Summary of Accounts for Fiscal Year Ended December 2022 (Japanese GAAP)(Consolidated)
Name of listed company: ES-CON JAPAN Ltd.
Code:
8892
Representative:(Name) Takatoshi Ito(Position)
Contact for inquiries:(Name) Minoru Nakanishi(Position)
Scheduled date for next regular general meeting of shareholders:
Scheduled date for submission of periodic securities report:
Scheduled date for start of dividend payment:
Supplementary explanatory materials created for accounts? Yes/No:
Accounts briefing meeting held?
Yes/No:January 27, 2023
Listing exchange: Tokyo Stock Exchange
URL:
https://www.es-conjapan.co.jp/english/
President & Representative Director
Senior Managing Director TEL: 06 (6223) 8055
March 24, 2023
March 27, 2023
March 27, 2023
No
Yes (for institutional investors and analysts)(Amounts are rounded down to the nearest million yen)

1.

Consolidated results for fiscal year ended December 2022 (from January 1, 2022 to December 31, 2022)(1)(% figures for the full fiscal year show the rate of increase (decrease)
compared with the previous period)

Consolidated operating results
Net sales

Operating income

Profit attributable toowners of parent

Ordinary income

million yen%
million yen%
million yen%
million yen%
Fiscal year ended
99,431
25.8
15,49249.2
14,012
54.0
7,250
21.6
Dec. 2022
Fiscal year ended
79,017
2.2
10,381(14.9)
9,099(18.5)
5,961(22.2)
Dec. 2021
Note: Comprehensive income
Fiscal year ended Dec. 2022: 5,399 million yen [-9.6%] Fiscal year ended Dec. 2021: 5,970 million yen [-20.7%]
Basic earnings per Diluted earnings per
Return on equity Return on assets Operating margin
share
share
yen

yen

%

%

%

Fiscal year ended
76.04
75.89
11.3
5.4
15.6
Dec. 2022
Fiscal year ended
67.48
67.30
11.8
4.5
13.1
Dec. 2021
Reference: Share of profit (loss) of entities accounted for using equity method
Fiscal year ended Dec. 2022: -16 million yen
Fiscal year ended Dec. 2021: 54 million yen
Note: “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29; March 31, 2020), etc. have been applied
from the beginning of the fiscal year ended December 2022, and the figures for the fiscal year ended December
2022 are the figures after applying the accounting standard, etc.
(2)Consolidated financial position
Total assets
Net assets
Equity ratio
Book value per share
million yen

million yen%

yen

Fiscal year ended
263,729
64,14425.0
691.87
Dec. 2022
Fiscal year ended
252,771
62,62824.8
657.50Dec. 2021
Reference: Equity
Fiscal year ended Dec. 2022: 65,906 million yen
Fiscal year ended Dec. 2021: 62,780 million yen
Note: “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29; March 31, 2020), etc. have been applied
from the beginning of the fiscal year ended December 2022, and the figures for the fiscal year ended December
2022 are the figures after applying the accounting standard, etc.
(3)
Consolidated cash flows
Net cash provided
Net cash provided by
Net cash provided by
Cash and cashby (used in)(used in) investing(used in) financing
equivalents at end ofoperating activities
activities
activities
periodFiscal year ended
Dec. 2022
Fiscal year ended
Dec. 2021

million yen

million yen

million yen

million yen

1,501(1,620)2,144

35,604(10,810)(29,721)50,29333,559- 1 -2.

Dividends
Annual dividend
End of first End of second End of third
Year-endquarterquarterquarter
yen
yen
yen
yen

Fiscal year ended
Dec. 2021
Fiscal year ended
Dec. 2022
Fiscal year ending
Dec. 2023(Forecast)
3.

Total

Total dividend
Dividend
Dividend on
amountpayout ratio
equity(Total)(Consolidated) (Consolidated)yenmillion yen

%

%

－

0.00

－

38.00

38.00

3,669

56.3

6.2

－

0.00

－

38.00

38.00

3,673

50.0

5.6

－

0.00

－

38.00

38.00

－

Consolidated earnings forecast for fiscal year ending December 2023 (from January 1, 2023 to December 31, 2023)
Operating income

Ordinary income

Profit attributable to Basic earnings
owners of parent
per share

million yen%

million yen%

million yen%

yenFirst two quarters
46,000
12.5
6,000
6.4
Full fiscal year
110,000
10.6
16,2004.6
Note: Revisions from the latest dividends forecast: None

5,200
14,200

1.2
1.3

3,400
9,400

3.1
29.6

35.69
98.68

Net sales
million yen*%

Explanatory notes(1) Changes in significant subsidiaries during fiscal year
(Changes in specified subsidiaries resulting in change in scope of consolidation):
Newly included: － companies (Company name)－ companies (Company name)
Excluded:None(2) Changes in accounting policies, changes in accounting estimates, and restatement
1) Changes in accounting policies due to amendment of accounting standards, etc.:
Yes2) Changes in accounting policies other than 1):
None3) Changes in accounting estimates:
None4) Restatement:
None(Note) For details, please see “Attachment; 4. Consolidated Financial Statements and Key Notes; (5) Notes toConsolidated Financial Statements (Changes in Accounting Policies)” on page 31.
(3) Number of shares issued and outstanding (common shares)
1) Number of shares issued and outstanding
Fiscal year
Fiscal year
98,580,887
98,580,887(including treasury shares) at end of fiscal
ended Dec.
ended Dec.
sharesshares
year
2022
2021
Fiscal year
Fiscal year
2) Number of treasury shares at end of fiscal
3,322,800
3,096,900
ended Dec.
ended Dec.
year
sharesshares2022
2021
Fiscal year
Fiscal year
95,356,315
88,346,828
3) Average number of shares during fiscal year ended Dec.
ended Dec.
sharesshares2022
2021(Note) The number of treasury shares at end of fiscal year includes ES-CON JAPAN shares held in a share-based
payment benefits trust for directors and a share-based payment benefits-type ESOP trust (fiscal year ended
December 2022: 851,000 shares in the share-based payment benefits trust for directors and 573,400 sharesin the share-based payment benefits-type ESOP trust). In the calculation of the average number of shares
during fiscal year, the treasury shares to be subtracted in that calculation includes ES-CON JAPAN shares
held in the share-based payment benefits trust for directors and the share-based payment benefits-type ESOP
trust (fiscal year ended December 2022: 1,221,448 shares).

- 2 -(Reference) Non-consolidated results
1. Non-consolidated results for fiscal year ended December 2022 (from January 1, 2022 to December 31, 2022)(1) Non-consolidated operating results(% figures show the rate of increase (decrease) compared with the previous fiscal year)
Net sales
Operating income
Ordinary income
ProfitFiscal year ended
Dec. 2022
Fiscal year ended
Dec. 2021

million yen%

million yen%

million yen%

million yen%

89,99922.6

13,85435.7

13,068

40.3

7,100

10.4

73,407(0.7)

10,213(14.7)

9,312(16.3)

6,434(16.6)

Basic earnings per share
Fiscal year ended
Dec. 2022
Fiscal year ended
Dec. 2021(2)

Non-consolidated financial position
Total assets
million yen

Diluted earnings per share
yen

yen

74.47

74.33

72.83

72.64

Net assets
million yen

Fiscal year ended
245,466
66,135
Dec. 2022
Fiscal year ended
233,860
63,206
Dec. 2021
Reference: Equity
Fiscal year ended Dec. 2022: 66,134 million yen

Equity ratio

Book value per share
%

yen

26.9

694.2727.0

661.95

Fiscal year ended Dec. 2021: 63,205 million yen*

This summary of accounts is not subject to review of certified public accountant or audit corporation.

*

Explanation regarding appropriate use of earnings forecasts, and other notes
The earnings outlook and other forward-looking statements contained in this document are based on information
currently available to and certain assumptions that are thought to be reasonable by ES-CON JAPAN. Accordingly, actual
business performance and other results may differ materially due to various reasons. For the conditions forming theassumptions on which earnings forecasts are based and explanatory notes for use of earnings forecasts, etc., pleasesee “Attachment 1; 1. Overview of Operating Results, Etc.; (1) Analysis of Operating Results” on page 5.

- 3 -○ Contents of Attachment
1. Overview of Operating Results, Etc. ................................................................................................................................. 5(1) Analysis of Operating Results ..................................................................................................................................... 5(2) Analysis of Financial Position .................................................................................................................................... 16(3) Basic Policy on Distribution of Profit, and Dividend for the Fiscal Year Under Review and Next Fiscal Year ........... 17(4) Business Risks .......................................................................................................................................................... 17
2. Management Policy ........................................................................................................................................................ 20(1) Basic Policy on Corporate Management ................................................................................................................... 20(2) Medium- to Long-Term Corporate Management Strategy and Management Indicator Targets ................................ 20(3) Business and Financial Issues to Be Addressed on a Priority Basis ........................................................................ 20
3. Basic Policy on Selection of Accounting Standard.......................................................................................................... 22
4. Consolidated Financial Statements ................................................................................................................................ 23(1) Consolidated Balance Sheet ..................................................................................................................................... 23(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income .................................. 25(Consolidated Statement of Income) ............................................................................................................................. 25(Consolidated Statement of Comprehensive Income) ................................................................................................... 26(3) Consolidated Statement of Changes in Equity .......................................................................................................... 27(4) Consolidated Statement of Cash Flows .................................................................................................................... 29(5) Notes to Consolidated Financial Statements ............................................................................................................ 31(Notes on Going Concern Assumption) ......................................................................................................................... 31(Changes in Accounting Policies) .................................................................................................................................. 31(Additional Information) ................................................................................................................................................. 31(Segment Information, Etc.) .......................................................................................................................................... 33
5. Other ............................................................................................................................................................................... 36(1) Status of Contracts and Sales ................................................................................................................................... 36- 4 -Attachment 1
1. Overview of Operating Results, Etc.
(1)

