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

Annual Report 2021
For the year ended December 31, 2021
https://www.es-conjapan.co.jp/english/

ES-CON JAPAN Annual Report 2021

To Our Shareholders

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

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

Thank you for your continued support and patronage. We would like to express our deepest sympathy to those
who suffered and are suffering from the novel coronavirus (COVID-19) pandemic and its spread.
In Fiscal 2021, the second year since the outbreak of the pandemic, society entered a “new normal” era ofliving with COVID-19, changing our conventional lifestyles and ways of working.
Despite this, in Fiscal 2021 we expanded into new business domains and laid the groundwork for sustainable growth. In April, we raised approximately 20.4 billion yen through a third-party allotment of new shares
to Chubu Electric Power Co., Inc. (“Chubu Electric Power”), making us a consolidated subsidiary of Chubu
Electric Power. With Chubu Electric Power ‘s strong corporate credit, this provided flexibility to our financing
options by improving our creditworthiness and generated various other synergies.
Furthermore, in February 2021, we formulated our Fourth Medium-Term Management Plan “IDEAL to
REAL 2023” (Fiscal 2021 - Fiscal 2023) and, with the themes of “Transformation” and “Rapid Progress,”
pursued management strategies of “establishing business foundations able to withstand unexpected changes in
economic conditions” and “simultaneously changing the revenue structure and expanding business domains.”
In October, we made Picasso Co., Ltd. and six other companies (“the Picasso Group”), which own many excellent rental income properties, into subsidiaries, thereby achieving our goal of “changing the revenue
structure.”
Our business results for Fiscal 2021 as described above were broadly in line with our initial plan, with net
sales of 79.0 billion yen (up 2.2% year-on-year) and operating income of 10.3 billion yen (down 14.9% yearon-year). This fiscal year and next, we plan to achieve record profits and maintain our “rapid progress.”
We will continue to develop our business in a multifaceted manner, and by promoting environment, socialand governance (ESG), we will respond appropriately to the diversifying social challenges in an aim to maximize our corporate value. I invite you to join and support us in this endeavor.

Table of Contents
Corporate Philosophy . ............................................................. 1
To Our Shareholders ................................................................ 2
Financial Highlights / Dividend Policy ..................................... 3
Segment Overview .................................................................... 4
Overview and Progress of Medium-Term
Management Plan .................................................................... 5
Interview of President Takatoshi Ito ........................................ 9
Chuden Synergy . .................................................................... 16
Increasing Creditworthiness due to Becoming
Consolidated Subsidiary of Chubu Electric Power ............... 18
Initiatives for Regional Revitalization .....................................20
Take on the Challenges of New Business Domains ..............22
Promotion of Development of Various Condominiums
in Rare Locations . ...................................................................23
ESG Initiatives . ........................................................................24

1

Management: Directors, Auditors and Executive Officers . .. 27
Management Policy ................................................................ 29
Direction and Corporate Governance .................................... 29
Company Overview ................................................................. 32
Property Spotlight .................................................................. 33
Financial Section
Management Discussion and Analysis .................................. 37
Consolidated Balance Sheet .................................................. 41
Consolidated Statement of Income and Consolidated
Statement of Comprehensive Income ................................... 43
Consolidated Statement of Changes in Equity . .................... 44
Consolidated Statement of Cash Flows ................................ 45
Notes to Financial Statements .............................................. 46
Investor Information ............................................................... 76

Forward-looking Statements

Takatoshi Ito

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

President andRepresentative Director
ES-CON JAPAN Ltd.

2

ES-CON JAPAN Annual Report 2021

Financial Highlights

Segment Overview

In Fiscal 2021, the condominium business remained strong, and the increase in rental income due to theacquisition of Picasso Group as a subsidiary resulted in a revenue increase for ten consecutive fiscal years.
Although profits decreased year-on-year, we plan to achieve record-high profits in Fiscal 2022.
Net Sales

Operating Income(Unit: million yen)

(Unit: million yen)

100,000

72,106

Fiscal
2019

New
record-highprofits

Record-highprofits

12,912

14,000Fiscal2021(Unit: million yen)New
record-highprofits

Record-highprofits

8,155

12,202

Fiscal2022(plan)

Fiscal
2019

Fiscal2020

Dividend Policy
From the Second Medium-Term Management
Plan, we introduced a progressive dividend
policy, in which the dividend per share (DPS) forthe previous year is set as the lower limit andprincipally adopting “no reduction, and only
maintaining or increasing dividends,” and thispolicy continues to be implemented in the Fourth
Medium-Term Management Plan. We paid a
dividend of 38 yen per share in Fiscal 2021, andplan to pay 38 yen per share also in Fiscal 2022.

Fiscal2021

5,961

Fiscal2022(plan)

Fiscal
2019

Fiscal
2020

Fiscal2021

Fiscal2022

38

or moreFiscal2022

Fiscal2023(plan)(plan)(plan)(Unit: yen)
Dividends per share
Dividend
payout ratio
32

15
25.5%

Fiscal
2016

36

38

38

38

56.3%

18
30.2% 30.2%

33.9%

22.0%

Fiscal2017

Fiscal2018

Fiscal2019

Second Medium-Term
Management Plan
periodFiscal2020

Real Estate Leasing Business

Real Estate Planning Agency
and Consulting Business

Net Sales

Net Sales

Net Sales

70,334 million yen

8,090 million yen

592 million yen

Segment Income

Segment Income

Segment Income

13,039 million yen

3,372 million yen-516 million yen

8,300

7,663

10,38177,308 79,017

Fiscal2020

Profit Attributable to
Owners of Parent

Real Estate Sales Business

Fiscal2021

Within the real estate sales business, the number of delivered units in the condominium business increased by 368
units year-on-year to 1,020 units due to the favorable progress in sales, and net sales increased by 14.3 billion yen
year-on-year to 45 billion yen. Other than the condominium business, we conducted the second capital increaseat ESCON JAPAN REIT Investment Corporation (“EJR”) in August 2021 and sold seven real estate for sale to
EJR (net sales of 11.9 billion yen), and also realized the sale of logistics facilities and other properties.
As a result, in the real estate sales business, net sales was 70,334 million yen (down 1.6% year-on-year) andsegment income was 13,039 million yen (down 8.5% year-on-year).
In the real estate leasing business, we secured stable income by strengthening leasing business through efforts
such as the increase in rental income of revenue-generating real estate by making Picaso Group a subsidiary, opening of “tonarie Yokkaichi,” a community-based shopping center, and “tonarie Fujimino” (former name: Soyoca
Fujimino), phased opening of “tonarie CREO” at “tonarie Tsukuba Square,” a redevelopment project in front of
Tsukuba Station in Ibaraki Prefecture, and reopening of “tonarie Minami-Senri Annex” after renovating it.
As a result, net sales was 8,090 million yen (up 46.4% year-on-year) and segment income was 3,372 million
yen (up 41.6% year-on-year).
In the real estate planning agency and consulting business, although sales increased as a result of our efforts
to maximize our strengths in planning and multifaceted business development including the launch of sales ofcolumbarium, delays in sales of columbarium and prior expenditures for advertising mainly due to the spreadof the COVID-19 infection resulted in net sales of 592 million yen (up 100.6% year-on-year) and segment lossof 516 million yen (segment income of 152 million yen in Fiscal 2020).

Fourth Medium-Term
Management Plan
periodContinuation of progressive dividend policy

34ES-CON JAPAN Annual Report 2021

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

(Unit: Million yen)
Fiscal 2021

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

Transformation• 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 the medium-term management plan)Plan(announced
Feb. 2021)

vs. plan

Percentage

Sales

79,01780,000

-983

-1.2%

36,300100,000

98,000

2,000

2.0%

110,000

Real estate sales
business

70,33469,900

434

0.6%

—

87,300————Condominium
sales

45,05047,240-2,190-4.6%—

59,300

—

—

—

—

1,020

1,062

-42

-4.0%

—

1,200

1,200

—

—

1,200

Other sales

25,283

22,660

2,623

11.6%

—

28,000————Real estate leasing
business

8,090

7,900

190

2.4%

—

11,600

9,500

2,100

22.1%

11,200Real estate planning agency andconsulting business

592

2,200

-1,608-73.1%

—

1,100

—

—

—

—

Operating income

10,381

10,800

-419

-3.9%

4,700

14,00014,000——16,000Ordinary income

9,099

9,400

-301

-3.2%

3,800

12,200————Stage for BS and profit structuralreforms
38 yen38 yen—Further rapid
through
New progressrecord- transformationhigh profits 110.0

Sales
Operating profit

BS structure/ 100.0
profit structurereforms

72.1

Listing on
TSE First
Section

77.3

44.7
18.8
2.8
Fiscal 2014

34.3

27.7

4.6

4.0
Fiscal 2015

Fiscal 2016

Period of First Medium-Term
Management Plan
Make The One for 2016

5

7.0
Fiscal 2017

11.5

12.9

12.2

10.3

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

Period of Second Medium-Term
Management PlanIDEAL to REAL 2019

Listing on
TSE Prime
Market14.0

16.0

Fiscal 2022

Fiscal 2023

(plan)—

38 yen(plan)

38 yenor more——38 yenor moreManagement Targets
Made Picasso Group subsidiary ➔ Revised some of the indicators for stable profit revenue structure for the
fiscal year under review and the final fiscal year of the medium-term management plan
• Most management indicators progressed according to plan in the Fiscal 2021.
• Accelerated progress on investment plans after making the Picasso Group a subsidiary. Revised some of the management indicators for the fiscal year under review and the final fiscal year of the medium-term management plan in orderto make further progress on transforming profit structure.

79.0
Made a subsidiary of
Chubu Electric
Power

54.3

Stage forrapid progress

Stage for new record-high profits—

Strive toexpandresults fromthe plansannounced
February
2021

Policy of gradually increasing dividends to continue• We are targeting sustainable growth through maximining corporate value and further increasing returns to shareholders, in addition to establishing robust business foundations capable of withstanding any economic conditions.
(Unit: Billion yen)

Initial plan Initial plan Initial plan vs. initial
Plan (announced(Q2)(full year) (announced
plan
Percentage
Feb. 2021)(announced Jan. 2022) Feb.2021) (full year)

Actualresults

Dividends per share

Performance Trends Over the Past 10 Years

Fiscal 2023

Planned financial results

Condominium
units soldBasic Policy: Transformation and Rapid Progress

Fiscal 2022

Fiscal 2020

Fiscal 2021

Actualresults

Actualresults(plan)

Period of Fourth Medium-Term
Management PlanIDEAL to REAL 2023

Share of profits from leasing *1

14.2%

Return on equity (ROE)

21.2%

➔

Fiscal 2022

Fiscal 2023

Revised
Plan
Initial plan Initial plan
Initial plan
plan
(Announced (Announced (Announced(Announced(Announced
Feb. 2021) Jan. 2022) Feb. 2021)
Feb. 2021)
Mar. 2022)

21.2%

23.0%

26.0%

24.0%

30.0%

26.0%

11.8%

12.0%

13.0%

13.0%

13.0%

13.0%

Return on invested capital (ROIC)

6.6%

3.2%

4.0%

4.0%

4.0%

4.0%

4.0%

Equity ratio

25.8%

24.8%

29.0%

23.0%

26.0%

21.0%

23.0%

Performance Plan

Share of long-term earnings
from real estate *2

9.5%

20.6%

12.0%

21.0%

14.0%

23.0%

18.0%

• In the first fiscal year, Fiscal 2021, despite recording lower sales and profits than planned, we implemented a transformation of our revenue structure. This period is identified as a stage for BS and profit structural reforms.
• We plan to set new record high in Fiscal 2022 and to realize rapid progress by expanding results from the initial plansannounced February 2021 in Fiscal 2023.

Net assets [billion yen]

38.6

62.6

61.0

67.3

66.0

72.0

72.0

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

6

ES-CON JAPAN Annual Report 2021

Strengthening the Leasing Segment

Transformation of Revenue Structure

Trends in Leasing Segment Profits and Lease Revenues as a Share of Profits(Lease revenues as a share of profits: leasing segment profits/total segment profits [excluding adjustments])

Investment Plan

• We plan to achieve the target for the final year of the medium-term management plan, which is to increase lease revenues as a share of profits to 26%, one year early, in Fiscal 2022, and then to proceed with further transformations of
the revenue structure.

• Gross investment during three-year period of the medium-term management plan: 220 billion yen.
• Gross investment increased by 74.4% ahead of schedule, after making the Picasso Group a subsidiary.
• Investment of 70 billion yen planned in Fiscal 2022.
Three-year cumulative investment (2021-2023)
Fiscal 2021
Planned financial results
ActualGross investment

Fiscal 2022

Plan
(Announced
Feb. 2021)

vs. plan

55.0

40.9

95.9

Total segment profits:

Percentage

Three-year
cumulative

Fiscal 2023

Plan
(Announced
Feb. 2021)

Plan(Announced
Feb. 2021)

Plan(Announced
Feb. 2021)

70.0

95.0

220.0

74.4%

Investment in revenue-generating
real estate

76.7

30.0

46.7

155.7%

40.0

60.0

130.0

Investment in development ofrevenue-generating real estate

5.6

5.0

0.6

12.0%

10.0

15.0

30.0

Investment in medium-term
revenue-generating real estate*

33.7

15.0

18.7

124.7%

20.0

25.0

60.0

Investment in long-term revenue-generating real estate

37.3

10.0

27.3

273.0%

10.0

20.0

40.0

Investment in other development

19.1

25.0

-5.9

-23.6%

30.0

35.0

90.0

Amount recovered

4.8

0

4.8

—

0

30.0

30.0

Net investment amount

91.1

55.0

36.1

65.6%

70.0

65.0

190.0

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

21.0

20.6

(Unit: billion yen)

(Unit: billion yen)
Total assets:

Inventory assets
Long-term revenue-generating real estate
Other

Real estate sales businessTotal segment profits:

16.7

Total segment profits:
15.8*

26%
Targetto achieve
one year early

24%
21%

13.0

14.2

Real estateleasing segment
profits

2.3

Fiscal 2020

5.5

5.0

3.3

10% UP

Fiscal 2021

Fiscal 2022
(initial plan)(revised plan)

252.7

160.0
130.9

11.6

(Unit: billion yen)

76%

Leasing sales
Segment profit

Long-term
revenue-generating real estate:
Approx. 5.6-foldgrowth from2020 to 2023

8.0

200.0

General and administrative
expenses (excluding
amortization of goodwill)

From initial plan

+ 2.1
billion yen(up 22%)

5.5

21.0%
52.0

61%

51%
5.5

62.0

80.0

From initial plan

Fiscal 2021

Fiscal 2022

14.1
46.8
Fiscal 2020

7

Coverage percentage

5.5

3.3
2.3

9.5%

7.2

4.5

23.0%
20.6%

*The real estate planning agency andconsulting business recorded segment
losses of 500 million yen in 2021

• A coverage percentage of leasing segment profits for total general and administrative expenses of 90% is targeted for
Fiscal 2023. This percentage will be 76% in 2022. Work is generally proceeding according to plan.

Total assets:

88.5

Making the Picasso Group a subsidiary increased real estateleasing business segment profits
compared to initial plans.

General and Administrative Expense Coverage Percentage of Leasing Segment Profits

290.0

149.4

Lease revenues as a shareof profits

9% UP

14%

Total assets:

Total assets:

Real estate planning agency
and consulting business

15.1
13.8

350.0

Projected early
achievement ofplanReal estate leasing business(Coverage percentage: leasing segment profits/general and administrative expenses [excluding amortization of goodwill])

Trends in Share of Long-Term Revenue-Generating Real Estate

Increase inmedium/longterm revenue-generating
real estate as ashare of total
assets(Unit: billion yen)

68.8

68.0

70.0

Fiscal 2021

Fiscal 2022

Fiscal 2023

(initial plan)(revised plan)

Fiscal 2020

+ 0.5
billion yen(up 10%)(plan)

8

ES-CON JAPAN Annual Report 2021

Q How do you view the results in Fiscal
2021, the first year of the Fourth Medium-Term
Management Plan “IDEAL to REAL 2023”?
Also, how are things progressing in Fiscal
2022, the second year of the plan?

Interview ofPresident Takatoshi Ito
ES-CO N JAPAN Ltd.

