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 JAPANproduce powerful lights of various colors creating a beautiful harmony that 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 2020
For the year ended December 31, 2020
https://www.es-conjapan.co.jp/english/

ES-CON JAPAN Annual Report 2020

Committed to Building a Bright Future for Japan

Performance Backed by Distinct Business Segments

ES-CON JAPAN Ltd. (“ES-CON JAPAN”) develops a comprehensive selection of realestate assets including retail, logistics, office and hotel, while primarily focusing on highvalue 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 thehappiness and future of residents.

The year 2020 was a challenging year both globally and in Japan. In the unpredictable situation brought on by thenovel coronavirus (COVID-19) pandemic, the real estate market outlook is still unforeseeable. Under such an environment, we have steadily advanced our businesses centering on for-sale condominium sales. We reviewed the timingof the sale of some hotels and the postponement of the sale of logistics sites to the next fiscal year onward due to the
spread of the COVID-19 infection. As a result, we posted an increase in sales but a decrease in profits year-on-year.

Corporate Philosophy:
Realizing the Importance of Being a Member of Society
The ES-CON JAPAN Group is committed to contributing to society in the best possible manner. Applying our
findings derived from our efforts to do so generates results. At the same time, all members of ES-CON JAPANpursue how they can realize the happiness they seek. Our staff is committed to assisting each other in realizing
the goal of positively contributing to society.
In this process, we aim to improve society by delivering and realizing better ideas for a better life. We seek totransform the connections of people into a significant force through our human resources and to expand thepossibilities of society through dynamic solutions and concepts generated through brainstorming.

Table of Contents
Corporate Philosophy . ............................................................. 1
Performance Backed by Distinct Business Segments ........... 2
To Our Shareholders ................................................................ 3
Significant Achievements of Fiscal 2020 ................................. 4
ES-CON JAPAN Becomes Consolidated Subsidiary of
Chubu Electric Power in April 2021 ......................................... 6
Fourth Medium-Term Management Plan
(Fiscal 2021 – Fiscal 2023) “IDEAL to REAL 2023” . ................ 8
Management Strategies Under the New Medium-Term
Management Plan .................................................................. 10Interview of President Takatoshi Ito ...................................... 13
Topics ...................................................................................... 21
ESG Initiatives . ........................................................................22
Management: Directors, Auditors and Executive Officers . .. 25

Management Policy ................................................................ 27
Direction and Corporate Governance .................................... 27
Company Overview ................................................................. 30
Property Descriptions ............................................................ 31
Financial Section
Management Discussion and Analysis .................................. 35
Consolidated Balance Sheet .................................................. 39
Consolidated Statement of Income and Consolidated
Statement of Comprehensive Income ................................... 41
Consolidated Statement of Changes in Equity . .................... 42
Consolidated Statement of Cash Flows ................................ 43
Notes to Financial Statements .............................................. 44
Investor Information ............................................................... 72

Forward-looking Statements
The earnings outlook and other forward-looking statements contained in this document are based on information currently
available to the 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.

1

Real Estate Sales Business

Real Estate Leasing Business

Real Estate Planning Agency
and Consulting Business

Net Sales

Net Sales

Net Sales

71,485 million yen

5,527 million yen

295 million yen

Segment Income

Segment Income

Segment Income

14,257 million yen

2,381 million yen

152 million yen

Assets by Segment (Unit: million yen)
ES-CON JAPAN’s real estate sales business performed
strongly in 2020 and we posted an increase in net sales by
Fiscal 2020 Fiscal 20197.2% to 71,485 million yen and in segment income by 3.3%
Condominiums
50,88043,588
to 14,257 million yen, both on a year-on-year basis. In the
Retail properties, etc.
25,99235,155
real estate sales business, sales of for-sale condominiums was
Rental residences
4,072
722
strong backed by the robust actual housing demand during
Hotels2,326
1,734
the COVID-19 pandemic, which was more solid than
Other
5,306
2,655
expected. Sales stood at 30,677 million yen (up 7.5% yearTotal
88,57883,854on-year), segment income was 3,591 million yen (up 38.5%
year-on-year), and the number of condominiums sold was
652 units (up 4 units year-on-year) and the unit price increased to 4,705 million yen.
As for other sales in our real estate sales business, sales of LOGITRES Tojo, our first logistics facility development project, sales of revenue-generating real estate, sales of commercial facilities and a commercial site forapproximately 19.8 billion yen to ESCON JAPAN REIT Investment Corporation (“ESCON REIT”) and
Chuden Real Estate Co., Inc. (“Chuden Real Estate”) significantly contributed to earnings. On the other hand,
we reviewed the timing of the sale of some hotels and postponed the sale of logistics sites to the next fiscal year
onward that resulted in an increase in sales and a decrease in profit. Net sales stood at 40,807 million yen (up6.9% year-on-year) and segment income was 10,666 million yen (down 4.8% year-on-year).
In the real estate leasing business, we focused on leasing activities and the property management business in order toraise asset value, including the increase in rental revenues for owned revenue-generating real estate. Net sales stood at
5,527 million yen (up 10.1% year-on-year) and segment income was 2,381 million yen (down 20.7% year-on-year).
In the real estate planning agency and consulting business, proactive efforts were made in receiving orders
for planning, consultation and other consigned services by making the best use of our planning and multifaceted business building abilities. Net sales stood at 295 million yen (down 20.7% year-on-year) and segment
income was 152 million yen (down 46.9% year-on-year).
The year 2021 will also be of note with ES-CON JAPAN’s role as a life developer becoming clearer as wereinforce comprehensive development of various types of real estate including for-sale condominiums anddetached houses. This will be accomplished through procurement of high-quality sites, neighborhood shopping
centers, and logistics facilities, as well as by our developing not only the condominium structures but also byconceptualizing and developing the lives of residents.
2

ES-CON JAPAN Annual Report 2020

To Our Shareholders

Significant Achievements of Fiscal 2020

Takatoshi Ito
President andThank you for your continued support and patronRepresentative Director
age. We would like to express our deepest sympathy
ES-CON JAPAN Ltd.
to those who suffered and are suffering fromthe COVID-19 and the spread of the pandemic.
Fiscal year 2020 was a year of great challenge forthe world and Japan. The pandemic made theabnormal, normal and significantly questioned ourapproaches to work, life, etc. The economic environment has also changed dramatically. During thestate of the emergency declared in April 2020, visitors to our sales centers decreased significantly andsales were stagnant. However, since then housing demand remained strong and a stable supply will continue.
The neighborhood shopping centers we own continued operations during the state of emergency, and the salesof supermarkets, drugstores and other tenants were stable, maintaining year-on-year increases. On the other
hand, restaurants, apparel shops, sports clubs and other tenants are still in a severe situation with the sluggish
return of customers. Despite strong financial results, we reviewed the timing of the sale of some hotels and the
postponed sale of logistics sites to the next fiscal year onward due to the pandemic which resulted in an increasein sales but a decrease in profit.
In such an uncertain business environment, we saw a dramatic change in our business environment. To
strengthen our financial standing, we implemented a third-party allotment in April 2021 with Chubu ElectricPower Co., Inc. (hereinafter “Chubu Electric Power”) that has a strong corporate credit as the allottee, andbecame a consolidated subsidiary of Chubu Electric Power. Moreover, we temporarily rescinded our MediumTerm Management Plan and newly formulated our Fourth Medium-Term Management Plan “IDEAL to REAL
2023” this year. The basic policy under the new plan is “Transformation” and “Rapid Progress.” Management
under the plan is focused on improving the structure of the balance sheet and transforming the focus from flows
to stock. ES-CON JAPAN will demonstrate its synergies with the Chubu Electric Power Group and seek tomeet the final year targets of net sales of 110 billion yen and operating income of 16 billion yen.
We thank you for your support in amid the uncertainties and challenges that the world faces under thecontinuing spread of COVID-19, and we look forward to a stellar fiscal 2021.

Net Sales

Operating Income(Unit: million yen)

(Unit: million yen)

80,00012,91277,308

Profit Attributable to
Owners of Parent
8,155

10,800• Acquired the naming rights for the new Nippon-Ham Fighters ballpark: ES CON FIELD HOKKAIDO

February• ESCON REIT conducts its first public offering since listing• Open tonarie Utsunomiya, ES-CON’s first neighborhood shopping center in the Kanto region

March• Participation with partner in Los Angeles, California
condominium project• Joint projects announced with Chuden Real Estate;
Grand Le JADE Shirakabe Rinzennotei and Suitashi Fujishirodai 5-chome Project (tentative name)• Raise three billion yen in funding through ESG/
SDGs assessment-based loan

Grand Le JADE Shirakabe Rinzennotei

April• Investment in SQUEEZE Inc. and participation in hotel operation businessMay• Environment: Earn environmental management system (EMS) certification under Eco Action 21

July• Earn DBJ Green Building certifications for tonarie Yamato-Takada and tonarie Toga-Mikita, commercial
facilities owned by ESCON REIT
• Review of Third Medium-Term Management Plan “IDEAL to REAL 2022” and rescind progressive dividend policy

August• Soyoca Fujimino (currently tonarie Fujimino) awarded CASBEE certification• Joint projects announced with Chuden Real Estate: Grand Crea Ichinomiya and Le JADE Kakegawa Ekimae(Unit: million yen)

12,202January

7,663
6,200

72,106

September• Open Hokkaido Office; Fukuoka Office renamed Kyushu Office• Formation of private investment fund and investments in silent partnership (Kamikitadai Ekimae development, Fujisawa development)

Fiscal 20193

Fiscal 2020

Fiscal 2021
(Projection)

Fiscal 2019

Fiscal 2020

Fiscal 2021
(Projection)

Fiscal 2019

Fiscal 2020

Fiscal 2021
(Projection)

4

ES-CON JAPAN Annual Report 2020

October• Good design awards bestowed on Grand Le JADE Todoroki and Le JADE Tsujido Higashikaigan• Sale of permanent use rights at columbarium and management of columbarium commence• Acquisition of Suroy Mall Nagamine

November• 3 Star and Green Star ratings earned in Development Benchmark of GRESB real estate assessments• Completion of ZEH builder certification registration by ES-CON HOME & ES-CON CRAFT

December• Acquisition of preferred negotiation rights of partner companies for the JR Kitahiroshima Station “West Exit
Area Revitalization Project” in Kitahiroshima City, Hokkaido• Raised 3.5 billion yen in funding through ESG/SDGs assessment-based financing (Tsukuba CREO Project(commercial facility))• Formation of private investment fund and investments in silent partnership (Keio Inagi Ekimae
development)

January 2021 

Details of Third-Party Allotment
Deadline for payment

April 5, 2021

Number of new shares to be offered

26,619,000 shares of common stock

Paid-in amount

769 yen per share

Total paid-in amount

20,470,011,000 yen

Major Shareholders Before Capital
Increase (as of end of Fiscal 2020)

tonarie Yokkaichi

February 2021 
Announcement of “IDEAL to REAL 2023,” the Fourth Medium-Term Management Plan
Earn DBJ Green Building certifications for tonarie Minami-senri and tonarie Seiwadai, commercial facilities owned
by ESCON REIT

March 2021 Conclusion of a partnership agreement for the JR Kitahiroshima Station “West Exit Area Revitalization Project”
Reception of the Award for Excellence in the Environmental Human Resource Development
Corporate Awards 2020

April 2021 

5ES-CON JAPAN concluded a capital and business partnership agreement with and became an equity-method
affiliate of Chubu Electric Power in 2018. Since then, we have aggressively developed business by positioning
the Chubu region as a core business area comparable to the Tokyo metropolitan area and the Kansai region.
As a result of considering various options and seeking effective means of further growth of business andenhancement of management stability, ES-CON JAPAN conducted a capital increase by third-party allotment
with Chubu Electric Power, with its strong corporate credit standing, as the allottee, and became its consolidated subsidiary.
ES-CON JAPAN aims to further increase its corporate value by realizing both enhancement of its management stability and an increase in its earnings potential.

Major Shareholders (before and after capital increase)

Opening of tonarie Yokkaichi
Formation of private investment fund and silent investment(Odakyu Isehara Ekimae Sakuradai development)

Implementation of the capital increase through third-party allotment with Chubu
Electric Power as allottee and becoming a consolidated subsidiary of Chubu
Electric Power.
Investments in Ryukyu Football Club Co., Ltd., the operator of the J2 professionalsoccer team “FC Ryukyu”
Formation of a private fund and investment in silent partnership (Kawasaki
Minamimachi residential bridge project)

ES-CON JAPAN Becomes Consolidated Subsidiary of
Chubu Electric Power in April 2021

Ownership
Ratio (%)

Major Shareholders After Capital
Increase (as of April 5, 2021)

Ownership
Ratio (%)

Chubu Electric Power Co., Inc.

33.01

Chubu Electric Power Co., Inc.

51.54

Nissei Build Kogyo Co., Ltd.

9.34

Nissei Build Kogyo Co., Ltd.

6.75

Tenma Seiryu Co., Ltd.

5.19

Tenma Seiryu Co., Ltd.

3.75

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

3.57

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

2.59

Custody Bank of Japan, Ltd.
(Trust account)

3.14

Custody Bank of Japan, Ltd.
(Trust account)

2.27

Koryu Oh

3.02

Koryu Oh

2.18

Takatoshi Ito

1.73

Takatoshi Ito

1.25

Custody Bank of Japan, Ltd.
(Trust account 5)

0.81

Custody Bank of Japan, Ltd.
(Trust account 5)

0.59

Keiko Akashi

0.76

Keiko Akashi

0.55

Custody Bank of Japan, Ltd.
(Trust account 6)

0.74

Custody Bank of Japan, Ltd.
(Trust account 6)

0.53*Ownership ratio after the issue are calculated using as the denominator the figure for voting rights (696,072 voting rights) for the total of 69,607,200
shares obtained by subtracting from the total of 71,961,887 shares issued and outstanding as of December 31, 2020, 2,344,400 shares of treasury
stock, and 10,287 shares in less than the minimum trading unit as of that same date, plus the increase in voting rights (266,190 voting rights) resulting
from this capital increase by third-party allotment (962,262 voting rights). The ownership ratios of shareholders other than Chubu Electric Powerassume no change in shareholdings since December 31, 2020.

FC Ryukyu emblem

6

ES-CON JAPAN Annual Report 2020

Concluded New Capital and Business Partnership Agreement with Chubu ElectricPower (effective February 24, 2021)
1. Enhancing joint efforts related to energy supply and facility construction
2. Joint research and joint implementation in businesses related to next-generation smart houses, connected
homes, and so forth
3. Further enhancing the partnership with Chuden Real Estate, a member of the Chubu Electric PowerGroup
4. Enhancing partnerships related to the effective utilization and development of unused or underused land
belonging to the Chubu Electric Power Group
5. Joint initiatives in businesses that contribute to society, including urban development

Exert Synergistic Effects with the Chubu Electric Power Group
Since the conclusion of a capital and business partnership agreement with Chubu Electric Power in August
2018, ES-CON JAPAN has steadily developed business in the Chubu region with the Nagoya Branch it established. ES-CON JAPAN has steadily exerted synergistic effects such as utilizing the warehousing function forsales of the properties it developed and exchanging personnel with group companies of Chubu Electric Power,in addition to the promotion of five joint projects with Chuden Real Estate (four in the Chubu region and one
in the Kinki region).
ES-CON JAPAN will strive to realize large-scale redevelopments in urban centers and in front of stations
and large-scale urban developments as well as a “new form of communities” through further exertion of synergy
effects with Chubu Electric Power Group that would be created by becoming its consolidated subsidiary.

Joint Projects with Chuden Real Estate• Grand Le JADE Shirakabe Getsuronotei• Suita-shi Fujishirodai 5-chome Project(complexes combining retail and residential functions)• Le JADE Kakegawa Ekimae• Grand Le JADE Shirakabe Rinzennotei

7

Fourth Medium-Term Management Plan (Fiscal 2021 – Fiscal 2023)“IDEAL to REAL 2023”
With challenging economic conditions continuing due to the COVID-19 pandemic and the real estate industry facing a business environment in which the future impact on the real estate market remains difficult topredict, ES-CON JAPAN decided in July 2020 to cancel its Third Medium-Term Management Plan “IDEAL
to REAL 2022” covering the three-year period from Fiscal 2020 through Fiscal 2022.
Later, ES-CON JAPAN identified an excellent opportunity to proceed with further business expansion andenhancements to its management stability, based on the finding that the impact of COVID-19 on its business
was relatively minor compared to initial expectations. ES-CON JAPAN considered various options in searchof the most effective means of capitalizing on this opportunity. As a result, ES-CON JAPAN determined it
could strengthen its financial standing through a capital increase realized by becoming a consolidated subsidiary of Chubu Electric Power which offers strong corporate credit, by issuing new shares through third-party
allocation. Thus, it established its Fourth Medium-Term Management Plan “IDEAL to REAL 2023” covering
the three-year period from Fiscal 2021 through Fiscal 2023.