Analysis of Operating Results

In the fiscal year under review (fiscal year ended December 2022), despite concerns over the impacts of the spread of
COVID-19, thanks in part to the easing of movement restrictions and the development of anti-COVID-19 measures, theJapanese economy saw steady progress towards the normalization of economic and social activities and has been ona mild recovery trend centered on domestic demand.
In the real estate industry in which the ES-CON JAPAN Group operates, as work-style reform and new ways of living,
including teleworking, become widespread, the market remains robust thanks to stable housing demand as well as theeffect of underlying support, including the continuation of monetary easing policy. On the hand, we continue to clearly
see rising construction costs due to soaring raw material prices, delivery delays of materials due to the shortage ofcomponents, intensifying competition over acquisition of properties and increasing acquisition costs, etc., and thesituation still requires close attention to the effect of these on the market.
Regarding prospects, there exist many downside factors to the economy, including the shortage in supply of
resources and other materials on the back of the deteriorated situation in Ukraine, surging prices due to the weaker
yen, and the upward trend of interest rates with the U.S. and other countries continuing tight monetary policies andJapan practically moving away from years of ultra-loose monetary policy. The future trend of the real estate market
remains uncertain, and we need to continue developing our real estate business prudently.
Amid these highly unpredictable business circumstances, we aim for sustainable growth by building a firmmanagement base that can withstand any economic environment to maximize corporate value under the fourth
medium-term management plan “IDEAL to REAL 2023” (the three-year period from the fiscal year ended December
2021 to fiscal year ending December 2023) formulated in February 2021 with the theme of “Transformation and Rapid
Progress.”
In fiscal 2021, the first year of the fourth medium-term management plan, we implemented a capital increase throughthird-party allotment with Chubu Electric Power Co., Inc. (hereinafter “Chubu Electric Power”) as the allotee and became
a consolidated subsidiary of Chubu Electric Power. This created a variety of synergistic effects, such as the progressof cooperation and collaboration with the Chubu Electric Power Group companies in development of condominiums
and vertical farms. In October 2021, ES-CON JAPAN acquired all shares of Picasso Co., Ltd., which owns numerous
prime revenue-generating properties, and its seven group companies (hereinafter “Picasso Group”), making them its
subsidiaries. Through this and other initiatives, we steadily promoted the enhancement of our financial standing andtransformation to a structure of sustained and stable revenue.
As a result of the above, we acquired credit ratings of “A+” (stable) from Japan Credit Rating Agency, Ltd. in
September 2022, upgraded from “A” acquired in July 2021. We were also selected as a constituent of JPX-Nikkei Index
400 for FY2022 (August 31, 2022 to August 30, 2023), continuing from FY2021. Against the backdrop of obtaining thisevaluation, we established a system enabling it to flexibly and actively consider a variety of investment opportunities
such as entering into commitment line agreements with financial institutions and registering the issuance of bonds.
As to business performance for the fiscal year under review, the second year of the fourth medium-term management
plan, sales were generally as planned due in part to strong sales of condominiums in the mainstay condominium
business with net sales standing at 99,431 million yen (down 0.6%), operating income at 15,492 million yen (up 10.7%),
and ordinary income at 14,012 million yen (up 14.9%), all compared with the initial plan. However, as separately
announced today, due in part to an extraordinary loss recorded in relation to Ryomon Co., Ltd., profit attributable toowners of parent was 7,250 million yen (down 12.6%), failing to meet the target.
In FY2023, the final fiscal year of the fourth medium-term management plan, ES-CON JAPAN will push forward toward“Rapid Progress” through concerted efforts.

- 5 -ES CON FIELD HOKKAIDO, the new stadium for the Hokkaido Nippon-Ham Fighters in Kitahiroshima City, Hokkaido,
will commence operations in March 2023. ES-CON JAPAN is participating in the urban development concept in thelarge-scale development area called HOKKAIDO BALLPARK F VILLAGE (total development area: approx. 36.7 ha;hereinafter “F VILLAGE”) centered on the stadium, and has been working on the development of “Le JADE Hokkaido
Ballpark” condominium (Kitahiroshima City, Hokkaido Prefecture; 118 units in total have been sold out early), which isdue to be delivered in the same month upon launch of the stadium, and senior residences. Furthermore, we are also
conducting development as a project partner for the “Train Station West Exit Area Revitalization Project” in the areaaround JR Kitahiroshima Station to create a gateway to F VILLAGE, including a rotary in front of the station.
We will continue to contribute to regional revitalization through our business, thereby achieving sustainable growth.
1)

Progress of Fourth Medium-term Management Plan “IDEAL to REAL 2023”

As mentioned above, in fiscal 2021, the first fiscal year of the medium-term management plan, we made the PicassoGroup subsidiaries. This allowed us to “transform” the revenue structure with a single stroke by ensuring stable rental
income, and we modified part of the management index, including the share of profits from leasing, for the fiscal year
ending December 2023, the final fiscal year of the plan. The details of the modification are described in the following“5. Management Targets.”
The details and progress of the fourth medium-term management plan are as follows.
1. Basic Management Strategy Policies
・ Establish business foundations able to withstand unexpected changes in economic conditions
Establish a solid business and financial standing that can maintain fund-raising ability under any economic
environment.
・ Simultaneously change the revenue structure and expand business domains
Transform the revenue structure from one based on flows to one based on stock by strengthening the real estateleasing business while simultaneously realizing business diversification and expanding businessterritories
2. Basic Policy: Transformation and Rapid ProgressTransformation
・ Proactive investment in long-term revenue-generating real estate and improvement of balance sheet structure
・ Transform the focus of management from flows to stock
Rapid Progress・ Demonstrating synergies within the Chubu Electric Power Group・ Achieving net sales of 110 billion yen and operating income of 16 billion yen (in the final fiscal year of themedium-term management plan)
3. Management Strategies
・ Transformation to a structure of sustained and stable revenues
・ Stable growth in existing core businesses through business diversification and area strategies
・ Growing new businesses into core businesses through business diversification and area strategies
・ Taking on the challenges of new business domains
・ Enhancing synergies within the ES-CON JAPAN Group・ Expanding business bases, primarily in the five major urban areas
・ Enhancing synergies with the Chubu Electric Power Group・ Promoting ESG initiatives- 6 -4. Performance Plan
Fiscal year ended
Dec. 2021(Unit: million yen)
Fiscal year ending
Dec. 2023

Fiscal year ended Dec. 2022

ActualActualDifference frominitial plan

Initial plan

Increase/decreasePlan

Net sales

79,01799,431

100,000(568)(0.6%)

110,000

Operatingincome10,381

15,492

14,000

1,492

10.7%

16,2005. Management Targets
Fiscal year
ended Dec.
2021

Fiscal year ended Dec. 2022

ActualShare ofprofits fromleasing*1
Return on
equity(ROE)
Return on
invested
capital(ROIC)*2

ActualFiscal year ending Dec. 2023

Percentagechange from
plan

Plan

Revisedplan*4

Initial plan

Percentagechange frominitial plan

21.2%

21.5%

26.0%

(4.5%)

30.0%

26.0%

4.0%

11.8%

11.3%

13.0%

(1.7%)

13.0%

13.0%

－

3.2%

4.6%

4.0%

0.6%

4.0%

4.0%

－

Equity ratio

24.8%

25.0%

23.0%

2.0%

21.0%

23.0%

(2.0%)

Share oflong-term
earnings
from realestate*3

20.6%

19.5%

21.0%

(1.5%)

23.0%

18.0%

5.0%

Net assets

62.6
billion yen

64.1
billion yen

67.3
billion yen(31billion yen)

72.0
billion yen

72.0
billion yen－

Notes: 1
2
3
4

Share of profits for leasing: Leasing segment profits / Total segment profits (excluding adjustments)
Return on invested capital (ROIC): After-tax operating income / (Shareholders’ equity + Interest-bearing liabilities)
Share of long-term earnings from real estate: Real estate generating leasing revenues recorded as noncurrent assets / Total assets.
In the first fiscal year of the fourth medium-term management plan, ES-CON JAPAN rapidly realized“transformation” of the revenue structure by accelerating progress on investment plans ahead of scheduleand securing stable leasing income, and “share of profits from leasing,” “equity ratio,” and “share of longterm earnings from real estate” for the fiscal year ending December 2023 were revised on March 25, 2022.

6. Investment Plan
Fiscal year Fiscal year
ended
ended
Dec. 2021 Dec. 2022
Investment inrevenue-generating
real estate
Investment in otherdevelopment
Gross investment
2)

Cumulative total for 2021 and 2022
Difference Increase/from plan decrease(Unit: million yen)Three-year
Fiscal year ending
cumulative
Dec. 2023
total
RevisedInitial plan
Plan
plan

ActualActualActualPlan

76,79910,80887,60770,00017,60725.2%

65,70060,000130,000

19,191

26,10345,29455,000(9,705)(17.6%)

22,30035,00090,00095,99036,911 132,902 125,000

7,902

6.3%

88,00095,000220,000

Status of Demonstration of Synergy Effect with the Chubu Electric Power GroupIn April 2021, ES-CON JAPAN became a consolidated subsidiary of Chubu Electric Power, and a variety ofsynergies have been created, such as the more aggressive development of our business in the Chubu area.
- 7 -As a joint project with Chubu Electric Power, a consortium of businesses led by Chubu Electric Power of which
ES-CON JAPAN is a member (hereinafter “Consortium”) entered into a basic agreement in August 2022 for the
project organized by Aichi Prefecture and the city of Nagoya to operate the site of the 20th Asian Games AichiNagoya 2026 Athletes’ Village after the games. In addition, the Consortium submitted a plan to utilize wood
produced in Aichi Prefecture for “Ideas for Projects/Plans for the Realization of Carbon Neutrality” solicited by Aichi
Prefecture and entered into an “Agreement on the Promotion of the Utilization of Wood in Public Buildings” with
Aichi Prefecture, the first of its kind in the prefecture, in September 2022.
Furthermore, we established TSUNAGU Community Farm LLC with Chubu Electric Power and Spread Co., Ltd.
(hereinafter “Spread”), and started construction of Techno Farm Fukuroi, which will be the world’s largest verticalfarm utilizing fully artificial light and capable of producing 10 tons of lettuce per day. By combining Chubu ElectricPower’s know-how in energy management, ES-CON JAPAN’s real estate development capabilities, and Spread’s
cultivation technology, we are working on the efficient and stable production of “safe and secure” lettuce with theaim of launching production in January 2024.
We have undertaken a joint project with Chuden Real Estate Co., Inc. to develop condominiums and commercial
facilities centered on the Chubu area. Regarding the first and second joint projects in Shirakabe, Higashi Ward,
Nagoya City, “Grand Le JADE Shirakabe Getsuronotei” (24 units in total) and “Grand Le JADE Shirakabe
Rinzennotei” (34 units in total), all the units were sold out in November 2022.
We will continue to strengthen our partnership with the Chubu Electric Power Group and actively work to achieve
large-scale urban development and realize a “new form of community.”
3)

Progress of Projects in Hokkaido
As mentioned above, ES-CON JAPAN participated in the F VILLAGE urban development concept centered on ES
CON FIELD HOKKAIDO, the new Hokkaido Nippon Ham Fighters stadium scheduled to open in March 2023, andhas concluded a ballpark naming rights agreement.
In February 2022, we commenced sales of the first project in the F VILLAGE urban development concept and theonly condominium in F VILLAGE “Le JADE Hokkaido Ballpark” (Kitahiroshima City, Hokkaido Prefecture; 118 units
in total). The property is a project in a rare location approximately 80 meters from the outfield stands of the newstadium and also allows enjoyment of Hokkaido’s rich nature, while bringing the ideal of “living in a ballpark” into
reality. The property has attracted attention from media within and outside Hokkaido and received many information
requests and visits from around Japan. It was contracted to sell out early in September 2022.
Furthermore, in February 2022, we began development of a senior residence in the southeastern corner of F
VILLAGE. It is scheduled for completion in spring of 2024 as a residence for active seniors constructed alongside
a medical mall. This initiative is part of sustainable urban development to create places for multigenerational
interaction and will create housing that is blessed with nature and enables full enjoyment of sports and activities,
contributing to the health maintenance of people of all ages from the young to the elderly and to regional healthcare.
In addition, we are advancing development of the JR Kitahiroshima Station “Train Station West Exit Area
Revitalization Project” in Kitahiroshima City as a partner of the project. The train station is garnering further attention
as an important point of access to F VILLAGE. We acquired part of the development site for the project in November
2021, and it is being used for three development projects: a station square in front of JR Kitahiroshima Station, an
exchange center complex comprising commercial facilities and a hotel, and a three-dimensional indoor/outdoor
plaza and park. Of the development projects on the site, we aim to complete the commercial facilities, etc. in FY2024
and are steadily conducting development in front of the station.
Beyond Kitahiroshima City, in November 2022, we sold out “Le JADE Sapporo Motomachi” (Higashi Ward,
Sapporo City; 39 units in total), our first condominium in Sapporo City, and are also making steady progress withprojects in Hokkaido, such as condominium development for Le JADE Sapporo Naebo (Higashi Ward, Sapporo
City; 42 units in total).
We will continue to cooperate in the promotion of sports and culture and contribute to the revitalization anddevelopment of Kitahiroshima City and by extension the entire Hokkaido region for the happiness of its residents.