Q Could you tell us about the impact ofmarket fluctuations during the COVID-19
pandemic and how you responded and proceeded with your business?
A little more than two years have passed since theoutbreak of the COVID-19 pandemic in 2020. In
the initial stage of the pandemic, the future outlookof the market was extremely uncertain, andalthough there was a project we were considering
regarding the purchase of land, we decided to9cancel the contract and instead monitor how thesituation would change. In particular, during thefirst state of emergency in April 2020, the numberof visitors to our condominium sales centers
declined by about 70% from that at normal times,
but we started using the web to serve customers andachieved certain results. After that, residential
demand remained strong partly due to the re-recognition of the need for and importance of residences as a result of the expansion of remote workand other factors. As a result, sales of for-sale condominiums, which is our core business, continued

to progress favorably even after the outbreak of
COVID-19.
The logistics market has also remained strong
due to the stimulated demand for e-commerce
resulting from the COVID-19 pandemic, and we
intend to strengthen our logistics business. Our
strategy is not to acquire logistics sites at high prices
in the market but to focus on the logistics businessby creating logistics sites from scratch and developing facilities through land readjustment projects orby selling the land itself to warehouse companies.

In the Fourth Medium-Term Management Plan,
we plan to achieve net sales of 110 billion yen andoperating income of 16 billion yen in Fiscal 2023,
which is the final fiscal year of the plan, under thebasic policy of “Transformation and Rapid Progress,”and everything remains favorable towards theachievement of such targets.
In Fiscal 2021, the previous year, we made thePicasso Group, which owns a large number ofprime rental revenue-generating properties, a subsidiary, and transformed the revenue structure by
securing stable rental income at once. We believethat in the first fiscal year we have established thefoundation for growing into a “hybrid” developerthat can increase earnings from both the flow business through real estate development in which wehave strengths and the stock business through the
expansion of leasing business.
Furthermore, the purchase of business sites necessary to achieve the plan by Fiscal 2023 has been
completed. In addition, due to the transformationof the revenue structure in the first fiscal year, wehave revised some of our management indicatorssuch as the percentage of rental income in Fiscal
2023, which is the final fiscal year. In both Fiscal
2022 and Fiscal 2023, we aim to achieve recordhigh profits and further “rapid progress.”

Q What are your plans for businessexpansion in 2024 onwards after the Fourth
Medium-Term Management Plan?
As mentioned earlier, we have completed the purchase of sites for up to Fiscal 2023 and are currently
purchasing business sites for 2024 onwards, and10

ES-CON JAPAN Annual Report 2021

such sites have been accumulated steadily.
However, due to the recent deterioration of thesituation in Ukraine, cost-push inflation is forecastin the future. Moreover, we believe that there areconcerns over soaring construction costs from early
fall of this year. In order to minimize business risks,
it is important to find a balance between projects
that newly develop and sell real estate and thosethat acquire revenue-generating properties and sellthem after increasing their value.
In such a situation, we intend to actively consider M&A of companies that own prime revenue-generating properties such as the acquisition of
Picasso Group as a subsidiary last year. In particular, we would like to continue considering not
M&A projects on the market but those that aredone together with companies that are consideringbusiness succession while having issues such as theabsence of successors.

ness partners to enhance the value of the city.
Regarding the development project in front of
JR Kitahiroshima Station, which is an important
access point to the ballpark, we will conduct threedevelopments consisting of a station square in frontof JR Kitahiroshima Station, an exchange center
complex comprising commercial facilities and a
hotel, and a three-dimensional indoor/outdoor
plaza and park. The commercial facilities, etc. arescheduled to be completed in 2024, and the infrastructure maintenance work for the roundabout infront of the station started this year. We will workon urban development so that the two areas will beconnected as one and create a bustling atmospherein the entire city with the development of the west
exit of Kitahiroshima Station and the opening of
the ballpark.

Q What are the current status andstrated and what has changed since thecompany became a consolidated subsidiaryof Chubu Electric Power Co., Inc. in April
2021?

future developments of the ballpark plan in
Hokkaido and the development at the west
exit of JR Kitahiroshima Station?
ES CON FIELD HOKKAIDO, which is the newstadium of the Hokkaido Nippon-Ham Fighters, isscheduled to open in March 2023, and urban
development around the stadium is progressing
steadily.
In February 2022, we started selling “Le JADE
Hokkaido Ballpark,” a for-sale condominium underdevelopment at a site approximately 80 metersfrom the new stadium. The response was beyond
expectation with more than 600 visits, and it was
immediately sold out in the first phase of sales. In
the same month, we also announced the development of a senior residence with a medical mall.
Urban development centering on the stadium isprogressing steadily. We will develop our businesswith the development contributing to such urban
development at the core and work with our busi-

11

Q What synergies have been demon-

As you mentioned, multiple projects are in progress
due to the demonstration of synergy effects after
becoming a consolidated subsidiary. Last October,at GK TSUNAGU Community Farm, which wasestablished together with Chubu Electric Power
Co., Ltd. and Spread Co., Ltd., we started construction of Techno Farm Fukuroi, which will be
the world’s largest vertical farm utilizing fully artificial light and capable of producing 10 tons of lettuce per day. In February 2022, a consortium ofbusinesses led by Chubu Electric Power of which
ES-CON JAPAN is a member concluded a basic
agreement on a project organized by Aichi
Prefecture and the city of Nagoya concerning utilization of the site of the 20th Asian Games AichiNagoya 2026 Athletes’ Village after the games. We
are still promoting and considering various projects
to realize a “new form of community” which Chubu

Electric Power aims for.
Additional significant progress came with theestablishment of a flexible financing structure dueto the significant increase in our creditworthiness asa result of the acquisition of credit ratings fromexternal institutions and other factors since becoming a consolidated subsidiary. We are now able tostably procure funds necessary for ES-CON JAPANGroup’s future growth, as evidenced by the registration of issuance of corporate bonds last year
(planned issue amount: 50 billion yen). In a situation with high risks of economic fluctuations andvolatility due to the situation in Ukraine, we believethat the development of an environment in which
we can flexibly invest in quality projects will be apositive factor in our further growth. We intend to
conduct selective investments in prime projects andachieve results as a real estate developer of the
Chubu Electric Power Group.

Q As a member of the Chubu ElectricPower Group, what are your thoughts on
future ESG initiatives with the increasing
importance being placed on initiatives fromthe perspective of the Task Force on ClimateRelated Financial Disclosure (TCFD)?
As initiatives towards so-called decarbonizationand carbon neutrality are progressing in Japan, we
intend to further accelerate the development of
ZEH condominiums especially in the developmentof for-sale condominiums, which is our corebusiness.
Moreover, as Chubu Electric Power Group, it
will be important also from the perspective of ESG
to conduct urban development utilizing Chubu
Electric Power’s know-how and knowledge inenergy business. We would like to further cooperate with Chubu Electric Power Group in the future,including in renewable energy.
Furthermore, we regard climate change issues as
one of the core management strategies and aremaking efforts to disclose financial information
based on the TCFD framework. Last year, we conducted capacity building for the management andall department heads and discussed the risks andopportunities associated with climate change in ourbusiness after sharing it as a material issue for theentire company. We plan to disclose the financial
impact assessment based on our scenario as well as
incorporate it as an important factor of our business strategy.
On the other hand, with the recent situation in
Ukraine, there is a possibility that the efforts in
Europe to achieve carbon neutrality may slightly
recede in the future as the trend of rising costs forliquid natural gas (LNG) and other resources are
seen. Naturally, this will have an impact on theJapanese economy, and we intend to make appropriate judgments and promote ESG initiatives one
by one, while taking into account the situation of
resources and other factors.

Q We heard that sales of condominiums
under development have been particularly
strong, but could you tell us about the statusof the mixed-use development you are conducting in front of Tsukuba Station in Ibaraki
Prefecture?
In front of Tsukuba Station there are integrated
projects of “commerce, work and residence” such as“tonarie CREO” consisting of commercial facilities
and offices, “tonarie Q’t” and “tonarie MOG,”
which are commercial facilities, and “Le JADE
Tsukuba Station Front,” a for-sale condominium
directly connected to “tonarie CREO.”
As for “tonarie CREO,” the media has reported
that stores are opening in phases and that themobility in front of Tsukuba Station has returned.
Moreover, with the scheduled handover of “Le
JADE Tsukuba Station Front” in November 2022,
the flow of people will further increase. In the
Tsukuba Station area, developments of12

ES-CON JAPAN Annual Report 2021

condominiums by other companies are also active
and supply is increasing, and we feel that the projects we have undertaken are contributing to therevitalization of the area in no small measure.
In cooperation with the government, we willcontinue to promote projects in order to contributeto the further revitalization of the area in front of
Tsukuba Station, while challenging the “new stateof city” in Tsukuba City, which is a special economic zone.

Q Other than the Tsukuba initiatives,
are there a number of mixed-use development projects centering on stations, such as
the mixed-use development in Yamatotakada
City, Nara Prefecture, and the developmentin front of Kitahiroshima Station in Hokkaido?
Yes, indeed, there have been. The common thing in
our redevelopment projects in front of stations,especially those in Tsukuba and Yamatotakada, is tolet people make daily purchases at places centering
not on the so-called urban shopping centers but
commercial facilities closely related to local communities and lives (neighborhood shopping centers) as well as develop residences there, increase thenumber of people in front of stations and create a
new bustling atmosphere.
As for the case of Tsukuba mentioned earlier, thesize of the station is much larger than that of
Yamatotakada, and we feel the power for starting atruly new city from a conventional new town withthe cooperation with the government in the future.
To further accelerate this trend, we will continue tofirmly demonstrate the stance of not just developing condominiums or renovating commercial facilities but becoming involved in and supporting local
communities.
We also believe that the development project inHokkaido will significantly change the flow ofpeople as a result of the huge content, namely the
new stadium of the Hokkaido Nippon-Ham

13Fighters. Kitahiroshima currently has a populationof just under 60,000 people, but it is located halfway between Chitose where the airport is locatedand Sapporo, which is the center of Hokkaido, andthe entire city of Kitahiroshima will change significantly when the stadium opens in 2023. The developments at the ballpark and in front ofKitahiroshima Station are projects attempt to create
a new town in itself, which is very different fromthe positioning of Tsukuba and Yamatotakada as
regional revitalization projects.

Q Do you position the development of
products for high-net-worth individuals as
an important strategy for the future as signified by the recent plans for “OSTRESIDENCE KARUIZAWA” in Karuizawa?
Yes, we do. We feel that there are more high-networth individuals in the domestic market and that
we are in a completely different environment compared with 10 years ago.
In such a situation, we expect new residential
demand to emerge in places such as Niseko in
Hokkaido, as well as Karuizawa, Hakone andAtami that are an hour or so from the Tokyo metropolitan area. We believe that it will become more
important to provide high-value-added condominiums, which were scarce in the past, to highnet-worth individuals.
Recently, we developed “OST RESIDENCEKARUIZAWA,” a luxury condominium utilizing
the rich nature of the resort town of Karuizawa,and the condominium sold out last year. We arealso proceeding with the development of residences
along the beautiful coast of Hayamacho in
Kanagawa Prefecture. We are also strengthening
for-sale condominium development in the centerof Tokyo, such as “Park Le JADE Shirokane
Residence” and “Minato Ward Nishiazabu 2-chome
Project (tentative name).”Q ESCON JAPAN REIT (“EJR”) conducted
its second public offering last August. What
are your future growth strategies and how
do you plan to develop the REIT business?
EJR conducted its second public offering lastAugust, and the asset size has steadily increased
from 41.6 billion yen at the time of listing to 69.6
billion yen. The aim is to increase the asset size to100 billion yen at an early stage. As EJR’s sponsor
company, ES-CON JAPAN will continue to support the improvement of EJR’s earnings and stable
growth by acquiring development projects andexisting revenue-generating properties and stably
supplying projects whose value has been enhanced
to EJR.
In order to realize the shift to a stable revenue
structure as stated in the medium-term management plan, we will accumulate assets with stable
income, but it is also important to sell part of theassets which we have accumulated and convert
them into income. To achieve this balance, we
intend to provide functions such as those of EJR,
which is a public REIT, as well as private REITs or
private funds that are scheduled to be formed to theentire ES-CON JAPAN Group. We intend to
supply them to REITs and funds while keeping aneye on the market trends.

Q How do you view the future development of FUEL Co., Ltd., which is engaged in
the real estate crowdfunding business, thatwas recently made a subsidiary and do you
think it could become a pillar following the
public/private REITs and funds mentioned
earlier?
FUEL is a company with a platform including theoperation of online funds, and we made it a subsidiary this January by judging that we could createbusiness synergy by strengthening our asset

management business and making it a steppingstone for future participation in the real estate
finance business.
FUEL’s current business model is to collect funds
from individual customers through crowdfunding
and lend them to companies, but we believe thatinvestors will benefit from equity-based business inthe future. In this aspect, we have just started
making preparations to obtain a license under theReal Estate Specified Joint Enterprise Act.
Furthermore, we recognize the fact that we havedeveloped a system which enables us to challenge
new real estate DX businesses 5 to 10 years ahead
from now such as security tokens at an early stage
and that a leading company contributing to the
expansion and growth of our business domain has
joined ES-CON JAPAN Group.

Q How is the development of the columbarium business, which you started selling
last year?
Sales of the permanent use rights of the Ryomon
columbarium started last year, but due to the priorexpenditure of advertising expenses and a delay inthe plan to attract customers attributable to the
COVID-19 pandemic, a segment loss was recordedin the first fiscal year. However, in locations withextremely high potential near Hiroo Station in central Tokyo, we are convinced that there is extremely
high potential demand for the business in which we
provide “after-life residences” beyond real estatesuch as residences and commercial facilities, inother words, residences after life is over, as a “lifedeveloper.” This is an initiative eyeing the development of additional businesses as a developer byutilizing the characteristics of the area with manyhigh-net-worth individuals. We will steadily accumulate our know-how in the columbarium business, and intend to get this business off the ground.

14

ES-CON JAPAN Annual Report 2021

Q ES-CON JAPAN invested and participated in a project promoted by Black Sand
Capital in Hawaii, but what is your overseas
business strategy?
This project is to enhance the value of “Waikiki
Galleria Tower,” which is a mixed-use facility in
Hawaii, as well as replace the tenants of the commercial facility (1st and 2nd floors) and convert theoffice (6th to 16th floors) into a timeshare hotel,
and we participated in it in August 2021.
The potential of Hawaii is stable even amid the
COVID-19 pandemic, and we would like to jointly
implement projects such as condominium sales byfurther deepening the cooperation with Black Sand
Capital and continue implementing various projects to serve as a sales channel in Japan.

Q Could you tell us about your participation in the project of “Creating the World’s
Most Advanced House Sphere with 3D
Printers” through the business alliance with
Serendix?
Building methods using 3D printers have justbecome popular especially in the U.S. However, inJapan, we are at the stage of considering how torealize residential development using 3D printers
under regulations such as the Building Standards
Law.
Serendix aims to create ”Sphere,” the world’s
most advanced house, based on the concepts of “30tsubo/3 million yen or less in total,” “the mostearthquake-resistant and wind-resistant house in
the world” and “24-hour construction period.” We
invested in the project it by empathizing with thepoint that cooperation with Serendix will lead tothe expansion of the potential of development by
our company as well as contribute to urban development and regional revitalization in Japan. It willtake a little more time to commercialize the15business, but we have formed a business alliancewith the intention of creating new value.

Q We believe that the organization is
growing at an accelerating pace, but whatenable ES-CON JAPAN to grow further going
forward?
The members of our directors, executive officers
and management-level department heads consist ofmembers who have been active at ES-CON JAPANfrom before and new members who joined us withhigh expectations for the future potential of ourcompany, and we feel that we have many good
human resources. We resumed hiring new graduates about 8 years ago, and now approximately 100
employees, which account for about 30% of all
employees, are new graduates. We will make efforts
to build an organization by eyeing the success ofsuch generation as core members of our company
after 10 years from now.
We are still a growing company and need to further foster and develop our corporate culture andstrengthen our organizational capabilities. Over the
next 10 years, we would like to foster a culture ofteaching and learning from each other and training
human resources in order to grow into a developer
representing Japan, and become a company like a“precious tree” rather than a “big tree” with strongorganizational capabilities. We have just started,but my mission is to enhance the organizational
capabilities while achieving sustainable growth overthe next decade.

