impairment losses for the following asset group.
Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Not applicable
Fiscal 2022 (from January 1, 2022 to December 31, 2022)

5. Notes to Consolidated Statement of Income(1) Net sales are not separately presented for revenues arising from contracts with customers and other revenues.

(Unit: million yen)

Location

Use

Type

Impairment losses

Minato Ward, Tokyo

Assets related to related tocolumbarium sales businessLong-term prepaid expenses
1,760 million yen
and others(Note) T he ES-CON JAPAN Group categorizes its assets into groups according to the smallest unit generating cash flows that are generally independent of
the cash flows of other assets or asset groups.
In the fiscal year ended December 2022, the Company reduced the book value of the asset group that has continuously posted losses from operating
activities to a collectible amount, and recorded the reduced amount as impairment losses (1,760 million yen) under extraordinary losses, which consist
1,759 million yen in long-term prepaid expenses and 0 million yen in others.
The collectible amount of the asset group has been measured by use value, which is calculated by discounting future cash flows by 3.18.

6. Notes to Consolidated Statement of Comprehensive Income(1) Reclassification Adjustments and Tax Effects to Each Component of Other Comprehensive Income(Unit: million yen)

Fiscal 2021

322

(from January 1, 2021
to December 31, 2021)

Fiscal 2022

(from January 1, 2022
to December 31, 2022)

Valuation difference on available-for-sale securities:(3) Breakdown of Gain on Sale of Non-Current Assets

(Unit: million yen)

Fiscal 2021

(from January 1, 2021
to December 31, 2021)

Fiscal 2022

(from January 1, 2022
to December 31, 2022)

Vehicles

0

—

Total

0

—

Amounts arising during the fiscal year

314
—

(423)
—

Tax effect

314
(96)

(423)
131

Valuation difference on available-for-sale securities

218

(292)

(8)

22

(9)

27

199

(241)

Reclassification adjustments
Subtotal before tax effect adjustments

Foreign currency translation adjustment:
Amounts arising during the fiscal year
Share of other comprehensive income/(loss) ofequity-method affiliate:
Amounts arising during the fiscal year
Total other comprehensive income

57

58

ES-CON JAPAN Annual Report 2022

7. Notes to Consolidated Statement of Changes in Equity

2) Dividends for which the record date was within the fiscal year but the effective date for the dividends was in the following fiscal year

Fiscal 2021 (from January 1, 2021 to December 31, 2021)(1) Type and Number of Shares Issued and Outstanding and Type and Number of Treasury Shares
Number of shares Increase in number Decrease in number Number ofshares at endof shares duringof shares during
at beginning ofof Fiscal 2021
the fiscal year
the fiscal year
Fiscal 2021

Common shares (Note 1)
Total

71,961,887

26,619,000—

98,580,887

71,961,887

26,619,000—

98,580,887

3,428,400—

331,500

3,096,900

3,428,400—

331,500

3,096,900

Treasury shares
Common shares (Note 2)(Note 3)
Total(Notes) 1. The increase in the number of common shares issued and outstanding (26,619,000 shares) is due to issuance of new shares through third-party
allotment with April 5, 2021 as the payment date.
2. The decrease in the number of treasury shares in common shares (331,500 shares) is due to provision of shares for exercise of the sixth offer ofsubscription rights to shares (324,200 shares) and provision of shares to the qualifying employees by the share-based payment benefits type ESOP
trust (7,300 shares).
3. The number of treasury shares in common shares includes the Company’s shares owned by the share-based payment benefits trust for directors
and the share-based payment benefits type ESOP trust (the share-based payment benefits trust for directors: 851,000 shares at the beginning of
Fiscal 2021 and 851,000 shares at the end of Fiscal 2021; the share-based payment benefits type ESOP trust: 233,000 shares at the beginning of
Fiscal 2021 and 225,700 shares at the end of Fiscal 2021).

Commonshares3,669

Dividend per
Record dateshare (yen)Retainedearnings

38.00

December31, 2021

Effective date
March 28,
2022

Category

Breakdown of Type of shares Number of shares subject to subscription rights to shares (shares) Balance at
subscription subject to
end ofDecrease
Increase
End of Fiscal
Beginning ofsubscription
rights to
Fiscal 2021
during theduring the2021(million yen)rights to shares Fiscal 2021
sharesfiscal year
fiscal year

Reportingcompany(parent
company)

Sixth offer ofsubscription Commonsharesrights toshares (Note)—

1,244,500—

342,100

902,400

0

1,244,500—

342,100

902,400

Issued shares
Common shares
Total

98,580,887——

98,580,887

98,580,887——

98,580,887

3,096,900

360,000

134,100

3,322,800

3,096,900

360,000

134,100

3,322,800

Treasury shares
Common shares (Note 1) (Note 2) (Note 3)(Notes) 1. T he increase in the number of treasury shares in common shares (360,000 shares) is due to acquisition from the market into the share-based
payment benefits type ESOP trust.
2. T he decrease in the number of treasury shares in common shares (134,100 shares) is due to provision of shares for exercise of the sixth offer ofsubscription rights to shares (121,800 shares) and provision of shares to the qualifying employees by the share-based payment benefits type ESOP
trust (12,300 shares).
3. T he number of treasury shares in common shares includes the Company’s shares owned by the share-based payment benefits trust for directors
and the share-based payment benefits type ESOP trust (the share-based payment benefits trust for directors: 851,000 shares at the beginning of
Fiscal 2022 and 851,000 shares at the end of Fiscal 2022; the share-based payment benefits type ESOP trust: 225,700 shares at the beginning of
Fiscal 2022 and 573,400 shares at the end of Fiscal 2022).

0(3) Dividends
1) Dividends paid

March 26, 2021
Annual General Meeting of Shareholders

Number of shares Increase in number Decrease in number Number ofof shares during the shares at endof shares during
at beginning ofof Fiscal 2022
fiscal year
the fiscal year
Fiscal 2022

(2) Subscription Rights to Shares and Subscription Rights to Treasury Shares(Note) T he decrease in the number of common shares subject to the sixth offer of subscription rights to shares (342,100 shares) is due to exercise of subscription rights to shares (324,200 shares) and due to expiration of the offer of subscription rights to shares (17,900 shares).

(Resolution)

Fiscal 2022 (from January 1, 2022 to December 31, 2022)(1) Type and Number of Shares Issued and Outstanding and Type and Number of Treasury Shares

Total(2) Subscription Rights to Shares and Subscription Rights to Treasury Shares

Type ofsharesCommonsharesTotal dividends Dividend per
Record date(million yen)share (yen)
2,645

38.00

December31, 2020

Effective date
March 29,2021

(Note) T he total amount of dividends includes 32 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 8 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

59

March 25, 2022
Annual General Meeting of
Shareholders

Total dividends Source of(million yen)
dividends(Note) T he total amount of dividends includes 32 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 8 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

Issued shares

Total

Type ofshares(Resolution)

Category

Breakdown of Type of shares Number of shares subject to subscription rights to shares (shares) Balance at
subscription subject to
end ofDecrease
Increase
End of Fiscal
Beginning ofsubscription
rights to
Fiscal 2022
during theduring the2022(million yen)rights to shares Fiscal 2022
sharesfiscal year
fiscal year

Reportingcompany(parent
company)

Sixth offer ofsubscription Commonsharesrights toshares (Note)

Total

—

902,400—

172,300

730,100

0902,400—

172,300

730,1000(Note) T he decrease in the number of common shares subject to the sixth offer of subscription rights to shares (172,300 shares) is due to exercise of subscription rights to shares (121,800 shares) and due to expiration of the offer of subscription rights to shares (50,500 shares).