- 8 -

4)

Initiatives Aimed at Regional and Area Revitalization through Real Estate Development
In front of Tsukuba Station, Ibaraki Prefecture, we are working to create a bustling atmosphere through the
integrated development of a complex where commerce, work, and residences intersect, consisting of “tonarie
Tsukuba Square” comprising commercial facilities and offices, and the condominium Le JADE Tsukuba Station Front(Tsukuba City, Ibaraki Prefecture; 218 units in total). In November 2022, the delivery of all units of the condominium
was completed. In the following month, we opened Cafe Apartment TSUKUBA, the second cafe & dining
establishment developed and run by the ES-CON JAPAN Group, on the premises.
In February 2022, we also conducted redevelopment to create a bustling atmosphere around the station throughthe “Namiki no Mori City” development project, a mixed-use facility of residential, commercial and parking lot
buildings in Iwaki City, Fukushima Prefecture, together with the Iwaki Station Namiki-dori District Urban
Redevelopment Association and Hoosiers Corporation. For the residential building, in November 2022, wecommenced unit sales for MID TOWER IWAKI, the tallest seismic isolation structure tower condominium in the city.
In March 2022, we entered into a basic agreement with Omura City regarding the “Shin-Omura Ekimae City
Owned Land Development Project” in Omura City, Nagasaki Prefecture, together with Daiwa House Industry Co.,
Ltd., and Izumi Co., Ltd., as a member of a business group composed of the three companies. With Shin-Omura
Station on the Nishi-Kyushu Shinkansen line opening in September 2022, the project entails developing
condominiums, commercial facilities, etc. where residents and visitors from outside the city can interact with eachother in line with the town development policy of Omura City. ES-CON JAPAN is scheduled to be engaged indevelopment of condominiums in two blocks.
In March 2022, we started development of a community-based shopping center “tonarie Hoshida (tentativename)” (Katano City, Osaka Prefecture) with Takara Leben Co., Ltd. (currently, MIRARTH Holdings, Inc.) This facility
is scheduled to open in the spring of 2023 as the tenth facility in our commercial facility brand “tonarie” series.
In June 2022, at a project site on the Itoshima Peninsula in the western part of Fukuoka Prefecture, which issurrounded by nature and enjoys access to a variety of activities such as swimming and surfing, we commenced
the first hotel development in the area with LANDIC Hotel & Resort Co., Ltd.
Also in August 2022, we started the development of a clinic mall handling about seven medical treatment subjects(scheduled) at a location in Himeji City, Hyogo Prefecture, where the development of welfare facilities centered ona new hospital, which is scheduled be opened in early 2023, is planned as a “medical/nursing care zone.”
As a general developer we are working on development of diverse real estate properties, including mixed-use
development, that are closely associated with their local communities.

5)

Efforts to Promote Diverse Condominium Development and Provide Secure Housing
We are not simply expanding the number of units, but also providing a diverse range centered on product plans thatdraw out the full value of sites purchased.
In October 2022, “Ost Residence Karuizawa” (Karuizawa Town, Kitasaku District, Nagano Prefecture; 33 units intotal), which we developed at a location surrounded by the abundant nature of Karuizawa, won the Good DesignAward for fiscal year 2022 for recognition of its high-quality product planning. As another example, we have acquired
two project sites in Hayama Town, Miura District, Kanagawa Prefecture, in an effort to develop condominiums thatfully utilize the abundant natural environment such as the Morito Coast. In this way, we have been promoting productplanning with high added value leveraging locational characteristics.
Beside this, as for Le JADE Cross Chiyoda Jimbocho (Chiyoda Ward, Tokyo; 50 units in total) under development
in a site adjacent to the Toho Gakkai Main Building, which is designated as an important building for the scenic
development of Chiyoda Ward, Tokyo all units were sold out in December 2022 ahead of schedule, showing ourbusiness has progressed smoothly in scarce locations in the heart of Tokyo.
Furthermore, as a company creating “lifelong items” in the form of housing, we formulated the IDEAL CONPASS
quality management guideline and provide the Escon Premium After Support long-term after-sales service
supporting the lifestyles of people living in condominiums. We will continue to provide housing that makes ourcustomers feel safer, more secure and more comfortable.

6)

Implementation of Strategic M&As
As mentioned above, ES-CON JAPAN made the Picasso Group engaged in the real estate leasing and otherbusinesses its subsidiaries in October 2021, reinforced the real estate leasing business, and secured stablerevenues, thereby rapidly promoting the “transformation” of the revenue structure in the fourth medium-term
management plan and contributing dramatically to the sustained growth of the ES-CON JAPAN Group.
- 9 -In January 2022, ES-CON JAPAN acquired shares of FUEL Inc., which manages online funds and provides
computer systems to specified joint real estate venture-type crowdfunding businesses, to make it a subsidiary. ESCON JAPAN will expand its business domain, and also make possible the rapid establishment of a system that will
enable it to take on the challenge of new real estate digital transformation (DX) businesses (such as ST and CF (*1))
5 to 10 years in the future.
We will continue to discuss positively with companies, etc. that are thinking of business succession, and willcontinue to actively consider M&A projects that do not appear in the market, with an aim to enhance the Group’sbusinesses and expand its domain.
*1

ST (Security Token) refers to investment management through the issuance of digital securities using blockchain technology.
CF (Crowdfunding) is a method of calling for funding from a large number of unspecified people via the Internet and raising funds fromthose who agree with the purpose.

7)

Taking on the Challenges of New Business Domains
We are promoting efforts to diversify business contents with the next generation in view by stating “growing new
businesses into core businesses” and “taking on the challenges of new business domains” in the fourth mediumterm management plan.
ES-CON JAPAN began selling permanent use rights of Ryomon, an urban-type columbarium in Minato Ward,
Tokyo, in March 2021 in an effort to solve a problem facing modern society, namely the difficulty of obtaining graves
particularly in the city center, while aiming for developing into a new area of the real estate business.
In December 2021, we entered into a basic agreement on the world’s most advanced housing development with
Serendix Inc., a company that aims to develop “Sphere,” the world’s most advanced house using 3D printing
technology originating from Japan, and invested in the company. We will cooperate in research toward thedevelopment of Sphere and, in the future, apply the Sphere technology to fields other than housing such as stores,
offices, and warehouses.
In addition, we are also engaged in multiple businesses overseas while carefully assessing the impact of the
spread of COVID-19. Most recently, in December 2022, we invested and participated in a detached housedevelopment project by Britania Public Company Limited, a subsidiary of Thai real estate developer Origin Property
Public Company Limited. This is our first overseas detached house development project.
We will continue to focus on initiatives in new business fields with a view to the next era and implement a
multifaceted real estate business.

8)

Declaration of Support for TCFD Recommendations and Disclosures
Based on the goal of achieving a carbon-neutral society by 2050, we are seeking to create new value for theenvironment through next-generation urban development and related efforts.
As a key management strategy to address climate change, we have selected members from management andeach department to create the ESG Promotion Group, which has worked on disclosing information based on theframework of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations calling foranalyzing risks and opportunities presented by climate change and promoting disclosure on them. The ES-CON
JAPAN Group declared its support for the TCFD recommendations in June 2022.
Please visit our website (https://www.es-conjapan.co.jp/english/about_us/environment.php) for details of
disclosures based on the TCFD recommendations (governance, strategies, risk management, indicators and targets
on climate change risks and opportunities).
Risks and opportunities of the 1.5°C scenario (in which decarbonization will advance further) and the 3°C scenario(in which decarbonization will not progress from the current level), financial implications looking toward 2030, andan overview of strategies based on each scenario are detailed below.

- 10 -

Risks and Opportunities in the 1.5°C and 3°C Scenarios and Financial Implications Looking Toward 2030
Classification

Policy andRegulations

Transition
Risks
MarketReputation

Physical Risks

UrgentProducts/
Services

MarketOpportunities

Resilience

Risks/Opportunities relating to
ES-CON JAPANFinancial impact

Procurement prices for steel,cement, and other highly carbonintensive construction materials rise;costs increase due to taxing of CO2
emissions from property
construction and owned properties.

-

Costs increase for low-carbon
measures such as investments inenergy-saving equipment.
Operational and renovation costs forowned properties also rise.
Properties that do not comply with
ZEH or ZEB standards are nolonger chosen by customers,
resulting in higher vacancy rates,
lower closing rates, rents, and sales
prices.
Lack of decarbonization efforts atreal estate held and real estate forsale increases finance costs. Failure
to meet investor expectations withregard to decarbonization activities
affects ES-CON JAPAN’s shareprice.
On-site construction of properties
under development is disrupted;
construction schedules are delayed.
Owned properties located indisaster-prone areas may see
property damage, equipment failure,and other functional issues resulting
from disasters. This could lead tothe need for repair costs andreduced property reputation that
may result in increased vacancy
rates. In addition, ES-CON JAPANmay be held liable for humancasualties attributable to disasters at
commercial facilities.
Competitiveness of properties with
low CO2 emissions grows. The
reputation of buildings withenvironmental certification
increases.
Compact cities contribute to
reduced travel distances andexpand opportunities for mixed-use
urban area development, allowing
energy to be produced locally for
local consumption and a wide range
of generations to coexist and enjoya high quality of life.
Decarbonization efforts arerecognized by financial institutions;the acquisition of environmentallyfriendly loans reduces financing
costs. The improved reputation of
ES-CON JAPAN for decarbonization
boosts share prices.
Sales opportunities for disasterresistant properties expand indisaster-prone areas. The ability toserve as a local recovery center inthe event of disasters helps gain the
support of local residents andcustomers, leading to lower vacancy
rates.

-- 11 -

-

-

-

-

-

-

-

-

-

-

Increase inprocurement
costs formaterials
Increase in costs
related to CO2emissions
Increase in costs forcapital investment
and renovations, etc.