Chuden Synergy
TOPICS: Status of Demonstration of Chubu Electric Power Group’s Synergy Effects
ES-CON JAPAN entered into a capital and business alliance agreement with Chubu Electric Power Co., Inc.,in 2018 and since becoming its equity-method affiliate, we have proactively developed our business by positioning the Chubu region as a priority business area along with the Tokyo metropolitan area and the Kinki
region.
As a result of considering various options and seeking effective means of further growth of business andenhancement of management stability, ES-CON JAPAN conducted a capital increase by third-party allotment
with Chubu Electric Power, with its strong corporate credit standing, as the allottee, and became its consolidated subsidiary in April 2021. This was conducted with the aim to strengthen the financial base of ES-CON
JAPAN and it raised approximately 20.4 billion yen of funds. ES-CON JAPAN will further demonstrate synergy effects with Chubu Electric Power Group and work on various projects going forward.
August 2018: Agreement concluded on
capital and business alliance

April 2021: Capital increase throughthird-party allocation of shares

Made an equity-method affiliate
Percentage of voting rights held: 33.3%

Made a consolidated subsidiary
Percentage of voting rights held: 51.5%

Concluded new capital and business alliance agreement with Chubu Electric Power (asof February 24, 2021)
1. Enhancing joint efforts related to energy supply and facility construction
2. Joint research and joint implementation in businesses related to next-generation smart houses, connected
homes, and so forth
3. Further enhancing the partnership with Chuden Real Estate, a member of the Chubu Electric PowerGroup
4. Enhancing partnerships related to the effective utilization and development of unused or underused land
belonging to the Chubu Electric Power Group
5. Joint initiatives in businesses that constitute to society, including urban development
Demonstrate Additional Synergies by Becoming a Consolidated Subsidiary

Large-scale redevelopmentin urban centers andrailway station areas

Realization of“New Norm
Neighborhoods”

Large-scale Urban
Development

16

ES-CON JAPAN Annual Report 2021

Major Actions

Increasing Creditworthiness due to Becoming Consolidated Subsidiary of
Chubu Electric Power

Energy management

July 2021: Establishment of GK TSUNAGU Community Farm
Construction of “Techno Farm Fukuroi,” the world’s largest plantfactory producing 10 tons per day, started in October 2021.
Production is scheduled to start in January 2024.

Expansion of ES-CON JAPAN Group’s System
Real estatedevelopment

Cultivation
technology

Since becoming a consolidated subsidiary of Chubu Electric Power, ES-CON JAPAN’s corporate credit has
increased dramatically, and we received external ratings of “A-” (stable) from Rating and Investment Information,
Inc. and “A” (stable) from Japan Credit Rating Agency, Ltd. and established a stable financing base.

Acquisition of Credit Ratings

Artist’s conception of the completed Techno
Farm Fukuroi

Ceremonial prayer for safety before start ofconstruction (October 2021)

Efficient and stable production of ‘pesticide-free, safe and clean’ lettuce

Becoming a
consolidated
subsidiary of
Chubu Electric Power

Improvingcreditworthiness

RatingRating Outlook

R&I

Issuer Rating

A−

StableJCR

Long-term Issuer Rating A

StableSelected as a constituent of the JPX-Nikkei Index 400 for Fiscal 2021

*The artist’s conception is for illustrative purposes
only and is subject to change.

February 2022: Concluded basic agreement for the “20th Asian Games Aichi-Nagoya 2026 Athletes’
Village Site Post-Games Project”
A group of operators, with Chubu Electric Power
Company as the representative corporation and inwhich ES-CON JAPAN participates as a member,concluded a basic agreement for the project. The
city is scheduled to open around 2028, and we plan
to develop a mixed-use commercial facility.

Rating Agency Subject of Rating

Transfer to the TSE Prime Market on April 4, 2022

Backed by this creditworthiness

Build a dynamic and stable fundraising system
September 2021
Commitment line of credit agreement concluded with
the Nishi-Nippon City Bank, Ltd.
Credit line: 10 billion yen

Trends in new funds raised and annual averageinterest rate
(Unit: billion yen)
New funds raised
Annual average interest rate

1.14%
Overview illustration of the 20th Asian Games Aichi-Nagoya2026 Athletes’ Village project (Overall site area: 15ha)

Progress in joint business for a total of five projects with Chuden Real Estate
The company is promoting sales of “Grand Le JADE Shirakabe” in the Shirakabe area in Higashi-ku, Nagoya
City, which is a particularly rare and valuable area. Synergistic effects are being generated, as evidenced byhaving sold out the contract for “Le JADE Kakegawa Ekimae” (Kakegawa City, Shizuoka Prefecture) withinfour months of the start of sales.

17

107.9

76.9

November 2021
Commitment line of credit agreement concluded with
the Shiga Bank, Ltd. as the arranger
Credit line: 5.5 billion yen

60.0
45.7

0.91%

0.85%

0.77%

December 2021
Registered as an issuer of corporate bonds
Planned issue amount: 50 billion yen
Use of funds: C apital investment, investment andfinance funding, working funds, loan
repayments

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

18

ES-CON JAPAN Annual Report 2021

Expansion of Group System

Initiatives for Regional Revitalization

ES-CON JAPAN is steadily expanding its group structure and business areas through efforts such as the acquisition of Picasso Group in October 2021 and FUEL in January 2022 as subsidiaries.

Progress of Projects in Hokkaido[Real estate investment
management]

ES CON AssetManagement[Detached housing in
Saitama][Property management]

ES CON Property

ES CON CRAFT[Condominium
management][Detached housing in
Saitama]

ES CON Living
Service

ES CON Home

[Employment
placement][Sales of columbarium
using rights]

Implementation of Strategic M&A

ES CON Global
Works[Real estateleasing][Real estate
crowdfunding]

Picasso GroupFUEL

RyomonColumbarium

Making the Picasso Group a subsidiary(October 2021)

Making FUEL a subsidiary(January 2022)

Rapid progress on transforming revenue structure tosecure stable leasing revenues

Enhancing the asset management business andlaying the groundwork for future ventures into realestate finance• Total value of stock acquired: 30.5 billion yen• Employees: 18 vs. ES-CON JAPAN Group total 344 (as ofDecember 31, 2021)• Total of 50 billion yen raised through syndicated loan tofund the acquisition of stock and refinance existing loans

Picasso Group realestate portfolio

Value of real estate heldby ES-CON JAPAN Group(Based on total number ofproperties)(Total of inventory assets andproperty, plant and equipment)

17%
10%

Approx.

32%

Total:
81 properties

183 billion yen
As of Dec. 31, 2021

11%
62%

• Involved in various businesses, including the operation of
online investment funds that provide opportunities forindividual investors to invest in real estate or real estatebusinesses in small investment units• Alongside efforts to expand our business domains, rapidly
realizing the structures needed to allow us to tackle thechallenge of new businesses related to the digital transformation (DX) of real estate (e.g., use of security tokens
and crowdfunding*) five to ten years in the futureRealestateLending

Interest
and principal
repayment

Fund
operator

Investment

Investor

Dividends
and principal
repayment*Security tokens: Used to manage investments through issue of digital securities
using blockchain technology
Crowdfunding: Crowdfunding businesses

ES-CON JAPAN is participating in the urban development plan (ballpark plan) in “HOKKAIDO BALLPARKF VILLAGE,” a large-scale development area around “ES CON FIELD HOKKAIDO” (Kitahiroshima City,
Hokkaido), which is the new baseball stadium of the Hokkaido Nippon-Ham Fighters scheduled to open in
2023. Furthermore, we acquired the naming rights for the new stadium, and the name of the new stadium willbe “ES CON FIELD HOKKAIDO.”With the participation in this ballpark plan, the Hokkaido branch started operation in 2020. We will contribute to the revitalization and development of the entire region by cooperating in the promotion of sports andculture.
For-sale condominium “Le JADE Hokkaido Ballpark”
A project in a location which is approximately 80 mfrom the new stadium. Media reporting on the project
has been extensive - including newspaper articles and TV
programs - and the number of visits to the condominium
gallery exceeded 600. The first stage of sales saw all units
receive application the day of its commencement.

Senior residence
As a residence for active seniors with a medical mall in F
VILLAGE, it is scheduled to be completed in the springof 2024. It will contribute to health maintenance andlocal healthcare for people of all ages, from young people
to the elderly, as part of the sustainable urban development that creates a place for multi-generational exchange.

Access base to the ballpark JR Kitahiroshima Station“West Exit Area Revitalization Project”
Redevelopment of the west exit of Kitahiroshima Station.
We acquired the city-owned site in front of the station in
November 2021, and promote 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.

Rental condominiums, etc. 50 properties
Offices, etc. 9 properties
Picasso-related
Stores 8 properties(Approx. 59.1 billion yen)
Others 14 properties

19

20

ES-CON JAPAN Annual Report 2021

Progress of Projects in Iwaki, Nagasaki
Participation in the “Iwaki Station Namiki Street District Category I Urban Redevelopment Project”(Iwaki City, Fukushima Prefecture)
Started the “Namiki no Mori City” development
project, an integrated project of a residential building, commercial building and parking lot building,in February 2022.
This project will carry out redevelopment tocreate a further bustling atmosphere around thestation. For the residential building, the plan is todevelop a next-generation condominium that
anticipates multi-generation residences under measures such as establishing residential units with barrier-free specifications (55 units), as the highest
seismic isolation structure tower condominium inIwaki City named “Mid Tower Iwaki.”*Joint business with Hoosiers Holdings

Shin-Omura Ekimae City Owned Land Development Project (Omura City, Nagasaki Prefecture)
In March 2022, we concluded a basic agreement with Omura City, together with Daiwa House Industry Co.,
Ltd., and Izumi Co., Ltd., as a member of a business group composed of the three companies.
As Shin-Omura Station on the Nishi-Kyushu Shinkansen line is scheduled to open in September 2022, theproject is to develop condominiums, commercial facilities, etc. where residents and visitors from outside thecity can interact with each other in line with the town development policy of Omura City. The Company isscheduled to be engaged in development of condominiums in two blocks.

Take on the Challenges of New Business Domains
ES-CON JAPAN is promoting diversification of business contents by stating “growing new businesses into
core businesses” and “taking on the challenges of new business domains” in the Fourth Medium-Term
Management Plan. In January 2022, we established the Strategic Business Division, and by this, we are accelerating efforts for future generations.

Overseas Business Development
August 2021: Waikiki Galleria Tower, a Mixed-Use Facility in Waikiki, Hawaii
Participation and investment in value enhancement business
Invested and participated in the value enhancement business of theproperty that was done mainly by Black Sand Capital, LLC, a real estate
investment advisory company. Furthermore, as a business advisor to theproject, we provide advice and support on the development, design, andoperation and management of the entire property.
September 2021: Investment in Crow Holdings Realty Partners IX, L.P.
Invested in a real estate investment fund that invests in a wide variety of real estate fields across the U.S. centering on rental apartments and logistics facilities.
March 2022: Investment in Agya Ventures Fund L.P.
To further expand ES-CON JAPAN Group’s business domain and create innovation through efforts such as
strengthening information gathering on promising overseas real estate tech companies.
Fiscal 2021: Participated in Joint Condominium Development Projects in Bangkok, Thailand andCalifornia, U.S.

Participation in the Project of “Creating the World’s Most Advanced House Sphere with
3D Printer”
In December 2021, we entered into a business alliance 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 intend to apply Sphere’s technology to other fields
besides residence such as retail, office and warehouse in the future.
Development of Community-Based Commercial Facility “tonarie Hoshida (tentative name)”(Hirakata City, Osaka Prefecture)
The construction site is within the “Hoshida Station North Land Readjustment Project” (implementation areaof approx. 26.4 ha) area, where development of condominiums, detached houses, and industrial facilities suchas business establishments is planned in the vicinity, leading to the expectation for future prosperity. Development
started in March 2022 and the facility is scheduled to open in the spring of 2023 as the tenth facility in ourcommercial facility brand “tonarie” series.

21

Columbarium “Ryomon” - Providing After Life Residence ES-CON JAPAN has been promoting sales of permanent use rights of Ryomon, anurban-type columbarium in Minato Ward, Tokyo, since March 2021 in an effort tosolve problems facing modern society such as the fact that obtaining graves is considerably difficult, particularly in urban areas.

22

ES-CON JAPAN Annual Report 2021

Promotion of Development of Various Condominiums in Rare Locations

ESG Initiatives

In the condominium business, instead of simply expanding the number of units for sale, ES-CON JAPAN has
carried out various developments using the product planning ability that maximizes the value of purchased
land. Recently, we are actively promoting development in rare locations in particular, such as central Tokyo andresort areas.

Proactively Promote Initiatives to Solve Social Issues

Development Cases
Ost Residence Karuizawa (Karuizawa-machi,
Kitasaku-gun, Nagano) (33 units in total)
A development project taking advantage of a widelocation surrounded by the rich nature of Karuizawa
and having an area of over 15,000 m2. Contracted andsold out in November 2021.

One of our key management strategies is addressing social issues through promotion of ESG initiatives. The“ESG Promotion Group,” comprising members selected from each department and headed by the director in
charge of the President’s Office, and the “Health & Culture Fostering Team” for further promotion of healthmanagement, lead ESG initiatives.

ESG Management Promotion Structure
Board of Directors
President and Representative Director
Nomination and Remuneration Committee
President’s Office

Kanagawa Prefecture Miura-gun Hayama-machi
Project (tentative name)We have acquired two project sites in the area, and are promoting the development of condominiums thatmake the most of the rich natural environment such as Morito Beach.
Repro Shinbashi Project (tentative name) (Minato-ku, Tokyo)
A project in which a business site located near JR Shinbashi Station was acquired by eyeing the medium- tolong-term leasing and development business.
Le JADE Cross Chiyoda Jimbocho (Chiyoda-ku, Tokyo) (50 units in total)
New condominium with fixed-term leasehold to be developed on the land adjacent to the “Toho Gakkai Main
Building,” a historical building designated as an important property for scenic urban development in
Chiyoda-ku, Tokyo. Mixed-use project of residence and office in combination with the building.

Tokyo Minato Ward Nishiazabu 2-chome Project (tentative name)Condominium business (with some ordinary leasehold right) is being promoted at a location surrounded byareas representing Tokyo such as Minami-Aoyama, Omotesando, Hiroo and Roppongi.

23

ESG Promotion GroupE TeamS TeamLaunched in July 2021

G TeamHealth & Culture Fostering Team

Coordinate

Coordinate

Related departments

Basic Policy on Promoting ESG
Environment

SocialGovernance• Creating• Contributing to regional revitalization and• Enhancing timely, appropriate, and fair

new environmental value
through next generation urban development and other initiatives aimed at realizing a carbon-neutral society by 2050
• Promoting real estate development andbusiness activities that account for theenvironment above all else
• Creating environmental value and business value through taking on the challenges of new business domains based on
environmental themes

promoting the creation of local communities through urban development to create a
new and brighter future• Creating working environments in which
employees can demonstrate the best of
their abilities while engaging in rewarding
work and promoting diversity so that all
human resources can thrive• Contributing to solutions to social issues
in areas such as medical care and welfare in
response to declining birthrates and an
aging population; and supporting safe andcomfortable living in local areas• Promoting business development to realize
the SDGs globally through the development of overseas businessdisclosure of management information• Promoting a governance system to securestability, soundness, and transparency ofmanagement• Aiming to strengthen risk management inorder to respond to increasing risks due tothe expansion and diversity of businesses• Engaging in business activities based on arespect for the human rights of all in accordance with the Corporate Ethics Charter

Contributing to a sustainable society

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ES-CON JAPAN Annual Report 2021

Most Recent Major Topics

Specific Initiatives Implemented Until Now

Continuous and Proactive Development of Environmentally Friendly ZEH*-Compatible Housing
In November 2021, “Le JADE Yao Sakuragaoka,” a new condominium,
received the certification of “ZEH-M Oriented” boasting excellent heat insulation performance and contributing to the reduction of annual primary energy
consumption. This is our second ZEH condominium following “Le JADE
Okurayama,” which won the Good Design Award for Fiscal 2021.
We will continue to make the most of the development know-how of ageneral developer and proactively work on the development of environmentally
Le JADE Yao Sakuragaoka
friendly ZEH condominiums.

Environment• Joint research with the Kozo Takase’s lab team of the Tokyo University of Science*ZEH (Net Zero Energy House) is a house aiming to make the annual primary energy consumption zero by introducing renewable energy 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.