Basic Management Strategy Policies
1. Establishing business foundations able to withstand unexpected changes in economic conditions.
2. Simultaneously changing the revenue structure and expanding business domains.

Basic Policy: Transformation and Rapid ProgressTransformation• Proactive investment in long-term revenue-generating real estate and improving the structure of the balance sheet• Transforming the focus of management from flows to stock
Rapid Progress• Demonstrating synergies in 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 theMedium-Term Management Plan)

Performance Plan

Net Sales
Operating Income

ES-CON JAPAN will realize its basic policy“Transformation” by planning to set new record
profits through positioning the year 2021 as a
“Stage of structural reforms to balance sheet andrevenues” and the year 2022 as a “Stage of setting
new record profits.” We position the year 2023 as astage of further rapid progress through realizing theTransformation.

(Unit: million yen)

77,308110,000
98,00080,00012,202

10,80014,00016,000

2020

2021

2022

2023

8

ES-CON JAPAN Annual Report 2020

Management Strategies Under the New Medium-Term Management Plan

Management Targets
Strive to transform the revenue structure through measures such as proactive investment in long-term revenue-generating real estate in addition to increasing the share of profits from leasing.
Fiscal year
ended
December 2020
Results

Fiscal year
Fiscal year
Fiscal year
endingendingendingDecember 2021 December 2022 December 2023
Plan
Plan
Plan

Share of profits from leasing (Note 1)

14.2%

23.0%

24.0%

26.0%

Return on equity (ROE)

21.2%

12.0%

13.0%

13.0%

Return on invested
capital (ROIC)

6.6%

4.0%

4.0%

4.0%

Equity ratio

25.8%

29.0%

26.0%

23.0%

Share of long-term
earnings from real estate (Note 2)

9.5%

12.0%

14.0%

18.0%

38.6 billion yen

61.0 billion yen

66.0 billion yen

72.0 billion yen

Net assets(Notes) 1. Share of profits from leasing: Leasing segment profits/segment total profits (not including adjustments).
2. Share of long-term earnings from real estate: Real estate generating leasing revenues recorded as noncurrent assets/net assets.

Investment Plan
ES-CON JAPAN strives to transform the revenue structure by expanding the amount of long-term revenue-generating real estate fourfold through making investment of 220 billion yen in gross investment amount and proactive
investment in long-term revenue-generating real estate during the period of this Medium-Term Management Plan.
Cumulative Amounts Invested Over Three Years (2021-2023)

(Unit: billion yen)

2021
Gross investment amount

2022

2023

Three-year
cumulative
total

55

70

95

220

30

40

60

130

Investment in development of revenue-generating real estate

5

10

15

30

Investment in medium-term revenue-generating real estate [Note]

15

20

25

60

Investment in long-term revenue-generating real estate

10

10

20

40

25

30

35

90

Amount recovered

0

0

30

30

Net investment

55

70

65

190

Investment in revenue-generating real estate

Investments in other development(Note) R eal estate generating rental revenues, acquired while being leased to tenants and intended for sale after increasing its value

Projected Asset Composition After Three Years
Gross assets
2020

149.4
2023 [projection]

307.0

9

(Unit: billion yen)

Share of long-term earnings
attributable to real estateLong-term revenue
generating real estate
Other
46.8
Other
60.0

14.1

2020

Inventories
88.5

55.0
Long-term revenue
generating real estate

9.5%
Inventories
192.0

2023 [projection]

18.0%

A. Transformation to a Structure of Sustained and Stable Revenues
1. Increasing the share of profits from leasing to 26% or higher
Real estate leasing businessWe intend to transform the revenue structure
Real estate sales businessby expanding the share of segment income
Real estate planning agency and consulting business
Share of profit from leasingfrom real estate leasing to all reportable seg1.7
0.1
1.5
ments (real estate sales business, real estateleasing business, and real estate planning
24.0%
23.0%
agency and consulting business) from 14.2%
13.8
14.2%
10.9
in Fiscal 2020 to 26% or more by Fiscal 2023,
14.2
which is the period covered by the plan.

(Unit: billion yen)

1.7

26.0%
15.1

2.3

3.7

5.0

6.1

2020

2021

2022

2023

2. Establishing a revenue structure wherein leasing segment profits cover total general and administrative
expenses
Leasing revenues(Unit: billion yen)
We intend to increase coverage ratio to 90% in
Leasing segment profits
Fiscal 2023 (final fiscal year of the mediGeneral and administrative expenses
11.2
Coverage ratio
90%
um-term management plan).
9.5
7.9 71%
5.5
51%

4.5

5.2

82%

5.0

6.1

6.8
6.1

3.7

2.3

2020

2021

2022

2023

B. Use Diversification and Geographic Strategies to Achieve Stable Growth in Existing Core Businesses
1. Condominiums
While aiming for a stable annual supply of
1,200 units from Fiscal 2022 and after, we will
focus on development of condominiums inharmony with the natural environment onsites characterized by natural abundance (e.g.,
OST RESIDENCE KARUIZAWA) as thediversification strategy. Furthermore, we will
provide a stable supply in Japan’s five majorurban areas (Kanto, Kansai, Chukyo, Kyushu
and Hokkaido regions).
OST RESIDENCE KARUIZAWA

2. Commercial and rental facilities
We will proactively engage in new development of neighborhood shopping centers and retail sites as well as
investment to raise values, centering on the “tonarie” brand. We will operate business in various retail sites

10ES-CON JAPAN Annual Report 2020

across Japan, including those connected directly to railway stations, in high population density areas, and in
highly convenient roadside locations, as the region-specific strategy while promoting development of complexes combining retail, residential, and employment functions, as typified by the Tsukuba Station integrated
development project in Ibaraki Prefecture, under the diversification strategy.
3. Listed REIT
As a sponsor firm of ESCON REIT, we aim to continuously develop retail facilities and retail sites rooted inlocal communities and realize mutual growth by supplying properties to ESCON REIT.
4. Hotels
We have developed 17 projects (of which 15 were sold) through January 2021. Despite uncertainties related tothe spread of COVID-19, we will carefully make decisions with regard to future developments based on theprospects of post-COVID recovery of inbound tourism demand.
C. Growing New Businesses into Core Businesses Through Business Diversification and Area Strategies
1. Logistics
We launched “LOGITRES,” a new logistics facility brand, and the development of the first project “LOGITRES
Tojo” is now complete. In October 2019, we acquired a development site in the same area as the second
project.
In light of the growing e-commerce market and growing demand for logistics facilities, our policy is tostrengthen efforts in this sector as a potential new core business.
2. Rental apartments
Our policy calls for enhancing efforts in apartment development as a potential core business by drawing on our
know-how in the condominium business, our mainstay business, to develop apartments to meet various needs,
including student apartments, company housing, and apartments for one-person households
3. Private REIT
Having ventured into the apartment market in which conditions remain solid despite future uncertainty, weplan to, as a new initiative, form ES-CON Private REIT (tentative name) as a private REIT to invest mainly
in apartments within the year 2021.
D. Proactively Pursuing New Business Domains
1. New businesses
We will proactively develop overseas business, sale of permanent use rights at columbariums, large-scale urban
development business, etc.
2. Other new initiatives
We will also proactively press ahead with M&As, alliances and digital transformation.
E. Demonstration of Synergies Within the ES-CON JAPAN GroupWe will enhance the stable earnings capabilities of subsidiaries through our diverse development strengths.

11

F. Expanding Offices and Branches
We will develop multifaceted real estate businesscentered on the five major urban areas of Kanto,
Kansai, Chukyo, Kyushu, and Hokkaido regions.

Hokkaido OfficeOpened on September
1, 2020. Ballpark (baseball stadium) to becompleted in 2023.

Nagoya OfficeOpened on March 1, 2019.
Proceeding with various
condominium projects,
including joint projects
with Chuden Real Estate.

ES CON FIELD HOKKAIDOGrand Le JADE Shirakabe
Rinzennotei

Kyushu Office
Changed the name on
September 1, 2020.
Acquired first condominium project in
September 2020.

Osaka Head Office

SUROY MALL NAGAMINETokyo Head Office

G. Seeking Further Synergies With the Chubu Electric Power GroupIn addition to synergies generated through 2020 (promoting joint projects, making effective use of real estate
owned by the Chubu Electric Power Group, prospective buyers for our real estate development projects,
exchange of human resources, etc.), we will seek further synergies attained by becoming a consolidated subsidiary. (Please refer to pages 6 and 7 for details.)
H. Promoting ESG Initiatives
1. Management Philosophy on ESG
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 promotion of ESG
initiatives as a life developer creating ideal living, meeting needs that change with the times.
2. Basic Policy on ESG
We seek to grow as a company required by society in compliance with laws and regulations on environment,social and governance (ESG) and the promises we make, and through promotion of ESG initiatives.
I. Returns to Shareholders
Although we announced a review of the progressive dividend policy* on July 30, 2020, we have decided tomaintain this policy for Fiscal 2020 and beyond.
*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, butrather only maintains or increases the dividend amount” in principle.

Trend in Dividends
We plan to maintain a dividend per share of at least 38 yen during the period of this Medium-Term Management Plan.
2016

2017

2018

2019

2020

2021

2022

2023

Dividend per share [yen]

15

18

32

36

38

38
or more38
or more38
or morePayout ratio [%]

25.5

22.0

30.2

30.2

33.9

—

—

—

12

ES-CON JAPAN Annual Report 2020

Q

Could you first tell us about the impact of the COVID-19 pandemic?

A little over a year has passed since COVID-19
began to spread and eventually become a pandemic,
but the future is still uncertain. On the other hand,
ES-CON JAPAN’s condominium business, which
accounts for about 50% of our net sales, has notbeen affected significantly because the actual housing demand in the COVID-19 pandemic, has been
more solid than expected. In Fiscal 2020, theQ

How have the retail facilities you own performed?

In the case of the community-based shopping centers we developed, overall sales performed better
than in the previous year but dining and appareltenants specifically experienced drops in sales.
Recovery is yet to be seen among these tenants andthere is a risk that any prolonging of the current
situation will lead to them moving out.
However, the emerging era has brought aboutchange. Specifically, the penetration of e-commerce
has resulted in people buying products on the web
more than before. Contrarily, retail tenants

Interview ofPresident Takatoshi Ito
ES-CO N JAPAN Ltd.

13

Q

impact of the spread of COVID-19 on financial
results was as little as around 10% in terms of bothsales and profits compared with the initial plan.
The decrease in revenue is mainly attributable tothe changes in the sales timings of some hotels andthe delay in the sale of logistics sites due to the
spread of COVID-19.

representing experiences and products that cannot
be bought unless you go to that store are increasing
and needed local residents.
What does this mean for ES-CON JAPAN? It
means we must change our tenant composition to
one that is needed by local residents, eyeing thefuture of the facility. We are proactively leasing
towards potential tenants that would satisfy local
needs as we constantly strive to enhance the valueof our retail facilities.

Have any clear differences in sales of retail facilities, etc. been seen between
before and after the declarations of states of emergency issued on multiple
occasions in Japan?

The number of visitors at our community-based
shopping centers is on the rise, but sales did not
grow drastically after the lifting of the declarations
as sales, etc. had been relatively stable even during
the periods of the declarations. On the other hand,the conditions of urban retail facilities were toughduring the period of the declarations, so the numberof visitors and sales will recover after the lifting. In
particular, community-based shopping centerswith fresh food supermarkets as anchor tenants arestable.

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ES-CON JAPAN Annual Report 2020

Q

What is the intent and future strategy behind rescinding the Third MediumTerm Management Plan “IDEAL to REAL 2022” in 2020 and newly formulating
the Fourth Medium-Term Management Plan “DEAL to REAL 2023” in February
2021?

When we rescinded our Medium-Term
Management Plan last July, the significance of the
impact of the spread of COVID-19 on the economic and social environment was still uncertain,
so we consider it necessary to rescind our MediumTerm Management Plan, focus on the businessenvironment, business progress, etc., and makemore careful management judgments. Of course,
the factors for the formulation of the new MediumTerm Management Plan include the drastic changes
in the real estate markets including hotels, offices,and urban commercial facilities due to the spreadof COVID-19. As the first measure, we conducteda capital increase through third-party allotment
with Chubu Electric Power as the allottee andbecame a consolidated subsidiary of Chubu ElectricPower. We also realized capital enhancement by
funding of about 20.4 billion yen based on the

Q

What are your thoughts on the meaning and significance of becoming a
subsidiary of Chubu Electric Power through third-party allotment?

One clear fact is that thanks to becoming a consolidated subsidiary of Chubu Electric Power, we can
now further improve our corporate value because
our trust has been enhanced and our credit has
increased dramatically, which enabled diversification of funding methods and reduction of funding
costs. Thanks to this, we can enhance our synergy
with the Chubu Electric Power Group and grow to
be a company that endeavors to perform large-scale
redevelopment of city centers and areas in front ofstations, large-scale urban development, and realization of “new community-style” and is engaged in
the development phase of urban development
15

approval of shareholders at the 26th regular general
meeting of shareholders held on March 26 thisyear. These drastic changes in the internal environment are the important assumptions of the new
Medium-Term Management Plan.
The basic policy of the new Medium-Term
Management Plan is “Transformation” and “Rapid
Progress.” Transformation means a shift of the revenue structure. It is one of the themes to shift thefocus of management from flows to stock andincrease the ratio of revenue-generating rental
properties to whole-segment profits from the resultof Fiscal 2020, 14.2%, to 26% by 2023, which isthe final fiscal year of the Medium-Term
Management Plan. We will aim to achieve sales of
110 billion yen and operating income of 16 billion
yen by Fiscal 2023 as Rapid Progress.

necessary for the next generation. We would like toestablish such an organization regardless of the
spread of COVID-19.
Although we have become a consolidated subsidiary of Chubu Electric Power, we are still listed asparent-child listings, but of course, we have toestablish an organization that also meets the expectations of minority shareholders. Specifically, theboard of directors consists of nine directors in total,
and the five directors who are non-executive directors or auditing committee members are all outside
directors, while the remaining four directors are
independent officers for supervision of ourmanagement. Moreover, this January, we also
recruited seven employed executive officers for theenhancement of the execution system. These activities aim to establish an organization that can accelerate execution of operation and boldly challengebusiness while managing risks, so the speed of ourQ

How is the progress of the two big projects in Hokkaido, namely the district
development adjoining the new ballpark of the Hokkaido Nippon-Ham Fighters(ballpark concept) and the JR Kitahiroshima Station West Exit Area
Revitalization Project in Kitahiroshima?

The new ballpark “ES CON FIELD HOKKAIDO”
is scheduled for opening in 2023 and we are developing the area surrounding the ballpark upon consultation with Kitahiroshima City and the
Hokkaido Nippon-Ham Fighters. We planned andproposed the JR Kitahiroshima Station West Exit
Area Revitalization Project, which will be an
important hub for accessing the ballpark, and wasofficially selected as a partner company in March
2021. We will make use of our development knowhow for the development of the area in front ofKitahiroshima Station eyeing 10 to 20 years fromnow. We will be engaged together in the ballpark
concept and the development of the area in front ofKitahiroshima Station, which will be a gateway forprosperity for all of Kitahiroshima.

Qdecision-making will be maintained even though
we have become a consolidated subsidiary.
I feel that we succeeded in building the foundation
for the basic policy of the new Medium-Term
Management Plan of “Transformation” and “Rapid
Progress.”

Conceptual drawing of JR Kitahiroshima Station West Exit Area
Revitalization Project

What is the significance and mission behind ES-CON JAPAN’s firm commitment
to investments in sports, more precisely “investments in society,” such as its
investment in the J2 professional soccer team FC Ryukyu based in Okinawa in
addition to the activities in Hokkaido?

It is important to contribute to the development of
the region based on the local community. To do so,
we have to be engaged in not only our businessactivities but also the promotion of education andculture. Participation in the ballpark concept of the
Hokkaido Nippon-Ham Fighters and sponsoring

FC Ryukyu are considered to lead to the promotion of education and culture. Professional baseballand the J-League are very popular in Japan. Support
for sports contributes to the development of theregion and education of children, so we will contribute to society through business activities.
16

ES-CON JAPAN Annual Report 2020

Q

ES-CON JAPAN has adopted a strategy to reinforce the development of logistics
facilities, but what are the reasons behind this and the direction?