Decrease in sales
due to lower rents
and sales prices

Assessment offinancial impact
3°C
1.5°C
Scenario Scenario

Low

Moderate

Low

High

Low

Moderate

Low

High

Increase in financing
costs

Increase inconstruction costs

High

Repair costs
required
Decrease in sales
due to higher
vacancy rates
Compensation
obligations

Increase in sales
due to improved
competitivenessof properties
Increase in sales
due to increased
opportunities formixed-usedevelopment

High

Low

Moderate

Low

High

Low

High

Lower financing
costs

Increase in sales
due to expanded
property sales
opportunities andlower tenantvacancy rates

Moderate- Strategies based on scenario analysis
We plan to further consider measures for risks/opportunities that pose especially significant impact on ourbusiness based on the results of scenario analysis and financial impact assessments<Examples of response measures>• Increase percentage of electricity use from renewable energy sources.
• Promote installation of LED lighting and other energy-saving equipment/devices among commercial
facilities.
• Further promote ZEH-M development.
• Promote improvement of environmental performance evaluation by acquiring DBJ Green Building
certification and CASBEE for Real Estate Certification.
9)

Status of ESG Initiatives
One of our key management strategies is addressing social issues through ESG promotion. Centered on the“ESG Promotion Group” and the “Health & Culture Fostering Team” designed to promote healthy management
further, we will promote company-wide efforts and focus on enhancing essential company value that cannot bemeasured by financial information alone.
The contents of the most recent major initiatives are as follows.
1. Environment (E)・ Acquisition of Various Certifications
In May 2020, ES-CON JAPAN acquired EcoAction 21 Certification, a Japanese environmental management
system (EMS) established by the Ministry of the Environment. Furthermore, “tonarie Fujimino,” a commercial
facility owned by ES-CON JAPAN, obtained “Rank S,” the highest rank of the Certification for CASBEE(*2) for Real
Estate from a CASBEE accreditation body authorized by the Institute for Building Environment and Energy
Conservation. Also, “tonarie Yamato-Takada,” “tonarie Toga-Mikita,” “tonarie Minamisenri,” “tonarie Seiwadai,”and “Asumigaoka Brand New Mall,” which are commercial facilities owned by ESCON JAPAN REIT Investment
Corporation (hereinafter “EJR”), obtained DBJ Green Building Certification from Development Bank of Japan Inc.
Our group as a whole is working to improve the value of the facilities, and the above six properties are being
operated and managed by our subsidiary ES-CON PROPERTY Ltd.
*2 CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a system to comprehensively assess the qualityof a building, which evaluates and ranks the environmental performance of the building by taking into account not only environmental
considerations such as energy savings and use of environmentally friendly materials, but also comfort in the building and its visual
impact on the area.

・ Continuous and Proactive Development of Environmentally Friendly ZEH-compatible Housing
In August 2022, ES-CON JAPAN acquired ZEH(*3)-M Oriented certification for its condominium “Le JADE
Honkawagoe Koedo Terrace” (Kawagoe City, Saitama Prefecture; 102 units in total. The property features
excellent heat insulation performance and helps reduce annual primary energy consumption. This is our third
ZEH condominium following “Le JADE Okurayama” (Kohoku Ward, Yokohama City; 25 units in total), which won
the Good Design Award for fiscal year 2021, and “Le JADE Yao Sakuragaoka” (Yao City, Osaka Prefecture; 72
units in total) which was contracted to sell out in June 2022.
We will continue to make the most of the development know-how of a general developer and proactively workon the development of environmentally friendly ZEH condominiums that are appreciated by our customers.
Moreover, in November 2020, ES-CON Home Co., Ltd. and ES-CON Craft Co., Ltd., which are consolidated
subsidiaries of ES-CON JAPAN, were registered for ZEH Builder Certification.
*3 ZEH (Net Zero Energy House) is a house aiming to make the annual primary energy consumption zero by introducing renewableenergy after realizing significant conservation of energy while maintaining the quality of the indoor environment with significant
improvement in the thermal insulation performance of the outer building skin as well as the introduction of a highly efficient equipment
system.

- 12 -

・ Construction and Operation of “Techno Farm Fukuroi,” a Vertical Farm Utilizing Fully Artificial LightAs previously mentioned, we are collaborating with Chubu Electric Power and Spread to develop Techno Farm
Fukuroi, which will be the world’s largest vertical farm utilizing fully artificial light and capable of producing 10 tonsof lettuce per day. The three companies including ES-CON JAPAN will solve issues in food and agricultural fields
through the plant factory business while also contributing to the realization of a sustainable and livable society
and the achievement of SDGs by making efforts towards decarbonization such as the proactive use of green
energy and effective use of CO2 in the process of cultivation.
・ Efforts to Promote Use of Wood in the Project Concerning Utilization of the Site of the 20th Asian Games AichiNagoya 2026 Athletes’ Village
As mentioned above, the Consortium has entered into the “Agreement on the Promotion of the Utilization of Woodin Public Buildings” with Aichi Prefecture. We will make efforts to contribute to decarbonization through the project,such as active utilization of wood produced in Aichi Prefecture.
・ Awarded Osaka Eco-Friendly Construction Award, Residential Section
In January 2022, the condominium “Le JADE Senri Aoyamadai (Suita City, Osaka Prefecture; 152 units in total)”
won the Osaka Eco-Friendly Construction Award, Residential Section for the fiscal year 2021 (hosted by Osaka
Prefecture and Osaka City). This was the first time we won the award, which recognizes clients and designers ofconstruction projects that are exemplary in terms of environmental consideration of buildings under the aim ofpromoting the spread of environmentally friendly buildings and raising awareness among residents of Osaka
Prefecture.
2. Social (S)・ Formulating General Employer Action Plans
In December 2022, ES-CON JAPAN formulated and published general employer action plans (action period:
January 1, 2023 to December 31, 2024) in accordance with the Act on Advancement of Measures to Support
Raising Next-Generation Children and the Act on the Promotion of Women’s Active Engagement in ProfessionalLife in order to help employees juggle career and family and create a workplace where human resources,
including women, can continue to be in employment and succeed.
・ Support for Kitahiroshima City, Hokkaido Prefecture, by Utilizing “Corporate Version of Hometown Tax”
ES-CON JAPAN donated 300 million yen to Kitahiroshima City, Hokkaido Prefecture, in March 2022 by utilizing
the “Corporate Version of Hometown Tax” under the hope that further progress in urban development and its
spread to various fields such as transportation, tourism, sports and education, etc. will contribute to the further
development of the city. In July, we received a letter of gratitude from the city. The funds will be utilized to maintaina vibrant city into the future.
・ Contributing to Healthcare
Since 2020, we have been donating to the Kyoto University “iPS Cell Research Fund” to support activities realizing
provision of early and inexpensive treatment using iPS cells for people suffering from diseases and injuries.
We have also been providing monetary donations to Osaka University’s Graduate School of Medicine since2019 to support clinical trials for cancer vaccines showing promise for the treatment of cancer. In May 2022, we
donated funds for the establishment of an endowed cancer immunology course the school is developing, for the
purpose of research of cancer immune therapy.
In November 2022, we co-sponsored the Osaka Great Santa Run 2022 charity running event (hosted by theGreat Santa Organization in Osaka Akaru Club). The event is designed to give a part of participation fees tochildren who are battling disease as presents.
・ Contribution to Sports Promotion
In April 2021, we invested in Ryukyu Football Club Co., Ltd., which operates FC Ryukyu, a professional soccer
team. With this investment, we will contribute to the local community through sports promotion by securing afoothold for the creation of business opportunities in Okinawa while at the same time supporting FC Ryukyu’s
regional revitalization activities deeply rooted in Okinawa Prefecture.

- 13 -

3. Governance (G)・ Establishment of Voluntary Committee on Nomination and Remuneration of Directors
In January 2020, we established the “Nomination and Remuneration Advisory Committee” for the purpose ofstrengthening the independence and objectivity of functions as well as the accountability of the board of directors
with regard to nomination and remuneration of directors and other matters. We have secured impartiality andtransparency concerning director election and remuneration.
・ Nurturing Successors
We also launched initiatives for a succession plan called the candidate successor system. We appointed a totalof seven employed executive officers in January 2023.
・ Diversity of the Board of Directors
ES-CON Japan’s board of directors consists of eight members: three executive directors, two outside directors,
and three directors who are also members of the audit committee, and half of the board members, namely four(including one woman) are independent directors. Further, a resolution passed to the effect that one candidate
each for an outside director and an auditor shall be elected be submitted to the twenty-eighth annual general
meeting of shareholders slated for March 24, 2023, in order to ensure the diversity of the board and corporate
governance.
・ Establishment of Compliance Office
In October 2022 ES-CON JAPAN established the Compliance Office directly under the President, taking theadministrative disposition on ES-CON ASSET MANAGEMENT Ltd. (hereinafter “EAM”), its consolidated
subsidiary, with utmost seriousness. The purpose of the Compliance Office is to strengthen legal compliance andinternal control systems and to monitor every aspect of transactions with the parties in question, as well as
establish a framework for managing any conflicts of interest that arise, in order to prevent the recurrence of such
incidents. The newly established Compliance Office is led by a Compliance Officer (Kenji Fujita, Director andHead of President’s Office), and will work to clarify management’s stance on legal compliance at ES-CON JAPANand the ES-CON JAPAN Group as a whole and to strengthen awareness of compliance management issues.
4.

Other
We have been participating in the Global ESG Benchmark for Real Assets (GRESB), which is an annual
benchmark assessment measuring ESG consideration in the real estate sector, every year since 2018 with an
aim to continuously improve the assessment results. In October 2022, we acquired “2 Stars” in the GRESB Rating,a five-grade evaluation system that reflects the applicant’s relative evaluation based on the overall score, forefforts on environmental consideration and sustainability in the “Development Benchmark” (reporting period:
January 1, 2021 to December 31, 2021). In addition, we acquired the “Green Star” (*4) rating for the fourthconsecutive year.
*4 “Green Star” in the “Development Benchmark” is given to participants whose score is 50% or higher in the absolute assessment
based on the two main points “Management Component” and “Development Component.”

10) Administrative Disposition against EAM
On July 15, 2022, the Commissioner of the Financial Services Agency has implemented an administrative
disposition, which consists of injunctions to suspend business operations and to institute improved practices
targeting our consolidated subsidiary EAM. In response, EAM formulated a business improvement report, which
was submitted to and accepted by the Commissioner of the Financial Services Agency on August 15, 2022.
Furthermore, it was determined that EAM would pay 666 million yen in damages to ES-CON JAPAN REIT
Investment Corporation (“EJR”) due to a violation of duty of loyalty by an approach to harm a real estate appraiser’s
independence. As for the damages, EAM accepts the fact that it made an inappropriate approach to a real estateappraiser and acknowledges the determination that EJR suffered damage despite the assumption that the appraisal
value indicated in the real estate appraisal report is appropriate.
ES-CON JAPAN, the parent company of EAM and main sponsor of EJR, for which EAM is entrusted with asset
management, took this administrative disposition on EAM with utmost seriousness and recognized this as animportant issue for our group as a whole. In order to build a system for managing conflicts of interest such as thosementioned above, we established the Compliance Office. Moreover, President & Representative Director Takatoshi
Ito offered to return 30% of his monthly remuneration (for three months from January 2023 to March 2023) andSenior Managing Director Minoru Nakanishi and Managing Executive Officer Tomohiko Egashira each offered toreturn 20% of his monthly remuneration (for the same three months), which was accepted.
- 14 -