Disclosure Based on the Framework of the Task Force on Climate-Related Financial Information
Disclosures (TCFD)
After carrying out capacity building for management and all heads of departments and divisions by regarding
issues on climate change as one of the core strategies in management, we have discussed the risks and opportunities associated with climate change in the condominium sales business and the commercial facilities/revenue-generating real estate management business, mainly among heads of departments and divisions and ESG
Promotion Group members.
Based on the current significant risks and opportunities in our business, we plan to incorporate them asimportant factors in our future business strategy.
• December 2021 Implemented capacity building intended to increase knowledge concerning TCFD
Assess the importance of business risks and opportunities• April 2022

Select external scenarios and set ES-CON JAPAN’s scenarios• CASBEE real estate assessment earned
tonarie Fujimino• Eco Action 21 certification earned• Development of detached houses with abundant natural blessings and condominiums open to thecommunity• Le JADE Senri Aoyamadai wins Osaka eco-friendly construction award in the residential section
Social• Contribute to regional revitalization and creation of communities through development of community-based retail facilities “tonarie”• Promoting use of diverse human resources, including female and people with disabilities• Training of people to support those with cognitive disabilities• Support for placement of workers from overseas (ES-CON Global Works)• Contributing to Healthcare Support for WT1 cancer vaccine research, iPS cell research, etc.

Implementation schedule• March 2022

• Earned DBJ Green Building certification
tonarie Yamato-Takada/tonarie Toga-Mikita/tonarie Seiwadai/tonarie Minamisenri/Asumigaoka BrandNew Mall

• Investment in Ryukyu Football Club, which operates the FC Ryukyu J2 professional soccer team
• Utilizing the “Corporate Version of Hometown Tax” to support Kitahiroshima City, Hokkaido• June 2022	Disclose assessment of the financial impacts of important risks and opportunities on climatechange on ES-CON JAPAN’s business (planned)

Formulated the General Employer Action Plan Based on the Act on Promotion of Women’s Participation
and Advancement in the Workplace (2022-2024)
In March 2021, we received the Award for Excellence in the Environmental Human Resource Development
Corporate Awards 2020 (recognizing companies leading the way in developing environment-related humanresources) hosted by the Ministry of the Environment and the Environmental Consortium for Leadership
Development (EcoLeaD).

Governance• Timely disclosure of business activities and conditions• Secure diversity of the board of directors
Appointment of four independent directors (one of them is female)• Establishment of nomination and remuneration advisory committee• Initiatives for a succession plan called the candidate successor system
Appointment of eight employed executive officers in total• Establishment of CS Committee

Received “2 Stars” and “Green Star” in GRESB in 2021
[Details of the evaluated initiatives (review comments)]• The initiative of “Dementia Support Shopping Street”
for training dementia supporters involving tenants andemployees (at tonarie Seiwadai) is excellent.
• ZEH leads to the reduction of environmental burden.

• Establishment of Health & Culture Fostering Team• Establishment of new disclosure items in accordance with the amended Corporate Governance Codetonarie Seiwadai

25

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ES-CON JAPAN Annual Report 2021

Management: Directors, Auditors and Executive Officers

Tomohiko Egashira

Keiko Otsuki

Kenji Fujita

Takatoshi Ito

Minoru Nakanishi

Atsushi Kawashima

Takatoshi Ito President & Representative Director

Atsushi Kawashima Director

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

March

DecemberJanuary
October
OctoberJanuary

2019
2020
2020
2021
2022

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

2021

Masayoshi Nishitake

Keiko Otsuki Director
March

2021

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

Masayoshi Nishitake Full-Time Auditor [Director]
March

2020

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

Hiroto Mizobata Auditor [Director]
March
March
January

2015
2016
2020

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

Tadashi Fukuda Auditor [Director]
March

2020

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

Tomohiko Egashira Managing Executive Officer

August
June
March
May
AugustJuly
November
March

April
January
March

2002
2016
2017

July
October
March

2018
2021
2022

2011
2012
2013
2013
2013
2014
2014
2015

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

Tadashi Fukuda

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

Minoru Nakanishi Senior Managing Director

September 2016
March
2017

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

Executive Officers (*indicates concurrent with directorship)

Takatoshi Ito*

Tadashi Tanaka

Minoru Nakanishi*

Katsushi Wakayama

Tomohiko EgashiraMegumi Nakadozono

Kenji Fujita Director

Kenji Fujita*

Akira Mizunoya

March

2019

Wataru Orii

Tomohito Nakata

January

2020

Yoshiro Kato

Hiroyuki Yamato

December 2019
October
2020
October
2021

27

Hiroto Mizobata

Appointed Director at ES-CON JAPAN (present post)
Appointed Executive Officer (present post)
Appointed Head of General Affairs Department
Appointed Head of President’s Office (present post)28

ES-CON JAPAN Annual Report 2021

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

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

29

To create not just buildings but lifestyles, not just towns but interactions, that get more attractive the longer
people live there – these are the kinds of places we want to spread across Japan.
System of Corporate Governance
ES-CON JAPAN boasts an Audit Committee and a structure whereby the implementation, management,
supervision and auditing of work are overseen by the Board of Directors and the Audit Committee.
(1) Board of Directors
The board of directors consists of eight members: three executive directors, two non-executive directors, andthree directors who are also members of the audit committee. (In order to improve management supervisory
functions, the five directors who are non-executive directors or directors that are also members of the audit
committee are all outside directors, of which four are independent outside directors. The president and representative director serves as the board chair.)• In principle, the Board holds meetings at least once month where the management and auditing functions are heightened by vetting and discussing important items on the agenda.
• Speed and flexibility of operations are secured by entrusting the executive directors with related decisions in line with
our Articles of Incorporation. The scope to which decision-making is entrusted to individual directors is strictly managed in line with the monetary and other criteria stipulated by the Board of Directors. Furthermore, the status of vital
discussions and operations that have been entrusted to the director shall be reported to the Board of Directors without
delay.

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

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

30

ES-CON JAPAN Annual Report 2021

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

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

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

Osaka Head Office

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

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

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

Nagoya Office

Diagram of Corporate Governance Structure

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

General Meeting of Shareholders
Audit Committee
Board of Directors

Audit Committee OfficeNomination andRemuneration
Advisory Committee

Kyushu OfficeInternal Auditing Office

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

Accounting Auditor(s)Executive Entities
President

Hokkaido Office

Management Committee

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

Risk Management Committee
Departments

Established: April 18, 1995
Capital: 16,519 million yen (as of end of 2021)
Revenue: 79,017 million yen (consolidated; fiscal year ended December 2021)
Number of Employees: 344 (consolidated; as of end of 2021)
221 (non-consolidated; as of end of 2021)
Businesses: Real estate sale
Real estate leasing
Real estate planning, brokerage and consultation

31

32

ES-CON JAPAN Annual Report 2021

Property Spotlight
Le JADE Nishi-Akashi(Akashi City, Hyogo Prefecture) (77 units in total)[Condominium]- Favorable location enabling excellent access to Kobe, Osaka,
Tokyo, Kyushu and other areas. Accessible to “Hayashizaki Matsue
Beach” with a beautiful sandy beach by bicycle- A new landmark residence in Nishi-Akashi adopting an exterior
design with a motif of the railroad that symbolizes Nishi-Akashi and
the Akashi Kaikyo Bridge overlooking the east side.

Le JADE Senri Furuedai(Suita City, Osaka Prefecture) (71 units in total)[Condominium]- Enabling direct access to “Osaka Umeda” Station. The surroundingarea is a location suitable for raising children as it is within a ten-minute
walk from “Senri Chuo Park” and “Banpaku Memorial Park” with richnature.
- A comfortable living space adopting a wide span with all residences
facing the south and bringing sufficient sunlight into the rooms

Le JADE Senri Aoyamadai(Suita City, Osaka Prefecture) (152 units in total)[Condominium]- A location with high transportation convenience enabling smooth
access to the center of Osaka such as Tennoji, Namba and Umeda. The
surrounding area is a location blessed with rich nature and a variety ofactivities

Le JADE Yamatotakada Ekimae(Yamatotakada City, Nara Prefecture)(205 units in total)- Realized an open view with full of greenery by making all residences
face the south and overlook a green space.

[Condominium]- Received the “2021 Osaka Environmentally Friendly ArchitectureAward Residential Category” (sponsored by Osaka Prefecture andOsaka City) for the first time for ES-CON JAPAN- Directly connected to “tonarie Yamatotakada,” a community-based commercial facility which we developed, andthe nearest station with a pedestrian deck.
- A living space with a variety of common use spaces andsoft services such as party rooms, kids’ rooms, guestrooms, study rooms, trunk rooms and concierge
counters.

Le JADE Mukonoso Honmachi(Amagasaki City, Hyogo Prefecture)(33 units in total)

Le JADE Suma Myohoji Ekimae(Kobe City, Hyogo Prefecture) (40 units in total)[Condominium]- Located only a one-minute walk from the nearest station. The surrounding area offers a residential environment suitable for raising children andwhere commercial, medical, cultural and educational facilities concentratecompactly.

[Condominium]- Realized a residential plan of having all residences facing the south at asite with open spaces on four sides, offering abundant independence.

- Location with high transportation convenience enabling
direct access to both Osaka and Kobe. The surroundingarea is close to the Mukonoso residential district, which
was developed by using the urban planning in the U.K. asa model.

Le JADE Nagai Koen Dori(Sumiyoshi-ku, Osaka City) (108 units in total)- High-quality living space with a long-lasting aesthetic
design realized by using custom-made bricks focusing
on materials for the exterior and entrance hall

[Condominium]- Favorable location enabling direct access to major stations in Osaka and Kyoto
Prefectures. The surrounding area has various convenient facilities for daily life
such as commercial facilities, restaurants, medical facilities and financial
institutions.
- Approximately 57% of the site is forest area (vacant land), and seasonal plants
are arranged to create a space where people can relax and enjoy the greenery.

33

34

ES-CON JAPAN Annual Report 2021

Le JADE Neyagawa Koen
(Neyagawa City, Osaka Prefecture) (60 units in total)[Condominium]- Enabling smooth access to major stations in Osaka. The surroundingarea is within the “Eastern Osaka Urban Planning Project
Uchiagetakatsukacho Land Readjustment Project” area, and a location in which further development is expected.
- A living space with abundant lighting and ventilation, excellent views
and a feeling of openness, pursuing a comfortable living environment

Grand Le JADE Shirakabe Getsuronotei(Nagoya City, Aichi Prefecture)(24 units in total)[Condominium]- A historically rare and valuable residential district facing“Shirakabechosuji,” a street in the “Nagoya City Shirakabe,
Chikara and Shumokucho Townscape Preservation
District” which flourished as a samurai residence district
since the Edo period and where a favorable landscape wasinherited.

Le JADE Ibaraki Higashichujo(Ibaraki City, Osaka Prefecture) (40 units in total)- A dignified design with a style of both samurai residences
and modern architecture that blends into the landscape of
the “Shirakabechosuji.”[Condominium]- Enabling direct access to both “Osaka” and “Kyoto” within 20 minutes. The
area surrounding the nearest station is the core area in Ibaraki City with a concentration of commercial, cultural and administrative facilities.

Le JADE Tennoji Katsuyama(Tennoji-ku, Osaka City) (39 units in total)- Making all residences face the south towards an open plaza and adopting an
out-pole design that keeps pillars out of the rooms.

[Condominium]- Enabling direct access to major central areas such as Tennoji,
Kyobashi and Osaka Stations. The surrounding area is an attractive location enabling people to live in a major commercial zone in
Osaka- Pursuing a comfortable life for residents by making all residences face the south and having three residences on each floor.

Ost Residence Karuizawa(Karuizawa-machi, Kitasaku-gun, Nagano Prefecture)(33 units in total)

Le JADE City Hyotanyama(Higashiosaka City, Osaka Prefecture)(232 units in total)[Condominium]- A location enabling smooth access to major stations in Osaka. It
is a large-scale integrated residential and commercial development project, and supermarket “mandai” has been establishedon the adjacent site.
- A landmark residence that will become a new base of bustling
activities as an integrated residential and commercial development, befitting the name “Le JADE City” which includes themeaning of “town.”

35

tonarie CREO
(Tsukuba City, Ibaraki Prefecture)[Commercial Facilities][Condominium]- A community-based commercial facility that opened after converting the first to third floors into a commercial facility and the fourth tosixth floors into offices.

- Although it is located in a resort area blessed with rich nature, it is only aneight-minute drive to Karuizawa Station, which is accessible in about an hourfrom Tokyo. The surrounding area is located in the “Minami-Karuizawa
area,” and is surrounded by rich nature with a view of Mount Asama.

- The facility is directly connected to Tsukuba Station and has a structure that maximizes the value of its location in front of the station,
attracting people for the first time in approximately five years andcontributing to the revitalization of the Tsukuba Station area.

- Adopting a space design that enables residents to enjoy the universal
beauty of nature itself, aiming to enhance the common areas such as the“Garden Terrace,” “Chef’s Kitchen” and “Library Lounge” and providing
high-quality living space for residents to spend a precious time.

- 218 units of “Le JADE Tsukuba station Front,” a condominium
directly connected with a pedestrian deck, were contracted and soldout at an early stage in four months after the start of sales (scheduled
to be delivered in November 2022).

tonarie Minami-Senri Annex(Suita City, Osaka Prefecture)[Commercial Facilities]- Reopened commercial facility “AEON Minami-Senri Store” as a community-based shopping center “tonarie Minami-Senri Annex” by utilizing thedevelopment know-how of commercial facilities, etc. in which we havestrengths based on the fact that there are many residences in the surrounding area and that commercial facilities with stores that handle daily
necessities such as food and daily goods are required by the people in theneighborhood.
- Operated as a facility that can be used by local residents on a daily basis,
with a variety of stores including food supermarkets, clothing and household goods stores, cafes, home appliance stores and clothing stores.

36

ES-CON JAPAN Annual Report 2021

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

Operating Results
For Fiscal 2021, ES-CON JAPAN achieved net sales of 79,017 million yen (up 2.2% from the previous consolidated fiscal
year), operating income of 10,381 million yen (down 14.9%), ordinary income of 9,099 million yen (down 18.5%), andprofit attributable to owners of parent of 5,961 million yen (down 22.2%).
Sales

Operating Income/Ordinary Income(Unit: million yen)

72,106
72,106

Management Discussion and Analysis

44,72444,72477,30877,30879,01779,017(Unit: Operating
million yen)
IncomeOperating
IncomeOrdinary Income
Ordinary Income

54,32554,325
7,042
5,988
7,042
5,988

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

Overview
In the fiscal year under review (fiscal year ended December 2021, or Fiscal 2021), despite concerns over the sixth wave of
COVID-19, the Japanese economy saw progress towards the normalization of social and economic activities such as therecovery trend of consumer spending. Due to concerns over the spread of COVID-19 variants in Japan and abroad, carefulattention should be paid to the fluctuation of the Japanese economy and overseas economies through supply chains as wellas the financial and capital markets and the impact of currency movement.
In the real estate industry, the real estate market remained strong as the policies and measures related to tackling COVID19 and monetary easing measures continued. However, depending on the status of the spread of infection by COVID-19
variants, it is extremely difficult to forecast the future trend of real estate market when assuming that corporate performance and consumer spending trends will change.
Despite such business environment, we formulated “IDEAL to REAL 2023,” the fourth medium-term management plan,for the three-year period from the fiscal year ended December 2021 through the fiscal year ending December 2023, andwill promote businesses by setting “Establishing business foundations able to withstand unexpected changes in economic
conditions” and “Simultaneously changing the revenue structure and expanding business domains” as management strategies based on the theme of “Transformation and Rapid Progress.”
We implemented a capital increase through third-party allotment with Chubu Electric Power Co., Inc. (hereinafter“Chubu Electric Power”) as the allotee on April 5, 2021, and ES-CON JAPAN became a consolidated subsidiary of
Chubu Electric Power. As a result, we dramatically increased our corporate credit standing, acquired credit ratings of “A-”(stable) from Rating and Investment Information, Inc. and “A” (stable) from Japan Credit Rating Agency, Ltd., andestablished a stable fundraising base.
Against the backdrop of such creditworthiness, we acquired all shares of Picasso Co., Ltd., which owns numerous outstanding income-generating properties, and its seven group companies in October 2021 in order to rapidly move ahead
with the strategy of “changing the revenue structure” = “securing stable leasing income.” Furthermore, we concluded acontract on the acquisition of the entire share of FUEL Inc., whose businesses include managing online funds and providing computer systems to crowdfunding businesses, and made it a subsidiary on January 21, 2022, with an aim to significantly contribute to the expansion of the ES-CON JAPAN Group’s business domain as preparation for future participationin real estate financial business.
As for the business performance for Fiscal 2021, although profits decreased year on year mainly as a result of recording
segment loss in the real estate planning agency and consulting business due to the burden of prior expenditure of advertising expenses in the columbarium sales business, the above “change in revenue structure” was realized.