60

ES-CON JAPAN Annual Report 2022

(3) Dividends(3) Major Breakdown of Assets and Liabilities of the Company That Was Newly Consolidated in the Fiscal
Year Ended December 31, 2022 Through Acquisition of its Shares

1) Dividends paid
Type ofshares(Resolution)
March 25, 2022
Annual General Meeting of Shareholders

Total dividends Dividend per
Record date(million yen)share (yen)Commonshares

3,669

38.00

December31, 2021

Effective date
March 28,2022

(Note) T he total amount of dividends includes 32 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 8 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

2) Dividends for which the record date was within the fiscal year but the effective date for the dividends was in the following fiscal year
(Resolution)
March 24, 2023
Annual General Meeting of
Shareholders

Type ofsharesCommonsharesTotal dividends Source of(million yen)
dividends
3,673

Dividend per
Record dateshare (yen)Retainedearnings

38.00

December31, 2022

Effective date
March 27,2023

(Note) T he total amount of dividends includes 32 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 21 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

In association with the new consolidation of FUEL Inc. through acquisition of its shares, the following table indicates thebreakdown of the assets and liabilities and the relationship between the acquisition price and income from acquisition(net) at the beginning of consolidation.
(Unit: million yen)
Current assets
Non-current assets
Goodwill
Current liabilities

395
50
1
(377)

Acquisition price of newly consolidated subsidiary
Cash and cash equivalents of newly consolidated subsidiary

70
(386)

Difference: income from acquisition of shares of the subsidiary accompanying changes in thescope of consolidation

316

9. Lease Transactions(Lessee)

8. Notes to Consolidated Statement of Cash Flows(1) Finance Lease Transactions

(1) Relationship Between the Year-End Balance of Cash and Cash Equivalents and the Amounts of Accounts(Unit: million yen)on the Consolidated Balance Sheet

Finance lease transactions without any transfer of ownership of leased assets
1) Leased assets
Property, plant and equipment
Consists of Internet security equipment used at the offices of the Company’s subsidiary companies

Fiscal 2021

Fiscal 2022

(from January 1, 2021
to December 31, 2021)(from January 1, 2022
to December 31, 2022)

Cash and deposits
Time deposits with maturities of more than 3 months
Deposits of share-based payment benefits trust

33,667(40)(68)

35,721(42)(75)

Cash and cash equivalents

33,55935,6042) Depreciation method for leased assets
As described in 3. Summary of Significant Accounting Policies, (4) Depreciation method for significant depreciable assets(2) Operating Lease Transactions
Unearned lease payments for non-cancellable operating lease transactions(Unit: million yen)

Fiscal 2021

(2) Major Breakdown of Assets and Liabilities of the Companies That Were Newly Consolidated in the Fiscal
Year Ended December 31, 2021 Through Acquisition of Their Shares
In association with the new consolidation of Picasso Co., Ltd. and the seven companies that are its group companies
through acquisition of their shares, the following table indicates the breakdown of the assets and liabilities and the relationship between the acquisition price and income from acquisition (net) at the beginning of consolidation.
(Unit: million yen)

61

Current assets
Non-current assets
Goodwill
Current liabilities
Non-controlling interests

30,473
34,233
8,115(1,552)(40,825)

Acquisition price of newly consolidated subsidiaries
Cash and cash equivalents of newly consolidated subsidiaries

30,445(6,375)Difference: expenditures for acquisition of shares of the subsidiaries accompanying changes inthe scope of consolidation

24,070(as of December 31, 2021)

Fiscal 2022

(as of December 31, 2022)

Due within one year

332

496

Due after one year

836

1,084

1,169

1,581

Total

(Lessor)(1) Operating Lease Transactions
Unearned lease payments for non-cancellable operating lease transactions(Unit: million yen)

Fiscal 2021

Fiscal 2022

(as of December 31, 2021)(as of December 31, 2022)

Due within one year

2,101

2,249

Due after one year

6,994

9,848

Total

9,096

12,09862

ES-CON JAPAN Annual Report 2022

10. Financial Instruments

Fiscal 2021 (as of December 31, 2021)
Book value recorded on
the balance sheet(1) Conditions of Financial Instruments
1) Policy for financial instruments
The ES-CON JAPAN Group manages funds only through short-term deposits, etc., and procures funds mainly throughborrowing from banks and other financial institutions.
2) Description of financial instruments and associated risks, and risk management structure
Among operating receivables, Notes and accounts receivable - trade, and contract assets are exposed to customer credit
risks. The Company averts such risks by receiving guarantee deposits for part of them. Moreover, in terms of these risks,
it conducts credit control and account balance management for respective customers in accordance with the internal rulesof the ES-CON JAPAN Group, and works to identify and mitigate concerns about accounts becoming uncollectible due
to such factors as worsening of financial conditions at its business customers at an early stage.
Investment securities mainly consist of shares owned over a medium to long term in order to strengthen relationships withbusiness partners and silent partnership, etc. Listed shares, etc. are exposed to market price fluctuation risks, but theCompany periodically checks their fair value. Non-listed shares and silent partnership, etc. have the risks from worsening
financial conditions, etc. of the issuer companies and silent partnership, etc., but the Company periodically checks theirfinancial conditions and other factors through financial statements and other materials.
Among operating payables, accounts payable – other are to be fully paid within one year.
Deposits received mainly consist of guarantee deposits received from tenants of income-generating real estate, and funds
deposited by joint venture partners of certain real estate development projects.
Among loans payable, short-term loans payable are procured mainly for working capital, and long-term loans payable areprocured mainly for real estate development projects. In addition, while loans payable are exposed to liquidity risks related
to fund procurement, the ES-CON JAPAN Group manages the risks through such measures as preparing fund procurement plans on a monthly basis.
3) Supplementary explanation on fair value, etc. of financial instruments
The fair value of financial instruments, aside from values based on market price, includes values based on reasonable calculations when there is no market price. Certain variable factors are adopted in calculating those values, and there may becases where the values will vary when different assumptions, etc. are adopted.

(2) Fair Value, Etc. of Financial Instruments
The following table shows the book values on the consolidated balance sheet, fair value and the difference between them.
The following table does not include shares, etc. and silent partnership equity investment, etc. for which there is no market
price. Furthermore, notes on “Cash and deposits,” “Notes and accounts receivable - trade, and contract assets,” “Accounts
payable - other,” “Deposits received” and “Short-term loans payable” are omitted as these are settled within a short periodof time and thus the fair value approximates the book value.

(Unit: million yen)

Fair value

Difference(1) Investment securities
Other securities

2,481

2,481

—
—

Total of assets

2,481

2,481

—

(1) Long-term loans payable*1

159,445

159,357(87)

Total of liabilities

159,445

159,357(87)*1 Long-term loans payable includes current portion of long-term loans payable.
(Note) F inancial instruments for which discerning fair value is recognized to be extremely difficult.

(Unit: million yen)Amount recorded on the balance sheet

Category
1) Non-listed shares

2,1542) Silent partnership equity investment, etc.