Understanding the background to and root causes of this matter, we will continue to exert every effort to preventthe recurrence of such events based on thorough enhancement of our approaches to compliance and internal
control of all members of the ES-CON JAPAN Group, not just at EAM, as well as the steadfast implementation of
improvements.
11) Business Development by Segment
In the real estate sales business, our core business, we are selling revenue-generating real estate and otherproperties, in addition to achieving steady progress in condominium sales.
In the condominium sales business, we have commenced selling 16 properties, including “Le JADE Shitennoji
Yuhigaoka” (Tennoji Ward, Osaka City; 52 units in total) and “Le JIAS OHASHI” (Minami Ward, Fukuoka City; 140
units in total).
Regarding the progress of sales, 14 properties, including “Le JADE Uehonmachi” (Tennoji Ward, Osaka City; 56
units in total) were sold out and 6 properties including “Le JADE Hokkaido Ballpark” (Kitahiroshima City, Hokkaido;
118 units in total) and “Le JADE Kamishinjo” (Higashi Yodogawa Ward, Osaka City; 60 units in total) scheduled forcompletion in the fiscal year ending December 2023 are contracted to sell out. Thus, 20 properties in total have soldout and sales and delivery are smoothly progressing.
In addition, we are expanding our business area by steadily establishing business foundations in the five majorurban areas of Kanto, Kansai, Chubu, Kyushu, and Hokkaido, including the progress of the condominium businessin Hokkaido, and the sales of our first condominium in Kyushu “Le JIAS Ohashi” (Minami Ward, Fukuoka City; 140
units in total).
In the real estate leasing business, we made the Picasso Group our subsidiaries as mentioned above, thereby
securing stable earnings by strengthening the leasing business. Furthermore, a pop-up store of “MUJI” in “tonarie
Minami-Senri Annex” opened in November 2021 became the store boasting the largest sales floor area in the Kansai
region in April 2022. As such, we have bolstered the leasing business steadily.
In addition, aiming to transform to a stable and sustainable revenue structure, we are also working to develop
and acquire commercial facilities and secure stable rent income from and improve the asset value of our commercial
facilities, as represented by the promotion of renewal in “tonarie Utsunomiya” (Utsunomiya City, Tochigi Prefecture)through tenant replacement and the development of aforementioned “tonarie Hoshida (tentative name).”In the real estate planning agency and consulting business, leveraging our strength in planning, we are focusing on
non-asset, high-margin businesses, such as the commissioning business and the planning agency and consulting
business.
As a result, ES-CON JAPAN achieved net sales of 99,431 million yen (up 25.8%), operating income of 15,492
million yen (up 49.2%), ordinary income of 14,012 million yen (up 54.0%) and profit attributable to owners of parentof 7,250 million yen (up 21.6%) for the fiscal year under review, all compared with the previous year.
Compared with the initial plan, sales went generally as planned, albeit down 0.6%. Sales of condominiums andrevenue-generating real estate remained strong, and as a result operating income and ordinary income were up
10.7% and 14.9%, respectively, all compared with the initial plan. However, considering the operating results of
Ryomon, which were impacted by the slow progress of sales for FY2022, we revisited the future revenue plan andrecorded impairment loss of 1,760 million yen and provision for allowance for doubtful accounts of 1,483 million
yen, as well as recorded 682 million yen of loss on compensation for damages including damages expected to be
paid to EJR by EAM as extraordinary loss. As a result, profit attributable to owners of parent fell 12.6% over the
initial plan, failing to meet the target.
The following describes the operating results per segment (comparisons are with the previous fiscal year).
1. Real estate sales businessIn the real estate sales business, activities including selling condominiums and revenue-generating real estate
resulted in net sales of 86,531 million yen (up 23.0%) and segment income of 17,006 million yen (up 30.4%), allcompared with the previous fiscal year.

- 15 -

2. Real estate leasing businessIn the real estate leasing business, focus was placed on leasing activities and the property management businessin view of enhancement of asset value, including increase in rental income of owned revenue-generating realestate, resulting in net sales of 11,824 million yen (up 46.1%) and segment income of 4,716 million yen (up39.8%), all compared with the previous fiscal year.
3. Real estate planning agency and consulting businessIn the real estate planning agency and consulting business, proactive efforts were made in such aspects as
entrustment with planning, consulting and other services by making the best use of planning and multifacetedbusiness-building abilities, resulting in net sales of 1,074 million yen (81.3% from the previous fiscal year) andsegment income of 228 million yen (segment loss of 516 million yen in the previous fiscal year).
(Earnings outlook for the next fiscal year and progress of the medium-term management plan)
Based on the fourth medium-term management plan “IDEAL to REAL 2023,” ES-CON JAPAN is promoting its
business toward achieving the plan under the management strategies of “Establishing business foundations able
to withstand unexpected changes in economic conditions” and “Simultaneously changing the revenue structureand expanding business domains.”
For details on the results for the fiscal year under review and the plan for the next fiscal year and beyond,please see “1. Overview of Operating Results, Etc., (1) Analysis of Operating Results, 1) Progress of Fourth
Medium-term Management Plan “IDEAL to REAL 2023””.
(Dividend for the next fiscal year)
For the next fiscal year, the dividend forecast is 38 yen per share.
(2)1)

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

2)

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

(Cash flows from operating activities)
Cash flows from operating activities in the fiscal year under review amounted to net cash provided by operating activitiesof 1,501 million yen (net cash used in operating activities of 10,810 million yen in the previous fiscal year). This was
mainly attributable to the increase in inventories of 11,104 million yen and income taxes paid of 3,040 million yen,despite the recording of profit before income taxes of 10,290 million yen.
(Cash flows from investing activities)
Cash flows from investing activities in the fiscal year under review amounted to net cash used in investing activities of
1,620 million yen (net cash used in investing activities of 29,721 million yen in the previous fiscal year). This was mainly
attributable to purchase of investment securities of 513 million yen and purchase of non-current assets of 2,033 millionyen.

- 16 -(Cash flows from financing activities)
Cash flows from financing activities in the fiscal year under review amounted to net cash provided by financing activitiesof 2,144 million yen (net cash provided by financing activities of 50,293 million yen in the previous fiscal year). This was
mainly attributable to proceeds from and repayments of long-term loans payable and short-term loans payableamounting to net proceeds of 6,030 million yen and payment of cash dividends of 3,668 million yen.
Reference: Changes in cash flow indicators
Fiscal year
ended
Dec. 2018

Fiscal year
ended
Dec. 2019

Fiscal year
ended
Dec. 2020

Fiscal year
ended
Dec. 2021

Fiscal year
ended
Dec. 2022

Equity ratio (%)

24.9

25.3

25.8

24.8

25.0

Equity ratio on market capitalization basis (%)

42.2

50.7

39.3

30.5

29.2

Equity ratio: Equity / Total assets
Equity ratio on market capitalization basis: Market capitalization / Total assets(Notes) 1 Each is calculated using consolidated financial figures.
2 Market capitalization is calculated by multiplying the closing share price at end of fiscal year by the numberof shares issued and outstanding at end of fiscal year.
(3) Basic Policy on Distribution of Profit, and Dividend for the Fiscal Year Under Review and Next Fiscal Year
Positioning the return of profit to shareholders as a key management task, ES-CON JAPAN makes it a basic policy to
strive for uninterrupted and stable return of profit in line with corporate growth potential based on decisions that take
into account the status of business performance, availability of internal reserves, dividend payout ratio and other factors
in a comprehensive manner.
ES-CON JAPAN has introduced a progressive dividend policy to “not decrease the dividend amount, but rather only
maintain or increase the dividend amount” in principle with DPS of the previous fiscal year as the lower limit, from thesecond medium-term management plan, and continues to implement the progressive dividend policy in the fourth
medium-term management plan.
For the fiscal year under review, the year-end dividend forecast will remain unchanged at 38 yen per share as initiallyscheduled. Furthermore, the dividend payout ratio is 50.0%.
For the fiscal year ending December 2023, the dividend forecast is 38 yen per share.
(4) Business Risks
The main risks that could impact the Group’s operating results, share prices, financial status, etc., are listed below.
Statements concerning future matters are based on the judgements of the ES-CON JAPAN Group as of the end of the
fiscal year under review.
1)

Impacts of Changes in Economic Conditions, Interest Rate Trends, Real Estate Market Conditions, Etc.
In the real estate sales business, we selectively acquire good-quality land for business, develop it making the bestuse of its locational characteristics, and provide attractive products including advantageous pricing. Upon the saleof properties, we take into account various factors in individual business plans by property and carefully consider
price range. However, when sale at the price determined in the business plan fails to progress as planned due toworsening supply-demand balance caused by rising construction costs, economic trends, economic conditions,trends in interest rates, tax systems and land prices and other factors, or when delay in delivery or unexpected costburden arises due to various factors, including unexpected defects such as underground obstacles, disorder inconstruction at the construction stage, the business performance of the ES-CON JAPAN Group may be impacted.
Likewise, in the real estate leasing business, depending on the effects of economic trends or conditions, or moving
out of main tenants or usage situations at commercial facilities, rents or occupancy rates of assets owned may
decline, which can have an impact on the Group’s operating results.
Amid periodic recurrent waves of COVID-19, whereas social and economic activities have been normalizing
steadily, if the infectious disease spreads further, the economic environment is expected to take a sharp turn for theworse. In such case, investor appetite may be dampened, leasing of commercial facilities by new tenants may fallbehind, sales in the columbarium business may weaken, and loss on valuation of inventory or impairment loss
associated with real estate we own may be recorded, which could have a material impact on the Group’s financial
position, operating results, or cash flows.
- 17 -

2)

Legal Restrictions, Etc.
In addition to the restrictions of the Companies Act and the Financial Instruments and Exchange Act, the real estateindustry to which the ES-CON Japan Group belongs is subject to the restrictions of the National Land Use Planning
Act, Real Estate Brokerage Act, Building Standards Act, Act on Maintenance of Sanitation in Buildings, Act on
Specified Joint Real Estate Ventures, Act on Securitization of Assets, Trust Business Act, Money Lending Business
Act, and Act on Prevention of Transfer of Criminal Proceeds, etc.
In addition, the ES-CON Japan Group conducts real estate sales and related business as a real estate company
licensed under the Real Estate Brokerage Act and the Act on Advancement of Proper Condominium Management,
etc., but the abolition of these or creation of new legal restrictions could affect the Group’s business performance.

3)

Dependence on Interest-Bearing Liabilities
The Group procures funds for land acquisition, etc. related to its real estate business primarily through borrowings
from financial institutions involved in project finance. In our condominium sale business, it takes time to get fromland acquisition to commercialization or sale, so the ratio of interest-bearing liabilities to total assets is relatively
high. We are committed to building and maintaining good business relationships with financial institutions, including
the main banks, and ensuring an expeditious financing environment after becoming a consolidated subsidiary of
Chubu Electric Power Company, but if financing ends up being insufficient or unsatisfactory due to higher interest
rates or a significant deterioration of the financial environment, it could affect the Group’s business performanceand financial position.

4)

Human Resources
As opposed to vertical integration, the Group seeks to build an efficient and agile organizational structure that isclosely linked horizontally so that it can flexibly promote business and produce the greatest value and performancewith the smallest number of people. Our real estate-related business requires diverse expertise, making personnel
an extremely important business resource. In order to conduct reliable business and grow as a Group, it isindispensable that we strive to share expertise and information and continue to improve employees’ abilities as well
as secure highly specialized personnel and employ, nurture, and educate executives and young employees whowill be the leaders of the next generation. However, failing to secure or nurture the human resources sought by theGroup or losing outstanding personnel could affect the Group’s business performance and future businessdevelopment.

5)

Personal Information Leakage and Information System Risks
As a business operator handling personal information under the Act on the Protection of Personal Information, theGroup receives personal information of customers and clients in each of its businesses when developing in a
multidimensional way. This includes customers who purchase or consider purchasing condominiums or detachedhouses through the condominium sales business or reside in rental apartments as well as customers who purchaseor consider purchasing permanent use rights in the columbarium business or are looking for jobs in the employment
placement business. The Group has set rules for the handling of personal information (basic policy, regulations, andmanual) to establish an internal system and keeps personal data files under strict safekeeping with monitoring
software and restricts access authority on the system in a bid to enhance the entire system as a whole to also
manage information other than personal information.
ES-CON JAPAN outsources part of the sale of condominiums to sales companies, and these companies are
required to use part of ES-CON JAPAN’s management system to prevent customer information from being leaked
to third parties and handle customer information within the scope to ensure confidentiality.
As malware (Emotet)(*5) infection spreads rapidly in Japan, the Group’s information system has been exposed tocybersecurity threats, including cyberattacks or fraudulent access, in recent months. To minimize system risk, ESCON JAPAN has revamped its security environment, including enhancing employee training and conducting
security training programs periodically. Should personal information be leaked due to unforeseen circumstances,
however, the Group’s sales could fall due to its ruined credibility or compensation for damages may arise, and suchmay affect the Group’s business performance.
*5 Malware is a general term for malicious software, combining these two words. Emotet is malware that downloads a variety ofmalicious software in addition to stealing information. It is found to be attached to suspicious emails by malicious people, which
accelerates the spread of infection.