37

FiscalFiscal2017
2017

FiscalFiscal2018
2018

FiscalFiscal2019
2019

FiscalFiscal2020
2020

FiscalFiscal2021
2021

FiscalFiscal2017
2017

FiscalFiscal2018
2018

FiscalFiscal2019
2019

Net Income Attributable to Parent

Per Share Information(Unit: million yen)

(Unit: yen)

7,226
7,226

8,155
8,155

7,663
7,663
5,961
5,961

5,456
5,456

FiscalFiscal2017
2017

Net Assets
Net Assets
IncomeNet Income

315.14315.1481.77
81.77

FiscalFiscal2018
2018

FiscalFiscal2019
2019

FiscalFiscal2020
2020

FiscalFiscal2021
2021

Results by Segment

FiscalFiscal2017
2017

400.47400.47105.98105.98

FiscalFiscal2018
2018

In the real estate sales business, activities including selling ofcondominiums and revenue-generating real estate resulted
in net sales of 70,334 million yen (down 1.6% from theprevious fiscal year) and segment income of 13,039 million
yen (down 8.5%).

Real estate leasing business

FiscalFiscal2019
2019

563.07563.07111.94111.94

FiscalFiscal2020
2020

FiscalFiscal2021
2021

657.50657.50

67.48
67.48

FiscalFiscal2021
2021

Sales Distribution Ratio by Segment
0.4%

Real estate sales business490.08490.08119.17119.17

FiscalFiscal
2020
2020

7.1%

0.8%
10.2%

Fiscal2020

92.5%

Fiscal2021

89.0%

Real Estate Sales Business
Real Estate Leasing Business
Real Estate Planning Agency and Consulting BusinessIn the real estate leasing business, we secured rental incomeof revenue-generating real estate by making Picasso andseven other group companies our subsidiaries and focused on leasing activities and the property management business inview of enhancement of asset value of owned revenue-generating real estate. As a result, net sales were 8,090 million yen(up 46.4%) and segment income was 3,372 million yen (up 41.6%).

38

ES-CON JAPAN Annual Report 2021

Real Estate Sales Business

Real Estate Leasing Business(Unit: million yen)

(Unit: million yen)

Net Sales
Segment Income

Net Sales
Segment Income

71,48566,71070,334

14,257

13,802

5,022

13,0393,001

Real Estate Planning Agency
and Consulting Business(Unit: million yen)
Net Sales
Segment Income

8,090

5,527

592

Overview of Consolidated Balance Sheet

Fiscal 2020 (as of December 31, 2020) Total assets: 149,423
Assets: Non-current assets: 27,306

286

2,381

Current assets: 122,117

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

372
3,372

295
152

(Unit: million yen)

Cash and deposits:
Real estate for sale:
Real estate for sale in process:Liabilities and Net assets: 38,627 Non-current liabilities: 70,982 Current liabilities: 39,813
net assets: Shareholders’ Long-term loans
Short-term loans payable: 2,907
equity: 38,454

payable: 69,274

Current portion of
long-term loans payable: 26,093
Current portion of bonds:
230

∆516
Fiscal
2019

Fiscal
2020

Fiscal2021

Fiscal
2019

Fiscal
2020

Fiscal2021

Fiscal
2019

Fiscal2020

23,8706,262
82,316

Fiscal2021

Fiscal 2021 (as of December 31, 2021) Total assets: 252,771
Assets:Real estate planning agency and consulting businessIn the real estate planning agency and consulting business, we took full advantage of our planning and multifaceted business development capabilities to actively engage in planning, consulting, and other services on consignment. However,
due to the delay in the sales plan mainly caused by the impact of the spread of COVID-19 in the columbarium businessand upfront advertising expenditures, net sales were 592 million yen (up 100.6%) and segment loss was 516 million yen(segment income of 152 million yen in the previous fiscal year).

Total assets
increased by
103,348
million yen

Non-current assets: 75,830

Current assets: 176,859

Property, plant and equipment: 52,778
Intangible assets:
8,275
Investments and other assets: 14,776
Net assets: 62,628
Liabilities andnet assets: Shareholders’equity: 62,445

Cash and deposits:
33,667
Real estate for sale:
7,541
Real estate for sale in process: 123,419

Non-current liabilities: 87,619
Long-term loans
payable: 76,533

Current liabilities: 102,523
Short-term loans payable: 3,589
Current portion of
long-term loans payable: 82,912
Current portion of bonds:—

Analysis of Financial Position
Status of Cash Flows
Assets, Liabilities and Net Assets
Assets at the end of Fiscal 2021 increased by 103,348 million yen compared with the end of the previous fiscal year to252,771 million yen. This was mainly attributable to cash and deposits, inventories and non-current assets increasing by
9,796 million yen, 42,381 million yen and 48,523 million yen, respectively.
Liabilities increased by 79,347 million yen compared with the end of the previous fiscal year to 190,143 million yen. Thiswas mainly attributable to long-term loans payable, short-term loans payable and bonds increasing by 64,529 million yen.
Net assets increased by 24,000 million yen compared with the end of the previous fiscal year to 62,628 million yen. This
was attributable to cash dividends paid of 2,645 million yen, while recording profit attributable to owners of parent of
5,961 million yen as well as the increase in capital and capital reserve by 10,235 million yen each with the capital increase
through third-party allotment. As a result, the equity ratio was 24.8% (25.8% at the end of the previous fiscal year).

Cash and cash equivalents (“net cash”) in Fiscal 2021 increased by 9,760 million yen compared with the end of the previous fiscal year to 33,559 million yen (23,798 million yen at the end of the previous fiscal year). The following outlines the
cash flows and the factors of changes in cash flows in Fiscal 2021.

Cash flows from operating activities
Cash flows from operating activities in Fiscal 2021 amounted to net cash used in operating activities of 10,810 million yen(net cash provided by operating activities of 119 million yen in the previous fiscal year). This was mainly attributable tothe increase in inventories of 19,306 million yen and income taxes paid of 3,419 million yen, despite the recording of
profit before income taxes of 9,099 million yen, increase in advanced received of 3,419 million yen.

Cash flows from investing activities
Total Assets/Net Assets

252,771(Unit: million yen)Interest-bearing Liabilities

163,034(Unit: million yen)

Total Assets
Net Assets

132,696

149,423

109,747
56,54486,43570,66185,01998,506

Cash flows from financing activities

62,62839

21,43327,35933,546

38,627

Fiscal2017

Fiscal2018

Fiscal
2019

Fiscal
2020

Fiscal2021

Fiscal2017

Fiscal2018

Cash flows from investing activities in Fiscal 2021 amounted to net cash used in investing activities of 29,721 million yen(net cash used in investing activities of 9,732 million yen in the previous fiscal year). This was mainly attributable topurchase of investment securities of 2,265 million yen, purchase of non-current assets of 4,763 million yen and purchaseof shares of subsidiaries resulting in change in scope of consolidation of 24,070 million yen.

Fiscal
2019

Fiscal
2020

Fiscal2021

Cash flows from financing activities in Fiscal 2021 amounted to net cash provided by financing activities of 50,293 million
yen (net cash provided by financing activities of 11,007 million yen in the previous fiscal year). This was mainly attributable to proceeds from and repayments of long-term loans payable and short-term loans payable amounting to net proceedsof 32,611 million yen, proceeds from issuance of shares of 20,361 million yen and payment of cash dividends of 2,645
million yen.

40

ES-CON JAPAN Annual Report 2021

Consolidated Balance Sheet(Unit: million yen)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
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

41(Unit: million yen)

Fiscal 2020

Fiscal 2021

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)(as of December 31, 2020)(as of December 31, 2021)

2,907
26,093
230
0
1,590
1,460
2,233
4,583
713
39,813

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

69,274
—
2
135
46
260
1,262
70,982
110,795

76,533
2
8,056
135
57
270
2,564
87,619190,143

6,284
2,088
31,429(1,348)38,454

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

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

371
(36)
334
0
(152)
62,628
252,771

23,870927
6,262
82,3168,739(0)122,11733,667835
7,541
123,419
11,396(0)
176,859

4,359
(889)
3,470
6
(6)
0
11,262
4
(4)
0
1
321
(180)
141
14,87623,312(1,516)
21,7956(6)
030,840
2
(0)
2
—
377
(238)
139
52,778

339
63
403

8,217
57
8,275

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

6,186
2,467
227
5,932
(37)
14,77675,830——149,423

81
81
252,771

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

42

ES-CON JAPAN Annual Report 2021

Consolidated Statement of Income andConsolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Income

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

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
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitLoss attributable to non-controlling interests
Profit attributable to owners of parent(Unit: million yen)

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

77,30857,62819,67979,01758,42920,588

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

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

16
93
19
—
—
26
155

10
101
37
73
54
25
303

1,047
—
109
37
1,194
11,164

1,463
27
—
95
1,585
9,099

0
0
0

0
0
0

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

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

Consolidated Statement of Comprehensive Income43

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

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

(Unit: million yen)

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

7,654

5,770

(103)
0

218
(8)

(18)
(121)
7,533

(9)
199
5,970

7,541
(8)

6,161
(190)

(Unit: million yen)

Shareholders’ equity

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

(Unit: million yen)

Accumulated othercomprehensive income
Total
Sub­
Valuation Foreign
Total
accumu- scription NonTotal difference currency
Trea­
lated rights to controlling net
share- on avail- translaCapital Capital Re­tainedsury
other shares interests assets
stock surplus earnings
holders’ able-for- tion
sharescompreequity
sale
adjusthensive
securities ment
incomeBalance at beginning of current period 6,284 2,088 31,429 (1,348) 38,454
153
(18)
134
1
37 38,627
Changes of items during period
Issuance of new shares
10,235 10,235
20,47020,470
Dividends of surplus(2,645)(2,645)(2,645)
Profit attributable to owners of parent
5,961
5,961
5,961
Disposal of treasury shares
73
132
205
205
Net changes of items other than
218
(18)
199
(0)
(190)
9
shareholders’ equity
Total changes of items during period 10,235 10,308 3,316
132 23,991
218
(18)
199
(0)
(190) 24,000
Balance at end of current period
16,519 12,396 34,745 (1,216) 62,445
371
(36)
334
0
(152) 62,628
Shareholders’ equity

44ES-CON JAPAN Annual Report 2021

Consolidated Statement of Cash Flows

Notes to Financial Statements

(Unit: million yen)

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Amortization of long-term prepaid expenses
Amortization of share issuance cost
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for directors’ share-based benefits
Increase (decrease) in provision for share-based benefits
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)Share of loss (profit) of entities accounted for using equity method
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in inventories
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable - other
Decrease/increase in consumption taxes receivable/payable
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from withdrawal of investment securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Proceeds from purchase of shares of subsidiaries resulting inchange in scope of consolidation
Purchase of shares of subsidiaries resulting in change in scope of
consolidation
Payments of loans receivableCollection of loans receivable
Repayments of guarantee deposits received
Proceeds from guarantee deposits received
Payments for investments in capital
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of bonds
Repayments of lease obligations
Repayments of installment payables
Proceeds from issuance of common shares
Proceeds from 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
45

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

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

9,099
706
237
27
27
(0)
—
10
(111)
1,463
(73)
(54)
(0)
0
107
(19,306)
(894)
366
(416)
3,575
439
(1,221)169(5,848)181(1,723)(3,419)(10,810)(18)
19(1,913)9717(6,555)86(15)
18(2,265)—0(4,763)
121

91

—

—
(2,930)
500
(983)
1,244
(2)
(9,732)(24,070)(8)
647(1,120)
1,732—(29,721)

8,018(9,690)62,166(46,917)
(40)
(1)
(31)
18
207
(233)
(2,488)11,007(8)
1,385
22,413
23,7986,539(5,857)111,250(79,320)
(230)
(1)
(5)
20,361203—(2,645)50,293(1)
9,760
23,79833,559

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

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

3. Summary of Significant Accounting Policies(1) Consolidation

The Company has sixteen consolidated subsidiaries as of December 31, 2021, as follows:
ES-CON Property Ltd.
ES-CON Asset Management Ltd.
ES-CON Living Service Ltd.
ES-CON Home Ltd.
ES-CON Craft Ltd.
ES-CON Global Works Ltd.
Ryomon Co., Ltd.
Picasso Co., Ltd.
Yuki Sangyo Co., Ltd.
Venus Corporation Co., Ltd.
Cubic Co., Ltd.
Santa Co., Ltd.
Hirano Bussan Co., Ltd.
Aria Co., Ltd.
Eikaku Y.K.
ESCON JAPAN (Thailand) CO., LTD.
46

ES-CON JAPAN Annual Report 2021

Picasso Co., Ltd., Yuki Sangyo Co., Ltd., Venus Corporation Co., Ltd., Cubic Co., Ltd.,
Santa Co., Ltd., Hirano Bussan Co., Ltd., Aria Co., Ltd. and Eikaku Y.K., which theCompany made its subsidiaries by acquiring their shares in the fiscal year ended December
2021, were included in the scope of consolidation.
Of these consolidated subsidiaries, the accounting period of ESCON JAPAN (Thailand)CO., LTD. ends on November 30. In preparing the accompanying financial statements,
its financial statements as of the date are used, while making necessary adjustments formaterial transactions that took place between December 1 and December 31, the day forsettlement of consolidated accounts.
Furthermore, ESCON USA LLC, ESCON USA II LLC and ESCON USA III LLC are
not included in the scope of consolidation as they are small companies and their total
assets, net sales, net income/loss (equivalent to the Company’s equity interest) andretained earnings (equivalent to the Company’s equity interest), etc. do not pose any
material impact on the consolidated financial statements.
(2) Equity-method affiliates

The Company has two equity-method affiliates, as follows:
ORIGIN KNIGHTSBRIDGE THEPHARAK CO., LTD.
TSUNAGU Community Farm LLC(4) Depreciation method forsignificant depreciable
assets2) Intangible assets (excluding leased assets)
Software for internal use is amortized using the straight-line method over the useful lives(5 years) estimated by the Company.
Trademarks are amortized using the straight-line method over 10 years.
3) Leased assets
For finance leases without any transfer of ownership of leased assets, the straight-line
method is adopted with a residual value of zero, deeming the lease period to be equal tothe useful lives of the assets.
(5) Standards for recording
significant allowances

TSUNAGU Community Farm LLC, which had been newly established in the fiscal year
ended December 2021, was included in the scope of equity-method accounting.
Furthermore, ESCON USA LLC, ESCON USA II LLC, ESCON USA III LLC andNishiguchi Building Management Co., Ltd. are not included in the scope of equity-method accounting as their net loss (equivalent to the Company’s equity interest) andretained earnings (equivalent to the Company’s equity interest), etc. do not pose any
material impact on the consolidated financial statements and they are of little importanceas a whole.
(3) Valuation standard andmethod for significant
assets1) Securities
Other securities
Securities with fair value are stated using the market price method based on the market
price, etc. at the end of the fiscal year (valuation difference is directly charged to shareholders’ equity, and selling costs are calculated by using the moving-average method).
Securities without fair value are stated by the cost method using the moving-averagemethod.
However, equity interests in silent partnership, etc. are stated at their net asset value. As
for income and losses from silent partnership, etc., the net amount of income or losses
equivalent to the equity interests are recorded as net sales or cost of sales, respectively,
with the relevant investment securities set as corresponding accounts.
2) Inventories
Real estate for sale is stated using the cost method (the value on the balance sheet is calculated using the method of reducing book value due to a decline in profitability).
Real estate for sale in process is stated using the cost method at net asset value (the valueon the balance sheet is calculated by using the method of reducing book value due to a
decline in profitability).

471) Property, plant and equipment (excluding leased assets)
The declining-balance method is applied.
However, the straight-line method is applied to buildings (excluding facilities attached tobuildings) acquired on or after April 1, 1998 and facilities attached to buildings andstructures acquired on or after April 1, 2016.