1,550

These are not subject to disclosure of fair value because discerning fair value is recognized to be extremely difficult as there is no market price andfuture cash flows cannot be estimated.

Fiscal 2022 (as of December 31, 2022)

(Unit: million yen)Book value recorded on
the balance sheet

Fair value

Difference(1) Investment securities
Other securities

2,058

2,058

—
—

Total of assets

2,058

2,058

—

(1) Long-term loans payable*1

159,003

158,237(765)

Total of liabilities

159,003

158,237(765)*1 Long-term loans payable includes current portion of long-term loans payable.
(Notes) 1. Amount of shares, etc. without market price and silent partnership equity investment, etc. recorded on the balance sheet.

Amount recorded on the balance sheet

Category
1) Non-listed shares

2,3242) Silent partnership equity investment, etc.

1,8961) Non-listed shares are not subject to disclosure of fair value pursuant to Paragraph 5 of the Implementation Guidance on Disclosures about Fair
Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020).
2) Silent partnership equity investment, etc. is not subject to disclosure of fair value pursuant to Paragraph 27 of the Implementation Guidance on
Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019).
2. Scheduled redemption amount of monetary claims and securities with maturities after closing of accounts.
Fiscal 2021 (as of December 31, 2021)

(Unit: million yen)
Due within 1 year

Cash and deposits
Notes and accounts receivable - trade
Total

Due in 1 to 5 years

Due in 5 to 10 years

Due in 10 years or more

33,667

—

—

—

835

—

—

—

34,503———Fiscal 2022 (as of December 31, 2022)

(Unit: million yen)
Due within 1 year

63

(Unit: million yen)Due in 1 to 5 years

Due in 5 to 10 years

Due in 10 years or more

Cash and deposits

35,721———

Notes and accounts receivable - trade,and contract assets

1,096

—

—

—

Total

36,818

—

—

—

64

ES-CON JAPAN Annual Report 2022

3. Scheduled repayment amount of long-term loans payable and lease obligations after closing of accounts.
Fiscal 2021 (as of December 31, 2021)

(Unit: million yen)

Due within
1 yearDue in 1 to
2 years

Due in 2 to
3 years

Due in 3 to
4 years

Due in 4 to
5 years

Due in 5 years or
more

Short-term loans payable

3,589

—

—

—

—

—

Long-term loans payable

82,912

27,53916,101

7,391

6,795

18,705

0

0

0

0

0

0

86,502

27,540

16,101

7,392

6,795

18,705

Lease obligations
Total
Fiscal 2022 (as of December 31, 2022)

(Unit: million yen)

Due within
1 yearDue in 1 to
2 years

Due in 2 to
3 years

Due in 3 to
4 years

Due in 4 to
5 years

Due in 5 years or
more

Short-term loans payable

10,061

—

—

—

—

—

Long-term loans payable

26,19328,607

19,597

9,537

34,151

40,916

0

0

0

0

—

—

36,25528,607

19,598

9,537

34,151

40,916

Lease obligations
Total

4. Matters related to breakdown of fair values of financial instruments by level.
The fair values of financial instruments are classified into the following three levels based on the observability and materiality of the inputs used to
calculate the fair values.
Level 1 fair value: Among the inputs for the calculation of observable fair value, the fair value calculated based on quoted prices in active markets
for the assets or liabilities for which such fair value is calculated

11. Notes to Securities(1) Other Securities
Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Type

Fiscal 2022 (as of December 31, 2022)
Category(Unit: million yen)
Fair value
Level 1

Level 2

Level 3

Total

Investment securities
Other securities
Shares

2,058

—

—

2,058

Total of assets

2,058

—

—

2,058

(2) Financial instruments other than those carried on the consolidated balance sheets at fair value
Fiscal 2022 (as of December 31, 2022)
Category(Unit: million yen)
Fair value
Level 1

Level 2

Level 3Total

Long-term loans payable—

158,237—

158,237

Total of liabilities—

158,237—

158,237

Difference(1) Shares

—

—

—

(2) Other

2,455

1,917

537

Securities with book values on the consolidatedbalance sheet not exceeding acquisition cost(1) Shares

26

27

(1)

(2) Other

0

0

(0)

2,481

1,945

536

Total

(Note) T he table above does not include non-listed shares and silent partnership equity investment, etc. (book value recorded on the consolidated balance
sheet: 3,704 million yen) as Other securities, because discerning fair value is recognized to be extremely difficult as there is no market price.

Fiscal 2022 (from January 1, 2022 to December 31, 2022)
Type

Level 3 fair value: Fair value calculated using inputs for calculating unobservable fair value(1) Financial instruments carried on the consolidated balance sheet at fair value

Book value recorded on Acquisition
the balance sheet
cost

Securities with book values on the consolidatedbalance sheet exceeding acquisition cost

Level 2 fair value: Among the inputs for the calculation of observable fair value, the fair value calculated using inputs for calculating fair value
other than the inputs for level 1 fair value

When multiple inputs that have a significant impact on the calculation of fair value are used, the fair value is classified to the level with the lowest
priority in the calculation of fair value among the levels to which each of such inputs belongs.

(Unit: million yen)

(Unit: million yen)Book value recorded on Acquisition
the balance sheet
cost

Difference

Securities with book values on the consolidatedbalance sheet exceeding acquisition cost(1) Shares

30

27

3

(2) Other

2,027

1,917

109

Securities with book values on the consolidatedbalance sheet not exceeding acquisition cost(1) Shares

—

—

—

(2) Other

0

0

(0)

2,058

1,945

112

Total

(Note) T he table above does not include non-listed shares and silent partnership equity investment, etc. (book value recorded on the consolidated balance
sheet: 4,221 million yen) as Other securities, because they are shares, etc. for which there is no market price..

12. Notes to Derivative Transactions
Not applicable

13. Notes to Retirement Benefits* Long-term loans payable includes current portion of long-term loans payable.
Explanation of valuation methods used for calculating fair value and inputs related to the calculation of fair value
Investment securities
Listed shares, etc. are based on the stock exchange prices. As listed shares, etc. are traded in active markets, their fair value is classified as
Level 1 fair value.
Long-term loans payable
The total amount of principal and interest is calculated by the discounted present value method using the interest rate assumed for similarborrowings, and its fair value is classified as Level 2 fair value.

Fiscal 2021 (from January 1, 2021 to December 31, 2021)(1) Description of Retirement Benefit Plans Adopted by the Company
The Company and certain consolidated subsidiaries have adopted a defined contribution pension plan.

(2) Defined Contribution Pension Plan
The Company and certain consolidated subsidiaries paid 18 million yen for the defined contribution pension plan.

Fiscal 2022 (from January 1, 2022 to December 31, 2022)(1) Description of Retirement Benefit Plans Adopted by the Company
The Company and certain consolidated subsidiaries have adopted a defined contribution pension plan.

65

66

ES-CON JAPAN Annual Report 2022

(2) Defined Contribution Pension Plan
The Company and certain consolidated subsidiaries paid 22 million yen for the defined contribution pension plan.