Demand for logistics facilities has increased under
the spread of COVID-19. While the popularity of
e-commerce will grow going forward, the buildingof logistics facilities will be sought socially to meetdemand in the market. We will aim to reinforce thelogistics facility development business in order tosupport the construction of logistics networks suitable for the needs of tenant companies.
In addition, we have been engaged in the preparation of the land readjustment business as a commercialization examination advisor since before theQ

What is the scale of logistics facilities that ES-CON JAPAN is developing?

So far, we have focused on a scale of one to twolayers, a land area of about 6,000 to 10,000 tsubos,
and total construction costs of 5 to 10 billion yen.
Because our financial foundation has been reinforced upon becoming a consolidated subsidiary of
Chubu Electric Power, we would like to be more
actively engaged in larger-scale logistics facility

Qdevelopment.
On the other hand, in rural areas in particular,
demand for logistics facilities of the scale we havebeen handling is still large. Through such logistics
facility development, we will meet demand in eacharea and establish a certain position in the market
of logistics facility development.

For real estate developers, procurement of land for business use is the lifeline.
How are the short-term and medium-term procurement conditions?

As of the first quarter of the fiscal year ending
December 2021, we have acquired around 80% of
the commercial land we plan to have prepared by2023, which is the final fiscal year of the new
Medium-Term Management Plan. Procurement
has been proceeding steadily, and we will aim to
procure 100% of the plan by around this summer.
Moreover, we will also actively pursue acquisition of revenue-generation properties and M&A
17

establishment of the Urban Regeneration and Land
Readjustment Association. The development oflogistics facilities is one of the most important categories in consideration of reuse with multiple
landowners after land readjustment. Therefore, weare reinforcing the organization of the logistics
division for further reinforcement of the logistics
business. From now on, we will endeavor to makethe logistics facility development business one of
the growth engines of ES-CON JAPAN.

since our capacity has sufficiently improved sufficiently thanks to the capital increase through thirdparty allotment. In spite of the COVID-19
pandemic, real estate prices have not dropped asmuch as expected. This is why collection of good
properties is our lifeline. Since we have realized
diversification of funding methods and capitalincrease, it is important to quickly grasp information about good commercial land.

Q

What are your thoughts about the future of hotel development as the spread of
COVID-19 has dramatically changed the hotel market?

We have been actively engaged in hotel development
as a general developer and basically sell the hotels
after completion. We have already completed sale of
15 of the 17 hotels we developed. Considering thefuture of the hotel market, there is no denying thatthe supply of budget hotels is excessive, but there will
be needs for “small luxury” hotels for the wealthy
who cannot travel abroad due to travel restrictions.
More specifically, demand for products that fuse
hotels and Japanese inns (ryokan) is expected toQ

Is “OST RESIDENCE KARUIZAWA” for which ES-CON JAPAN has been engaged
in development as a joint business with Wellwood Ltd. (Minato, Tokyo/President:
Shinya Kihara) be what you refer to as a small luxury residence?

Yes. We are considering the adoption of such a concept for OST RESIDENCE KARUIZAWA andthe Hayamamachi, Miura, Kanagawa Project (provisional name), which we acquired in September
2020. Construction of buildings to as high asallowed under height regulations in order to maximize floor area ratio is common. On the other
hand, for small luxury residences, our focusedQ

grow, especially in areas within a one-hour drive ofTokyo like Karuizawa, Atami, and Hakone.
In the future, the development of hotels buoyedby domestic demand independent from inbounddemand, etc. will be sought. It is very important tocreate high added value in attractive locations forboth small luxury hotels and residences. We would
like to boldly challenge the business domains where
no other developer has focused their efforts in orderto create new markets.

development concepts are securing a wide ceilingheight without using up the floor area ratio andrealization of ocean views in every unit in the project of Hayamamachi, etc. Of course, this kind ofdevelopment raises the price range of products, but
judging from the robust sales of OST RESIDENCEKARUIZAWA, I am confident there are customer
segments seeking such “ideal properties.”

About two years ago mentioned ES-CON JAPAN was reinforcing the direct salesof condominiums, but are you also considering direct sales of small luxury
properties?

For reinforcement of direct sales, direct experiences
and sensitivity are important, so it is necessary toexperience sales of various properties and absorb
knowledge. Of course, at first, we will sell properties under the support of partner companies, but
we aim to sell small luxury properties directly aswell as share the goal of refining sensitivity inproduct development and carefully handle theentire process from land procurement to productplanning, sales, and after-sales services. Throughsuch organizational reinforcement, we would liketo grow into a stronger organization within thethree years of the Medium-Term Management
Plan.
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ES-CON JAPAN Annual Report 2020

Q

Next, let me ask you about the overseas strategy of ES-CON JAPAN. Since youinvested in a Hawaii-focused real estate investment fund in February 2019, youhave been engaged in joint investments and joint businesses in Thailand andLos Angeles. On the other hand, the environment for business has become
more difficult due to restrictions on overseas travel, etc. due to COVID-19. How
are you positioning the overseas business going forward?

As for our three ongoing projects in Hawaii,
Thailand, and Los Angeles, we are proceeding withbusiness with good and reliable partners. However,
because it is now difficult to travel abroad, starting
new business with new partners in new locations isdifficult. After the spread of infection calms down,

Q

Recently, ESG efforts have become essential as a method to demonstrate
corporate social responsibility. What is the recent progress of ES-CON JAPAN’s
ESG activities which it embarked on several years ago?

We established a cross-group, cross-department
ESG promotion group for which the officer incharge of the president’s office is responsible, andhave been promoting activities in terms of “environment,” “society,” and “governance.”
Specifically, for the environment, we completed
construction of “Le JADE Okurayama,” our firstenvironment-friendly ZEH condominium (Net
Zero Energy House) and will continue to develop
ZEH. In addition, we are promoting various efforts
such as the introduction of solar power generationin the logistics facility “LOGITRES Tojo,” which
we developed, and acquisition of certification of
the Japanese unique environment management
system “Eco Action 21” formulated by the Ministryof the Environment.
As for society, we have been engaged in suchactivities as activation of community vitalization
through the development of the community-based
shopping center brand “tonarie” and contribution
to the creation of local communities. For example,
we are proceeding with a project for the integrated
19

we would like to consider further expansion ofoverseas business. The overseas business is basicallya joint business with local partners, so we will proceed with the business upon careful construction oftrust relationships.

development of multiple retail facilities we acquiredin front of Tsukuba Station in Tsukuba, Ibaraki,eyeing activation of the entire area as “ES-CON
City Tsukuba.” We are developing not only retailfacilities but also offices and condominiums in thisarea for urban development and prosperity of theentire area in front of the station. We have started
the sale of the condominium “Le JADE Tsukuba
Station Front” which received a great response fromlocal residents. As a developer, we want to accelerate our efforts to create bases of exchange in local
communities toward the next generation throughour business.
In terms of governance, we are focusing on theestablishment of a transparent management organization. As I mentioned, we have separated the supervision and execution of management, for example,
by appointing five directors who are non-executive
directors or auditing committee members andmaking the remaining four officers independent
officers, and we would like to fulfill our corporatesocial responsibility through great governance.

Q

Could you give us an update on “ES-CON HOME” and “ES-CON CRAFT,” which
run detached house businesses mainly in Saitama Prefecture and became
subsidiaries in 2019?

Sales, profits, etc. have been steady as expected
since we obtained the shares of these two companies and made them subsidiaries in 2019. Through
ES-CON HOME, I strongly feel the needs of customers for detached houses as well as the strengths
of companies providing detached houses in regions
where demand for detached houses is stronger. In
addition to ES-CON HOME, which sells detachedhouses and condominiums, ES-CON CRAFT,
which runs a detached house construction business,Q

Could you tell us about ESCON REIT, which was listed in February 2020?

ESCON REIT conducted its first public offeringin February 2020 since listing. As a result, the asset
size expanded to about 52 billion yen. We will conduct public offerings again when appropriate andQ

is also a group company. Thanks to the activities ofthese two companies, we can enjoy a certain level ofcompetitiveness. Going forward, we want to gradually widen the business area centering around thearea around Omiya and not only purchase land andconstruct and sell buildings but also develop products with high quality and characteristics in order
to avoid competition with so-called “power builders” who sell many small-scale ready-built houses at
low prices.

aim at mutual growth by supporting its growth as
the sponsor company through reinforcement of theorganization in considering the establishment of a
private REIT or a private fund.

What are the values, as well as the standards and vision of ES-CON JAPAN?

The external environment has changed dramatically due to the spread of COVID-19. Moreover,the internal environment has also changed because
we became a consolidated subsidiary of Chubu
Electric Power. Under this environment, we will
aim to become a representative developer in Japan
comparable to the major general developers, or
so-called “Major 7,” toward the future of 10 years
from now beyond the period of the new MediumTerm Management Plan up to 2023.

We would like to enhance our recognition in themarket and contribute to society as a general developer that develops various types of real estateincluding retail facilities, logistics facilities, hotels,
and offices with a focus on condominiums.
However, what is most important is to provide
high-quality products that truly satisfy customers
rather than pursue scales and numbers. Within thenext decade, we will aim to become a one-and-only
company rather than a big company.

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ES-CON JAPAN Annual Report 2020

TopicsIII. Scheduled Formation of Private REIT
Plan to form and commence operation of ES-CON Private REIT (tentative name)Even under the current uncertain circumstances amid the COVID-19 crisis, the rental apartment market
remains strong, and ES-CON JAPAN believes that stable needs can continue to be expected. ES-CON JAPANplans to form and commence operation of ES-CON Private REIT (tentative name) which will invest mainly
in rental apartments. In the fundraising phase, ES-CON JAPAN intends to reduce financing risks by utilizing
an SPC aiming to develop rental apartments, and will exclude the necessity of relying only on its balance sheet.
ES-CON Asset Management will be in charge of arrangement and operation of the SPC.

I. Overseas Business Development
ES-CON JAPAN launched overseas business development byinvesting in a Hawaii-focused real estate investment fund in 2019.
In August 2019, ES-CON JAPAN joined a condominium development project undertaken by Origin Property PCL, a real estatedeveloper in Thailand, in Samut Prakan Province adjacent to thecapital city of Bangkok. This was the first time for ES-CON
JAPAN to participate in a joint condominium development project overseas. In March 2020, ES-CON JAPAN participated in ajoint for-sale condominium development project in Los Angeles
County, California, and steadily promoted business development.
Although ES-CON JAPAN will take a cautious approach until theend of the spread of COVID-19, it will focus on efforts based ona medium/long-term perspective. We embarked upon a development project in California with a partner. However, the pandemic
has impacted our decisions in this segment and we have decided
for the time being all overseas investments will involve existingoverseas partners until we are at peace with global issues, etc.

IV. Columbarium Sale and Management BusinessKnightsbridge Sukhumvit-Thepharak Project

Exterior of Tower 520 N.
CentralExterior of Tower 521 N.
OrangeII. ES-CON City Tsukuba Project (Tsukuba-shi, Ibaraki) (integrated commercial facility,

In an aging, high-death-rate society where it is said that there will be 1.68 million deaths in the year 2040, there
is a shortage of cemeteries as well as concerns that there will be a lack of “grave guardians” given the declining
birth rate and the increasing number of smaller families. In view of the fact that it is particularly difficult toobtain graves in central Tokyo, ES-CON JAPAN has decided to launch this business in October 2020 at
Ryomon, a columbarium in Minami-Azabu, Minato-Ku, Tokyo, in an effort to solve problems facing modern
society and to secure revenue by expanding the scope of the real estate business.
Operations of the columbarium are overseen by Religious Corporation Zuikein, and Ryomon Co., Ltd., aconsolidated subsidiary of ES-CON JAPAN, is entrusted with sales and management of the columbarium. Asa “life developer” that not only develops buildings but also the lives of those who live in them, thinking of theirhappiness, the ES-CON JAPAN Group will take on the responsibility of managing and operating thislong-standing columbarium.
Name
Location
AccessSiteoffice and residence development in front of Tsukuba Station)
Seibu Tsukuba, a commercial facility in front of the station, closed in
February 2017 and Aeon Tsukuba Ekimae closed in January 2018, so
the area around the station was in need of urban development andrevitalization.
Therefore, ES-CON JAPAN acquired three facilities namely Tsukuba Q’t, Tsukuba MOG and Tsukuba
CREO between December 2018 and March 2019. In order to conduct an integrated development combining
commercial facilities, offices and residences in front of Tsukuba Station, ES-CON JAPAN changed the conventional use of the building of the former Seibu Tsukuba within Tsukuba CREO to maximize the value of thelocation in front of the station by converting the first to third floors into a commercial facility and the fourth
to sixth floors into offices under the name of tonarie CREO. On the former site of Aeon Tsukuba Ekimae,
ES-CON JAPAN is developing Le JADE Tsukuba Station Front (218 units in total), which is a condominium.
ES-CON JAPAN extended part of the existing pedestrian deck in front of the station and connected Tsukuba
Station with the three facilities and the condominium to enhance convenience.
With the above initiatives, “tonarie Tsukuba Square,” a community-based shopping center combined withthree facilities, was established on May 19, 2021, and tonarie CREO was opened as the first property on thesame day after undergoing conversion.
ES-CON JAPAN will contribute to the revitalization of the area around Tsukuba Station by continuing toproceed with the integrated development of the three facilities namely tonarie CREO, tonarie Q’t and tonarie
MOG as well as the condominium.
21

Structure/scale
Number of chambers
Facility overview
Sales launched

Ryomon5-1-4 Minami Azabu, Minato-ku Tokyo
3-minute walk from Hiroo Station on the Hibiya Line
861.36 m2
Steel frame, partially reinforced concrete, 7 floors above ground,
1 below
9,999
Private visit-type automatic transfer columbarium
March 2021

ESG Initiatives
ES-CON JAPAN has conducted various social contribution activities from the aspects of environment, society
and governance as ESG initiatives. It has set “Promoting ESG initiatives” as one of the management strategies
in the abovementioned fourth medium-term management plan “IDEAL to REAL 2023,” and aims to further
promote such activities.

ESG Promotion System
We assign the Director, Head of President’s Office as the person in charge, and divide the ESG Promotion Group
that is comprised of selected members from different departments into the “E (Environment) team,” “S (Social)team” and “G (Governance) team.” We then set annual targets for each team and promote ESG initiatives.
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ES-CON JAPAN Annual Report 2020

Specific ESG Initiatives
E: Environment• Conducting environmentally and socially friendly real estate research and development including ZEH-M• Initiatives for promoting the improvement of operational efficiency with IT and increasing the percentage of
people of taking maternity leave, childcare leave and paid holidays• Utilization of renewable energy• Contribution to decarbonization in cooperation with Chubu Electric Power Group

S: Social• Contribution to regional revitalization and community creation through development of “tonarie” commercial facilities with roots in the local community• Research of WT1 cancer vaccine, a cancer immunotherapy, and monetary donation to iPS Cell ResearchFund• Investment in Ryukyu Football Club Co. Ltd. which operates FC Ryukyu, a professional football team in the
J2 league• Promoting proactive recruitment and success of female employees, the elderly and people with disabilities• Promoting action plans based on the Act on Advancement of Measures to Support Raising Next-Generation
Children• Initiatives for regional revitalization through urban development (acquisition of naming rights for the Hokkaido
Nippon-Ham Fighters’ new stadium and participation in urban development activities for the overall area)

G: Governance• Conducting timely disclosure of business activities and management status• Thorough holding of the Risk Management Committee on a regular basis and in emergencies and report to
the Risk Management Committee in the event of an emergency or when there are concerns over the occurrence of emergency• Establishment of Nomination and Remuneration Committee• Thorough respect for human rights• Succession plan (successor candidate system) initiatives

Assessment of Recent Initiatives• Obtained “3 Star” and “Green Star” ratings in the 2020 GRESB real estate assessment “Development
Benchmark”
GRESB Development Benchmark ratings are five-tier assessments based on a relative ratingbased on an overall score for environmental and sustainability initiatives. We improved on our 2Star rating in 2019, achieving a 3 Star rating for the first time. We received high ratings in both
the Management Component and Development Component, achieving the Green Star distinction for the second consecutive year.
23• Fundraising through ESG/SDG assessment-based loan provided by Sumitomo Mitsui Banking Corporation
Judged as implementing good ESG and SDG initiatives and information disclosure, we earned an A* overall ranking, thethird-best of seven possible rankings in March 2020. As a result, we raised three billion yen of the project funds of the syndicated loan with Sumitomo Mitsui Banking Corporation as the arranger through the ESG/SDG assessment-based loan as partof funding efforts for the Fujishirodai 5-Chome Project (joint project with Chuden Real Estate) on a site acquired in March
2020. We achieved this rating once again in December 2020 and leveraged the result to procure 3.5 billion with syndicatedloan for the Tsukuba CREO Project (commercial facility) currently being developed in Tsukuba City, Ibaraki Prefecture.