- 18 -

6)

Important Litigation
Regarding the risk of becoming subject to litigation, the Risk Management Committee consisting of directors andrisk management members from each division monitors risks and shares information across the Group. Important
litigation could affect the Group’s business performance and financial condition.

7)

Risks Related to Climate Change
A society with increasing climate damage is assumed to be seen in the future, and the increasing risk on business
continuity caused by climate change may have an impact on ES-CON JAPAN’s management results and financial
position.
In June 2022, the Company endorsed the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations, which assess the financial impact of risks and opportunities from climate change on
management and encourage companies to make disclosures about it. We disclose information on the impact fromclimate change on our business based on TCFD’s framework.
For details, please see the “(1) Analysis of Operating Results, 8) Declaration of Support for TCFD
Recommendations and Disclosures.”8)

Legal Violation Risks
Should an employee or officer of the Group or Company violate any relevant laws as the Group conducts business(including the Companies Act, Real Estate Brokerage Act, Construction Industry Act, Licensed Architect Act,
Financial Instruments and Exchange Act, Act on Investment Trusts and Investment Corporations, Act on theProtection of Personal Information, Money Lending Business Act, Act on Advancement of Proper Condominium
Management, Labor Standards Act, and Employment Security Act), administrative disposition may be imposed by
the authorities concerned. In this case, due to the Group’s ruined social credibility and compensation for damages,
its financial position, business performance, and reputation in the market may be affected.

- 19 -

Attachment 2
2. Management Policy(1)

Basic Policy on Corporate Management
How should we live each day and participate in society, how can we contribute to society, and how can we achieve
the happiness we seek as individual human beings through the benefits that our contribution brings to society? The
ES-CON JAPAN Group strives to answer these questions by continually providing meaningful opportunities to its
employees to help and encourage each other in the achievement of their full potential as individuals while
experiencing the joy of contribution to society through their work. This is the management philosophy of the ES-CON
JAPAN Group, the realization of which is pursued by setting and striving to realize the following management policy.
1) To create new value that will truly satisfy customers by unleashing the infinite possibilities of real estate throughinformation, planning, and product development abilities.
2) To constantly strive to remain ahead of the competition through aggressive management combined with strong
defensive strategies centering on in-depth control of ROA, cash flows, and risk.
3) To aim to be small teams of highly skilled professionals in order to maintain the ability to adapt quickly and flexibly
in today’s rapidly changing social environment.
4) To build and maintain good cooperative relationships, both internally and externally, based on respect for andgratitude to colleagues and those in other organizations.
5) To form an open organizational structure in which ideas can flow freely from front-line staff to senior management,
while also enhancing the internal audit system, with compliance and governance in mind.

(Corporate Branding Concept)
IDEAL to REAL ~Making the ideal real, and creating a new future ~Our aim as a life developer is to develop tangible properties as well as imagine and develop happy living for thepeople who will live there. With new, unprecedented, think-outside-the-box approaches, we aim to create new wealthand connect people, communities, and the future. We will strive to make the ideal real by exploring the infinite
possibilities of real estate.
(2)

Medium- to Long-Term Corporate Management Strategy and Management Indicator Targets
We formulated “IDEAL to REAL 2023,” the fourth medium-term management plan, in February 2021. The new
medium-term management plan sets “Establishing business foundations able to withstand unexpected changes in
economic conditions” and “Simultaneously changing the revenue structure and expanding business domains” asmanagement strategies, and we are promoting businesses towards the achievement of the plan.
For an outline of the fourth medium-term management plan, “IDEAL to REAL 2023,” please see “1. Overview ofOperating Results, Etc. (1) Analysis of Operating Results, 1) The progress of the fourth medium-term management
plan “IDEAL to REAL 2023””.

(3)

Business and Financial Issues to Be Addressed on a Priority BasisAs the COVID-19 pandemic has effected change on people’s lifestyles and corporate activities significantly since2020, our business environment, too, has been changing rapidly and dramatically in the age of the “new normal.”Thanks in part to progress of vaccination and measures taken by various countries, movement restrictions havebeen relaxed and social and economic activities have been normalizing. On the other hand, we have witnessed a
streak of incidents that will significantly influence future economic trends, such as the worsening of the Ukraine
situation, the weakening of the yen, and rising prices. Furthermore, we are called on to urgently address various
social problems ranging from global warming to the declining birthrate and aging population, decrease in population,
gender issues, economic gap issues, and geopolitical risks, on top of digital transformation (DX) in various fields andfiercer competition that goes beyond industry boundaries. Moreover, the consumption behavior and values ofcustomers are constantly and swiftly changing, and in order to achieve sustainable growth, businesses findthemselves in an environment where they must provide true value to customers and society through businessactivities.

- 20 -

In order to sustainably improve corporate value and contribute to society under this environment of rapid
diversification and change, we, as the ES-CON JAPAN Group, need to adopt new, flexible ideas not bound by
precedent or established concepts, carry out business activities, and contribute to revitalizing the local community.
Concurrently, we should strive to conduct stable management based on the solid financial foundation and grow surely
and steadily through the satisfaction of our customers with the ultimate aim of being a “life developer” bringing theideal into reality, building a future, and developing a lifestyle per se by envisioning the happiness of those living there.
Through a multifaceted real estate business that includes residential development, commercial development,
logistics development, leasing business, office development, hotel development, overseas business,planning/consulting, facility operation management, asset management, columbarium business, and real estate
crowdfunding, we must constantly strike the optimal balance of businesses in our operations and establish a firmmanagement base that can withstand any economic environment. In addition, to achieve sustainable growth,recognizing the further enhancement of organizational power, human capital—that is, our employees or theirknowledge, skills, talents, and the like— is our top priority, we have started preparations to formulate our policy onhuman resources development, build an educational and training system, and disclose information on matters related
to human capital.
We will continue to maximize corporate value and increase shareholder returns, thereby aiming to become a oneof-a-kind company.
Our specific endeavors are the following:(1) Business Management Structure
Naturally, there is a limit to land prices that can fetch certain profit, so purchasing at appropriate prices is one of ourmost important tasks. In order to purchase quality land, we must secure and nurture talented personnel, constantly
enhance and expand information channels, seek alliances with other companies, and make quick, bold, and yet careful
decisions. Given the industry characteristic of a tendency toward larger balances of borrowings due to purchases ofland, etc., we anticipate a disparity between revenue plans in the phase in which interest rates are rising, so we needto continue building a strong financial standing while reducing financing costs, diversifying ways of financing, andimproving cash flows.
As mentioned above, in July 2022, our consolidated subsidiary EAM received an administrative disposition, which
consists of injunctions to suspend business operations and to institute improved practices, from the Commissioner of
the Financial Services Agency. Based on the recognition that shoring up the legal compliance and internal control
system and promoting compliance management further by the Group as a whole is our priority, the Group will bolster
the system steadily.
(2) Internal Organizational Reinforcement
No two properties are alike in form or location. We believe that the Group’s mission is to make the best use of locational
characteristics and propose and provide ideal housing, towns, and ideal living environments in the eyes of those wholive in the area as well as in our residences, and those who use facilities. Thus, the ES-CON JAPAN Group is working
to fulfill its mission with the aim of being a “life developer” that not only creates spaces, such as houses and facilities,
but also proposes better, more affluent lifestyles as well.
As we promote condominium development, we put in place the tripartite system in which those in charge ofpurchasing, planning, and sales are involved, working on a single project from start to finish. From the standpoint ofcustomers centered on families who buy real estate to meet actual demand, we pursue comfortable places to live in
into the future and aim for creating not one-size-fits-all products but those that meet individual customer needs
according to locational features, thereby setting us apart from the competition. Most recently, we are focusing on
developing properties with high added value, including rental condominiums, in central Tokyo or rare locations richly
endowed with nature.
As for commercial development, we are mainly developing everyday life-based retail facilities that are closely
associated with local communities in an effort to contribute to revitalizing those communities.
Our development concept is to not only provide specifications and designs that can easily be customized but also
constantly ask ourselves, “What is the best plan for this project?” This is done in place of focusing on the size of the
project or number of units at the land acquisition stage or even the basic planning stage. The Group will maintain thissystem, which is our forte, bolster it further to ensure a competitive edge regardless of business environment, andalways keep a sense of impending crisis.
- 21 -

(3) New Initiatives
We have set and comply with NOI standards that enable possession of our acquisitions and developments regardlessof economic changes, and set out aggressive initiatives eyeing the next generation, thereby expanding our businessdomain.
In the real estate sales business, centered on the development of condominiums and commercial facilities, wedevelop diversified projects, including logistics facilities, offices, hotels, and land readjustment to revitalize thedowntown area, according to market trends.
In the real estate leasing business, we continue to focus on the leasing business in accordance with “Transforming
the focus from flows to stock,” which is the basic management strategy policy in the fourth medium-term management
plan, and acquired the Picasso Group, which owns a wealth of prime rental income-generating properties, in 2021. We
will also continue to focus on stabilizing the profit-earning structure by handling M&A cases that do not appear in themarket through discussions with businesses who face issues, including no successor to take over the business.
Furthermore, since the Group became a consolidated subsidiary of Chubu Electric Power Co., Inc. in April 2021, we
have been able to expand operations in the Chubu region and launched several joint projects with the Chubu ElectricPower Group that have demonstrated synergistic effects steadily. We aim to realize a “new form of community” by
combining our know-how in urban development and Chubu Electric Power Group’s knowledge in energy management,
and will also be engaged in large-scale redevelopments in central Tokyo and near stations and large-scale urban
developments.
In addition to developing real estate, ES-CON PROPERTY, a consolidated subsidiary, focuses on property
management business to further add value to real estate, and, in order to solidify our position as the only generaldeveloper with the operational capability suited to the function of the real estate, our consolidated subsidiary ES-CON
Living Service will expand the breadth and depth of our development capabilities by enhancing real estate operation.
As an initiative eyeing the next generation, we promoted overseas investment business steadily and sales of thepermanent use rights to our urban columbarium as well as implemented M&A for companies engaged in real estate
crowdfunding in January 2022, enhancing the breadth and quality of our business domain.
(4) Medium- to Long-Term Initiatives
We will strengthen “Promotion of ESG,” which is one of the management strategies in “IDEAL to REAL 2023,” the fourth
medium-term management plan that is currently being promoted. We believe that nationwide initiatives on climatechange, such as the new target for greenhouse gas emissions reduction for 2030 and carbon neutrality in 2050, areimportant issues in terms of management also for the ES-CON JAPAN Group. Furthermore, we will also contribute tomeeting SDGs (Sustainable Development Goals) step by step through our business activities.
The ES-CON JAPAN Group, which provides cities, residences and spaces where people live, promotes a vibrantenvironment where various people can select from many kinds of lifestyles, working styles and ways of living and safely
live active lives as well as sustainable urban development with high environmental performance.
We also aim to be a company that can boast transparent management, high integrity, and trustworthy governancealongside respecting human rights, accelerating human capital management so that various personnel can succeed,
strengthening health management to fulfill our corporate social responsibility, and realizing a sustainable society.