14. Notes to Stock Options, Etc.

(2) Size and changes of the stock acquisition rights, which involve considerations, with vesting conditions
The following table describes the stock option plan that existed in Fiscal 2022 ended December 31, 2022. The number ofstock options indicates the number of shares when the stock options are exercised.
1) Number of stock options
6th subscription rights to shares
Before right allotment (shares)(Additional Information)(Adoption of the Practical Solution on Transactions Granting Employees and Others Stock Acquisition Rights, which
Involve Considerations, with Vesting Conditions, etc.)
For transactions granting employees and others stock acquisition rights, which involve considerations, with vesting conditions conducted prior to the application date of the Practical Solution on Transactions Granting Employees and Others
Stock Acquisition Rights, which Involve Considerations, with Vesting Conditions (Practical Issues Task Force (PITF) No.
36; January 12, 2018), the Company continues to conduct the accounting treatment that have been conventionallyapplied for such transactions.

—

Granted—Expired—Right allotment—

Balance of unexercised options—

After right allotment (shares)
Balance of unexercised options at the end of the previous fiscal year

902,400

Right allotment—－

1. Overview of the Stock Acquisition Rights, Which Involve Considerations, with Vesting Conditions

Exercise of right

121,800(1) Descriptions of the stock acquisition rights, which involve considerations, with vesting conditions

Expired50,500

Balance of unexercised options

730,100

6th subscription rights to shares
Category and number of eligible persons

146 people comprising the Company’s directors andemployees and the employees of its subsidiaries

2) Unit price informationNumber of stock options by type of shares (Note 1)

Common shares: 1,400,000 shares

Exercise price627

Date of grant of options

December 27, 2017

Average share price upon exercise

818

Vesting conditions(Note 2)

Covered period of work

Not specified

Exercise period

From April 1, 2021 to December 26, 2025

(Notes) 1. The figures have been converted to the number of shares.
2. The vesting conditions to exercise the subscription rights to shares are as follows;(1) The persons eligible for the subscription rights to shares may exercise the subscription rights to shares allotted to them, starting on the first dayof the month following the date when the securities report for the fiscal year ended December 2020 is submitted, if the Company’s operating
income for all the fiscal years ended December 2018 through December 2020 exceeds the respective amounts described in the following items.
When the number of the subscription rights to shares they can exercise has a portion less than one share, the number shall be rounded down to
one share.
1) If the operating income for the fiscal year ended December 2018 exceeded 8,500 million yen
2) If the operating income for the fiscal year ended December 2019 exceeds 9,500 million yen
3) If the operating income for the fiscal year ended December 2020 exceeds 10,000 million yen
Furthermore, in determining the operating income stated above, the operating income in the consolidated statement of income described in the
Company’s securities report (or statement of income if no consolidated statement of income is prepared) shall be referred to. In addition, if
material changes are made to the concept of the items to be referred to due to such reasons as application of the international financial reporting
standards, the Company shall otherwise determine the appropriate indicators to be referred to at the Board of Directors to the extent reasonable(the same shall be applied hereinafter).
(2) T he persons eligible for the subscription rights to shares must be directors, auditors or employees of the Company or its affiliates when they
exercise their subscription rights to shares; however, this shall not apply for their retirement from office due to expiration of tenure, retirement at
predetermined age or for other reasons deemed reasonable by the Board of Directors.
(3) Successors of the persons eligible for the subscription rights to shares may not exercise the stock acquisition rights; however, this shall not apply
if the persons eligible for the subscription rights to shares died of accidents during their work or if the Board of Directors approve that there isfair reason to allow the said successors to exercise the subscription rights to shares.
(4) The subscription rights to shares may not be exercised if such an exercise cause the Company’s number of shares issued and outstanding to
exceed the authorized number of shares at that time.
(5) The subscription rights to shares may not be exercised for less than one share each.

67

Balance of unexercised options at the end of the previous fiscal year

(Unit: yen)

2. Overview of the Adopted Accounting Treatment
When issuing the subscription rights to shares, the Company records the paid-in amount corresponding to the issuance as
Subscription rights to shares in Net assets of the balance sheet. When the subscription rights to shares are exercised andnew shares are issued, the Company re-states the paid-in amount corresponding to the issuance of the said subscription
rights to shares and the paid-in amount corresponding to the exercise of the subscription rights to shares as Capital stock
and Capital surplus.
Furthermore, when the subscription rights to shares are expired, the Company records the amount corresponding to the
expiration as profits for the fiscal year in which the expiration has been finalized.

68

ES-CON JAPAN Annual Report 2022

15. Notes to Tax Effect Accounting(2) Significant Components of Material Difference between the Effective Statutory Tax Rate and Income(Unit: %)Tax Rate Applicable after Applying Tax Effect Accounting(1) Significant Components of Deferred Tax Assets and Deferred Tax Liabilities

(Unit: million yen)

Fiscal 2021

(as of December 31, 2021)

Deferred tax assets
Net operating loss carried forward (Note 2)
Loss on valuation of inventories
Enterprise tax payable
Impairment loss
Asset retirement obligations
Loss on valuation of investment securities
Allowance for doubtful accounts
Other

Fiscal 2022

(as of December 31, 2022)

291
143
119
24
82
35
11
397

496
208
192
610
83
35
509
672

1,105

2,810

(243)

(496)

(337)

(1,638)Valuation allowance (Note 1)(580)(2,134)

Total of deferred tax assets
Deferred tax liabilities
Asset retirement expenses
Valuation difference on fair value of consolidated subsidiaries
Loss on valuation of other securities

525

675

(55)
(7,921)
(164)
(211)

(50)
(7,785)(33)(368)(8,353)(7,828)(8,239)(7,563)

Subtotal of deferred tax assets
Valuation allowance for net operating loss carried forward for tax
purposes (Note 2)
Valuation allowance for total deductible temporary difference

Other
Total of deferred tax liabilities
Deferred tax assets (liabilities), net

Fiscal year ended December 2021
2 to
3 years

3 to
4 years

4 to
5 yearsOver
5 years

7

8

273

291

Valuation allowance

—

—

(1)

(7)

(8)

(225)

(243)

Deferred tax assets

—

—

—

—

—

48

* 48
2

*1 Net operating loss carried forward for tax purposes is the amount multiplied by effective statutory tax rate.
*2 Deferred tax assets of 48 million yen was recorded for 291 million yen in net operating loss carried forward for tax purposes (the amount multiplied by effective statutory tax rate). For the net operating loss carried forward for tax purposes, valuation allowance is not recognized for the
portions determined to be collectible due to expected future taxable income.
(Unit: million yen)

Net operating loss carried forward for tax purposes*1

—

—

3 to
4 years

4 to
5 years—

4Over
5 years

0.2
0.8
3.5
1.1

0.1
1.6
13.4
(1.1)

Effective tax rate after applying tax effect accounting

36.6

45.2

(1) Name and business description of the combining companies
Name of the combining company
Absorbing andPicasso Co., Ltd.
surviving company

Extinct company
by absorption

Business description
Real estate leasing, real estate management, real estate investment, etc.

Venus Corporation Co., Ltd.

Real estate management

Cubic Co., Ltd.

Real estate leasing, management, brokerage services

Santa Co., Ltd.

Real estate leasing, management, brokerage services

Hirano Bussan Co., Ltd.

Real estate leasing, management, brokerage services

Aria Co., Ltd.

Real estate leasing, management, brokerage services

Eikaku Y.K.