• Received the Award for Excellence in the SME category of the Environmental Human Resource Development
Corporate Awards 2020 (recognizing companies leading the way in developing environment-related humanresources) in March 2021
These awards were created in 2014 project by the Ministry of the Environment with an aim to encourage Japanese companies to engage in and train human resources for environmentally friendly business management and increase the numberof companies contributing to comprehensive improvement of the environment, economy and society, considering thesituation where efforts toward a sustainable society have become essential.
Recognized initiatives (comments from panel)
The ‘dementia support district’ initiative to involve tenants (of tonarie Seiwadai) and employees in training dementia
supporters is excellent.
Initiatives like ZEH help reduce the environmental burden.

Main Recent Acquisitions of Certifications• Eco Action 21
We obtained the certification of Eco Action 21, an environmental management system formulated by Japan’s Ministry of
the Environment to proactively and effectively engage in environmental management including the reduction of CO2
emissions. Based on a sustained commitment to environmental management, companies are expected to fulfill their social
responsibility to reduce environmental impact, as well as enhance management benefits and increase corporate value by
reducing administrative expenses and raising productivity.

• DBJ Green Building
We obtained DBJ Green Building certification from the Development Bank of Japan, a certification program created by
DBJ in April 2011 to support real estate projects that account for both the environment and society for tonarie YamatoTakada and tonarie Toga-Mikita, which are commercial facilities developed by ES-CON JAPAN and owned by ESCONREIT and Chuden Real Estate, and tonarie Minamisenri and tonarie Seiwadai, which are owned by ESCON REIT.

• CASBEE real estate certification
Soyoca Fujimino, a commercial facility owned by ES-CON JAPAN, obtained the S Rank, the highest rank recognized by
the CASBEE Real Estate assessment and certification system which comprehensively assesses the quality of buildings
including consideration to the environment and landscape from a CASBEE certification institute accredited by theInstitute for Building Environment and Energy Conservation.

• ZEH builder certification
ES-CON HOME Co., Ltd. and ES-CON CRAFT Ltd. have completed registration for ZEH builder certification given
to business entities capable of meeting specific requirements, such as setting as operating targets a ZEH ratio of 50% or
better by FY2020 for the home orders they receive.
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ES-CON JAPAN Annual Report 2020

Management: Directors, Auditors and Executive Officers

Tomohiko Egashira

Hiroto Mizobata

Keiko Otsuki

Kenji Fujita

Takatoshi Ito

Minoru Nakanishi

Atsushi Kawashima

Takatoshi Ito President & Representative Director

Atsushi Kawashima Director

September 2001
February 2006
March
2007
November 2010
March
2011
January
2012
May
2013
August
2013
July
2014
November 2014
September 2016
July
2018
July
2019

March

December 2019
January
2020
October
2020

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 (present post)
Appointed President and Executive Officer at ES-CON JAPAN (present post)
Appointed Director at ES-CON LIVING SERVICE (present post)
Appointed Director at ES-CON PROPERTY (present post)
Appointed Director at One’s Own House Co., Ltd. (currently ES-CON HOME) (present post)
Appointed Director at Rise Home Co., Ltd. (currently ES-CON CRAFT) (present post)
Appointed Director at ES-CON GLOBAL WORKS (present post)
Appointed member of Nomination and Remuneration Advisory Committee at ES-CON JAPAN (present post)
Appointed Director at Ryomon Co., Ltd. (present post)

Minoru Nakanishi Senior Managing Director
August
June
March
May
AugustJuly
November
March

2011
2012
2013
2013
2013
2014
2014
2015

September 2016
March
2017
December 2019
October
2020

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

2021

Tadashi Fukuda

Appointed Director at ES-CON JAPAN (present post)

Keiko Otsuki Director
March

2021

Appointed Director at ES-CON JAPAN (present post)

Masayoshi Nishitake Full-Time Auditor [Director]
March

2020

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

Hiroto Mizobata Auditor [Director]
March
March
January

2015
2016
2020

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

Tadashi Fukuda Auditor [Director]
March

2020

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

Tomohiko Egashira Managing Executive Officer
April
January
March

2002
2016
2017

July

2018

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 (present post)

Executive Officers

Yoshiro Kato
Tadashi Tanaka

Kenji Fujita Director

Satoshi Omori

March

2019

Katsushi Wakayama

January

2020

Appointed Director at ES-CON JAPAN (present post)
Appointed Executive Officer (present post)
Appointed Head of General Affairs Department
Appointed Head of President’s Office (present post)

Masayoshi Nishitake

Megumi Nakadozono
Akira Mizunoya
Tomohito Nakata

25

26

ES-CON JAPAN Annual Report 2020

Management Policy
1. ES-CON JAPAN is committed to realizing the unlimited potential of real estate through its information
sourcing, planning and product development ability to create new value that sincerely satisfies
customers.
2. ES-CON Japan is committed to achieving management that is a step more proactive than the competition
by implementing work management that has a robust defense based on ROA, cash flow and thorough risk
management.
3. ES-CON JAPAN is committed to becoming a limited-scale team of professions that can maintain theability to respond quickly and maintain flexibility within a rapidly changing society.
4. ES-CON JAPAN will maintain and build robust relationships of cooperation by respecting and appreciating competitors at all times whether inside or outside the company.
5. ES-CON Japan is committed to building a “well-ventilated” bottom-up organization while also building
an enhanced internal audit system consciously aware of compliance and governance.

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
ES-CON JAPAN asks our employees to think daily about how they should live their lives, how they should
participate in society, what kind of fruit they will bear society by contributing and, as a result, how the happiness desired by each and every one of us will be attained through these efforts.
Our employees assist and encourage each other to achieve the above goal. ES-CON JAPAN pursues a management that continues to provide fields as steps to self-realization of the unique characteristics pursued by eachof our employees.
Corporate Vision“Life Developer”
ES-CON JAPAN seeks to be a life developer; that is, a company that develops not only the hardware of thecondominium itself but also conceptualizes and develops the lives of residents. This is our goal at ES-CON
JAPAN. We are creating “new wealth” that traditional real estate firms cannot achieve with solutions provided
by our small cross-organizational teams that overcome the boundaries of divisions. ES-CON JAPAN teams
connect people, communities and the future.

27

Corporate Mission
Development of the “New Norm Neighborhood”
ES-CON JAPAN’s teams create, connect and expand values built into local areas. We do not perceive the term
“Local” as an antonym to “Urban” but rather as a location where residents are proud of the area where they live.
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 eight members: three executive directors, two non-executive directors, andthree directors who are also members of the audit committee. (In order to improve management supervisory
functions, the five directors who are non-executive directors or directors that are also members of the audit
committee are all outside directors, of which four are independent outside directors. The president and representative director serves as the board chair.)• In principle, the Board holds meetings at least once month where the management and auditing functions are heightened by vetting and discussing important items on the agenda.
• Speed and flexibility of operations are secured by entrusting the executive directors with related decisions in line with
our Articles of Incorporation. The scope to which decision-making is entrusted to individual directors is strictly managed in line with the monetary and other criteria stipulated by the Board of Directors. Furthermore, the status of vital
discussions and operations that have been entrusted to the director shall be reported to the Board of Directors without
delay.

(2) Audit Committee
The audit committee consists of three members, all outside directors to enhance management supervision andits independence. Two are independent directors and one is the full-time auditor.
• In principle, the committee meets once a month, and members of management such as accounting auditors, internal
auditors, and executive directors attend at the request of committee members to report on manners in a timely andappropriate manner.
• Members of the audit committee regularly exchange opinions with the president and, if necessary, interview membersof management such as the executive directors to understand the status of business execution and issues in eachsegment.
• Members such as the full-time auditor attend important, regularly-held meetings such as management committee
meetings, led by executive directors, and head office meetings, attended by executive directors and the members ofmanagement of each segment, to share the status of management and progress on business plans.
• The committee reviews important documents such as circulars for approval and collaborates with accounting auditors
and the internal auditing department to audit the legality and validity of the directors’ performance of duties. In addition, it strengthens governance by selecting one full-time audit committee member and making that person 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.
28

ES-CON JAPAN Annual Report 2020

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: 6,284,000,000 yen (as of end of 2020)
Revenue: 77,308,000,000 yen (consolidated, fiscal year ended December 2020)
Number of Employees: 278 (consolidated; as of end of 2020)
192 (non-consolidated; as of end of 2020)
Businesses: Real estate sale
Real estate leasing
Real estate planning, brokerage and consultation

29

30

ES-CON JAPAN Annual Report 2020

Property Descriptions

Le JADE Morinomiya[Condominium]- This condominium is located a four-minute walk from Morinomiya Station on JR
Osaka Loop Line and a five-minute walk from Morinomiya Station on Osaka Metro
Chuo Line and Nagahori Tsurumi-ryokuchi Line, it stands in a location with excellent traffic convenience enabled to directly access major stations in Osaka including Osaka and Shinsaibahi stations, as it is accessible from the two stations on
three lines.

Grand Le JADE Todoroki (Good Design Award 2020 Winner)[Condominium]- This condominium stands in a convenient location as it is a 12-minute walk from Oyamadai and Todoroki stations on the Tokyu Oimachi Line, whichenables smooth access not only to areas in central Tokyo including Shibuya, Roppongi and Shinagawa, but also to popular areas such as Jiyugaoka andFutakotamagawa where there are many sophisticated shops and restaurants.
- The surrounding area is a quiet residential district designated as category I exclusive low-rise residential district where land use is severely limited, andhas rich greenery spots such as Todoroki Valley, which is one of the only valleys in the 23 wards of Tokyo.
- The property offers a beautiful and classy living space by realizing a stately exterior design that catches people’s attention, the entrance and lounge thathave large glass windows so people can enjoy plenty of sunlight and greenery, and abundant plants arranged within the site to add colors to everyday life.
- The property won the Good Design Award 2020 as efforts in creating the building including the above were highly evaluated, with comments such as“there is a sense of unity from the overall concept to detailed ideas.”

Le JADE Tsujido Higashi-kaigan(Good Design Award 2020 Winner)[Condominium]- This condominium stands in a favorable location offering direct access to Yokohama andcentral Tokyo using Tsujido Station on the JR
Tokaido Main Line and JR Shonan-Shinjuku
Line, while also providing easy access to popular tourist spots like Kamakura and Enoshima.
- Located in a quiet residential environment
near Shonan’s rich nature and a mere
four-minute walk to the beach, the buildings
are in a residential zone with strict regulations
on building height and usage.
- It is a residential area that enables a lifestyle
only available in Shonan near the sea throughthe installing of shower booths and a surfboard storage space in the common areas inaddition to pursuing an exterior design thatgives out a feeling of a resort matching thesurrounding neighborhood by arranging various plants including Washington palms.
- The property won the Good Design Award
2020 as the above efforts resulted in a reputation as “a residence as if the regional lifestyle
has metamorphosed into the buildings.”

31- In addition to the fulfilling living environment formed in the surrounding areas
with “Osaka Castle Park,” which is rich in nature, as well as convenient living facilities such as large-scale retail facilities nearby, it stands in a location where further development is expected including two major development projects near theMorinomiya Station and a plan to extend Osaka Metro Chuo Line to “Yumeshima,”
the planned site of the Osaka Expo.
- Through measures such as placing the residential building to make all residential units face south, applying wide-span design having wide frontage on the balcony side and placing plants at the space between the front road and its entrance
based on greenery of Osaka Castle, it offers a residential space that stimulates thesensibility of people living on the property while creating harmony with its
surroundings.
- The sales started in February 2020 and all units were contracted and sold out in
October 2020 ahead of schedule, just eight months since the sales started.

Le JADE Okurayama(adopted in Fiscal 2019 High-Rise ZEH-M
Support Projects)[Condominium]- This condominium stands in a favorable location convenient
for commuting to work or school as it is an eight-minute ride to
Yokohama Station via direct train and a 20-minute train ride to
Shibuya Station from Okurayama Station, the nearest station,on the Tokyu Toyoko Line and, moreover, it is easy to maketransfers to various railway lines, enabling various access toTokyo or Kanagawa.
- In addition to having sufficient facilities that make living convenient such as a shopping street on the flat road from
Okurayama Station to the property, the location is also appropriate for child-rearing as there are as many as 10 nurseryschools and seven parks all within a range of ten-minutes on
foot.
- The property achieved a balance between a comfortable interior environment and energy efficiency through the use of
external walls and ceilings with improved thermal insulation
performance as well as high-efficiency equipment. It is anenvironmentally-friendly condominium that meets the “ZEH-M
Oriented” standards stipulated by the Ministry of Trade,
Economy, and Industry, which is the level that should be targeted for multi-family housing with 6 or more floors.

Le JADE Kotoen[Condominium]- This condominium stands in a favorable location enabling comfortable access as it stands on a site a five-minute walk from Kotoen
Station on Hankyu Imazu Line. It is only a four-minute train ride to
Nishinomiya-kitaguchi Station, which is two stations away and has
many large retail facilities, and there are even direct trains runningto central Osaka City in hours of commuting to offices and schools.
- It is located in Kotoen area which has the oldest history in the residential area “Nishinomiya Nanaen” that represents the Hanshinkanarea and, the surrounding area is also attractive with an educational
facility with a school building that is valuable even in terms ofmodern architecture, as well as a variety of convenient living
facilities.
- It offers a high-quality residential space with attention given to
details, such as a planting plan that envisions decades into the
future, the location of a driveway space, and displaying art works inthe museum corridor of the common space.

32

ES-CON JAPAN Annual Report 2020

LOGITRES Tojo
[Logistics facility]- This logistics warehouse has a total floor area of 42,258 m2 developed as the first project under the “LOGITRES” brand, an originallogistics facility brand launched in January 2019.

Grand Le JADE Shukugawa Residence[Condominium]- This condominium is accessible from three stations on three lines as the property is located a four-minute walk from Sakura-Shukugawa Station on JR
Kobe Line, an eight-minute walk from Shukugawa Station on Hankyu Kobe Line and a nine-minute walk from Nishinomiya Station on Hankyu Main Line,the property stands in a favorable location accessible to major stations including Osaka, Sannomiya and Kobe stations without changing trains.
- In addition to Shukugawa Riverside Park, which has been selected as one of the top 100 cherry blossom spots and is famous as a cherry blossom viewing
spot, and other beautiful streetscapes of Shukugawa are depicted in numerous literature of Junichiro Tanizaki, Yasushi Inoue, Haruki Murakami andothers, it has living convenience facilities including supermarkets, department stores and other retail facilities, financial institutions and educational
facilities. As such, the location achieves a combination of the historic residential districts, beautiful nature and convenience of a city.
- To make the best use of standing on a corner lot that faces roads on two sides, it only has a maximum of four units on each floor and realized placing all
13 residential units at the corner of the building. Furthermore, by adopting a hotel-like interior corridor design, it realized a private residence that satisfies
its residents.

- Situated in a location with excellent traffic convenience to Kansai
and Chugoku areas, being located close to Hyogo Tojo interchangeon the Chugoku Expressway.
- Conducted eco-friendly development by introducing a solar power
generation system and utilizing renewable energy.

Oh! Me Otsu Terrace[Retail property]- This property was acquired in October 2019 to secure stable revenue as a revenue-generating property for the time being, and to
conduct multipurpose redevelopment on the land in the future. The
property is situated in a convenient location close to Zeze Station on
the JR Biwako Line, which is in Otsu City, Shiga Prefecture.
- Neighborhood retail facility having approximately 50 stores including retail stores, restaurants and a movie theater.
- Seibu Otsu, a nearby department store, closed in August 2020 and
12 of its tenants moved to Oh! Me Otsu Terrace, which implemented
its first renovation in September 2020. It pursues value enhancement to continuously contribute to the local community as a base ofcreating local excitement.

tonarie Yokkaichi
Le JADE Takatsuki Miyanocho[Condominium]- This condominium is situated in a favorable location enabling direct access to major stations in Osaka and Kyoto prefectures including Umeda, ShinOsaka and Kyoto stations as it is accessible from two stations on two lines, namely Takatsuki-shi Station on the Hankyu Kyoto Line and Takatsuki Stationon the JR Kyoto Line.
- In addition to there being a number of facilities to make living convenient, including restaurants, medical institutions, financial institutions as well as
Aeon Takatsuki and other retail facilities, the location is suitable for raising children, as it is also near schools, being a three-minute walk to a district
public elementary school and an eight-minute walk to a junior high school, and having several parks within a ten-minute walking distance.
- This condominium not only offers various plans, 31 basic types that are easy to reflect individual tastes and 54 variations of menu types, it also offers
comfortable residential spaces through measures such as having an owners’ lounge (meeting room) that residents can use as a venue for interaction.