3. Basic Policy on Selection of Accounting Standard
The ES-CON JAPAN Group uses Japanese GAAP for the preparation of its consolidated financial statements in viewof comparability for the period covered by the consolidated financial statements and inter-company comparability. The
Group’s policy is to respond to the application of IFRS in an appropriate manner, taking into account a variety ofcircumstances inside and outside Japan.

- 22 -

Attachment 3
4. Consolidated Financial Statements(1)

Consolidated Balance Sheet(Unit: million yen)
Fiscal year ended Dec. 2021
(as of Dec. 31, 2021)

Fiscal year ended Dec. 2022
(as of Dec. 31, 2022)*233,667*235,721

835－

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Notes and accounts receivable - trade andcontract assets
Real estate for sale
Real estate for sale in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
VehiclesAccumulated depreciation
Vehicles, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Deferred assets
Share issuance cost
Total deferred assets
Total assets- 23 -－

1,096*27,541*24,804*2123,419*2138,968

11,396(0)
176,859

10,766(1)
191,357

23,312(1,516)*221,7956(6)0*230,840
2
(0)
2
－
377
(238)
*2139
52,77822,734(2,353)*220,3809(9)0*231,535
2
(1)
1
109
395
(283)
*2112
52,139

8,217
57
8,275

7,696
77
7,774

*16,186*16,279

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

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

81
81
252,77145
45
263,729

(Unit: million yen)
Fiscal year ended Dec. 2021
(as of Dec. 31, 2021)
Liabilities
Current liabilities
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Accounts payable - other
Income taxes payable
Advances received
Deposits received
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Provision for directors’ share-based benefits
Provision for share-based benefits
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive
incomeSubscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets- 24 -

Fiscal year ended Dec. 2022
(as of Dec. 31, 2022)*23,589*210,061*2, *482,912*2, *426,193

0
2,468
1,653
6,058
5,634
205
102,523

0
4,702
3,258
5,201
5,416
856
55,690*276,533*2132,810

2
8,056
135
57
270
2,564
87,619190,143

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

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

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

371

79

(36)

13

334

93

0
(152)
62,628
252,771

0(1,761)64,144
263,729

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income(Consolidated Statement of Income)(Unit: million yen)
Fiscal year ended Dec. 2021
(from Jan. 1, 2021
to Dec. 31, 2021)

Fiscal year ended Dec. 2022
(from Jan. 1, 2022
to Dec. 31, 2022)

79,01758,42920,588*172,823

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

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

10
101
37
73

1
130
48
287

54

－

25
303

9
478

1,463
27

1,895
36

－

16

95
1,585
9,099

9
1,957
14,012

*20

0

－
0

－

205

0

205

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

*3

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

- 25 -

99,431
26,607

*3

0
682
1,483
*41,760
3,927
10,290
4,782
(133)
4,648
5,641
(1,608)7,250

(Consolidated Statement of Comprehensive Income)(Unit: million yen)
Fiscal year ended Dec. 2021
(from Jan. 1, 2021
to Dec. 31, 2021)

Fiscal year ended Dec. 2022
(from Jan. 1, 2022
to Dec. 31, 2022)

5,770

5,641

218

(292)

(8)

22

(9)

27

199
5,970

(241)
5,399

6,161

7,008

(190)

(1,608)

ProfitOther comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:Comprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests- 26 -

(3)Consolidated Statement of Changes in Equity
Fiscal year ended Dec. 2021 (from Jan. 1, 2021 to Dec. 31, 2021)(Unit: million yen)
Shareholders’ equity
Capital stock

Balance at beginning ofcurrent period
Changes of items during
periodIssuance of new shares

Capital surplus

6,284

2,088

10,235

10,23531,429(1,348)38,454

20,470

Dividends of surplus
Profit attributable toowners of parent
Disposal of treasury
sharesNet changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end of current
periodTotal
shareholders’equityRetained earnings Treasury shares(2,645)(2,645)

5,961

5,961

73

132

205

10,235

10,3083,316

132

23,991

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

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period153

Total
accumulated Subscription Non-controllingrights to sharesinterests
othercomprehensive
incomeForeigncurrencytranslation
adjustment
(18)

134

1

37

Total net
assets38,627Issuance of new shares

20,470

Dividends of surplus(2,645)

Profit attributable toowners of parent
Disposal of treasury
sharesNet changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end of current
period

5,961
205
218

(18)

199

(0)

(190)

9

218

(18)

199

(0)

(190)

24,000

371

(36)

334

0

(152)

62,628- 27 -

Fiscal year ended December 2022 (from Jan. 1, 2022 to Dec. 31, 2022)(Unit: million yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

16,519Retained earnings Treasury shares

12,39634,745

Dividends of surplus
Profit attributable toowners of parent
Disposal of treasury
sharesPurchase of treasury
shares by the sharebased payment
benefits trust
Net changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end of current
periodTotal
shareholders’equity(1,216)62,445(3,669)(3,669)

7,250

7,250

27

52

79

(293)

(293)

－

27

3,581

(241)

3,367

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

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period371

Total
accumulated Subscription Non-controllingrights to sharesinterests
othercomprehensive
incomeForeigncurrencytranslation
adjustment
(36)

334

0

(152)

Dividends of surplus
Profit attributable toowners of parent
Disposal of treasury
sharesPurchase of treasury
shares by the sharebased payment
benefits trust
Net changes of items
other thanshareholders’ equity
Total changes of items
during period
Balance at end of current
periodTotal net
assets62,628(3,669)
7,250
79
(293)

(292)

50

(241)

(0)

(1,608)(1,851)

(292)

50

(241)

(0)

(1,608)

1,516

79

13

93

0

(1,761)64,144- 28 -

(4)Consolidated Statement of Cash Flows(Unit: million yen)
Fiscal year ended Dec. 2021
(from Jan. 1, 2021
to Dec. 31, 2021)

Fiscal year ended Dec. 2022
(from Jan. 1, 2022
to Dec. 31, 2022)

9,099
706
－
237
27
27

10,290
1,256
1,760
522
24
36

(0)

1,484

－

50

10

52

(111)
1,463
(73)

(132)
1,895
(287)

(54)

16

－

(205)

－
(0)
0

682
－
0

107

－

－

(259)

(19,306)(894)
366(11,104)
(16)
1,408

(416)

859

3,575
439
(1,221)169(5,848)181(1,723)(3,419)(10,810)

(857)
(840)
59
39
6,737
133
(2,328)(3,040)
1,501

(15)
18
(2,265)

(4)
2
(513)

0

294

－

(603)

－

699

(4,763)121(2,033)
46

－

*3316

Net cash provided by (used in) operating activities
Profit before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Amortization of long-term prepaid expenses
Amortization of share issuance cost
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in provision for directors’share-based benefits
Increase (decrease) in provision for share-based
benefits
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)Share of loss (profit) of entities accounted forusing equity method
Loss (gain) on sales of shares of subsidiaries andassociates
Loss on compensation for damage
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts
receivable - trade
Decrease (increase) in notes and accounts
receivable - trade and contract assets
Decrease (increase) in inventories
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable - other
Decrease/increase in consumption taxes
receivable/payable
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of investment securities
Proceeds from withdrawal of investment
securities
Purchase of shares of subsidiaries andassociates
Proceeds from sales of shares of subsidiaries andassociates
Purchase of non-current assets
Proceeds from sales of non-current assets
Proceeds from purchase of shares of subsidiaries
resulting in change in scope of consolidation- 29 -

(Unit: million yen)
Fiscal year ended Dec. 2021
(from Jan. 1, 2021
to Dec. 31, 2021)

Fiscal year ended Dec. 2022
(from Jan. 1, 2022
to Dec. 31, 2022)*2 (24,070)

－

(8)
647
(1,120)
1,732－(29,721)

(117)
1
(769)
1,060
1
(1,620)6,539(5,857)111,250(79,320)
(230)
(1)
(5)
20,361203－(2,645)50,293(1)

11,929(2,956)110,273(113,215)
－
(0)
－
－
76
(293)
(3,668)
2,144
19

9,760

2,045

Purchase of shares of subsidiaries resulting inchange in scope of consolidation
Payments of loans receivableCollection of loans receivable
Repayments of guarantee deposits received
Proceeds from guarantee deposits received
Proceeds from divestments
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of bonds
Repayments of lease obligations
Repayments of installment payables
Proceeds from issuance of common shares
Proceeds from disposal of treasury shares
Purchase of treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities
Translation differences on cash and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period- 30 -

23,79833,559*133,559*135,604

(5) Notes to Consolidated Financial Statements(Notes on Going Concern Assumption)
Not applicable.
(Changes in Accounting Policies)(Application of accounting standard for revenue recognition, etc.)“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020; hereinafter "Revenue
Recognition Accounting Standard"), etc. have been applied from the beginning of the fiscal year ended December
2022, and we decided to recognize the amount expected to be received in exchange for goods or services at thetime when control of promised goods or services is transferred to the customer. As a result, although the total amountof consideration received from customers was previously recognized as revenue in some transactions, we decided
to recognize the net amount arrived at by subtracting the amount paid to the supplier from the amount received fromthe customer as revenue for transactions in which the Company or its domestic consolidated subsidiaries play therole of agents in provision of goods or services to customers.
Regarding the application of Revenue Recognition Accounting Standard, etc., in accordance with the transitional
treatment stipulated in the proviso of paragraph 84 of the Revenue Recognition Accounting Standard, the cumulative
effects of retrospective application of the new accounting policy, assuming it has been applied to periods prior to thebeginning of the current consolidated fiscal year, has been added to or subtracted from retained earnings at the
beginning of the fiscal year ended December 2022, and the new accounting policy is applied from such beginningbalance. As a result, there was no impact on the balance of retained earnings at the beginning of the fiscal year
ended December 2022. Furthermore, the impact of the application of the accounting standard on the consolidated
financial statements is minimal.
Due to the application of the Accounting Standard for Revenue Recognition, it was decided that "Notes andaccounts receivable - trade," indicated under "Current assets" in the consolidated balance sheet in the previous
fiscal year ended December 2021, will be included in "Notes and accounts receivable - trade and contract assets"from the fiscal year ended December 2022. In accordance with the transitional treatment stipulated in paragraph 892 of the Revenue Recognition Accounting Standard, figures for the previous fiscal year have not been reclassified
in accordance with the new approach to presentation. Furthermore, in accordance with the transitional treatment
stipulated in paragraph 89-3 of the Accounting Standard for Revenue Recognition, information on the breakdown ofrevenue from contracts with customers for the previous fiscal year is not shown.
(Application of accounting standard for fair value measurement, etc.)“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019; hereinafter “Fair Value
Measurement Accounting Standard”), etc., have been applied since the beginning of the fiscal year ended December
2022. In accordance with the transitional treatment stipulated in paragraph 19 of the Fair Value Measurement
Accounting Standard and paragraph 44-2 of “Accounting Standard for Financial Instruments” (ASBJ Statement No.
10, July 4, 2019), we decided to apply the new accounting policies set forth by the Fair Value Measurement AccountingStandard, etc. in the future. There is no impact on the consolidated financial statements.
(Additional Information)(Accounting estimates in line with the spread of COVID-19)
There are no significant changes in the assumptions concerning the impact of the COVID-19 pandemic stated in
the previous fiscal year’s securities report.
However, there are many factors of uncertainty concerning the impact of the COVID-19 pandemic, and thus if
the real estate market deteriorates further, the operating results, financial position, and status of cash flow of ESCON JAPAN Group may be materially impacted due to posting of appraisal loss of inventories and impairment loss,etc.