Real estate leasing, management, brokerage services

Total

—

491

496

Valuation allowance

—

—

—

(4)

—

(491)

(496)

Deferred tax assets

—

—

—

—

—

—

—

*1 Net operating loss carried forward for tax purposes is the amount multiplied by effective statutory tax rate.
(Changes in presentation methods)“Allowance for doubtful accounts,” which was included in “Other” in Deferred tax assets in the previous fiscal year, is separately presented in thefiscal year ended December 2022 due to its increased monetary materiality. To reflect this change in the presentation method, the notes for theprevious fiscal year have been reclassified. As a result, 408 million yen presented as “Other” in Deferred tax assets in the previous fiscal year has
been reclassified as 11 million yen in “Allowance for doubtful accounts” and 397 million yen in “Other” in this report.

69

0.5

Total

1

2 to
3 years

0.3

1. Overview of Transaction—

1 to
2 years30.7(Absorption-type merger among consolidated subsidiaries)
The Company made a resolution at its Board of Directors’ meeting held on April 27, 2022 to conduct an absorption-typemerger with Picasso Co., Ltd., a consolidated subsidiary of the Company, as the absorbing and surviving company, andVenus Corporation Co., Ltd., Cubic Co., Ltd., Santa Co., Ltd., Hirano Bussan Co., Ltd., Aria Co., Ltd. and Eikaku Y.K.
as the extinct companies by absorption. The absorption-type merger was conducted on July 1, 2022.

—

Less than
1 year30.7

Common control transaction

Net operating loss carried forward for tax purposes*1

Fiscal year ended December 2022

Effective statutory tax rate
(Adjustments)
Expenses like entertainment expenses not qualifying fordeduction permanently
Inhabitant tax on a per capita basis
Amortization of goodwill
Valuation allowance
Other(Business Combination Through Acquisition)(Unit: million yen)
1 to
2 years

Fiscal 2022

(as of December 31, 2022)

16. Notes to Business Combination, Etc.

(Notes) 1. Valuation allowance increased by 1,554 million yen. The increase is mainly due to the additional recognition of valuation allowances in accordancewith the accrual of impairment losses, allowance for doubtful accounts, and net operating loss carried forward for tax purposes at consolidated
subsidiaries for which it has been determined that their deferred tax assets are not fully collectible..
2. Amount of net operating loss carried forward for tax purposes and deferred tax assets by carry-over periodLess than
1 yearFiscal 2021

(as of December 31, 2021)(2) Date of business combination
July 1, 2022
(3) Legal format of business combination
Absorption-type merger with Picasso Co., Ltd. as the absorbing and surviving company and Venus Corporation Co., Ltd., Cubic
Co., Ltd., Santa Co., Ltd., Hirano Bussan Co., Ltd., Aria Co., Ltd. and Eikaku Y.K. as the extinct companies by absorption70

ES-CON JAPAN Annual Report 2022

The book value for the rental real estate as stated in the consolidated balance sheet, the amount of increase/decrease during
the fiscal year and fair value were as follows:
(Unit: million yen)

(4) Company name after business combination
Picasso Co., Ltd.
(5) Other matters related to the overview of transaction
The business combination is aimed at consolidating management resources and enhancing operational efficiency within
the ES-CON JAPAN Group.

2. Summary of Accounting Procedures
The transaction has been treated as a common control transaction for accounting purposes pursuant to the AccountingStandard for Business Combinations (ASBJ Statement No.21, January 16, 2019) and the Guidance on AccountingStandard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No.10, January
16, 2019).

17. Notes to Asset Retirement Obligations(Asset Retirement Obligations That Are Recorded on the Consolidated Balance Sheet)(1) Description of the Relevant Asset Retirement Obligations

Fiscal 2022

(from January 1, 2022
to December 31, 2022)

Balance at beginning of fiscal year

14,13552,082

Increase/decrease during fiscal year

37,946(636)

Balance at end of fiscal year

52,08251,445

Fair value at end of fiscal year

52,40252,228Book value recorded on the consolidated balance sheet(Notes) 1. T he book value recorded on the consolidated balance sheet represents the amount obtained by deducting accumulated depreciation and accumulated impairment loss from acquisition cost.
2. O f the amount of increase/decrease during fiscal year, the amount of increase during Fiscal 2021 is primarily attributable to acquisition of subsidiaries that own rental real estate, etc. (33,886 million yen) and acquisition of rental real estate (3,617 million yen), and the amount of decrease is
primarily attributable to depreciation (584 million yen). The amount of increase during Fiscal 2022 is primarily attributable to acquisition of rental
real estate (1,579 million yen), and the amount of decrease is primarily attributable to depreciation (1,103 million yen) and transfer to real estate
for sale in process due to a change in the holding purpose (1,405 million yen).
3. F air value at end of fiscal year indicates the amount calculated on the basis of Japan’s Real Estate Appraisal Standards, using appraisals byoutside real estate appraisers as a reference.

The Company is mainly obliged to restore its Tokyo Head Office, Osaka Head Office, Nagoya Office, Kyushu Office andHokkaido Office to the original state in accordance with each of the real estate lease agreements.

19. Revenue Recognition(2) Calculation Method of the Amount of the Asset Retirement Obligations(1) Breakdown Information on Revenues from Contracts with Customers

The amount of the asset retirement obligations is calculated by using discount rates of 0.0% to 1.9%, with the expectedperiod of use estimated to be 4 years to 18 years.

For the breakdown information on revenues from contracts with customers, refer to 19. Segment Information in Notes toFinancial Statements. Furthermore, net sales in the relevant notes include revenues in accordance with the AccountingStandard for Lease Transactions (ASBJ Statement No.13), etc. on top of revenues from contracts with customers.

(3) Increase/Decrease of the Total Amount of the Asset Retirement ObligationsFiscal 2021

(from January 1, 2021
to December 31, 2021)(Unit: million yen)

Fiscal 2022

(from January 1, 2022
to December 31, 2022)

Balance at beginning of fiscal year
Increase due to acquisition of property, plant and equipment
Adjustments over passage of time

260
8
1

270
—
1

Balance at end of fiscal year

270

271

18. Notes to Rental Real Estate
The Company and some of its consolidated subsidiaries own retail properties, rental condominiums and other properties.
Income or loss from leasing these rental properties during Fiscal 2021 totaled 1,018 million yen in income (with rental
income recorded as net sales and rental expenses recorded as cost of sales). Income or loss from leasing these rental properties during Fiscal 2022 totaled 1,520 million yen in income (with rental income recorded as net sales and rental expenses
recorded as cost of sales).

71

Fiscal 2021

(from January 1, 2021
to December 31, 2021)(2) Information Utilized as the Base for Understanding Revenues from Contracts with Customers
The information utilized as the base for understanding revenues is omitted, as the same is described in 3. Summary of
Significant Accounting Policies, (6) Recognition of material revenues and expenses in Notes to Financial Statements.

(3) Information on Relationship between Fulfillment of Performance Obligations Based on Contracts with
Customers and Cash Flows Generated from Said Contracts, and on Amount and Period of Revenues
Expected to be Recognized in the Following Fiscal Year or Thereafter from Contracts with Customers
Existing at the End of the Current Fiscal Year
1) Balance, etc. of contract assets and contract liabilities

(Unit: million yen)

Balance at beginning of
Fiscal 2022
Claims from contracts with customers
Contract liabilities

Balance at end of
Fiscal 2022

272

353

5,699

4,795

The contract liabilities consist mainly of deposits received from customers based on sales contracts of for-sale condominiums, and are included in advances received on the consolidated balance sheet. The contract liabilities are reversed uponrecognition of revenues. The amount of revenues recognized in Fiscal 2022 that were included in the balance of contract
liabilities at the beginning of the fiscal year was 4,457 million yen.