33[Retail property]- This property was acquired in January 2021 and opened after changing the name totonarie Yokkaichi.
- It stands in a favorable location in the northern part of Mie Prefecture and a two-minute walk to Yokkaichi Station on the Kintetsu Line.
- It is a neighborhood retail facility that handles various products and services from daily
shopping products to entertainment facilities and can be visited by local residents on adaily basis.
- The surrounding area of Yokkaichi Station on the JR and Kintetsu lines is designatedas a target of the basic redevelopment concept for the surrounding area of Yokkaichi
Station on the Kintetsu Line, and further enhancement of convenience can be expected.

34

ES-CON JAPAN Annual Report 2020

Financial Section
The Management Discussion and Analysis, Financial Statements and Notes to Financial Statements contained in this report areoutside 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
As a result of these and other endeavors, business performance for Fiscal 2020 was net sales of 77,308 million yen (up7.2%), operating income of 12,202 million yen (down 5.5%), ordinary income of 11,164 million yen (down 5.5%) andprofit attributable to owners of parent of 7,663 million yen (down 6.0%), all on a year-on-year basis.
Sales

Operating Income/Ordinary Income(Unit: million yen)Management Discussion and Analysis
Overview
In the consolidated fiscal year under review (fiscal year ended December 2020, or Fiscal 2020), the Japanese economy
continued to face a harsh situation due to the spread of the novel coronavirus (COVID-19) pandemic. As the government
declared a state of emergency in January 2021, the second such declaration since April 2020, the situation remains unpredictable. The real estate industry in which the ES-CON JAPAN Group operates also found it extremely difficult to foresee
what impact COVID-19 will give on the real estate market going forward.
Given such a difficult business environment, the Company decided to review the “IDEAL to REAL 2022,” its third medium-term
management plan set for the three years of Fiscal 2020 through Fiscal 2022, and withdrew the plan in July 2020. Despite being
in a situation with an unforeseeable future, we took it as an opportunity to develop our business and made strategic moves towards
expansion of new business fields and sustainable growth. Some of its initiatives taken in the fiscal year are explained below.
(1) Growth Strategy of ESCON JAPAN REIT Investment Corporation
In February 2020, the Company transferred several for-sale real estate properties it owns to Chuden Real Estate Co., Inc.
(“Chuden Real Estate”), on the assumption that they will be transferred to ESCON JAPAN REIT Investment Corporation(“ESCON REIT”), by utilizing the warehousing function based on the support agreement concluded among Chuden
Real Estate, ESCON REIT and ES-CON Asset Management Ltd. (“EAM”), a consolidated subsidiary and the asset
management company for ESCON REIT, in September 2019.
In February 2020, ESCON REIT conducted its first public offering after listing, steadily expanding its asset size from 41.6
billion yen upon listing to 51.9 billion yen. The ES-CON JAPAN Group fully supports enhancement of earnings andstable growth of ESCON REIT as its sponsor and aims for further growth.
(2) Synergy Effect with the Chubu Electric Power GroupThe Company concluded a capital and business partnership agreement with Chubu Electric Power Co., Inc. in August 2018
to position the Chubu region as a core business area comparable to the Tokyo metropolitan area and the Kansai region, andhas acquired land for six new projects in the Chubu region since establishing its Nagoya branch in March 2019. The
Company has also initiated condominium and retail development projects in Aichi, Shizuoka and Osaka prefectures as joint
projects with Chuden Real Estate. Going forward, the Company will develop businesses that can satisfy local residents bydemonstrating synergy while continuing to strengthen its partnership with each group company of Chubu Electric Power.
(3) Participation in Hokkaido Ballpark Project and Acquisition of Naming Rights for New Ballpark
The Company concluded a naming rights agreement for the new ballpark of the Hokkaido Nippon Ham Fighters, to beopened in 2023 in Kitahiroshima City, Hokkaido, with Hokkaido Nippon Ham Fighters Baseball Club Co., Ltd. andFighters Sports & Entertainment Co., Ltd., which manages the entire HOKKAIDO BALLPARK F VILLAGE and owns/
operates the ballpark, in January 2020. The new ballpark will be called “ES CON FIELD HOKKAIDO.”
The area surrounding the ballpark is an important base as a planned site for a sports park and part of a large-scale development
area for HOKKAIDO BALLPARK F VILLGE with construction of a new station also planned. The Company plans to participate in the development of various real estate in the area such as a hotel adjoining the ball park as well as urban development.

35

44,72444,724

72,106
72,10677,30877,308Operating Income
Operating Income
Ordinary Income
Ordinary Income

54,32554,32534,34734,347

FiscalFiscal2016
2016(Unit: million yen)

4,680
4,680
3,575
3,575

FiscalFiscal2017
2017

FiscalFiscal2018
2018

FiscalFiscal2019
2019

FiscalFiscal2020
2020

Net Income Attributable to Parent(Unit: million yen)

7,226
7,226

8,155
8,155

11,561
11,561
10,498
10,49812,912
12,912 12,202
11,81011,810 12,202
11,164
11,164

7,042
7,042
5,988
5,988

FiscalFiscal2016
2016

FiscalFiscal2017
2017

FiscalFiscal2018
2018

FiscalFiscal2019
2019

Per Share Information
7,663
7,663

5,456
5,456

400.47400.47315.14315.14

3,936
3,936

563.07563.07(Unit: yen)
Net Assets
Net Assets
Net Income
Net Income

259.07259.07105.98105.98

FiscalFiscal2020
2020

490.08490.08119.17119.17111.94111.94

81.77
81.77

58.76
58.76

FiscalFiscal2016
2016

FiscalFiscal2017
2017

FiscalFiscal2018
2018

FiscalFiscal2019
2019

FiscalFiscal2020
2020

Results by Segment

FiscalFiscal2016
2016

FiscalFiscal2017
2017

In the real estate sales business, activities including sales ofcondominiums and income-generating real estate resulted
in net sales of 71, 485 million yen (up 7.2% year-on-year)
and segment income of 14,257 million yen (up 3.3%
year-on-year).

Real estate leasing business

FiscalFiscal2019
2019

FiscalFiscal2020
2020

Sales Distribution Ratio by Segment
0.5%Real estate sales business

FiscalFiscal
2018
2018

7.0%

0.4%
7.1%

Fiscal2019

92.5%

Fiscal2020

92.5%

Real Estate Sales Business
Real Estate Leasing Business
Real Estate Planning Agency and Consulting BusinessIn the real estate leasing business, focus was placed on leasing activities and the property management business in viewof enhancement of asset value, including higher rental income of owned income-generating real estate, resulting in net
sales of 5,527 million yen (up 10.0% year-on-year) and segment income of 2,381 million yen (down 20.7%
year-on-year).

36

ES-CON JAPAN Annual Report 2020

Real Estate Sales Business

Real Estate Leasing Business(Unit: million yen)

(Unit: million yen)

Net Sales
Segment Income

71,48566,71050,519Net Sales
Segment Income

5,022

14,257

13,802

Real Estate Planning Agency
and Consulting Business(Unit: million yen)

5,527

405

3,400

2,381

2,128

12,341

295
286

Fiscal
2019

Fiscal
2020

Fiscal2018

Fiscal
2019

Fiscal
2020

Fiscal2018

Fiscal2019

Total assets: 132,696
Current assets: 114,137
Cash and deposits:
22,511
Real estate for sale:
24,234
Real estate for sale in process: 59,619

Fiscal 2020

Total assets: 149,423
Current assets: 122,117

Non-current assets: 27,306

152
Fiscal2018

Fiscal 2019

(Unit: million yen)

Property, plant and equipment: 13,433
Intangible assets:
492
Investments and other assets: 4,632

372

369

AssetsNon-current assets: 18,558

Net Sales
Segment Income

3,001

Overview of Consolidated Balance Sheet

Fiscal
2020

Liabilities and Fiscal 2019
Net Assets

Liabilities and net assets: 132,696
Non-current liabilities: 48,950

Net assets: 33,546

Real estate planning agency and consulting businessIn the real estate planning agency and consulting business, proactive efforts were made in receiving orders for planning,
consultation and other consigned services by making the best use of planning and multifaceted business building abilities.
Net sales stood at 295 million yen (down 20.7% year-on-year) and segment income was 152 million yen (down 46.9%
year-on-year).

Long-term loans
payable: 47,720

Shareholders’equity: 33,288

Fiscal 2020

Current liabilities: 50,199
Short-term loans payable: 4,580
Current portion of
long-term loans payable: 32,415
Current portion of bonds:
40

Liabilities and net assets: 149,423

Net assets: 38,627
Shareholders’equity: 38,454

Analysis of Financial Position

Cash and deposits:
23,870Real estate for sale:
6,262
Real estate for sale in process: 82,316

Property, plant and equipment: 14,876
Intangible assets:
403
Investments and other assets: 12,026

Non-current liabilities: 70,982
Long-term loans
payable: 69,274

Current liabilities: 39,813
Short-term loans payable: 2,907
Current portion of
long-term loans payable: 26,093
Current portion of bonds: 230

Assets, Liabilities and Net Assets
Assets at the end of the Fiscal 2020 increased by 16,726 million yen compared with the end of Fiscal 2019 to 149,423
million yen. This was mainly attributable to cash and deposits, inventories and non-current assets increasing by 1,359
million yen, 4,724 million yen and 8,747 million yen, respectively.
Liabilities increased by 11,645 million yen in comparison with the end of Fiscal 2019 to 110,795 million yen. This was
mainly attributable to long-term loans payable, short- term loans payable and bonds increasing by 13, 520 million yen in
total.
Net assets increased by 5,080 million yen compared with the end of Fiscal 2019 to 38,627 million yen. This was due torecording of 7,663 million yen as profit attributable to owners of parent against payment of 2,490 million yen as dividends. As a result, the equity ratio came to 25.8% (25.3% at the end of Fiscal 2019).
Total Assets/Net Assets

Interest-bearing Liabilities
149,423(Unit: million yen)37

17,363

21,433Fiscal2016

Fiscal2017

51,17727,359Fiscal2018

33,546

Fiscal2019

Cash flows from operating activities in Fiscal 2020 amounted to net cash provided by operating activities of 119 million
yen (net cash provided by operating activities of 122 million yen in Fiscal 2019. This was mainly due to the increase ininventories of 4,370 million yen, interest expenses paid of 1,195 million and income taxes paid of 5,072 million yen,against the recording of profit before income taxes of 11,164 million yen.

Cash flows from investing activities in Fiscal 2020 amounted to net cash used in investing activities of 9,732 million yen(net cash used in investing activities of 4,770 million yen in Fiscal 2019). This was mainly attributable to purchase ofinvestment securities of 1,913 million yen and purchase of non-current assets of 6,555 million yen.

70,66186,435

Cash flows from operating activities

Cash flows from investing activities

85,019109,747

Cash and cash equivalents (“net cash”) in Fiscal 2020 increased by 1,385 million yen compared with the end of Fiscal 2019
to 23,798 million yen (22,413 million yen at the end of Fiscal 2019). The following outlines the cash flows and the factorsof changes in cash flows in Fiscal 2020.

98,506132,696

Total Assets
Net Assets

73,703(Unit: million yen)

Status of Cash Flows

56,544

38,627

Cash flows from financing activities

Fiscal2020

Cash flows from financing activities in Fiscal 2020 amounted to net cash provided by financing activities of 11,007 million
yen (net cash provided by financing activities of 10,501 million yen in Fiscal 2019). This was mainly attributable to proceeds from and repayments of long-term loans payable and short-term loans payable amounting to net proceeds of 13,576
million yen and payment of cash dividends of 2,488 million yen.

Fiscal2016

Fiscal2017

Fiscal2018

Fiscal
2019

Fiscal2020

38

ES-CON JAPAN Annual Report 2020

Consolidated Balance Sheet(Unit: million yen)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Real estate for sale
Deferred tax assets
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
Total assets

39(Unit: million yen)

Fiscal 2019

Fiscal 2020

Fiscal 2019

Fiscal 2019(as of December 31, 2019)(as of December 31, 2020)(as of December 31, 2019)(as of December 31, 2019)

4,580
32,415
40
1
2,097
3,396
2,809
4,733
126
50,1992,907
26,093
230
0
1,590
1,460
2,233
4,583
713
39,813230
47,720
0
2
114
35
249
597
48,95099,149—69,274
—
2
135
46
260
1,262
70,982
110,795

6,275
2,004
26,256(1,247)33,2886,284
2,088
31,429(1,348)38,454

256
(0)
256
1
0
33,546132,696

153
(18)
134
1
37
38,627
149,423

22,511
598
24,234
59,6197,173—
114,137

23,870927
6,262
82,3168,739(0)122,117

3,216
(566)
2,649
7
(6)
1
10,621
4
(3)
1
0
281
(122)
159
13,433

4,359
(889)
3,470
6
(6)
0
11,262
4
(4)
0
1
321
(180)
141
14,876

436
56
492

339
63
403

2,711
347
662
949
(37)
4,632
18,558132,696

3,556
2,468
406
5,633
(37)
12,02627,306
149,423

Liabilities
Current liabilities
Short-term loans payable
Current portion of long-term loans payable
Current portion of bonds
Lease obligations
Accounts payable - other
Income taxes payable
Advances received
Deposits received
Other
Total current liabilities
Non-current liabilities
Bonds payable
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

40

ES-CON JAPAN Annual Report 2020

Consolidated Statement of Income andConsolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Income

Accumulated othercomprehensive income
Total
Sub­
Valuation Foreign
Total
accumu- scription NonTotal difference currency
Trea­
lated rights to controlling net
share- on avail- translaCapital Capital Re­tainedinterests assets
sury
other
share
stock surplus earnings
holders’ able-for- tion
sharescompreequity
sale
adjusthensive
securities ment
incomeBalance at beginning of current period 6,259 1,988 20,310 (1,207) 27,352
6—
6
1— 27,359
Changes of items during period
Issuance of new shares
15
15
30
30
Dividends of surplus(2,209)(2,209)(2,209)Profit attributable to owners of parent
8,155
8,155
8,155
Purchase of treasury shares
(40)
(40)
(40)
Disposal of treasury shares000
Net changes of items other than
250
(0)
250
(0)
0
250
shareholders’ equity
Total changes of items during period
15
15 5,945(40) 5,936
250
(0)
250
(0)
0 6,187
Balance at end of current period
6,275 2,004 26,256 (1,247) 33,288
256
(0)
256
1
0 33,546

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
Reversal of allowance for doubtful accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
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
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent(Unit: million yen)

Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

72,10652,33919,76777,30857,62819,679

2,218
726
210
1,375
16
5
388
639
1,273
6,854
12,912

2,524
502
308
1,723
21
10
333
559
1,492
7,477
12,202

5
35
30
8
4
84

16
93
19
—
26
155

1,143
33
9
1,186
11,810

1,047
109
37
1,194
11,164

—
0
0

0
0
0

7
7
11,803
4,057
(409)
3,648
8,155
—
8,155

0
0
11,164
3,212
297
3,509
7,654
(8)
7,663

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
41

Fiscal year ended December 2019 (from January 1, 2019 to December 31, 2019)

(Unit: million yen)

Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

8,155

7,654

250
(0)

(103)
0

(0)
250
8,405

(18)
(121)
7,533

8,405
—

7,541
(8)

(Unit: million yen)

Shareholders’ equity

Fiscal year ended December 2020 (from January 1, 2020 to December 31, 2020)

(Unit: million yen)

Accumulated othercomprehensive income
Total
Sub­
Valuation Foreign
Total
accumu- scription NonTotal difference currency
Trea­
lated rights to controlling net
share- on avail- translaCapital Capital Re­tainedinterests assets
sury
other
share
stock surplus earnings
holders’ able-for- tion
sharescompreequity
sale
adjusthensive
securities ment
incomeBalance at beginning of current period 6,275 2,004 26,256 (1,247) 33,288
256
(0)
256
1
0 33,546
Changes of items during period
Issuance of new shares
9
9
18
18
Dividends of surplus(2,490)(2,490)(2,490)
Profit attributable to owners of parent
7,663
7,663
7,663
Disposal of treasury shares
74
132
207
207
Purchase of treasury shares by theshare-based payment benefits trust(233) (233)(233)
for directors
Net changes of items other than
(103)
(17)
(121)
(0)
36
(84)
shareholders’ equity
Total changes of items during period
9
84 5,173(101) 5,165
(103)
(17)
(121)
(0)
36 5,080
Balance at end of current period
6,284 2,088 31,429 (1,348) 38,454
153
(18)
134
1
37 38,627
Shareholders’ equity

42ES-CON JAPAN Annual Report 2020

Consolidated Statement of Cash Flows

Notes to Financial Statements

(Unit: million yen)

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Amortization of long-term prepaid expenses
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 sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable - trade
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 sales of investment securities
Proceeds from withdrawal of investment securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Payments for asset retirement obligations
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
Proceeds from guarantee deposits received
Repayments of guarantee deposits received
Payments for investments in capital
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 share issuance to non-controlling shareholders
Purchase of treasury shares
Proceeds from disposal 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
43

Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

11,803
176
48
—
—
16
5
(40)
1,143
(8)
33
—
7
(84)
(10,179)
55
135
(239)
(246)
95
638
75
3,436
40
(1,109)(2,245)122

11,164
399
100
4
0
21
10
(109)
1,047
31
109
(0)
0
(329)
(4,370)
(381)
(358)
192
(576)
187
(805)
(45)
6,291
95
(1,195)(5,072)
119

(18)
18
(1,641)—516(3,295)
61
(3)

(18)
19
(1,913)9717(6,555)
86
—

—

91

(310)
(300)
0
1,130
(927)
—
(4,770)—(2,930)
500
1,244
(983)
(2)
(9,732)

6,714(5,220)44,231(32,930)
(40)
(0)
(34)
30
0
(40)
—
(2,207)
10,501(3)
5,849
16,563
22,413

8,018(9,690)62,166(46,917)
(40)
(1)
(31)
18
—
(233)
207
(2488)
11,007(8)
1,385
22,413
23,798

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 JAPANwas listed on the second tier of the Tokyo Stock Exchange in 2015, and successfully rose to the first tier in June 2016.