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

(6) Standards for conversionof significant assets or
liabilities denominatedin foreign currencies into
Japanese yen

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

(7) Method and period ofamortization of goodwill

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

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

The funds (cash and cash equivalents) in the consolidated statement of cash flows consistof cash on hand, deposits that can be withdrawn at any time, and short-term investmentswith a maturity of 3 months or less from the date of acquisition, which are readily convertible to cash and bear only an insignificant risk of changes in value.
48

ES-CON JAPAN Annual Report 2021

(9) Other significant items
fundamental topreparing the financial
statements

1) Share issuance costs
Share issuance costs are amortized utilizing the straight-line method over three years.
2) Accounting for consumption taxes
Consumption taxes are excluded from the transaction amounts. Non-deductible consumption taxes are recorded as expenses for the relevant consolidated fiscal year.
3) Accounting principles and procedures adopted in cases when provisions of relevant
accounting standards are not clear
With regard to recording of advertising expenses, etc., selling expenses including advertising expenses that accrued before delivery of products in the condominium sales businessshall be recorded as prepaid expenses, to be expensed in a lump-sum at the time of delivery, in order to appropriately match cost with revenue in the condominium sales
business.
(Additional information)
The Company adopted the Accounting Standard for Accounting Policy Disclosures,
Accounting Changes and Error Corrections (ASBJ Statement No. 24 (revised 2020)
issued by ASBJ on March 31, 2020, starting with the consolidated financial statements asof the end of the fiscal year ended December 2021, and disclosed the “accounting principles and procedures adopted in cases when provisions of relevant accounting standards
are not clear.”

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

(Unit: million yen)

Fiscal 2021
(as of December 2021)

Long-term prepaid expenses (exclusive sales right of permanent use rights)

3,968

Long-term loans receivable related to columbarium business

2,400(2) Information on the nature of significant accounting estimates for identified items
Ryomon Co., Ltd., a consolidated subsidiary, started sales of permanent use of columbarium in the fiscal year ended
December 2021. Impacted by the spread of COVID-19 infection, the business posted an operating loss, and there aresigns of impairment for non-current assets and delays in collection of long-term loans receivable at the company. Judgement
whether to recognize impairment loss has been made based on the future cash flows in accordance with the business plans
prepared on the premise of the current business environment, and the Company considers that there is no need to recognize any impairment loss as future cash flows before discount surpasses the book value of non-current assets. In addition,
cash-flow plans of the borrowers have been investigated based on the said business plans, and the Company considers that
long-term loans receivable are also collectible. Anticipated sales volume and the sale price have been estimated on thepremise that, as a material assumption of the said business plans, the impact of the spread of COVID-19 will continue
going forward.
Furthermore, the estimated future cash flows based on the business plans are highly uncertain, and if they need to berevised due to such factors as future economic trends, interest rate trends and changes in the business environment, it may
cause a material impact on the financial statements of the following fiscal year and thereafter through recording of impairment loss and allowance for doubtful accounts.

[Significant Accounting Estimates](Changes in Accounting Policies)

1. Inventory Valuation(1) Amount recorded on the financial statements for the fiscal year ended December 2021

(Unit: million yen)

Fiscal 2021
(as of December 2021)

Real estate for sale
Real estate for sale in process

7,541
123,419(2) Information on the nature of significant accounting estimates for identified items
Real estate for sale, etc. is estimated using the specific identification method under the cost approach (the method to
reduce the book value due to lower profitability). Valuation loss of inventories are recorded when the net realizable value
calculated based on sales plans, etc. falls below the acquisition cost. The net realizable value is obtained by deducting
estimated additional construction cost and estimated direct selling expenses from anticipated sales value.
The important assumptions in estimating the net realizable value are the estimates of sale price, cost of completed workand direct selling expenses in for-sale condominium projects, and the estimates of NOI (Net Operating Income) andcapitalization rate in income-generating real estate projects. As for the impact of the COVID-19 pandemic, the Company
anticipates that the impact on the real estate market conditions is limited, although it will continue over a long term.
Furthermore, if the net realizable value of for-sale real estate, etc. drops significantly due to such factors as future economic
trends, interest rate trends and worsening of the real estate market conditions, it may cause a material impact on thefinancial statements of the following fiscal year and thereafter through recording of valuation loss of inventories.

49

Not applicable[Unapplied Accounting Standard and Implementation Guidance]
1. Accounting Standard for Revenue Recognition, etc.
• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 (revised 2020); March 31, 2020)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30 (revised 2020);
March 31, 2020)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19 (revised2020); March 31, 2020)(1) Overview
The International Accounting Standard Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) havejointly developed the comprehensive accounting standard for revenue recognition, and have published “Revenue fromContracts with Customers” (IFRS No. 15 issued by IASB and Topic 606 issued by FASB) in May 2014. As IFRS No. 15
is effective for annual periods beginning on or after January 1, 2018 and Topic 606 is effective for annual periods beginning after December 15, 2017, ASBJ has developed the comprehensive accounting standard for revenue recognition, andannounced it along with the implementation guidance.
As a basic policy to develop the accounting standards for revenue recognition, ASBJ decided to incorporate the basic
principles from IFRS No. 15 in order to ensure the comparability among Financial Statements based on IFRS, U.S. GAAP

50

ES-CON JAPAN Annual Report 2021

and Japanese GAAP. The comparability between the financial statements is one of the benefits of the consistency withIFRS No. 15. In addition, in the case there is an item where consideration should be given to special treatment in Japan,
the alternative treatment is accepted to the extent consistency is maintained.

provides notes on [Significant Accounting Estimates] in the financial statements.
However, in accordance with the transitional treatment stipulated in the Proviso of Paragraph 11 of the Accounting, thenote on the matter for the previous fiscal year is not provided.

(2) Scheduled date of the application
The Company will adopt the Accounting Standard for Revenue Recognition, etc. from the beginning of the fiscal year
ending December 31, 2022.

(Additional Information)(3) Impact of the application of the respective Accounting Standard and Implementation Guidance
The impact on the consolidated financial statements from adoption of the Accounting Standard for Revenue Recognition,etc. is currently being assessed.

2. Accounting Standard for Fair Value Measurement, etc.
• Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30; July 4, 2019)• Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31; July 4, 2019)• Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9; July 4, 2019)• Accounting Standard for Financial Instruments (ASBJ Statement No. 10; July 4, 2019)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19; March 31,
2020)(1) Overview
IASB and FASB have established detailed guidance for fair value measurement (IFRS 13 “Fair Value Measurement” underthe International Financial Reporting Standards and Topic 820 “Fair Value Measurement” of the Accounting Standards
Codification under the U.S. accounting standards) containing almost the same content. In light of this, the ASBJ worked
to secure consistency of the Japanese accounting standards with the international accounting standards, mainly in termsof the guidance on and disclosure of the fair value of financial instruments, and announced the Accounting Standard for
Fair Value Measurement, etc.
The basic policy of ASBJ for the development of the Accounting Standard for Fair Value Measurement was to adopt all
provisions of the IFRS 13 as a rule by using a unified calculation method, from the viewpoint of improving the comparability between the financial statements of the Japanese and foreign companies. Moreover, in consideration of the practices
conducted in Japan to date, ASBJ determined to establish other treatments for individual items, to the extent that they do
not greatly harm the comparability between the financial statements.
(2) Scheduled date of adoption
The Company will adopt the Accounting Standard for Fair Value Measurement, etc. from the beginning of the fiscal year
ending December 31, 2022.
(3) Impact of the application of the accounting standard, etc.
The impact on the consolidated financial statements from adoption of the Accounting Standard Fair Value Measurement,
etc. is currently being assessed.

(Changes in Presentation)(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 is referred to as “board
benefit trust for executives”) at the Regular General Meeting of Shareholders held on March 20, 2015, with an aim tofurther clarify the relationship between remuneration for company directors (excluding outside directors, auditors andnon-executive directors) and (authorized) executive managing officers (the “Directors, etc.”; Hereinafter referred 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 as shareholders in relation to a fall in shareprice, thereby increasing awareness of contribution to the medium- to long-term improvement of operating results andenhancement of corporate value. Furthermore, ES-CON JAPAN passed a resolution for continuation and partial
revision of the System for the Directors, etc. at the Regular 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 a trust with thetrust acquiring shares of ES-CON JAPAN with the said money as capital, and shares of ES-CON JAPAN and the fairmarket 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 thesaid Director, etc. retires from all positions such as director in principle.
Under the System, for a set period of three fiscal years from the fiscal year ended December 2021 to the fiscal year
ending December 2023 as well as each subsequent period of three fiscal years, ES-CON JAPAN will contribute money
up to 330 million yen (110 million yen per fiscal year multiplied by the number of target fiscal years) to the trust.
2) Total number of shares to be granted to the Directors, etc.
• Resolution passed at the Regular 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 Regular General Meeting of Shareholders held on March 26, 2020
Upper limit of funds for acquisition of shares (for the three fiscal years from the fiscal year ended December 2020 tothe fiscal year ending December 2022, and each subsequent period of three fiscal years): 330 million yen• Resolution passed at the Regular 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.

(Adoption of Accounting Standard for Disclosure of Accounting Estimates)
The Company adopted the Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31; March
31, 2020), starting with the consolidated financial statements as of the end of the fiscal year ended December 2021, and

51(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 the book value in52

ES-CON JAPAN Annual Report 2021

the trust (excluding the amount of incidental expenses). The book value of the treasury shares and the number of shares is
347 million yen and 851,000 shares for the previous fiscal year, and 347 million yen and 851,000 shares for the fiscal year
under review.

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

(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 trust (the “System”; Thetrust established based on the trust agreement concluded with Resona Bank, Limited for the System is referred to as“Share-Based Payment ESOP” ) at the Regular General Meeting of Shareholders held on March 20, 2015, with an aim tofurther enhance the benefit program for its employees and raise their motivation and morale for improving the share priceand operating results.
The System is a system by which ES-CON JAPAN contributes money to a trust 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 the book value inthe trust (excluding the amount of incidental expenses). The book value of the treasury shares and the number of shares is
59 million yen and 233,000 shares for the previous fiscal year, and 57 million yen and 225,700 shares for the fiscal year
under review.

4. Notes to Consolidated Balance Sheet(1) Unconsolidated Subsidiaries and Affiliates

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

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

491
484

1,261
1,281

(Unit: million yen)

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

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

2,269
24,241
61,1352,429
77,22068,310Total

87,646

147,960(3) Guarantee Obligations
The Company guarantees obligations of the following affiliate for its borrowings from financial institutions.
(Unit: million yen)

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

TSUNAGU Community Farm LLC—(4) Commitment Line Agreement
The Company has executed a commitment line agreement with three banks in order to conduct financing in a flexible
manner as needed while securing financing stability. The balance of unused commitment line based on this agreement is
as follows.
(Unit: million yen)
Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

Credit limit
Balance of used commitment line——

15,5003,550

Difference—

11,9505. Notes to Consolidated Statement of Income(1) Breakdown of Gain on Sale of Non-Current Assets

(Unit: million yen)

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

53(Unit: million yen)

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

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

20
4,745
78,546
2,856
11,261
16
—

40
5,204
89,6405,156
13,21437
30,539Total

97,446

143,832

387

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

Vehicles

0

0

Total

0

0

(2) Breakdown of Loss on Retirement of Non-Current Assets

(Unit: million yen)

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

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

0
—

0
0

Total

0

0

54

ES-CON JAPAN Annual Report 2021

6. Notes to Consolidated Statement of Comprehensive Income(2) Subscription Rights to Shares and Subscription Rights to Treasury Shares(1) Reclassification Adjustments and Tax Effects to Each Component of Other Comprehensive Income(Unit: million yen)

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

(145)

314

—

—

Subtotal before tax effect adjustments
Tax effect

(145)
41

314
(96)

Valuation difference on available-for-sale securities

(103)

218

Foreign currency translation adjustment:
Amounts arising during the fiscal year

(0)

(8)

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

(18)

(9)

Total other comprehensive income

(121)

199

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

Category

Reportingcompany(parent
company)

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

Balance at
end ofFiscal 2020

Beginningof Fiscal
2020

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

Fifth offer ofCommonsubscription
rights to shares shares(Note 1)

120,000—

120,000——

Sixth offer ofCommonsubscription
rights to shares shares(Note 2)

1,261,500—

17,0001,244,500

1

1,381,500—

137,000

1,244,500

1

Total

—

End ofFiscal 2020 (million yen)

(Notes) 1. The decrease in the number of common shares issued and outstanding (120,000 shares) is due to exercise of the fifth offer of subscription
rights to shares.
2. The decrease in the number of treasury shares in common shares (17,000 shares) is due to expiration of the sixth offer of subscription rights
to shares.
3. For the sixth offer of subscription rights to shares, the first day of the exercise period has not yet arrived.

(3) Dividends
1) Dividends paid

7. Notes to Consolidated Statement of Changes in Equity(Resolution)

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

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

Issued shares
Common shares (Note 1)
Total

71,841,887

120,000—

Total

Total dividends Dividend per(million yen)share (yen)2,490Record date

Effective date

December 31,
2019

36.00

March 27,2020

(Note) The total amount of dividends includes 17 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 8 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

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

71,841,887

120,000—

71,961,887(Resolution)

3,394,700

363,800

330,100

3,428,400

3,394,700

363,800

330,100

3,428,400

March 26, 2021
Annual General Meeting of
Shareholders(Notes) 1. The increase in the number of common shares issued and outstanding (120,000 shares) is due to exercise of the fifth offer of subscription
rights to shares.
2. The increase in the number of treasury shares in common shares (363,800 shares) is due to transfer of shares to the share-based payment
benefits trust for directors by the Company (330,000 shares) and acquisition of shares on the market by the share-based payment benefits
trust for directors (33,800 shares).
3. The decrease in the number of treasury shares in common shares (330,100 shares) is due to transfer of shares to the share-based payment
benefits trust for directors by the Company (330,000 shares) and provision of shares to the qualifying employees by the share-based payment
benefits type ESOP trust (100 shares).
4. The number of treasury shares in common shares includes the Company’s shares owned by the share-based payment benefits trust for
directors and the share-based payment benefits type ESOP trust (the share-based payment benefits trust for directors: 487,200 shares at the
beginning of Fiscal 2020 and 851,000 shares at the end of Fiscal 2020; the share-based payment benefits type ESOP trust: 233,100 shares atthe beginning of Fiscal 2020 and 233,000 shares at the end of Fiscal 2020).

55

Commonshares

71,961,887

Treasury shares
Common shares (Note 2)(Note 3)

March 26, 2020
Annual General Meeting of
Shareholders

Type of shares

Type ofsharesCommonsharesTotal
dividends(million yen)

2,645

Source ofdividends
Retainedearnings

Dividend
per share

Record date

Effective
date

December 31,
2020

March 29,
2021

(yen)

38.00

(Note) The total amount of dividends includes 32 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 8 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

56

ES-CON JAPAN Annual Report 2021

Fiscal 2021 (from January 1, 2021 to December 31, 2021)(1) Type and Number of Shares Issued and Outstanding and Type and Number of Treasury Shares
Increase in
Number of shares
number of sharesat beginning ofduring the fiscal
Fiscal 2021year2) Dividends for which the record date was within the fiscal year but the effective date for the dividends was in the following fiscal year

Decrease in
Number of shares
number of sharesat end of Fiscal
during the fiscal
2021
year

Issued shares
Common shares (Note 1)
Total(Resolution)
March 25, 2022
Annual General Meeting of
Shareholders

Type ofsharesCommonsharesTotal dividends (million yen)
3,669

Effective
Dividend per
Record datedateshare (yen)Source ofdividends
Retainedearnings

38.00

December 31,
2021

March 28,2022

71,961,887

26,619,000—

98,580,887

71,961,887

26,619,000—

98,580,887(Note) The total amount of dividends includes 32 million yen of dividends to the Company’s shares owned by the share-based payment benefits trust for
directors and 8 million yen of dividends to the Company’s shares owned by the share-based payment benefits type ESOP trust.

3,428,400—

331,500

3,096,900

8. Notes to Consolidated Statement of Cash Flows

3,428,400—

331,500

3,096,900

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

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

Category

Reportingcompany(parent
company)

Type of sharessubject toBreakdown ofsubscription
subscription
rights to shares rights tosharesSixth offer ofCommonsubscription
rights to shares shares(Note)

Total—

Number of shares subject to subscription rights
to shares (shares)
Beginningof Fiscal
2021

Increaseduring the
fiscal year

Decreaseduring the
fiscal year

1,244,500—

342,100

1,244,500—

342,100

Balance at
end ofFiscal 2021

End ofFiscal 2021 (million yen)902,400

0902,4000(Note) T he decrease in the number of common shares subject to the sixth offer of subscription rights to shares (342,100 shares) is due to exercise ofsubscription rights to shares (324,200 shares) and due to expiration of the offer of subscription rights to shares (17,900 shares).