72

ES-CON JAPAN Annual Report 2022

2) Transaction value allocated to remaining performance obligations
The aggregate transaction price allocated to the remaining performance obligations and the period over which revenues are
expected to be recognized are as follows.
Fiscal year ended December 2022
(Unit: million yen)
1 year or less

60,745

Over 1 year

3,980

Total

64,725The aggregate transaction price allocated to performance obligations that have not been satisfied as of the end of the fiscal
year mainly relates to sales of for-sale condominiums and income-generating real estate projects in the Real estate sales
business segment. There are no material amounts of consideration arising from contracts with customers that are notincluded in the transaction price.
Property management services and other services incidental to lease agreements for which revenues arising from satisfaction of performance obligations are recognized in accordance with Paragraph 19 of the Implementation Guidance on
Accounting Standard for Revenue Recognition are not included in the notes on remaining performance obligations, inapplication of the provisions of Paragraph 80-22 (2) of the Accounting Standard for Revenue Recognition.

20. Segment Information(1) Overview of Reportable Segments
The reportable segments of the ES-CON JAPAN Group are, among the Group’s business units, those for which separate
financial information can be obtained and that are to be regularly reviewed by the Board of Directors and other meeting
structures in order to decide the distribution of management resources and to assess business performance.
The ES-CON JAPAN Group integrates individual projects that have similar features in terms of products and services into
three reportable segments of Real estate sales business, Real estate leasing business and Real estate planning agency andconsulting business.

(3) Information on Net Sales, Income or Loss, Assets and Other Item Amounts by Reportable Segment
Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Reportable segment
Real estate
Real estate Real estate planning
Total
sales
leasingagency andbusinessbusiness
consulting
business
Net sales
Net sales to external customers
Intersegment net sales or transfers(Note 2)592—

79,017———79,017—70,334

8,090

592

79,017—79,017

Segment income (segment loss)

13,039

3,372

(516)

15,895(5,514)

10,381

Segment assets

139,31068,8087,320

215,439

37,332

252,771

—
97
536

584
140
—

35
—
710

619
237
1,247

114
—
—

733
237
1,247

—

46,652

15

46,66742

46,710

Total

Other items
Depreciation (Note 3)
Amortization of goodwill
Investment in equity method affiliates
Increase in property, plant and equipment and intangible assets (Note 3)(Notes) 1. Reconciliations are as follows:(1) T he reconciliation of segment income/loss of -5,514 million yen is from corporate expenses not attributable to any reportable segment.
Corporate expenses are general and administrative expenses not attributable to reportable segments.
(2) T he reconciliation of segment assets of 37,332 million yen is mainly from surplus operating funds (cash and deposits) and administrative
assets, etc. not attributable to reportable segments.
(3) T he reconciliation of depreciation of 114 million yen is from depreciation on corporate assets not attributable to reportable segments.
(4) T he reconciliation of increase in property, plant and equipment and intangible assets of 42 million yen is from an increase in corporate assets
not attributable to reportable segments.
2. Segment income/loss is reconciled with operating income on the consolidated statement of income.
3. D epreciation and increase in property, plant and equipment and intangible assets includes long-term prepaid expenses and their amortization.

Fiscal 2022 (from January 1, 2022 to December 31, 2022)

(Unit: million yen)

Reportable segment
Real estate
Real estate Real estate planning
Total
sales
leasingagency andbusinessbusiness
consulting
business

Real estate leasing business: Leasing of real estate, etc.
Real estate planning agency and consulting business: Consigned operations of real estate-related services, brokerage oftransactions, sales agency, etc.

73

(Note 1)

Amount on
consolidated
financialstatements

8,090
—

Real estate sales business: Development and sale of for-sale condominiums and retail properties, sale of land, etc.

The accounting method for the reported business segments is the same as described in “Summary of significant accounting
policies.”
As described in Changes in Accounting Policies, the Company has adopted the Accounting Standard for Revenue
Recognition, etc. from the beginning of Fiscal 2022 and has changed its accounting method for revenue recognition. In
accordance with this, the measuring methods of income or loss by business segment has been changed in the same manner.
The impact of the change on net sales and segment income of the reportable segments is immaterial.

Reconcilia­
tion

70,334—Each of the reportable segments mainly comprises the following operations.

(2) Calculation Method of Net Sales, Income or Loss, Assets and Other Item Amounts by Reportable
Segment(Unit: million yen)

Net sales
Revenues from contracts with customers
Other revenues (Note 4)
Net sales to external customers
Intersegment net sales or transfers

Reconcilia­
tion(Note 1)

Amount on
consolidated
financialstatements(Note 2)86,531—
86,531—

1,156
10,667
11,824
—

1,074
—
1,074
—

88,763
10,66799,431—————

88,763
10,66799,431—

Total

86,531

11,824

1,074

99,431－

99,431

Segment income

17,006

4,716

228

21,951(6,459)15,492

Segment assets

152,41267,721

3,966

224,100

39,629263,729

—
97
603

1,140
425
—

30
—
688

1,171
522
1,292

110
—
—

1,281
522
1,292

77

1,929

1

2,009

36

2,045

Other items
Depreciation (Note 3)
Amortization of goodwill
Investment in equity method affiliates
Increase in property, plant and equipment and intangible assets (Note 3)74

ES-CON JAPAN Annual Report 2022

(Notes) 1. Reconciliations are as follows:(1) The reconciliation of segment income of -6,459 million yen is from corporate expenses not attributable to any reportable segment. Corporate
expenses are general and administrative expenses not attributable to reportable segments.
(2) T he reconciliation of segment assets of 39,629 million yen is mainly from surplus operating funds (cash and deposits) and administrative
assets, etc. not attributable to reportable segments.
(3) T he reconciliation of depreciation of 110 million yen is from depreciation on corporate assets not attributable to reportable segments.
(4) T he reconciliation of increase in property, plant and equipment and intangible assets of 36 million yen is from an increase in corporate assets
not attributable to reportable segments.
2. Segment income is reconciled with operating income on the consolidated statement of income.
3. Depreciation and increase in property, plant and equipment and intangible assets includes long-term prepaid expenses and their amortization.
4. Other revenues are rental income, etc. based on the Accounting Standard for Lease Transactions.

22. Information on Impairment Loss on Non-current Assets by Reportable
Segment
Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Not applicable

Fiscal 2022 (from January 1, 2022 to December 31, 2022)

21. Related Information
Impairment losses

Fiscal 2021 (from January 1, 2021 to December 31, 2021)(1) Information by Product and Service
Descriptions are omitted as identical information is disclosed in the segment information section.

(Unit: million yen)

Real estate
sales business

Real estateleasing business

Real estate planning agency
and consulting businessEliminations
or corporate

—

—

1,760

—

Total
1,760

(2) Information by Region

23. 
Information on Amortization of Goodwill and Unamortized Balance byReportable Segment

1) Net sales
Not applicable as the Company records no net sales to external customers outside Japan.

Fiscal 2021 (from January 1, 2021 to December 31, 2021)

2) Property, plant and equipment
Not applicable as the Company has no property, plant and equipment outside Japan.