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 eight consolidated subsidiaries as of December 31, 2020, 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.
Ryomon Co., Ltd.
ESCON JAPAN (Thailand) CO., LTD.
Ryomon Co., Ltd., which the Company made its subsidiary by acquiring its shares in thefiscal year ended December 2020, was included in the scope of consolidation.
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 and ESCON USA II LLC are not included in the scopeof consolidation as they are small companies and their total assets, net sales, net loss
(equivalent to the Company’s equity interest) and retained earnings (equivalent to theCompany’s equity interest), etc. do not pose any material impact on the consolidated
financial statements.
44

ES-CON JAPAN Annual Report 2020

(2) Equity-method affiliates

The Company has one equity-method affiliate, as follows:
ORIGIN KNIGHTSBRIDGE THEPHARAK CO., LTD.
GCB Mezzanine GK(5) Standards for recording
significant allowances

GCB Mezzanine GK, which had been an equity-method affiliate in the fiscal year ended
December 2019, was excluded from the scope of equity-method accounting as theCompany transferred its equity interest in the silent partnership investment agreementwith GCB Mezzanine GK as the business operator.
Furthermore, ESCON USA LLC and Nishiguchi Building Management Co., Ltd. are
not included in the scope of equity-method accounting as their net sales, net 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 and they are of little importance as a whole.
(3) Valuation standard andmethod for significant
assets1) Securities
Other securities
Securities with fair value are stated using the market price method based on the market
price, etc. at the end of the fiscal year (valuation difference is directly charged to shareholders’ equity, and selling costs are calculated by using the moving-average method).
Securities without fair value are stated by the cost method using the moving-averagemethod.
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).

(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.

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) 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.

(7) 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.

(8) 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.

(9) Other significant items
fundamental topreparing the financial
statements

Accounting for consumption taxes
Consumption taxes are excluded from the transaction amounts. Non-deductible consumption taxes are recorded as expenses for the relevant consolidated fiscal year.

(Changes in Accounting Policies)
Not applicable3) 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.
45

46

ES-CON JAPAN Annual Report 2020

[Unapplied Accounting Standard and Implementation Guidance]
1. Accounting Standard for Revenue Recognition, etc.
• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 (revised 2020); March 31, 2020)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30 (revised 2020);
March 31, 2020)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19 (revised2020); March 31, 2020)(1) Overview
The International Accounting Standard Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) havejointly developed the comprehensive accounting standard for revenue recognition, and have published “Revenue fromContracts with Customers” (IFRS No. 15 issued by IASB and Topic 606 issued by FASB) in May 2014. As IFRS No. 15
is effective for annual periods beginning on or after January 1, 2018 and Topic 606 is effective for annual periods beginning after December 15, 2017, ASBJ has developed the comprehensive accounting standard for revenue recognition, andannounced it along with the implementation guidance.
As a basic policy to develop the accounting standards for revenue recognition, ASBJ decided to incorporate the basic
principles from IFRS No. 15 in order to ensure the comparability among Financial Statements based on IFRS, U.S. GAAP
and Japanese GAAP. The comparability between the financial statements is one of the benefits of the consistency withIFRS No. 15. In addition, in the case there is an item where consideration should be given to special treatment in Japan,
the alternative treatment is accepted to the extent consistency is maintained.
(2) Scheduled date of the application
The Company will adopt the Accounting Standard for Revenue Recognition, etc. from the beginning of the fiscal year
ending December 31, 2022.
(3) Impact of the application of the respective Accounting Standard and Implementation Guidance
The impact on the consolidated financial statements from adoption of the Accounting Standard for Revenue Recognition,etc. is currently being assessed.

2. Accounting Standard for Fair Value Measurement, etc.
• Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30; July 4, 2019)• Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31; July 4, 2019)• Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9; July 4, 2019)• Accounting Standard for Financial Instruments (ASBJ Statement No. 10; July 4, 2019)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19; March 31,
2020)(1) Overview
IASB and FASB have established detailed guidance for fair value measurement (IFRS 13 “Fair Value Measurement” underthe International Financial Reporting Standards and Topic 820 “Fair Value Measurement” of the Accounting Standards
Codification under the U.S. accounting standards) containing almost the same content. In light of this, the ASBJ worked
to secure consistency of the Japanese accounting standards with the international accounting standards, mainly in termsof the guidance on and disclosure of the fair value of financial instruments, and announced the Accounting Standard for
Fair Value Measurement, etc.
The basic policy of ASBJ for the development of the Accounting Standard for Fair Value Measurement was to adopt all

47

provisions of the IFRS 13 as a rule by using a unified calculation method, from the viewpoint of improving the comparability between the financial statements of the Japanese and foreign companies. Moreover, in consideration of the practices
conducted in Japan to date, ASBJ determined to establish other treatments for individual items, to the extent that they do
not greatly harm the comparability between the financial statements.
(2) Scheduled date of adoption
The Company will adopt the Accounting Standard for Fair Value Measurement, etc. from the beginning of the fiscal year
ending December 31, 2022.
(3) Impact of the application of the accounting standard, etc.
The impact on the consolidated financial statements from adoption of the Accounting Standard Fair Value Measurement,
etc. is currently being assessed.

3. Accounting Standard for Disclosure of Accounting Estimates• Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31; March 31, 2020)(1) Overview
Given the recommendation to investigate enhancement of note information regarding the “accounting principles andprocedures adopted in cases when provisions of relevant accounting standards are not clear,” ASBJ has made necessary
amendments and published the Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections.
Furthermore, ASBJ has determined that, when enhancing the note information regarding the “accounting principles andprocedures adopted in cases when provisions of relevant accounting standards are not clear,” the provisions in the Notes
on Corporate Accounting Principles (Note 1-2) shall be followed as before in order to avoid any impact on the practices
taken to date when the provisions of relevant accounting standards are clear.
(2) Scheduled date of adoption
The Company will adopt the Accounting Standard from the end of the fiscal period ending December 31, 2021.

(Changes in Presentation)
Consolidated Balance SheetWith regard to Long-term loans receivable, which was included in Other under Investments and other assets for the previous fiscal year ended December 31, 2019, the Company has presented it separately for the fiscal year ended December
31, 2020 as the amount exceeded one hundredth of total assets. To reflect this change in the presentation method, thefinancial statements for the previous fiscal year have been reclassified.
As a result, the 1,296 million yen included in Other under Investments and other assets for the previous fiscal year wasreclassified into 347 million yen as Long-term loans receivable and 949 million yen as Other.

(Additional Information)
Accounting Estimates in Accordance with the Spread of COVID-19
As the impact of the spread of the COVID-19 pandemic on the Group’s business is limited, the Company made accounting estimates on the assumption that the impact on the Group’s business is marginal. More recently, however, there ismuch uncertainty as to how COVID-19 will further spread or be contained. Accordingly, the Company has madeaccounting estimates on the inventory valuation, impairment loss of non-current assets and valuation of investment

48

ES-CON JAPAN Annual Report 2020

securities, etc. on the assumption that the impact of COVID-19 on the Group’s business, although limited, will continue
for a certain period of time.
Nevertheless, there are many uncertain elements as to the impact of the spread of COVID-19. If the real estate market
conditions further worsen going forward, it may pose a material impact on the financial conditions, business performanceand cash flows of the Group due to recording of valuation loss on inventories and impairment loss of the real estate properties it owns.

4. Notes to Consolidated Balance Sheet(2) Breakdown of gain on sale of non-current assets is as follows::

(Unit: million yen)

Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

Vehicles

—

0

Total

—

0

(3) Breakdown of loss on retirement of non-current assets is as follows:

(1) Unconsolidated subsidiaries and affiliates

(Unit: million yen)

Fiscal 2019

Fiscal 2020(as of December 31, 2019)(as of December 31, 2020)

31
407

491
484

Investment securities (equity capital)
Investment securities (shares)(Unit: million yen)

Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

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

2
1
4

—
0
—

Total

7

0

(2) Pledged assets and secured debts
Assets provided as collateral are as follows:

(Unit: million yen)

Fiscal 2019

Fiscal 2020(as of December 31, 2019)(as of December 31, 2020)

Cash and deposits
Real estate for sale
Real estate for sale in process
Buildings and structures
Land
Property, plant and equipment (Other)20
23,02556,177
2,033
10,621—

20
4,745
78,546
2,856
11,261
16

Total

91,87797,446

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 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

361

(145)

—

—

Subtotal before tax effect adjustments
Tax effect

361
(110)

(145)
41

Valuation difference on available-for-sale securities

250

(103)

Foreign currency translation adjustment:
Amounts arising during the fiscal year

(0)

(0)

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

(0)

(18)

250

(121)

Valuation difference on available-for-sale securities:
Amounts arising during the fiscal year
Reclassification adjustments

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

(Unit: million yen)

Fiscal 2019

Fiscal 2020(as of December 31, 2019)(as of December 31, 2020)

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

4,042
31,642
46,3402,269
24,241
61,135

Total

82,02587,646

Total other comprehensive income

5. Notes to Consolidated Statement of Income(1) Book value reduction due to lowered profitability of inventories held for the purpose of ordinary sales is(Unit: million yen)
as follows:

Cost of sales

49

Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

921

—

50

ES-CON JAPAN Annual Report 2020

7. Notes to Consolidated Statement of Changes in Equity(3) Dividends
1) Dividends paid

Fiscal 2019 (from January 1, 2019 to December 31, 2019)(1) Type and Number of Shares Issued and Outstanding and Type and Number of Treasury Shares
Increase in
Number of shares
number of sharesat beginning ofduring the fiscal
Fiscal 2019year

(Resolution)

Decrease in
Number of shares
number of sharesat end of Fiscal
during the fiscal
2019
year

Issued shares
Common shares (Note 1)
Total

71,649,387

192,500—

71,841,887

71,649,387

192,500—

71,841,887

Treasury shares

March 26, 2019
Annual General Meeting of
Shareholders

Total

3,334,900

61,0001,200

3,394,700

3,334,900

61,0001,200

3,394,700(Notes) 1. The increase in the number of common shares issued and outstanding (192,500 shares) is due to exercise of the fifth offer of subscription
rights to shares.
2. The increase in the number of treasury shares in common shares (61,000 shares) is due to acquisition of treasury shares based on the resolution by the Board of Directors.
3. The decrease in the number of treasury shares in common shares (1,200 shares) is due to provision of shares to the qualifying employees by
the share-based payment benefits type ESOP trust.
4. 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: 487,200 shares at the
beginning of Fiscal 2019 and 487,200 shares at the end of Fiscal 2019; the share-based payment benefits type ESOP trust: 234,300 shares atthe beginning of Fiscal 2019 and 233,100 shares at the end of Fiscal 2019).

CommonsharesCategory

Reportingcompany(parent
company)

Total

Number of shares subject to subscription rights
to shares (shares)

Balance at
end ofFiscal 2019

Beginningof Fiscal
2019

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

Fifth offer ofCommonsubscription
rights to shares shares(Note 1)

312,500—

192,500

Sixth offer ofCommonsubscription
rights to shares shares(Note 2)

1,299,000—

37,5001,261,500

1

1,611,500—

230,000

1,381,500

1—

End ofFiscal 2019 (million yen)March 26, 2020
Annual General Meeting of
Shareholders

Type ofsharesCommonshares

Effective date

December 31,
2018

32.00

March 27,
2019

Total
dividends(million yen)

2,490

Source ofdividends

Dividend
per share

Record date

Effective
date

December 31,
2019

March 27,
2020

(yen)

Retainedearnings

36.00(Note) The total amount of dividends includes 17 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.

Fiscal 2020 (from January 1, 2020 to December 31, 2020)(1) Type and Number of Shares Issued and Outstanding and Type and Number of Treasury Shares
Increase in
Number of shares
number of sharesat beginning ofduring the fiscal
Fiscal 2020
year

Decrease in
Number of shares
number of sharesat end of Fiscal
during the fiscal
2020
year

Issued shares
Common shares (Note 1)
Total

71,841,887

120,000—

71,961,887

71,841,887

120,000—

71,961,887

3,394,700

363,800

330,100

3,428,400

3,394,700

363,800

330,100

3,428,400

Treasury shares
120,000

0Common shares (Note 2)(Note 3)
Total(Notes) 1. The decrease in the number of common shares issued and outstanding (192,500 shares) is due to exercise of the fifth offer of subscription
rights to shares.
2. The decrease in the number of treasury shares in common shares (37,500 shares) is due to expiration of the sixth offer of subscription rights
to shares.
3. For the sixth offer of subscription rights to shares, the first day of the exercise period has not yet arrived.

51

2,209

Record date2) Dividends for which the record date was within the fiscal year but the effective date for the dividends was in the following fiscal year(2) Subscription Rights to Shares and Subscription Rights to Treasury Shares
Type of sharessubject toBreakdown ofsubscription
subscription
rights to shares rights tosharesTotal dividends Dividend per(million yen)share (yen)(Note) The total amount of dividends includes 15 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 7 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

(Resolution)

Common shares (Note 2)(Note 3)

Type of shares(Notes) 1. The increase in the number of common shares issued and outstanding (120,000 shares) is due to exercise of the fifth offer of subscription
rights to shares.
2. The increase in the number of treasury shares in common shares (363,800 shares) is due to transfer of shares to the share-based payment
benefits trust for directors by the Company (330,000 shares) and acquisition of shares on the market by the share-based payment benefits
trust for directors (33,800 shares).
3. The decrease in the number of treasury shares in common shares (330,100 shares) is due to transfer of shares to the share-based payment
benefits trust for directors by the Company (330,000 shares) and provision of shares to the qualifying employees by the share-based payment
benefits type ESOP trust (100 shares).
4. 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: 487,200 shares at the
beginning of Fiscal 2020 and 851,000 shares at the end of Fiscal 2020; the share-based payment benefits type ESOP trust: 233,100 shares atthe beginning of Fiscal 2020 and 233,000 shares at the end of Fiscal 2020).

52

ES-CON JAPAN Annual Report 2020

8. Notes to Consolidated Statement of Cash Flows(2) Subscription Rights to Shares and Subscription Rights to Treasury Shares

Category

Reportingcompany(parent
company)

Type of sharessubject toBreakdown ofsubscription
subscription
rights to shares rights tosharesNumber of shares subject to subscription rights
to shares (shares)

Balance at
end ofFiscal 2020

Beginningof Fiscal
2020

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

Fifth offer ofCommonsubscription
rights to shares shares(Note 1)

120,000—

120,000——

Sixth offer ofCommonsubscription
rights to shares shares(Note 2)

1,261,500—

17,0001,244,500

1

1,381,500—

137,000

1,244,500

1

Total

—

End ofFiscal 2020 (million yen)(1) Relationship between the year-end balance of cash and cash equivalents and the amounts of accounts on(Unit: million yen)
the consolidated balance sheet
Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

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

22,511(44)(53)

23,870(43)(28)

Cash and cash equivalents

22,413

23,798(2) Major breakdown of assets and liabilities of the companies that were newly consolidated in the fiscal year
ended March 31, 2019 through acquisition of their shares(Notes) 1. The decrease in the number of common shares issued and outstanding (120,000 shares) is due to exercise of the fifth offer of subscription
rights to shares.
2. The decrease in the number of treasury shares in common shares (17,000 shares) is due to expiration of the sixth offer of subscription rights
to shares.
3. For the sixth offer of subscription rights to shares, the first day of the exercise period has not yet arrived.