(3) Dividends
1) Dividends paid
(Resolution)
March 26, 2021
Annual General Meeting of
Shareholders

Type of shares
CommonsharesTotal dividends Dividend per(million yen)share (yen)
2,645

38.00

Record date
December 31,
2020

Effective date
March 29,2021

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

57

(1) Relationship Between the Year-End Balance of Cash and Cash Equivalents and the Amounts of Accounts(Unit: million yen)on the Consolidated Balance Sheet
Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

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

23,870(43)(28)

33,667(40)(68)

Cash and cash equivalents

23,79833,559(2) Major Breakdown of Assets and Liabilities of the Company that was Newly Consolidated in the Fiscal
Year Ended December 31, 2020 Through Acquisition of its Shares
In association with the new consolidation of Ryomon Co., Ltd. through acquisition of its shares, the following tableindicates the breakdown of the assets and liabilities and the relationship between the acquisition price and income fromacquisition (net) at the beginning of consolidation.
(Unit: million yen)
Current assets
Non-current assets
Goodwill
Current liabilities
Non-controlling interests

143
0
3
(51)
(45)

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

51
(142)

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

91(3) Major Breakdown of Assets and Liabilities of the Company that was Newly Consolidated in the Fiscal
Year Ended December 31, 2021 Through Acquisition of its Shares
In association with the new consolidation of Picasso Co., Ltd. and the seven companies that are its group companies
through acquisition of their shares, the following table indicates the breakdown of the assets and liabilities and the relationship between the acquisition price and income from acquisition (net) at the beginning of consolidation.

58

ES-CON JAPAN Annual Report 2021



(Unit: million yen)

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

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

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

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

24,0709. Lease Transactions(Lessee)(1) Finance Lease Transactions
Finance lease transactions without any transfer of ownership of leased assets
1) Leased assets
Property, plant and equipment
Consists of vehicles used by the Company and Internet security equipment, etc. used at the offices of subsidiarycompanies2) Depreciation method for leased assets
As described in 3. Summary of Significant Accounting Policies, (4) Depreciation method for significant depreciable
assets(2) Operating Lease Transactions
Unearned lease payments for non-cancellable operating lease transactions(Unit: million yen)

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

Due within one year

460

332

Due after one year

1,078

836

Total

1,538

1,169

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

(2) Fair Value, Etc. of Financial Instruments
The following table shows the book values on the consolidated balance sheet, fair value and the difference between them.
The following table does not include items for which determining the fair value is recognized to be extremely difficult (SeeNote 2 below).

(Lessor)(1) Operating Lease Transactions
Unearned lease payments for non-cancellable operating lease transactions59(Unit: million yen)

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

Due within one year

1,302

2,101

Due after one year

5,652

6,994

Total

6,955

9,096

60

ES-CON JAPAN Annual Report 2021

Fiscal 2020 (as of December 31, 2020)

2. Financial instruments for which discerning fair value is recognized to be extremely difficult.

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

Fiscal 2020(as of December 31, 2020)

Category

Fair value

Difference

23,8709271) Non-listed shares(1) Cash and deposits(2) Notes and accounts receivable - trade(3) Investment securities
Other securities

23,870
927
1,670

1,670

—

Total of assets

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

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

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

—
—
—
(65)
—

Total of liabilities

104,679

104,614

(65)

Total

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

Cash and deposits

Total

2,481

Due in 5 to 10 years

Due in 10 years or more

—

—

—

927

—

—

—

24,798———

Fiscal 2021 (as of December 31, 2021)

(Unit: million yen)
Due within 1 year

Due in 1 to 5 years

Due in 5 to 10 years

Due in 10 years or more

33,667

—

—

—

835

—

—

—

34,503———

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

Difference

2,481

Due in 1 to 5 years

23,870Notes and accounts receivable - trade

Notes and accounts receivable - trade33,667835

3,704(Unit: million yen)
Due within 1 year

(Unit: million yen)

33,667835

1,886

Fiscal 2020 (as of December 31, 2020)

Cash and deposits

Fair value

1,550

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

Total

Book value recordedon the balance sheet

2,154

591

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

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

Fiscal 2021 (as of December 31, 2021)

Fiscal 2021
(as of December 31, 2021)

1,2942) Silent partnership equity investment, etc.

——

(Unit: million yen)

Fiscal 2020 (as of December 31, 2020)
Due within
1 year———(1) Accounts payable - other(2) Deposits received(3) Short-term loans payable(4) Long-term loans payable*1

2,468
5,634
3,589
159,445

2,468
5,634
3,589
159,357

—
—
—
(87)

Total of liabilities

171,137

171,049(87)

Due in 4 to
5 years

Due in 5 years
or more

2,907

—

—

—

—

—

22,71915,521

5,380

3,776

21,876

230

—

—

—

—

—

29,231

22,71915,521

5,380

3,776

21,876

Fiscal 2021 (as of December 31, 2021)

(Unit: million yen)

Due within
1 yearDue in 1 to
2 years

Due in 2 to
3 years

Due in 3 to
4 years

Due in 4 to
5 years

Due in 5 years
or moreShort-term loans payable

3,589

—

—

—

—

—

Long-term loans payable

82,912

27,53916,101

7,391

6,795

18,705

0

0

0

0

0

0

86,502

27,53916,101

7,391

6,795

18,705

Lease obligations
Total*1 Long-term loans payable includes current portion of long-term loans payable.
(Notes) 1. Calculation method for fair value of financial instruments and matters related to derivative transactions.
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated at that bookvalue.
(3) Investment securities
With regard to investment securities, the fair value of stocks is determined by their price on stock exchanges.
Liabilities(1) Accounts payable – other, (2) Deposits received and (3) Short-term loans payable
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated at that bookvalue.
(4) Long-term loans payable
The fair value of long-term loans payable is based on the method of calculating by discounting the sum of their principal by a rate assumed
as being applicable to a new similar borrowing to be made by the Company.

Due in 3 to
4 years

26,093

Total

36,984Due in 2 to
3 years

Long-term loans payable
Bonds payable

36,984Due in 1 to
2 years

Short-term loans payable—

Total of assets(Unit: million yen)

11. Notes to Securities(1) Other Securities
Fiscal 2020 (from January 1, 2020 to December 31, 2020)
Type(Unit: million yen)Book value recordedon the balance sheet

Acquisition
cost

Difference

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

—

—

—

(2) Other

1,643

1,420

223

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

25

27

(1)

(2) Other

0

0

(0)

1,670

1,448

221

Total

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

61

62

ES-CON JAPAN Annual Report 2021

Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Type(Unit: million yen)Book value recordedon the balance sheet

Acquisition
cost(1) Descriptions of the stock acquisition rights, which involve considerations, with vesting conditions
Difference

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

—

—

—

(2) Other

2,455

1,917

537

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

26

27

(1)

(2) Other

0

0

(0)

2,481

1,945

536

Total

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

12. Notes to Derivative Transactions
Not applicable

13. Notes to Retirement Benefits
Fiscal 2020 (from January 1, 2020 to December 31, 2020)(1) Description of Retirement Benefit Plans Adopted by the Company
The Company and certain consolidated subsidiaries have adopted a defined contribution pension plan.

(2) Defined Contribution Pension Plan
The Company and certain consolidated subsidiaries paid 16 million yen for the defined contribution pension plan.

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

(2) Defined Contribution Pension Plan

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

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

Number of stock options by type of shares (Note 1)

Common shares: 1,400,000 shares

Date of grant of options

December 27, 2017

Vesting conditions(Note 2)

Covered period of work

Not specified

Exercise period

From April 1, 2021 to December 26, 2025

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

(2) Size and changes of the stock acquisition rights, which involve considerations, with vesting conditions
The following table describes the stock option plan that existed in Fiscal 2021 ended December 31, 2021. The number ofstock options indicates the number of shares when the stock options are exercised.
1) Number of stock options
6th subscription rights to shares

The Company and certain consolidated subsidiaries paid 18 million yen for the defined contribution pension plan.
Before right allotment (shares)

14. Notes to Stock Options, Etc.
(Additional Information)(Adoption of the Practical Solution on Transactions Granting Employees and Others Stock Acquisition Rights, which
Involve Considerations, with Vesting Conditions, etc.)
For transactions granting employees and others stock acquisition rights, which involve considerations, with vesting conditions conducted prior to the application date of the Practical Solution on Transactions Granting Employees and Others
Stock Acquisition Rights, which Involve Considerations, with Vesting Conditions (Practical Issues Task Force (PITF) No.
36; January 12, 2018), the Company continues to conduct the accounting treatment that have been conventionallyapplied for such transactions.

63

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

1,244,500

Granted—Expired

3,000

Right allotment
Balance of unexercised options

1,241,500—

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

Right allotment

1,241,500

Exercise of right

324,200

Expired14,900

Balance of unexercised options

902,40064

ES-CON JAPAN Annual Report 2021

2) Unit price information

(Unit: yen)

Exercise price

627

Average share price upon exercise

805

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

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

Deferred tax assets
Net operating loss carried forward (Note 3)
Loss on valuation of inventories
Enterprise tax payable
Impairment loss
Asset retirement obligations
Loss on valuation of investment securities
Other
Subtotal of deferred tax assets
Valuation allowance for net operating loss carriedforward for tax purposes (Note 3)
Valuation allowance for total deductible temporary
difference

65(Unit: million yen)

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

16
229
104
28
79
40
266

291
143
119
24
82
35
408

766

1,105

(13)

(243)

(218)

(337)

Valuation allowance (Note 2)

(231)

(580)

Total of deferred tax assets

534

525

(57)

(55)

(2) Significant Components of Material Difference between the Effective Statutory Tax Rate and Income(Unit: %)Tax Rate Applicable after Applying Tax Effect Accounting

Effective statutory tax rate
(Adjustments)
Expenses like entertainment expenses not qualifying
for deduction permanently
Inhabitant tax on a per capita basis
Amortization of goodwill
Valuation allowance
Other
Effective tax rate after applying tax effect accounting

Fiscal 2020

Fiscal 2021

(as of December 31, 2020)(as of December 31, 2021)

—

30.7

—

0.3

—
—
—
—

0.2
0.8
3.5
1.1

—

36.6

(Notes) 1. The note for the fiscal year ended December 2020 is omitted as the difference between the effective statutory tax rate and the income tax rateapplicable after applying tax effect accounting is less than 5/100 of the effective statutory tax rate.
2. Valuation allowance increased by 348 million yen. The increase is mainly attributable to the additional recognition of valuation allowance inaccordance with the accrual of net operating loss carried forward for tax purposes, etc. at certain consolidated companies that determinedthat their deferred tax assets are uncollectible for the entire amount.
3. Amount of net operating loss carried forward for tax purposes and deferred tax assets by carry-over period
Fiscal year ended December 2020

(Unit: million yen)Less than
1 yearNet operating loss carried forward fortax purposes*1—

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years Total

—

—

1

7

6

16

Valuation allowance

—

—

—

(1)

(7)

(4)

(13)

Deferred tax assets

—

—

—

—

—

2

*2 2

*1 Net operating loss carried forward for tax purposes is the amount multiplied by effective statutory tax rate.
*2 Deferred tax assets of 2 million yen was recorded for 16 million yen in net operating loss carried forward for tax purposes (the amount multiplied by effective statutory tax rate). For the net operating loss carried forward for tax purposes, valuation allowance is not recognized for the
portions determined to be collectible due to expected future taxable income.
Fiscal year ended December 2021

(Unit: million yen)Less than
1 yearNet operating loss carried forward fortax purposes*1—

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years Total

—

1

7

8

273

291

Valuation allowance

—

—

(1)

(7)

(8)

(225)

(243)

Deferred tax assets

—

—

—

—

—

48

*2 48

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

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

—

(7,921)

16. Notes to Business Combination, Etc.

(68)
(4)

(164)
(211)

(Business Combination Through Acquisition)

Total of deferred tax liabilities(130)(8,353)

Deferred tax assets (liabilities), net

403(7,828)The Company made a resolution at its Board of Directors’ meeting held on August 31, 2021 to acquire all shares of PicassoCo., Ltd. and the seven companies that are its group companies (Yuki Sangyo Co., Ltd., Venus Corporation Co., Ltd.,
Cubic Co., Ltd., Santa Co., Ltd., Hirano Bussan Co., Ltd., Aria Co., Ltd. and Eikaku Y.K.) and make them subsidiaries,
and concluded a share transfer agreement as of the same date. Based on the agreement, the Company completed acquisitionof the entire shares of Picasso Co., Ltd. and its seven group companies on October 29, 2021, making them subsidiaries.

66

ES-CON JAPAN Annual Report 2021

1. Overview of Business Combination(1) Name and business description of the acquired companies
Name of the acquired company

Business description

Picasso Co., Ltd.

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

Yuki Sangyo Co., Ltd.

Real estate leasing, management, brokerage services

Venus Corporation Co., Ltd.

Real estate management

Cubic Co., Ltd.

Real estate leasing, management, brokerage services

Santa Co., Ltd.

Real estate leasing, management, brokerage services

Hirano Bussan Co., Ltd.

Real estate leasing, management, brokerage services

Aria Co., Ltd.

Real estate leasing, management, brokerage services

Eikaku Y.K.

Real estate leasing, management, brokerage services(2) Major reason of conducting business combination
On October 29, 2021, the Company acquired all shares of Picasso Co., Ltd., a company engaged in the real estate leasing
business mainly in the Kansai region, and seven of its group companies, and made them subsidiaries, with the purpose of
securing stable earnings through income-generating real estate.
Picasso Co., Ltd., founded in 1991 in Osaka City, along with its seven group companies is engaged in the real estate leasing
business mainly in the Kansai region. It owns numerous outstanding income-generating assets such as rental apartments
and office buildings.
Currently, the Company conducts business operations based on “IDEAL to REAL 2023,” its fourth medium-term management plan (for the three years from the fiscal year ending December 2021 to the fiscal year ending December 2023).
One of its business strategies is shifting from “flow-focused management” to “stock-focused management” in pursuit of“Transformation and Rapid Progress” to a sustained and stable revenue structure.
The companies that have newly become subsidiaries should reinforce the Company’s leasing business, secure stable earnings and drive the shift of the revenue structure. As such, they should contribute dramatically to the sustained growth of
the ES-CON JAPAN Group.
(3) Date of business combination
October 29, 2021 (deemed acquisition date: August 31, 2021)(4) Legal format of business combination
Acquisition of shares with considerations paid by cash(5) Company name after business combination
No company name is changed after business combination.
(6) Ratio of acquired voting rights
100%(7) Major grounds for deciding on the company to be acquired
By acquiring the shares of the companies with considerations paid by cash67

2. Period During Which the Performance of the Acquired Companies is Included in the Company’s
Consolidated Financial Statements
From September 1, 2021 to December 31, 2021

3. Acquisition Cost of the Acquired Companies (total of the above-mentioned eight companies) andBreakdown of Considerations by TypeConsiderations of the acquisition: Cash
Acquisition cost:

30,445 million yen
30,445 million yen

4. Item and Amount of Major Acquisition-Related Expenses
Due diligence expenses, etc.

93 million yen

5. Amount of Generated Goodwill, Grounds for Generation, Amortization Method and Amortization Period(1) Amount of goodwill generated
8,115 million yen(2) Grounds for generation
Picasso Co., Ltd., founded in 1991 in Osaka City, along with its seven group companies is engaged in the real estate leasing
business mainly in the Kansai region. It owns numerous outstanding income-generating assets such as rental apartments
and office buildings.
The companies that have newly become subsidiaries should reinforce the Company’s leasing business, secure stable earnings and drive the shift of the revenue structure. As such, they should contribute dramatically to the sustained growth of
the ES-CON JAPAN Group. The generated goodwill reflects the excess earning power that is expected to arise throughthe business implementation in the future.
(3) Amortization method and amortization period
To be amortized evenly using the straight-line method over the period (up to 20 years) in which it is reasonably deemedthat investment effects will arise.