(3) Information by Major Customer
Customer’s nameSales (million yen)

Related segment

ESCON JAPAN REIT Investment Corporation

12,456

Real estate sales business
Real estate leasing business

Fiscal 2022 (from January 1, 2022 to December 31, 2022)(1) Information by Product and Service(Unit: million yen)

Real estate
sales business

Real estateleasing business

Real estate planning agency
and consulting businessEliminations
or corporate

Amortization amountduring the fiscal year

97

140

—

—

237

Balance at the end of
the fiscal year

242

7,975

—

—

8,217

Fiscal 2022 (from January 1, 2022 to December 31, 2022)

Total(Unit: million yen)

Real estate
sales business

Real estateleasing business

Real estate planning agency
and consulting businessEliminations
or corporate

Total

Descriptions are omitted as identical information is disclosed in the segment information section.

Amortization amountduring the fiscal year

97

425

—

—

522

(2) Information by Region

Balance at the end of
the fiscal year

145

7,551

—

—

7,696

1) Net sales
Not applicable as the Company records no net sales to external customers outside Japan.

24. Information on Gain on Negative Goodwill by Reportable Segment

2) Property, plant and equipment
Not applicable as the Company has no property, plant and equipment outside Japan.

Not applicable(3) Information by Major Customer

25. Information on Related Parties

Not applicable(1) Transactions with Related Parties
1) Transactions between the filing party of these consolidated financial statements and related parties
a. Between the parent company of the filing party of these consolidated financial statements and major shareholders(limited to companies, etc.), etc.

7576

ES-CON JAPAN Annual Report 2022

Fiscal 2022 (from January 1, 2022 to December 31, 2022)

Fiscal 2021 (from January 1, 2021 to December 31, 2021)

Type

Name

Location

Parentcompany

Chubu
Electric
PowerCo., Inc.

Higashi-ku,
Nagoya-shi

Paid-in
capital orBusiness
equitydescription or
investment
occupation(millionyen)

430,777

The Company’s
share of voting
Description
rights, etc.
Description ofof[or ownership oftransaction
relationshipsuch in the
Company]

Electricity business(Ownership)and businesses
Directincidental to the
51.4%
electricity business

Capital increase
Capital andthrough thirdbusinessparty allotment
partnership(Note 2)

Transaction
amountCategory(million yen)

20,470—

Balance at
end offiscal year
(millionyen)—(Notes) 1. The figure does not include consumption taxes.
2. The capital increase through third-party allotment was conducted based on the resolution made at the Company’s board of directors’ meeting held
on February 24, 2021 and the approval made at the 26th Regular General Meeting of Shareholders held on March 26, 2021. The Company issued
shares through third-party allotment (26,619,000 shares) and Chubu Electric Power Co., Inc. underwrote them at 769 yen per share. With thetransaction, the type of Chubu Electric Power has been changed from other affiliate to parent company. Furthermore, the issue price per share wasreasonably determined in consideration of the share price on the business day (February 22, 2021) immediately preceding the day when the said
resolution by the board of directors was made.

Fiscal 2022 (from January 1, 2022 to December 31, 2022)
Not applicable

Director

Takatoshi
Ito

Director

MinoruNakanishi

Officer

Tomohiko
Egashira

Location———

The Company’s
share of voting
Description
rights, etc.
Description ofof[or ownership oftransaction
relationshipsuch in the
Company]—

President &Representative
Director(Ownership)
Direct 1.3—

Senior Managing
Director(Ownership)
Direct 0.2—

Managing
Executive Officer(Ownership)
Direct 0.2

Transaction
amountCategory(million yen)

Balance at
end offiscal year
(millionyen)—

Exercise ofsubscription
rights to shares(Note)

43

—

—

—

Exercise ofsubscription
rights to shares(Note)

18

—

—

—

Exercise ofsubscription
rights to shares(Note)

16——(Note) T he figure indicates the paid-in amount from exercise of subscription rights to shares, which came into effect due to the resolution made at the boardof directors’ meeting held on December 1, 2017.

77

Officer

Tomohiko
Egashira———

Senior Managing
Director(Ownership)
Direct 0.2—

Managing
Executive Officer(Ownership)
Direct 0.2

Balance at
end offiscal year
(millionyen)—

Transfer offor-sale realestate(Note 1)

41

—

—

—

Exercise ofsubscription
rights to shares(Note 2)10——(Notes) 1. T he transaction is related to the sale of a for-sale condominium unit and the price is determined in the same manner as other units in the same
property.
2. T he figure indicates the paid-in amount from exercise of subscription rights to shares, which came into effect due to the resolution made at theboard of directors’ meeting held on December 1, 2017.

Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Parent company information
Chubu Electric Power Co., Inc. (listed on the Tokyo Stock Exchange and Nagoya Stock Exchange)c. Between the directors of the filing party of these consolidated financial statements and major shareholders (limited toindividuals), etc.
Fiscal 2021 (from January 1, 2021 to December 31, 2021)

Name

Director

MinoruNakanishi

LocationTransaction
amountCategory(million yen)

(2) Notes to Parent Company or Important Affiliates

Fiscal 2022 (from January 1, 2022 to December 31, 2022)
Not applicable

Type

Name

The Company’s
share of voting
Description
rights, etc.
Description ofof[or ownership oftransaction
relationshipsuch in the
Company]

2) Transactions between the consolidated subsidiaries of the filing party of these consolidated financial statements andrelated parties
Not applicable.

b. Between the subsidiaries of the other affiliates of the filing party of these consolidated financial statements
Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Not applicable

Paid-in
capital orBusiness
equitydescription
investment
or occupation(million
yen)

Type

Paid-in
capital orBusiness
equitydescription or
investment
occupation(millionyen)

Fiscal 2022 (from January 1, 2022 to December 31, 2022)
Parent company information
Chubu Electric Power Co., Inc. (listed on the Tokyo Stock Exchange and Nagoya Stock Exchange)

26. Per Share Information
(Unit: yen)

Fiscal 2021

Fiscal 2022

(from January 1, 2021
to December 31, 2021)(from January 1, 2022
to December 31, 2022)

Net assets per share

657.50691.87

Basic earnings per share

67.48

76.04

Diluted earnings per share

67.30

75.89

(Notes) 1. In calculating net assets per share, the Company’s shares owned by the share-based payment benefits trust for directors and share-based payment benefits type ESOP trust (the share-based payment benefits trust for directors: 851,000 shares for Fiscal 2021 and 851,000 shares for Fiscal
2022; the share-based payment benefits type ESOP trust: 225,700 shares for Fiscal 2021 and 573,400 shares for Fiscal 2022) are included in treasury shares, which are excluded from the number of shares issued and outstanding at end of the fiscal year.
2. In calculating basic earnings per share and diluted earnings per share, the Company’s shares owned by the share-based payment benefits trustfor directors and the share-based payment benefits type ESOP trust (1,078,783 shares for Fiscal 2021 and 1,221,448 shares for Fiscal 2022) are
included in treasury shares, which are excluded when calculating the period-average number of shares.

78

ES-CON JAPAN Annual Report 2022

3) Date of business combination
July 31, 2023 (scheduled)

3. The basis for the calculation of basic earnings per share and diluted earnings per share is as follows:
Fiscal 2021
(from January 1, 2021
to December 31, 2021)

Fiscal 2022
(from January 1, 2022
to December 31, 2022)

Basic earnings per share
Profit attributable to owners of parent (million yen)
Profit not attributable to common shareholders (million yen)
Profit attributable to owners of parent for common shares (million yen)
Period-average number of common shares (shares)

5,961

7,250

—

—

5,961

7,250

88,346,828

95,356,315

4) Legal format of business combination
Acquisition of shares for a cash consideration
5) Company name after business combination
No change is made.