In association with the new consolidation of ES-CON Home Ltd. (former One’s Own House Co., Ltd.) and ES-CON
Craft Ltd. (former Rise Home Co., Ltd.) through acquisition of their shares, the following table indicates the breakdownof the assets and liabilities and the relationship between the acquisition price and expenditures for acquisition (net) at the
beginning of consolidation.
(Unit: million yen)

(3) Dividends

Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities

2,462
37
485
(1,640)(190)

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

1,154
(843)

1) Dividends paid
(Resolution)
March 26, 2020
Annual General Meeting of
Shareholders

Type of shares
CommonsharesTotal dividends Dividend per(million yen)share (yen)2,490Record date

Effective date

December 31,
2019

36.00

March 27,2020

(Note) T he total amount of dividends includes 17 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 26, 2021
Annual General Meeting of
Shareholders

Type ofsharesCommonsharesTotal
dividends(million yen)

2,645

Source ofdividends
Retainedearnings

Dividend
per share

Record date

Effective
date

December 31,
2020

March 29,
2021

(yen)

38.00

(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.

Difference: expenditures for acquisition of shares of the subsidiaries accompanying
changes in the scope of consolidation(3) Major breakdown of assets and liabilities of the company that was newly consolidated in the fiscal year
ended December 31, 2020 through acquisition of its shares
In association with the new consolidation of Ryomon Co., Ltd. through acquisition of its shares, the following tableindicates the breakdown of the assets and liabilities and the relationship between the acquisition price and income fromacquisition (net) at the beginning of consolidation.
(Unit: million yen)
Current assets
Non-current assets
Goodwill
Current liabilities
Non-controlling interests

143
0
3
(51)
(45)

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

51
(142)

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

53

310

91

54

ES-CON JAPAN Annual Report 2020

9. Lease Transactions(Lessee)(1) Finance Lease Transactions
Finance lease transactions without any transfer of ownership of leased assets
1) Leased assets
Property, plant and equipment
Consists of vehicles, etc.
2) 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control and account balance management for respective customers in accordance with the internal rules of 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 and bonds payable, short-term loans payable and bonds payable are procured mainly for working
capital, and long-term loans payable are procured 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 throughsuch measures as preparing capital plans on a monthly basis.

(Unit: million yen)

Fiscal 2019

Fiscal 2020(as of December 31, 2019)(as of December 31, 2020)

Due within one year

298

460

Due after one year

434

1,078

Total

732

1,538

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 items for which determining the fair value is recognized to be extremely difficult (SeeNote 2 below).

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

Fiscal 2019

Fiscal 2019(as of December 31, 2019)(as of December 31, 2019)

Due within one year

486

1,302

Due after one year

2,276

5,652

Total

2,763

6,955

10. Financial Instruments(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.

Fiscal 2019 (as of December 31, 2019)

(Unit: million yen)Book value recordedon the balance sheet

Fair value

Difference(1) Cash and deposits(2) Notes and accounts receivable - trade(3) Investment securities
Other securities

22,511598

22,511
598

—
—

1,543

1,543

—

Total of assets

24,65424,654—(1) Accounts payable - other(2) Deposits received(3) Short-term loans payable(4) Long-term loans payable*1(5) Bonds payable*2

2,097
4,733
4,580
80,135
270

2,097
4,733
4,580
80,164
270

—
—
—
29
0

Total of liabilities

91,816

91,84529*1 Long-term loans payable includes current portion of long-term loans payable.
*2 Bonds payable includes current portion of bonds payable.

2) Description of financial instruments and associated risks, and risk management structure
Among operating receivables, notes and accounts receivable – trade 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

55

56

ES-CON JAPAN Annual Report 2020

Fiscal 2020 (as of December 31, 2020)

4. Scheduled repayment amount of bonds payable, long-term loans payable and other interest-bearing liabilities after closing of accounts.

(Unit: million yen)

Fiscal 2019 (as of December 31, 2019)

Book value recordedon the balance sheet

Fair value(Unit: million yen)

Due within
1 yearDifference

Due 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(1) Cash and deposits(2) Notes and accounts receivable - trade(3) Investment securities
Other securities

23,870927

23,870927——

Short-term loans payable

4,580

—

—

—

—

—

Long-term loans payable

32,415

16,60812,409

8,868

4,246

5,587

40

230

—

—

—

—

1,670

1,670

—

Total

37,035

16,83812,409

8,868

4,246

5,587

Total of assets

26,46826,468—(1) Accounts payable - other(2) Deposits received(3) Short-term loans payable(4) Long-term loans payable*1(5) Bonds payable*2

1,590
4,583
2,907
95,368
230

1,590
4,583
2,907
95,302
230

—
—
—
(65)
—

Total of liabilities

104,679

104,614(65)(Notes) 1. Calculation method for fair value of financial instruments and matters related to derivative transactions.
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated at that bookvalue.
(3) Investment securities
With regard to investment securities, the fair value of stocks is determined by their price on stock exchanges.
Liabilities(1) Accounts payable – other, (2) Deposits received and (3) Short-term loans payable
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated at that bookvalue.
(4) Long-term loans payable and (5) Bonds payable
The fair value of these financial instruments is based on the method of calculating by discounting the sum of their principal by a rate
assumed as being applicable to a new similar borrowing to be made or bonds payable to be issued by the Company.
2. Financial instruments for which discerning fair value is recognized to be extremely difficult.
(Unit: million yen)

Fiscal 2019(as of December 31, 2019)

Fiscal 2020(as of December 31, 2020)

1) Non-listed shares

417

1,294

2) Silent partnership equity investment, etc.

749

591

1,167

1,886

Total

Fiscal 2020 (as of December 31, 2020)

(Unit: million yen)

Due within
1 yearDue in 1 to
2 years

Due in 4 to
5 years

Due in 5 years
or moreShort-term loans payable

2,907

—

—

—

—

—

Long-term loans payable

26,09322,71915,521

5,380

3,776

21,876

Bonds payable
Total

230

—

—

—

—

—

29,231

22,71915,521

5,380

3,776

21,876(1) Other Securities
Fiscal 2019 (from January 1, 2019 to December 31, 2019)

Securities with book values on the consolidatedbalance sheet exceeding acquisition cost

Fiscal 2019 (as of December 31, 2019)
Due in 5 to 10 years

Due in 10 years or more

Cash and deposits
Notes and accounts receivable - trade22,511
598

—
—

—
—

—
—

Total

23,110———Fiscal 2020 (as of December 31, 2020)

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

Due in 5 to 10 years

Acquisition
cost(1) Shares

34

27

6

(2) Other

1,509

1,149

360

1,543

1,176

367

Total

Due in 10 years or more

Cash and deposits
Notes and accounts receivable - trade23,870
927

—
—

—
—

—
—

Total

24,798———Difference(Note) The table above does not include non-listed shares and silent partnership equity investment, etc. (book value recorded on the consolidatedbalance sheet: 1,167 million yen) as Other securities, because discerning fair value is recognized to be extremely difficult as there is no market
price.

Type(Unit: million yen)Due in 1 to 5 years(Unit: million yen)Book value recordedon the balance sheet

Type(Unit: million yen)Book value recordedon the balance sheet

Acquisition
cost

Difference

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

—

—

—

(2) Other

1,643

1,420

223

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

25

27

(1)

(2) Other

0

0

(0)

1,670

1,448

221

3. Scheduled redemption amount of monetary claims and securities with maturities after closing of accounts.

Due within 1 year

Due in 3 to
4 years

Fiscal 2020 (from January 1, 2020 to December 31, 2020)

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

Due within 1 year

Due in 2 to
3 years

11. Notes to Securities*1 Long-term loans payable includes current portion of long-term loans payable.
*2 Bonds payable includes current portion of bonds payable.

Category

Bonds payable

Total(Note) The table above does not include non-listed shares and silent partnership equity investment, etc. (book value recorded on the consolidatedbalance sheet: 1,886 million yen) as Other securities, because discerning fair value is recognized to be extremely difficult as there is no market
price.

12. Notes to Derivative Transactions
Not applicable57

58

ES-CON JAPAN Annual Report 2020

13. Notes to Retirement Benefits
Fiscal 2019 (from January 1, 2019 to December 31, 2019)(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 13 million yen for the defined contribution pension plan.

Fiscal 2020 (from January 1, 2020 to December 31, 2020)(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 16 million yen for the defined contribution pension plan.

14. Notes to Stock Options, Etc.
(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 (PTIF) No. 36; January 12, 2018), theCompany continues to conduct the accounting treatment that have been conventionally applied for such transactions.

1. Overview of the stock acquisition rights, which involve considerations, with vesting conditions(1) Descriptions of the stock acquisition rights, which involve considerations, with vesting conditions
5th subscription rights to shares
Category and number of
eligible persons

59

49 people comprising the Company’s
directors (in-house) and employees(3) Even before (1) above is satisfied, the persons eligible for the subscription rights to shares may exercise the entire subscription rights toshares allotted to them if the cumulative operating income for the fiscal years ended December 2014 through December 2016 exceeds 7,000
million yen. Furthermore, they may exercise the entire subscription rights to shares allotted to them if the cumulative operating income forthe fiscal years ended December 2014 through December 2015 exceeds 7,000 million yen.
(4) In determining the operating income for (1) through (3) above, if material changes are made to the concept of the operating income to bereferred to due to changes in the applicable accounting standards, etc., the Company shall otherwise determine the appropriate indicators to
be referred to at the Board of Directors to the extent reasonable.
(5) The 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.
(6) Successors of the persons eligible for the subscription rights to shares may not exercise the subscription rights to shares; however, thisshall 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 is fair reason to allow the said successors to exercise the subscription rights to shares.
(7) 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.
(8) The subscription rights to shares may not be exercised for less than one share each.
3. 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 day ofthe month following the date when the securities report for the fiscal year ending December 2020 is submitted, if the Company’s operating income
for all the fiscal years ending December 2018 through December 2020 exceeds the respective amounts described in the following items. When thenumber 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 ending December 2019 exceeds 9,500 million yen
3) If the operating income for the fiscal year ending 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 theextent reasonable (the same shall be applied hereinafter).
(2) The 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 is fair 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.

(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 2020 ended December 31, 2020. 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
146 people comprising the Company’s
directors and employees and the employees of its subsidiaries

5th subscription rights to shares 6th subscription rights to shares
Before right allotment (shares)
Balance of unexercised options at the endof the previous fiscal year—

1,261,500

Granted——Number of stock options bytype of shares (Note 1)

Common shares: 3,500,000 shares

Common shares: 1,400,000 shares

Date of grant of options

November 29, 2013

December 27, 2017

Expired—17,000

Vesting conditions(Note 2)

(Note 3)Right allotment——

Covered period of work

Not specified

Not specified

Balance of unexercised options—

1,244,500

Exercise period

From April 1, 2015 to November 28, 2020 From April 1, 2021 to December 26, 2025

120,000—

Right allotment——

Exercise of right

120,000—

Expired——Balance of unexercised options——(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 not exercise their rights from the fiscal year ended December 2014 to the fiscal
year ended December 2016 if the operating income (referring to 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); the same shall apply hereinafter) falls below 1,790 million yen.
(2) When (1) above is satisfied, the persons eligible for the subscription rights to shares may exercise their rights for the number of sharedequivalent to 10% of the subscription rights to shares allotted to them if the operating income for any of the fiscal years ended December
2014 through December 2016 exceeds 2,500 million yen. Furthermore, 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.

After right allotment (shares)
Balance of unexercised options at the endof the previous fiscal year60

ES-CON JAPAN Annual Report 20202) Unit price information

(Unit: yen)

Exercise price

157

627

Average share price upon exercise

833—

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.

15. Notes to Tax Effect Accounting(1) Significant Components of Deferred Tax Assets and Deferred Tax Liabilities

(Unit: million yen)

Fiscal 2019

Fiscal 2020(as of December 31, 2019)(as of December 31, 2020)

Deferred tax assets
Net operating loss carried forward
Loss on valuation of inventories
Enterprise tax payable
Impairment loss
Asset retirement obligations
Loss on valuation of investment securities
Other

1
592
169
33
76
23
125

16
229
104
28
79
40
266

Subtotal of deferred tax assets

1,023

766

Valuation allowance

(192)

(231)

Total of deferred tax assets

831

534

Deferred tax liabilities
Asset retirement expenses
Loss on valuation of other securities
Other

(58)
(110)
(3)

(57)
(68)
(4)

Total of deferred tax liabilities

(172)

(130)

Deferred tax assets, net

659

403

(Changes in Presentation)
With regard to Enterprise tax payable, which was included in Other under Deferred tax assets for the previous fiscal year
ended December 31, 2019, the Company has presented it separately for the fiscal year ended December 31, 2020 as its
relative importance in the breakdown increased. To reflect this change in the presentation method, the breakdown ofdeferred tax assets for the previous fiscal year have been reclassified.
As a result, the 295 million yen in Other for the previous fiscal year was reclassified into 169 million yen as Enterprise tax
payable and 125 million yen as Other.

61(2) Significant Components of Material Difference between the Effective Statutory Tax Rate and Income
Tax Rate Applicable after Applying Tax Effect Accounting
Fiscal 2019

Fiscal 2020(as of December 31, 2019)(as of December 31, 2020)

The note is omitted as the difference between theeffective statutory tax rate and the income tax rateapplicable after applying tax effect accounting is lessthan 5/100 of the effective statutory tax rate.

The note is omitted as the difference between theeffective statutory tax rate and the income tax rateapplicable after applying tax effect accounting is lessthan 5/100 of the effective statutory tax rate.

16. Notes to Business Combination, Etc.
(Business combination through acquisition)
The Company made a resolution at its Board of Directors’ meeting held on October 29, 2020 to acquire the shares of
Ryomon Co., Ltd. and make it a subsidiary. The Company also concluded a share transfer agreement as of the same date,
and acquired the shares of Ryomon Co., Ltd. as of October 29, 2020.

1. Overview of business combination(1) Name and business description of the acquired company
Name of the acquired company

Ryomon Co., Ltd.

Business description

Sales of permanent use rights, operations and management of ossuaries(2) Major reason of conducting business combination
The Company decided to acquire the shares of Ryomon Co., Ltd. and make it a subsidiary for the purpose of help solving
issues of the modern society, including inadequate availability of cemeteries in an aging society with many deaths, lack ofpersons to keep their family graves as families are becoming smaller due to the dropping birthrate, and the extreme difficulty to obtain graveyards especially in city centers.
(3) Date of business combination
October 29, 2020
(4) Legal format of business combination
Acquisition of shares with considerations paid by cash(5) Company name after business combination
Ryomon Co., Ltd.
(6) Ratio of acquired voting rights
51%(7) Major grounds for deciding on the company to be acquired
By acquiring the shares of the company with considerations paid by cash62

ES-CON JAPAN Annual Report 2020

2. Period during which the performance of the acquired company is included in the Company’s Consolidated
Financial Statements for the fiscal year ended December 31, 2020(3) Increase/Decrease of the Total Amount of the Asset Retirement ObligationsFiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

Balance at beginning of fiscal year
Increase due to acquisition of property, plant and equipment
Adjustments over passage of time
Decrease due to implementation of asset retirement
obligations
Other

111
172
1

249
9
1

(3)

—

(33)

—

Balance at end of fiscal year

249

260

From October 30, 2020 to December 31, 2020

3. Acquisition cost of the acquired company and breakdown of considerations by type
Considerations of the acquisition: Cash
Acquisition cost:				

51 million yen
51 million yen

4. Item and amount of major acquisition-related expenses
Not applicable(Unit: million yen)

5. Amount of generated goodwill, grounds for generation, amortization method and amortization period(1) Amount of goodwill generated
3 million yen

18. Notes to Rental Real Estate(2) Grounds for generation
Reflects the excess earning power that is expected to arise through the business implementation in the future(3) Amortization method and amortization period
Immediately amortized as the goodwill is of small importance

The Company owns retail properties, medical facilities and other properties. Income or loss from leasing these rental
properties during Fiscal 2019 totaled 578 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 2020 totaled 641
million yen in income (with rental income recorded as net sales and rental expenses recorded as cost of sales).
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)
Fiscal 2019

Fiscal 2019(from January 1, 2019
to December 31, 2019)(from January 1, 2019
to December 31, 2019)

Balance at beginning of fiscal year

1,526

12,657

Increase/decrease during fiscal year

11,1301,478

Balance at end of fiscal year

12,657

14,135

13,27014,180

6. Amounts and major breakdown of assets acquired and liabilities assumed on the date of businesscombination
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities

143 million yen
0 million yen
143 million yen
51 million yen
51 million yen

7. Estimate amount of the impact on the consolidated statement of income of the fiscal year ended December 2019 on
the supposition that the business combination completed on the beginning day of the fiscal year, and its calculation
methodDescriptions are omitted as the estimate amount of the impact in the fiscal year ended December 2020 is of small
importance.