6. Amounts and Major Breakdown of Assets Acquired and Liabilities Assumed on the Date of Business
Combination (total of the above-mentioned eight companies)
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities

30,473 million yen
34,233 million yen
64,707 million yen
1,552 million yen
40,825 million yen
42,377 million yen

7. Estimate Amount of the Impact on the Consolidated Statement of Income of the Fiscal Year Ended
December 2019 on the Supposition that the Business Combination Completed on the Beginning Day of
the Fiscal Year, and its Calculation Method
Net sales
Operating income

2,469 million yen
321 million yen

68

ES-CON JAPAN Annual Report 2021

(Calculation method of the estimate amount)
The estimate amount of the impact indicates the difference between net sales as well as income information calculated on
the supposition that the business combination completed on the beginning day of the fiscal year and net income as wellas income information on the consolidated statement of income of the fiscal year of the acquired companies.
In addition, the estimate amount of impact takes into account the amortization amount of goodwill, etc. deemed to havebeen generated on the beginning date of the fiscal period ended December 2021.
Furthermore, no audit certificate has been given to these notes.

17. Notes to Asset Retirement Obligations(Notes) 1. The book value recorded on the consolidated balance sheet represents the amount obtained by deducting accumulated depreciation andaccumulated impairment loss from acquisition cost.
2. Of the amount of increase/decrease during fiscal year, the amount of increase during Fiscal 2020 is primarily attributable to acquisition ofrental real estate (1,660 million yen), and the amount of decrease is primarily attributable to depreciation (281 million yen). The amount of
increase during Fiscal 2021 is primarily attributable to acquisition of subsidiaries that own rental real estate, etc. (33,886 million yen) andacquisition of rental real estate (3,617 million yen), and the amount of decrease is primarily attributable to depreciation (584 million yen).
3. Fair value at end of fiscal year indicates the amount calculated on the basis of Japan’s Real Estate Appraisal Standards, using appraisals byoutside real estate appraisers as a reference.

19. Segment Information(1) Overview of Reportable Segments(Asset Retirement Obligations that are Recorded on the Consolidated Balance Sheet)(1) Description of the Relevant Asset Retirement Obligations
The Company is mainly obliged to restore its Tokyo Head Office, Osaka Head Office, Nagoya Office, Kyushu Office andHokkaido Office to the original state in accordance with each of the real estate lease agreements.

(2) Calculation Method of the Amount of the Asset Retirement Obligations
The amount of the asset retirement obligations is calculated by using discount rates of 0.0% to 1.9%, with the expectedperiod of use estimated to be 6 years to 18 years.

The reportable segments of the ES-CON JAPAN Group are, among the Group’s business units, those for which separate
financial information can be obtained and that are to be regularly reviewed by the Board of Directors and other meeting
structures in order to decide the distribution of management resources and to assess business performance.
The ES-CON JAPAN Group integrates individual projects that have similar features in terms of products and services into
three reportable segments of Real estate sales business, Real estate leasing business and Real estate planning agency andconsulting business.
Each of the reportable segments mainly comprises the following operations.
Real estate sales business: Development and sale of for-sale condominiums and retail properties, sale of land, etc.
Real estate leasing business: Leasing of real estate, etc.
Real estate planning agency and consulting business: Consigned operations of real estate-related services, brokerage(3) Increase/Decrease of the Total Amount of the Asset Retirement Obligations(Unit: million yen)

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

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

249
9
1

260
8
1

Balance at end of fiscal year

260

270

of transactions, sales agency, etc.

(2) Calculation Method of Net Sales, Income or Loss, Assets and Other Item Amounts by Reportable
Segment
The accounting method for the reported business segments is the same as described in “Summary of significant accounting
policies.”(3) Information on Net Sales, Income or Loss, Assets and Other Item Amounts by Reportable Segment
Fiscal 2020 (from January 1, 2020 to December 31, 2020)

18. Notes to Rental Real Estate

Reportable segment

The Company and some of its consolidated subsidiaries own retail properties, medical facilities, rental condominiums andother properties. Income or loss from leasing these rental properties during Fiscal 2020 totaled 641 million yen in income(with rental income recorded as net sales and rental expenses recorded as cost of sales). Income or loss from leasing theserental properties during Fiscal 2021 totaled 1,018 million yen in income (with rental income recorded as net sales andrental expenses recorded as cost of sales).
The book value for the rental real estate as stated in the consolidated balance sheet, the amount of increase/decrease during(Unit: million yen)
the fiscal year and fair value were as follows:
Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

Book value recorded on the consolidated balance sheet
Balance at beginning of fiscal year

12,657

14,135

Increase/decrease during fiscal year

1,478

37,946

Balance at end of fiscal year

14,13552,082

14,18052,402

Fair value at end of fiscal year
69

(Unit: million yen)Amount on
consoliReconcilia­
dated
tion
financial(Note 1)statements

Real estate
Real estate Real estate planning
Total
sales
leasingagency andbusinessbusiness
consulting
business
Net sales
Net sales to external customers
Intersegment net sales or transfers(Note 2)

71,485
—

5,527
—

295
—

77,308———77,308—

Total

71,485

5,527

295

77,308—77,308Segment income

14,2572,381

152

16,791(4,588)

12,202

Segment assets

95,146

20,521

6,598

122,266

27,156

149,423

Depreciation (Note 3)

—

283

4

287

116

403

Amortization of goodwill
Investment in equity method
affiliates
Increase in property, plant andequipment and intangible assets(Note 3)

97

—

3

100

—

100

455

—

—

455

—

455

—

1,761

4,003

5,765

79

5,845

Other items

70

ES-CON JAPAN Annual Report 2021

(Notes) 1. Reconciliations are as follows:(1) The reconciliation of segment income of -4,588 million yen is from corporate expenses not attributable to any reportable segment.
Corporate expenses are general and administrative expenses not attributable to reportable segments.
(2) The reconciliation of segment assets of 27,156 million yen is mainly from surplus operating funds (cash and deposits) and administrative
assets, etc. not attributable to reportable segments.
(3) The reconciliation of depreciation of 116 million yen is from depreciation on corporate assets not attributable to reportable segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 79 million yen is from an increase in corporate
assets not attributable to reportable segments.
2. Segment income is reconciled with operating income on the consolidated statement of income.
3. Depreciation and increase in property, plant and equipment and intangible assets includes long-term prepaid expenses and theiramortization.

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

(Unit: million yen)

Reportable segment

Amount on
consoliReconcilia­
dated
tion
financial(Note 1)statements

Real estate
Real estate Real estate planning
Total
sales
leasingagency andbusinessbusiness
consulting
business
Net sales
Net sales to external customers
Intersegment net sales or transfers(Note 2)

8,090
—

592
—

79,017———79,017—70,334

8,090

592

79,017—79,017

Segment income (segment loss)

13,039

3,372

(516)

15,895(5,514)

10,381

Segment assets

139,31068,8087,320

215,439

37,332

252,771

—
97

584
140

35
—

619
237

114
—

733
237

536

—

710

1,247

—

1,247

—

46,652

15

46,66742

46,710

Other items
Depreciation (Note 3)
Amortization of goodwill
Investment in equity method
affiliates
Increase in property, plant andequipment and intangible assets(Note 3)(3) Information by Major Customer
Customer’s nameSales (million yen)

Related segment

ESCON JAPAN REIT Investment Corporation

10,797

Real estate sales business
Real estate leasing business

Chuden Real Estate Co., Inc.

9,605

Real estate sales business
Real estate leasing business

Hyogo Logistics TMK

7,740

Real estate sales business

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

70,334—Total

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

(Notes) 1. Reconciliations are as follows:(1) The reconciliation of segment income of -5,514 million yen is from corporate expenses not attributable to any reportable segment.
Corporate expenses are general and administrative expenses not attributable to reportable segments.
(2) The reconciliation of segment assets of 37,332 million yen is mainly from surplus operating funds (cash and deposits) and administrative
assets, etc. not attributable to reportable segments.
(3) The reconciliation of depreciation of 114 million yen is from depreciation on corporate assets not attributable to reportable segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 42 million yen is from an increase in corporate
assets not attributable to reportable segments.
2. Segment income is reconciled with operating income on the consolidated statement of income.
3. Depreciation and increase in property, plant and equipment and intangible assets includes long-term prepaid expenses and theiramortization.

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

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

Related segment

ESCON JAPAN REIT Investment Corporation

12,456

Real estate sales business
Real estate leasing business21. Information on Impairment Loss on Non-current Assets by Reportable
Segment
Fiscal 2020 (from January 1, 2020 to December 31, 2020)
Not applicable

Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Not applicable

Fiscal 2020 (from January 1, 2020 to December 31, 2020)(1) Information by Product and Service
Descriptions are omitted as identical information is disclosed in the segment information section.

(2) Information by Region
1) Net sales
Not applicable as the Company records no net sales to external customers outside Japan.

71

72

ES-CON JAPAN Annual Report 2021

22. Information on Amortization of Goodwill and Unamortized Balance byReportable Segment
Fiscal 2020 (from January 1, 2020 to December 31, 2020)

(Unit: million yen)

Real estate
Real estate
Real estate planning agency Eliminations
Total
sales business leasing business and consulting businessor corporate
Amortization amountduring the fiscal year

97

Balance at the end of
the fiscal year

339

—

3

—

b. Between the subsidiaries of the other affiliates of the filing party of these consolidated financial statements
Fiscal 2020 (from January 1, 2020 to December 31, 2020)

—

—

100

—

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

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

339(Unit: million yen)

Real estate
Real estate
Real estate planning agency Eliminations
Total
sales business leasing business and consulting businessor corporate
Amortization amountduring the fiscal year

97

140

—

—

237

Balance at the end of
the fiscal year

242

7,975

—

—

8,217

Type

Name

Location

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

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

Category(million yen)Transfer ofreal estateTransfer ofreal estate forsale(Note 2)

9,515

Balance at
end offiscal year
(million yen)——

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

Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Not applicableNot applicablec. Between the directors of the filing party of these consolidated financial statements and major shareholders (limited toindividuals), etc.
Fiscal 2020 (from January 1, 2020 to December 31, 2020)
Not applicable

24. Information on Related Parties

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

23. Information on Gain on Negative Goodwill by Reportable Segment(1) Transactions with Related Parties
1) Transactions between the filing party of these consolidated financial statements and related parties
a. Between the parent company of the filing party of these consolidated financial statements and major shareholders(limited to companies, etc.), etc.
Fiscal 2020 (from January 1, 2020 to December 31, 2020)
Not applicable

Type

Name

Location

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

Director

Takatoshi Ito——

President &Representative
Director—

SeniorManaging
Director—

Managing
Executive
Officer

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

Type

Parentcompany

73

Real estatebusiness

Transaction
Description of Description ofamountrelationship transaction

Name

Location

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

Chubu Electric Higashi-ku,
430,777
Power Co., Inc. Nagoya-shi

Electricity
business andbusinesses
incidental tothe electricity
business(Ownership)
Direct51.4%

Director
Transaction
Description of Description ofamountrelationship transaction

Category(million yen)

Balance at
end offiscal year
(million yen)

Officer
Capital andbusiness
partnership

Capitalincreasethroughthird-party
allotment(Note 2)

20,470——MinoruNakanishi

Tomohiko
Egashira——

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

Transaction
Description of Description ofamountrelationship transaction(Ownership)
Direct 1.3—

Exercise ofsubscription
rights toshares(Note 2)

43

—

—

—

Exercise ofsubscription
rights toshares(Note 2)

18

—

—

—

Exercise ofsubscription
rights toshares(Note 2)16——

(Ownership)
Direct 0.2(Ownership)
Direct 0.2

Category(million yen)

Balance at
end offiscal year
(million yen)

(Notes) 1. The figure does not include consumption taxes.
2. The figure indicates the paid-in amount from exercise of subscription rights to shares, which came into effect due to the resolution made at
the board of directors’ meeting held on December 1, 2017.

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ES-CON JAPAN Annual Report 2021

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

Investor Information
Status of Share Price (from January 4, 2021 to April 28, 2022)(Unit: million shares)(2) Notes to Parent Company or Important Affiliates

3

Fiscal 2020 (from January 1, 2020 to December 31, 2020)
Parent company information
Not applicable(Unit: yen)

1,200

Trading volume (left scale)
Share price (right scale)Fiscal 2021 (from January 1, 2021 to December 31, 2021)
Parent company information
Chubu Electric Power Co., Inc. (listed on the Tokyo Stock Exchange and Nagoya Stock Exchange)

25. Per Share Information


2

1,000

2

800

1

600

1

400

0

200

(Unit: yen)

Fiscal 2020

Fiscal 2021

(from January 1, 2020
to December 31, 2020)(from January 1, 2021
to December 31, 2021)

Net assets per share

563.07657.50

Basic earnings per share

111.94

67.48

Diluted earnings per share

111.3767.30(Notes) 1. In calculating net assets per share, the Company’s shares owned by the share-based payment benefits trust for directors and share-based
payment benefits type ESOP trust (the share-based payment benefits trust for directors: 851,000 shares for Fiscal 2020 and 851,000 sharesfor Fiscal 2021; the share-based payment benefits type ESOP trust: 233,000 shares for Fiscal 2020 and 225,700 shares for Fiscal 2021) are
included in treasury shares, which are excluded from the number of shares issued and outstanding at end of the fiscal year.
2. In calculating basic earnings per share and diluted earnings per share, the Company’s shares owned by the share-based payment benefits
trust for directors and the share-based payment benefits type ESOP trust (950,138 shares for Fiscal 2020 and 1,078,783 shares for Fiscal
2021) are included in treasury shares, which are excluded when calculating the period-average number of shares.
3. The basis for the calculation of basic earnings per share and diluted earnings per share is as follows:
Fiscal 2020
(from January 1, 2020
to December 31, 2020)

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

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

7,663

5,961

—

—

7,663

5,961

68,459,909

88,346,828——

349,477

236,481——

Diluted earnings per share
Adjustments to profit attributable to owners of parent(million yen)
Increase in common shares (shares)
Description of dilutive shares without dilutive effect and notincluded in the calculation of diluted earnings per share0
Jan. 4, 2021

Mar. 31, 2021

Jun. 30, 2021

Sep. 30, 2021

Dec. 30, 2021

0
Apr. 28, 2022

Major Shareholders (as of December 31, 2021)
Name

No. of shares owned

Ownership ratio (%)

1

CHUBU Electric Power Co., Inc.

49,599,000

50.3

2

Nissei Build Kogyo Co., Ltd.

6,500,000

6.6

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

4,274,800

4.3

4Tenma Seiryu Co., Ltd.

3,610,000

3.7

5Kouryu Oh

2,100,000

2.1

6ES-CON JAPAN Ltd.

2,020,200

2.0

7

Custody Bank of Japan, Ltd. (trust account)

1,981,900

2.0

8Takatoshi Ito

1,280,200

1.3

9

Keiko Akashi

531,000

0.5

10

NS Corporation Co., Ltd.

500,300

0.5(Notes) 1. The table indicates the top 10 major shareholders.
2. 1,076,700 shares owned by Japan Trustee Services Bank, Ltd. (trust account) through a share-based payment benefits trust for directors anda share-based payment benefits type ESOP trust are not included in the treasury shares.
3. Ownership ratio is rounded to the first decimal place.

26. Significant Subsequent Events
Not applicable

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ES-CON JAPAN Annual Report 2021

Notes for Investors
Fiscal year: January 1 to December 31
Securities code: 8892
Standard date for regular general meeting of shareholders: End of March
Standard date for submission of periodic securities report: End of March
Standard date for start of end-of-year dividend: December 31
The names of shareholders to be paid interim dividends shall be finalized on June 30 in the event they are to be paid.
Listing exchange: First tier, Tokyo Stock Exchange
Total number of shares issued and outstanding: 71,961,887 shares (as of March 31, 2021)
Total number of shareholders: 13,280 shareholders (as of March 31, 2021)
Share units: 100 shares
Institution managing the Shareholder Register Manager’s Extraordinary Account:
Sumitomo Mitsui Trust & Banking, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo
Contact: Transfer Agent Department, Sumitomo Mitsui Trust & Banking, 2-8-4 Izumi, Suginami-ku, Tokyo 168-0063
Toll-free: 0120-782-031 (Japan only)
Agency services are available at the main branch and all branches of Sumitomo Mitsui Trust & Banking nationwide.
Notification of address change, etc.:
Please notify the securities firm that holds your investment account. Shareholders who have extraordinary accounts because they
do not have an account at the securities firm should contact Sumitomo Mitsui Trust & Banking, the account manager for extraordinary accounts.
Payment of unpaid dividends: Please notify Sumitomo Mitsui Trust & Banking, the shareholder register manager.
Announcement method: Electronic announcements (https://www.es-conjapan.co.jp/) (Japanese)
However, the announcement shall be made via Nihon Keizai Shimbun when an accident or other development makes announcement via electronic announcement impossible.

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

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

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