- 31 -

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

Total number of shares to be granted to the Directors, etc.
・ Resolution passed at the Annual General Meeting of Shareholders held on March 20, 2015
Upper limit of funds for acquisition of shares (for the five fiscal years from the fiscal year ended December
2015 to the fiscal year ended December 2019): 240 million yen
・ Resolution passed at the Annual General Meeting of Shareholders held on March 26, 2020
Upper limit of funds for acquisition of shares (for the three fiscal years from the fiscal year ended
December 2020 to the fiscal year ended December 2022, and each subsequent period of three fiscal
years): 330 million yen
・ Resolution passed at the Annual General Meeting of Shareholders held on March 26, 2021
Upper limit of funds for acquisition of shares (for the three fiscal years from the fiscal year ended
December 2021 to the fiscal year ending December 2023, and each subsequent period of three fiscal
years): 330 million yen

3)

Scope of persons who are eligible to receive beneficiary rights and other rights under the System
The Directors, etc. of ES-CON JAPAN who have acquired the right to receive shares based on the officer
stock ownership regulations.

(2)

Residual Shares of ES-CON JAPAN in the Trust
Residual shares of ES-CON JAPAN in the trust are recorded as treasury shares under net assets using thebook value in the trust (excluding the amount of incidental expenses). The book value of the treasury sharesand the number of shares is 347 million yen and 851,000 shares for the previous fiscal year, and 347 million
yen and 851,000 shares for the fiscal year ended December 2022.

- 32 -

(Share-Based Payment Benefits-Type ESOP Trust)(1) Overview of the transaction
ES-CON JAPAN passed a resolution to introduce a share-based payment benefits-type ESOP (the “System”;
the trust established based on the trust agreement concluded with Resona Bank, Limited for the System isreferred to as “share-based payment benefits-type ESOP trust”) at the board of directors meeting held on
March 20, 2015, with an aim to further enhance the benefit program for its employees and raise theirmotivation and morale for improving the share price and operating results. Furthermore, ES-CON JAPAN
passed a resolution for continuation and partial revision of the share-based payment benefits-type ESOP
trust for employees at the board of directors meeting held on June 30, 2022.
The System after the revision is a system by which ES-CON JAPAN contributes money to a trust for a new
period of seven fiscal years from the fiscal year ended December 2022 to the fiscal year ending December
2028 and the period of the seven fiscal years after the elapse of the period, with the trust acquiring shares of
ES-CON JAPAN with the said money as capital, and shares of ES-CON JAPAN are granted to ES-CON
JAPAN Group’s employees who have satisfied certain requirements through the trust, pursuant to the stock
ownership regulations set by ES-CON JAPAN.
(2)

Residual Shares of ES-CON JAPAN in the Trust
Residual shares of ES-CON JAPAN in the trust are recorded as treasury shares under net assets using thebook value in the trust (excluding the amount of incidental expenses). The book value of the treasury sharesand the number of shares is 57 million yen and 225,700 shares for the previous fiscal year, and 347 million
yen and 573,400 shares for the fiscal year ended December 2022.

(Changes in Purpose of Holding)Due to change in the purpose of holding, a part of property, plant and equipment amounting to 1,405 million yen (782million yen in buildings and structures and 623 million yen in land) was transferred to real estate for sale in processduring the fiscal year ended December 2022.
(Segment Information, Etc.)[Segment Information]
1. Overview of the Reporting Segments
The reporting segments of the ES-CON JAPAN Group are, among the units constituting the ES-CON JAPANGroup, segments that have available separate financial information and are subject to periodical review for
determining allocation of management resources and evaluation of performance by the board of directors
and other meetings.
The ES-CON JAPAN Group has consolidated independent projects that have similar products, services,
etc. and formed three reporting segments of “real estate sales business,” “real estate leasing business” and“real estate planning agency and consulting business.”
The following are the main descriptions of each reporting segment.
Real estate sales business:
Development/sale of condominiums, commercial facilities, etc., sale ofland and such
Real estate leasing business:
Leasing of real estate and such
Real estate planning agency
Subcontracting of real estate-related businesses, brokerage, sales
and consulting business:
agency and such2.

Calculation Method of Net Sales, Income or Loss, Assets and Other Item Amounts by Reporting Segment
The method of accounting treatments of the reported business segments is the same as that described in“Important Matters Serving as the Base for Preparation of Consolidated Financial Statements.”- 33 -

3.

Information on Net Sales, Income or Loss, Assets and Other Item Amounts by Reporting Segment
Fiscal year ended December 2021 (from January 1, 2021 to December 31, 2021)(Unit: million yen)
Reporting segment
Real estateplanning agency
Real estate sales
Real estateandbusinessleasing businessconsulting
businessAmount on
consolidated
Reconciliation
financial(Note 1)statements(Note 2)Total

Net sales
Net sales to externalcustomers

70,334

8,090

592

79,017－79,017

－

－

－

－

－

－

Total

70,334

8,090

592

79,017－79,017

Segment income (loss)

13,039

3,372

(516)

15,895(5,514)

10,381

Segment assets

139,31068,8087,320

215,439

37,332

252,771

－

584

35

619

114

733

97

140

－

237

－

237

536

－

710

1,247

－

1,247

－

46,652

15

46,66742

46,710Intersegment net
sales or transfers

Other items
Depreciation(Note 3)
Amortization of
goodwill
Amount ofinvestment inentities accounted
for using equity
methodIncrease in property,
plant and equipment
and intangible
assets (Note 3)(Note 1)

Reconciliations are as follows:(1) The reconciliation of segment income (loss) of -5,514 million yen is corporate expenses not attributable toany reporting segment. Corporate expenses are general and administrative expenses not attributable toreporting segments.
(2) The reconciliation of segment assets of 37,332 million yen is mainly surplus operating funds (cash anddeposits), administrative assets, etc. not attributable to reporting segments.
(3) The reconciliation of depreciation of 114 million yen is depreciation on corporate assets not attributable toreporting segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 42 million yen isincrease in corporate assets not attributable to reporting segments.
(Note 2) Segment income (loss)is reconciled with operating income on the consolidated statement of income.
(Note 3) Increase in depreciation, property, plant and equipment and intangible assets includes long-term prepaid
expenses and the amortization amount of such expenses.

- 34 -

Fiscal year ended December 2022 (from January 1, 2022 to December 31, 2022)(Unit: million yen)
Reporting segment
Real estateplanning agency
Real estate sales
Real estateandbusinessleasing businessconsulting
businessAmount on
consolidated
Reconciliation
financial(Note 1)statements(Note 2)Total

Net sales
Revenue fromcontracts withcustomers

86,531

1,156

1,074

88,763－88,763－

10,667－

10,667－

10,66786,531

11,824

1,074

99,431－

99,431

－

－

－

－

－

－

Total

86,531

11,824

1,074

99,431－

99,431

Segment income (loss)

17,006

4,716

228

21,951(6,459)15,492

Segment assets

152,41267,721

3,966

224,100

39,629263,729

－

1,140

30

1,171

110

1,281

97

425

－

522

－

522

603

－

688

1,292

－

1,292

77

1,929

1

2,009

36

2,045

Other items (Note 4)
Net sales to externalcustomers
Intersegment net
sales or transfers

Other items
Depreciation(Note 3)
Amortization of
goodwill
Amount ofinvestment inentities accounted
for using equity
methodIncrease in property,
plant and equipment
and intangible
assets (Note 3)(Note 1) Reconciliations are as follows:(1) The reconciliation of segment income of -6,459 million yen is corporate expenses not attributable to any
reporting segment. Corporate expenses are general and administrative expenses not attributable toreporting segments.
(2) The reconciliation of segment assets of 39,629 million yen is mainly surplus operating funds (cash anddeposits), administrative assets, etc. not attributable to reporting segments.
(3) The reconciliation of depreciation of 110 million yen is depreciation on corporate assets not attributable toreporting segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 36 million yen isincrease in corporate assets not attributable to reporting segments.
(Note 2) Segment income is reconciled with operating income on the consolidated statement of income.
(Note 3)(Note 4)

Increase in depreciation, property, plant and equipment and intangible assets includes long-term prepaid
expenses and the amortization amount of such expenses.
"Other revenue" is rental income, etc. based on "Accounting Standard for Lease Transactions."- 35 -

5.

Other

(1)

Status of Contracts and Sales
The performance of contracts in the real estate sales business for the fiscal year ended December 2022 is as follows:
Fiscal year ended Dec. 2022
(from Jan. 1, 2022 to Dec. 31, 2022)
Category

Mid- to high-risehousing, etc.

Contract amount during the period
Number of units(units)Amount(million yen)

Number of units(units)Amount(million yen)

1,094

55,334743

44,869－30,347－

19,4781,094

85,682743

64,348

Other
Total

Balance of contracts at the end of the period

The main performance of sales for the most recent two fiscal years is as follows:
Fiscal year ended Dec. 2021
(from Jan. 1, 2021 to Dec. 31, 2021)
Name of segment

Number ofunits(units)Amount(millionyen)

Condominiums

1,020

45,050SUROY MALL
Nagamine

－

4,600

－

4,039

Property name

Number ofunits(units)Amount(million
yen)

1,185

58,532

－

5,479

－

4,000

－

3,950

－

3,300

KoLuTeNa I

－

3,500

Kuzuhahanazono

－

3,275

Detached house

－

2,784

－

3,001

Fukuroi-shi, Shizuoka

－

1,442

－

1,794

Commercial leasehold
land in Sapporo-shi

－

1,300

Chiba Research Park4-chome Sakae,
Naka-ku, Nagoya-shi
5-chome Fujishirodai,
Suita-shi (completed
residence land)

－

1,439

－

1,090

Selection Aobadai

－

800

－

702

Nishi-Kunitachi

－

373

－

565

Tsuruma station front

－

323

－

530

Shijo Omiya station
front

－

296

－

300

Nishi-Tokorozawa

－

268

－

226

Other

－

3,650

－

52

－

201

1,020

70,334

1,185

86,531

Kandacho,
Higashiosaka-shi
Commercial leasehold
land in Neyagawa-shi
Commercial leasehold
land in Amagasaki-shi
Commercial leasehold
land in Kobe-shi
Commercial leasehold
land in Hikone-shi
3-chome, Aoyamadai,
Suita-shi
Uchiagetakatsukacho,
Neyagawa-shi
Other
Subtotal

Real estateleasing business
Real estateplanning agency
and consulting
business
Total(Note)

Property nameCondominiums
Koga Genboen Land
Readjustment Project
6
LIONS SQUAREKAWAGUCHI
Solprasa Sakai

Genboen, Koga-shi,
Fukuoka Prefecture
Fuji Grand Natalie

Real estate
sales business

Fiscal year ended Dec. 2022
(from Jan. 1, 2022 to Dec. 31, 2022)

8,090

11,824592

1,074

79,017

There are no transactions between segments.

- 36 -

Subtotal

Total

99,431