Diluted earnings per share
Adjustments to profit attributable to owners of parent (million yen)——

Increase in common shares (shares)

236,481

176,154(Of which, subscription rights to shares)(236,481)(176,154)——

Description of dilutive shares without dilutive effect and not included in the calculation of diluted earnings per share

27. Significant Subsequent Events

6) Percentage of voting rights acquired
100%7) Main basis for determining the acquiring company
The Company will acquire the shares of the subsidiary for a cash consideration.
(2) Acquisition cost and consideration paid, by type, for the acquired company
Consideration for acquisition

Business Combination through Acquisition

Cash

Acquisition cost

The Company resolved at its Board of Directors’ meeting held on February 28, 2023 to acquire all the shares of Shijo
Omiya Building Co., Ltd. and make it a subsidiary, and concluded a share transfer agreement as of the same date. Basedon the agreement, the Company plans to acquire all of the relevant shares with July 31, 2023 set as the date of sharetransfer.

(1) Overview of business combination

30,000 million yen (planned)
30,000 million yen (planned)(3) Main items and amounts related to the acquisitionDue diligence expenses, etc. (estimate)

71 million yen(4) Goodwill generated by acquisition, reason, amortization method and period
Yet to be finalized at present.

1) Name and description of the acquired company
Name of acquired company:

Shijo Omiya Building Co., Ltd.

Description of business:

Real estate leasing(5) Amount of assets and liabilities to be accepted on the date of business combination and their major breakdown
Yet to be finalized at present.

2) Main reasons for conducting the business combination
The Company chose to acquire all the shares of Shijo Omiya Building, which is active in real estate leasing primarily in
Kyoto City, after Shijo Omiya Building implemented the procedures required to establish a new company through anincorporation-type corporate split. The goal is to secure a stable revenue stream from rental properties.
Shijo Omiya Building is active in real estate leasing, primarily in Kyoto City. It owns numerous prime revenue-generating
properties, including rental condominiums and commercial facilities.
The Company is currently promoting business under the basic policy of Transformation and Rapid Progress based on its
fourth medium-term management plan, “IDEAL to REAL 2023” (covering the three-year period from FY2021 to
FY2023), aiming for a more sustainable and stable revenue structure by shifting from one based on flows to one based on
stock.
The Company made Picasso Co., Ltd. and its group companies, which are active in real estate leasing primarily in the
Kansai region and own a number of prime revenue-generating assets, its subsidiaries in October 2021, and it is steadily
promoting a shift to a stable revenue structure. The conversion of Shijo Omiya Building into a subsidiary is believed tofurther promote the transformation of the revenue structure and contribute to the sustainable growth and enhancementof corporate value of the ES-CON JAPAN group.

79

80

ES-CON JAPAN Annual Report 2022

Investor Information

Notes for Investors
Fiscal year: January 1 to December 31
Securities code: 8892

Status of Share Price (from January 4, 2022 to April 28, 2023)(Unit: million shares)

3(Unit: yen)

1,200

Trading volume (left scale)
Share price (right scale)

2

1,000

2

800

1

600

1

400

0

200

Standard date for regular general meeting of shareholders: End of March
Standard date for submission of periodic securities report: End of March
Standard date for start of end-of-year dividend: December 31
The names of shareholders to be paid interim dividends shall be finalized on June 30 in the event they are to be paid.
Listing exchange: First tier, Tokyo Stock Exchange
Total number of shares issued and outstanding: 98,580,887 shares (as of December 31, 2022)
Total number of shareholders: 17,313 shareholders (as of December 31, 2022)
Share units: 100 shares

0Jan. 4, 2022

Mar. 31, 2022

Jun. 30, 2022

Sep. 30, 2022

Dec. 30, 2022

0
Apr. 28, 2023

No. of shares owned

Ownership ratio (%)

Institution managing the Shareholder Register Manager’s Extraordinary Account:
Sumitomo Mitsui Trust & Banking, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo
Contact: Transfer Agent Department, Sumitomo Mitsui Trust & Banking, 2-8-4 Izumi, Suginami-ku, Tokyo 168-0063
Toll-free: 0120-782-031 (Japan only)
Agency services are available at the main branch and all branches of Sumitomo Mitsui Trust & Banking nationwide.
Notification of address change, etc.:
Please notify the securities firm that holds your investment account. Shareholders who have extraordinary accounts because they do nothave an account at the securities firm should contact Sumitomo Mitsui Trust & Banking, the account manager for extraordinary accounts.
Payment of unpaid dividends: Please notify Sumitomo Mitsui Trust & Banking, the shareholder register manager.
Announcement method: Electronic announcements (https://www.es-conjapan.co.jp/) (Japanese)
However, the announcement shall be made via Nihon Keizai Shimbun when an accident or other development makes announcement via
electronic announcement impossible.

Major Shareholders (as of December 31, 2022)
Name
1

CHUBU Electric Power Co., Inc.

49,599,000

51.3

2

Nissei Build Kogyo Co., Ltd.

6,500,000

6.7

3The Master Trust Bank of Japan, Ltd. (trust account)

5,071,000

5.2

4Tenma Seiryu Co., Ltd.

3,610,000

3.7

5

Custody Bank of Japan, Ltd. (trust account)

2,905,400

3.0

6Kouryu Oh

2,100,000

2.2

7

Takatoshi Ito

1,283,200

1.3

8

Keiko Akashi

531,000

0.5

9

Yutaka Tonami

433,000

0.4

10

NS Corporation Co., Ltd.

400,000

0.4(Notes) 1. The table indicates the top 10 major shareholders.
2. Of shares owned by Custody Bank of Japan, Ltd. (trust account), 851,000 shares are owned by a share-based payment benefits trust for directors
ES-CON JAPAN has introduced and 573,400 shares are owned by a share-based payment benefits-type ESOP trust ES-CON JAPAN has introduced.
These shares are recorded as treasury shares on the consolidated balance sheet and financial statements.
3. Other than the above, ES-CON JAPAN owns 1,898,400 treasury shares.

81

Shareholders who have owned shares in ES-CON JAPAN for at least one year since June 30 of each year and who
own more than 1,000 shares are eligible to receive shareholder benefits.

Disclaimer
This annual report contains selected information including a partial translation of certain documents originally prepared in accordancewith the Financial Instruments and Exchange Act of Japan (FIEA) and other relevant laws. The document has been prepared solely forthe convenience of readers outside Japan and, unless otherwise specified, the information contained herein does not constitute disclosure documents stipulated by the FIEA, or requested by the listing regulations of the Tokyo Stock Exchange or other related rules andregulations.
English terms for Japanese legal, accounting, tax and business concepts used herein may not be identical to the equivalent Japaneseterms. If there are any discrepancies between the original Japanese documents and English translation, the Japanese documents will
always govern the meaning and interpretation. Neither ES-CON JAPAN nor any of its directors, officers, employees, partners, shareholders, agents, affiliates or their advisors will be responsible or liable for the completeness, appropriateness or accuracy of English translations contained herein.

82