17. Notes to Asset Retirement Obligations

Fair value at end of fiscal year

(Notes) 1. The book value recorded on the consolidated balance sheet represents the amount obtained by deducting accumulated depreciation andaccumulated impairment loss from acquisition cost.
2. Of the amount of increase/decrease during fiscal year, the amount of increase during Fiscal 2019 is primarily attributable to acquisition ofrental real estate (2,823 million yen) and transfer from real estate for sale in process due to a change in the holding purpose (8,410 millionyen), and the amount of decrease is primarily attributable to depreciation (104 million yen). The amount of increase during Fiscal 2020 isprimarily attributable to acquisition of rental real estate (1,660 million yen), and the amount of decrease is primarily attributable to depreciation (281 million yen).
3. Fair 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.

(Asset retirement obligations that are recorded on the consolidated balance sheet)

19. Segment Information(1) Description of the Relevant Asset Retirement Obligations(1) Overview of Reportable Segments

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.

(2) Calculation Method of the Amount of the Asset Retirement Obligations
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 6 years to 18 years.
63

Book value recorded on the consolidated balance sheet

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.
64

ES-CON JAPAN Annual Report 2020

Fiscal 2020 (from January 1, 2020 to December 31, 2020)

Each of the reportable segments mainly comprises the following operations.
Real estate sales business: Development and sale of for-sale condominiums and retail properties, sale of land, etc.

Reportable segment

Real estate leasing business: Leasing of real estate, etc.

Amount on
consoliReconcilia­
dated
tion
financial(Note 1)statements

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

Real estate planning agency and consulting business: Consigned operations of real estate-related services, brokerageof transactions, sales agency, etc.

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

Net sales
Net sales to external customers
Intersegment net sales or transfers(Note 2)

71,485
—

5,527
—

295
—

77,308———77,308—

Total

71,485

5,527

295

77,308—77,308(3) Information on Net Sales, Income or Loss, Assets and Other Item Amounts by Reportable Segment

Segment income

14,2572,381

152

16,791(4,588)

12,202

Fiscal 2019 (from January 1, 2019 to December 31, 2019)

Segment assets

95,146

20,521

6,598

122,266

27,156

149,423

Depreciation

—

283

4

287

116

403

Amortization of goodwill
Investment in equity method
affiliates
Increase in property, plant andequipment and intangible assets

97

—

3

100

—

100

455

—

—

455

—

455

—

1,761

4,003

5,765

79

5,845

The accounting method for the reported business segments is the same as described in “Summary of significant accounting
policies.”(Unit: million yen)

Reportable segment

Amount on
consoliReconcilia­
dated
tion
financial(Note 1)statements

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)Other items

66,710
—

5,022
—

372
—

72,106———

72,106—

Total

66,7105,022

372

72,106—

72,106

Segment income

13,802

3,001

286

17,091(4,178)12,912

Segment assets

90,633

17,216

2

107,852

24,843

132,696

—
48

105
—

—
—

105
48

71
—

176
48

20. Related Information

417

—

—

417

—

417

485

2,824

—

3,309

577

3,886

Fiscal 2019 (from January 1, 2019 to December 31, 2019)(1) Information by Product and Service

Other items
Depreciation
Amortization of goodwill
Investment in equity method
affiliates
Increase in property, plant andequipment and intangible assets(Notes) 1. Reconciliations are as follows:(1) The reconciliation of segment income of -4,178 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) The reconciliation of segment assets of 24,843 million yen is mainly from surplus operating funds (cash and deposits) and administrative
assets, etc. not attributable to reportable segments.
(3) The reconciliation of depreciation of 71 million yen is from depreciation on corporate assets not attributable to reportable segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 577 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.

(Notes) 1. Reconciliations are as follows:(1) The reconciliation of segment income of -4,588 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) The reconciliation of segment assets of 27,156 million yen is mainly from surplus operating funds (cash and deposits) and administrative
assets, etc. not attributable to reportable segments.
(3) The reconciliation of depreciation of 116 million yen is from depreciation on corporate assets not attributable to reportable segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 79 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.

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

(2) Information by Region
1) Net sales
Not applicable as the Company records no net sales to external customers outside Japan.
2) Property, plant and equipment
Not applicable as the Company has no property, plant and equipment outside Japan.

(3) Information by Major Customer

65

Customer’s nameSales (million yen)

Related segment

ESCON JAPAN REIT Investment Corporation

14,137

Real estate sales business
Real estate leasing business66

ES-CON JAPAN Annual Report 2020

Fiscal 2020 (from January 1, 2020 to December 31, 2020)(1) Information by Product and Service

Fiscal 2020 (from January 1, 2020 to December 31, 2020)

(Unit: million yen)

Real estate
Real estate
Real estate planning agency Eliminations
Total
sales business leasing business and consulting businessor corporate

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

(2) Information by Region

Amortization amountduring the fiscal year

97

—

3

—

100

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

Balance at the end of
the fiscal year

339

—

—

—

339

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

23. Information on Gain on Negative Goodwill by Reportable Segment(3) Information by Major Customer

Not applicable

Customer’s nameSales (million yen)

Related segment

ESCON JAPAN REIT Investment Corporation

10,797

Real estate sales business
Real estate leasing business

Chuden Real Estate Co., Inc.

9,605

Real estate sales business
Real estate leasing business

Fiscal 2019 (from January 1, 2019 to December 31, 2019)(1) Transactions with Related Parties

Hyogo Logistics TMK

7,740

Real estate sales business

1) Transactions between the filing party of these consolidated financial statements and related parties
a. Subsidiaries, etc. of other affiliates of the filing party of these consolidated financial statements

21. Information on Impairment Loss on Non-current Assets by Reportable
Segment
Fiscal 2019 (from January 1, 2019 to December 31, 2019)24. Information on Related Parties

Type

Name

Location

Subsidiary of
Chuden Real Naka-ku,
other
Estate Co., Inc. Nagoya-shi
affiliates

Not applicable

Fiscal 2020 (from January 1, 2020 to December 31, 2020)

Paid-in
The Company’s
capital or
share of voting
Business
equityrights, etc. [ordescription or
investownership of
occupation
mentsuch in the(million yen)Company]
100

Real estatebusiness—

Transaction
Description of Description ofamountrelationship transaction

Category(million yen)Transfer ofreal estateTransfer ofreal estate for
sale

9,515

Balance at
end offiscal year
(million yen)

Advances
received

475(Note 2)

Not applicable(Notes) 1. The figure does not include consumption taxes.
2. The Company sold retail properties and lands for retail properties. The transaction amount has been reasonably determined in considerationof the real estate appraisal value. Payment terms require payment of the amount equivalent to 5% upon contracting and the rest upon implementation of the transaction. Furthermore, implementation of the transaction completed on February 4, 2020.

22. Information on Amortization of Goodwill and Unamortized Balance byReportable Segmentb. Officers of the filing party of these consolidated financial statements and major shareholders (individuals only), etc.
Not applicable

Fiscal 2019 (from January 1, 2019 to December 31, 2019)

c. Consolidated subsidiaries of the filing party of these consolidated financial statements and affiliates
Not applicable.

(Unit: million yen)

Real estate
Real estate leas- Real estate planning agency Eliminations
Total
sales business ing businessand consulting businessor corporate
Amortization amountduring the fiscal year

48

—

—

—

48

Balance at the end of
the fiscal year

436

—

—

—

436

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

(2) Notes to Parent Company or Important Affiliates
Not applicable.

67

68

ES-CON JAPAN Annual Report 2020

Fiscal 2019 (from January 1, 2019 to December 31, 2019)(1) Transactions with Related Parties

3. The basis for the calculation of basic earnings per share and diluted earnings per share is as follows:
Fiscal 2019(from January 1, 2019
to December 31, 2019)1) Transactions between the filing party of these consolidated financial statements and related parties
a. Subsidiaries, etc. of other affiliates of the filing party of these consolidated financial statements

Type

Name

Location

Paid-in
capital orBusiness
equitydescription
investor occupation
ment(million yen)

Subsidiaryof otheraffiliates

Chuden Real Naka-ku,
Estate Co., Inc. Nagoya-shi

100Real estatebusiness

The Company’s
share of voting
rights, etc. [orownership ofsuch in the
Company]—

Basic earnings per share
Profit attributable to owners of parent (million yen)
Profit not attributable to common shareholders (million yen)Transaction
Description of Description ofamountrelationship transaction

Balance at
end offiscal year

Category(million yen)Transfer ofreal estateTransfer ofreal estate forsale

Fiscal 2019(from January 1, 2020
to December 31, 2020)(million yen)

Profit attributable to owners of parent for common shares(million yen)
Period-average number of common shares (shares)

8,155

7,663

—

—

8,155

7,663

68,433,365

68,459,909——

136,502349,477

Diluted earnings per share

9,515

—

—

Adjustments to profit attributable to owners of parent(million yen)
Increase in common shares (shares)(Note 2)

(Notes) 1. The figure does not include consumption taxes.
2. The Company sold retail properties and lands for retail properties. The transaction amount has been reasonably determined in considerationof the real estate appraisal value. Payment terms require payment of the amount equivalent to 5% upon contracting and the rest upon implementation of the transaction.

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

Description of dilutive shares without dilutive effect and notincluded in the calculation of diluted earnings per share

Sixth offer of subscription rights
to shares based on resolution by
the Board of Directors’ meetingon December 1, 2017
Common shares:
1,261,500 shares—

26. Significant Subsequent Events
Conclusion of Agreement on Capital and Business Partnership and Issue of New Shares through ThirdParty Allocation(2) Notes to Parent Company or Important Affiliates
Not applicable.

25. Per Share Information
(Unit: yen)

Fiscal 2019

Fiscal 2020

(from January 1, 2019
to December 31, 2019)(from January 1, 2020
to December 31, 2020)

Net assets per share

490.08563.07

Basic earnings per share

119.17111.94

Diluted earnings per share

118.93111.37(Notes) 1. In 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: 487,200 shares for Fiscal 2019 and 851,000 sharesfor Fiscal 2020; the share-based payment benefits type ESOP trust: 233,100 shares for Fiscal 2019 and 233,000 shares for Fiscal 2020) are
included in treasury shares, which are excluded from the number of shares issued and outstanding at end of the fiscal year.
2. In calculating basic earnings per share and diluted earnings per share, the Company’s shares owned by the share-based payment benefits
trust for directors and the share-based payment benefits type ESOP trust (721,142 shares for Fiscal 2019 and 950,138 shares for Fiscal 2020)are included in treasury shares, which are excluded when calculating the period-average number of shares.

The Company resolved at its board of directors’ meeting held on February 24, 2021 to submit to the 26th Ordinary
General Meeting of Shareholders for approval about newly concluding an agreement on capital and business partnershipwith Chubu Electric Power Co., Inc. (“Chubu Electric Power”) (the “Capital and Business Partnership Agreement”) andissuing new shares through third-party allotment to Chubu Electric Power as the allottee (the “Third-party Allotment”).
The agenda was approved by the said General Meeting of Shareholders held on March 26, 2021.
Payment for the Third-party Allotment will be completed on April 5, and the Company will become a consolidated subsidiary of Chubu Electric Power.

1. Overview of the Capital and Business Partnership Agreement(1) Purpose and Reason
The Company aims to achieve the following objectives: a) Becoming a consolidated subsidiary of Chubu Electric Power,
which boasts strong corporate credit standing will allow diversification of fundraising methods and reduce fundraisingcosts by improving the Company’s creditworthiness; b) The move will also enable participation in large-scale urban-development projects through further business partnerships with the Chubu Electric Power Group: and c) This will provide
increased access to real estate information and, by extension, make it possible for the Company to increase its corporate
value even further by increasing earnings potential and enhancing management stability.
(2) Details of the Business Partnership
In the Capital and Business Partnership Agreement newly concluded on February 24, 2021 between the Company and
Chubu Electric Power, the two companies agreed on a business tie-up with the following items as major subjects, in orderto promote business progress and increase the corporate value of both firms:(i) Enhancing joint efforts related to energy supply and facility construction(ii)	Joint research and joint implementation in businesses related to next-generation smart houses, connected homes,
and so forth(iii) Further enhancing the partnership with Chuden Real Estate, a member of the Chubu Electric Power Group69

70

ES-CON JAPAN Annual Report 2020(iv)	Enhancing partnerships related to the effective utilization and development of unused or underused land belonging to the Chubu Electric Power Group(v) Joint initiatives in businesses that constitute to society, including urban development
Plans call for the Company and Chubu Electric Power to discuss details of the business partnership after concluding theCapital and Business Partnership Agreement.

Investor Information
Status of Share Price (from January 4, 2019 to April 30, 2020)(Unit: million shares)

3(Unit: yen)

1,200

Trading volume (left scale)
Share price (right scale)(3) Details of the Capital PartnershipAs described above, the Company will allot shares of its common stock to Chubu Electric Power as the allottee by issuing
new shares through the Third-party Allotment.

2

1,000

2

800

1

600

1

400

0

200

2. Issue of New Shares through Third-party Allotment(1) Purpose and Reason
As described in (1) Purpose and Reason in 1. Overview of the Capital and Business Partnership Agreement above, theThird-party Allotment will be conducted as part of the partnership, and the Company will issue new shares with Chubu
Electric Power as the allottee with the aim of reinforcing the business and financial foundations.
(2) Overview of Issuance1) Type of shares to be issued
26,619,000 shares in common stock2) Paid-in amount
769 yen per share3) Total paid-in amount
20,470 million yen
4) Of which, the amount to be capitalized 10,235 million yen
5) Method of offering
Third-party allotment
6) Use of funds	To be allocated to partially fund the acquisition of real estate for developing and holding new revenue-generating real estate properties

0
Jan. 6, 2020

Mar. 31, 2020

Jun. 30, 2020

Sep. 30, 2020

Dec. 30, 2020

0
Apr. 30, 2021

Major Shareholders (as of March 31, 2021)
Name

No. of shares owned

Ownership ratio (%)

1

Chubu Electric Power Co., Inc.

22,980,000

33.01

2

Nissei Build Kogyo Co., Ltd.

6,500,000

9.34

3Tenma Seiryu Co., Ltd.

3,610,000

5.19

4Koryu Oh

2,100,000

3.02

5

Custody Bank of Japan, Ltd. (Trust account)

2,062,800

2.96

6The Master Trust Bank of Japan, Ltd. (Trust account)

2,013,500

2.89

7

Takatoshi Ito

1,208,400

1.74

8Custody Bank of Japan, Ltd. (Trust account 5)

546,600

0.79

9

RE FUND 107-CLIENT AC

533,300

0.77

10

Keiko Akashi

531,000

0.76(Notes) 1. ES-CON JAPAN owns 2,344,400 treasury shares but is excluded from the major shareholders above.
2. Ownership ratio is rounded down to the first decimal place.
3. As the payment of the third-party allotment was completed on April 5, 2021, the Chubu Electric Power Co., Inc. currently owns 51.54% of all
outstanding shares.

71

72

ES-CON JAPAN Annual Report 2020

Notes for Investors
Fiscal year: January 1 to December 31
Securities code: 8892
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: 71,961,887 shares (as of March 31, 2021)
Total number of shareholders: 13,280 shareholders (as of March 31, 2021)
Share units: 100 shares
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 not have 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.

Shareholders who have owned shares in ES-CON JAPAN for at least one year since June 30 of each year andwho 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 accordance with the Financial Instruments and Exchange Act of Japan (FIEA) and other relevant laws. The document has been prepared solely for the 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 and regulations.
English terms for Japanese legal, accounting, tax and business concepts used herein may not be identical to the equivalentJapanese terms. 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.

73