日本エスコン（8892） – 【SUMMARY】[Delayed]Accounts for Fiscal Year Ended December 2021 (Japanese GAAP) (Consolidated)

Summary of Accounts for Fiscal Year Ended December 2021 (Japanese GAAP) (Consolidated) Listing exchange: Tokyo Stock Exchange URL: Name of listed company: ES-CON JAPAN Ltd. Code: Representative: Contact for inquiries: Scheduled date for next regular general meeting of shareholders: Scheduled date for submission of periodic securities report: Scheduled date for start of dividend payment: Supplementary explanatory materials created for accounts? Yes/No: No Accounts briefing meeting held? 1. Consolidated results for fiscal year ended December 2021 (from January 1, 2021 to December 31, 2021) (Position) President & Representative Director (Position) Senior Managing Director TEL: 06 (6223) 8055 8892 (Name) Takatoshi Ito (Name) Minoru Nakanishi March 25, 2022 March 28, 2022 March 28, 2022 Yes/No: Yes (for institutional investors and analysts) https://www.es-conjapan.co.jp (Amounts are rounded down to the nearest million yen) January 27, 2022 (1) Consolidated operating results (% figures for the full fiscal year show the rate of increase (decrease) compared with the previous period) Net sales Operating income Ordinary income million yen % million yen % Profit attributable to owners of parent million yen % 10,381 (14.9) 9,099 (18.5) 5,961 (22.2) 12,202 (5.5) 11,164 (5.5) 7,663 (6.0) million yen 79,017 77,308 % 2.2 7.2 Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2020 Note: Comprehensive income Fiscal year ended Dec. 2021: 5,970 million yen (-20.7%) Fiscal year ended Dec. 2020: 7,533 million yen (-10.4%) Basic earnings per share Diluted earnings per share Return on equity Return on assets Operating margin Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2020 yen 67.30 111.37 % 11.8 21.2 % 4.5 7.9 Reference: Share of profit (loss) of entities accounted for using equity method Fiscal year ended Dec. 2021: 54 million yen Fiscal year ended Dec. 2020: -109 million yen (2) Consolidated financial position Total assets Net assets Equity ratio Book value per share % 24.8 25.8 Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2020 Reference: Equity (3) Consolidated cash flows Fiscal year ended Dec. 2021: 62,780 million yen Fiscal year ended Dec. 2020: 38,589 million yen Net cash provided by (used in) operating activities million yen (10,810) 119 Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Cash and cash equivalents at end of period million yen million yen 50,293 11,007 33,559 23,798 End of first quarter Annual dividend End of third quarter End of second quarter yen － － － yen 0.00 0.00 0.00 Year-end Total yen － yen yen 38.00 38.00 － 38.00 38.00 Total dividend amount (Total) million yen Dividend payout ratio (Consolidated) % Dividend on equity (Consolidated) % 2,645 3,669 33.9 56.3 7.2 6.2 － 38.00 38.00 － Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2020 2. Dividends Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2021 Fiscal year ending Dec. 2022 (Forecast) million yen 62,628 38,627 million yen (29,721) (9,732) – 1 – yen 67.48 111.94 million yen 252,771 149,423 % 13.1 15.8 yen 657.50 563.07 3. Consolidated earnings forecast for fiscal year ending December 2022 (from January 1, 2022 to December 31, 2022) Net sales Operating income Ordinary income Profit attributable to owners of parent Basic earnings per share million yen 36,300 100,000 % million yen 4,700 14,000 45.3 26.6 % million yen 3,800 12,200 83.5 34.9 % million yen 2,600 8,300 96.5 34.1 % 87.3 39.2 yen 29.43 93.95 First two quarters Full fiscal year * Explanatory notes (1) Changes in significant subsidiaries during fiscal year (Changes in specified subsidiaries resulting in change in scope of consolidation): None Newly included: － companies (Company name) 、 Excluded: － companies (Company name) (2) Changes in accounting policies, changes in accounting estimates, and restatement 1) Changes in accounting policies due to amendment of accounting standards, etc.: None None 2) Changes in accounting policies other than 1): None 3) Changes in accounting estimates: None 4) Restatement: (3) Number of shares issued and outstanding (common shares) 1) Number of shares issued and outstanding (including treasury shares) at end of fiscal year 2) Number of treasury shares at end of fiscal year 3) Average number of shares during fiscal year Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2021 98,580,887 shares 3,096,900 shares 88,346,828 shares Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2020 71,961,887 shares 3,428,400 shares 68,459,909 shares (Note) The number of treasury shares at end of fiscal year includes ES-CON JAPAN shares held in a share-based payment benefits trust for directors and a share-based payment benefits type ESOP trust (fiscal year ended December 2021: 851,000 shares in the share-based payment benefits trust for directors and 225,700 shares in the share-based payment benefits type ESOP trust). In the calculation of the average number of shares during fiscal year, the treasury shares to be subtracted in that calculation includes ES-CON JAPAN shares held in the share-based payment benefits trust for directors and the share-based payment benefits type ESOP trust (fiscal year ended December 2021: 1,078,783 shares). (Reference) Non-consolidated results 1. Non-consolidated results for fiscal year ended December 2021 (from January 1, 2021 to December 31, 2021) (1) Non-consolidated operating results (% figures show the rate of increase (decrease) compared with the previous fiscal year) Net sales million yen % Operating income million yen % Ordinary income million yen Profit % million yen % 73,407 (0.7) 10,213 (14.7) 9,312 (16.3) 6,434 (16.6) 73,903 5.4 11,980 (5.3) 11,121 (4.1) 7,718 (4.2) Basic earnings per share Diluted earnings per share Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2021 Fiscal year ended Dec. 2020 Reference: Equity yen 72.83 112.75 million yen 63,206 38,527 – 2 – million yen 233,860 139,940 yen 72.64 112.18 % 27.0 27.5 yen 661.95 562.15 (2) Non-consolidated financial position Total assets Net assets Equity ratio Book value per share Fiscal year ended Dec. 2021: 63,205 million yen Fiscal year ended Dec. 2020: 38,526 million yen * Presentation regarding implementation of audit procedures This summary of accounts is not subject to the audit procedures pursuant to the Financial Instruments and Exchange Act. * Explanation regarding appropriate use of earnings forecasts, and other notes The earnings outlook and other forward-looking statements contained in this document are based on information currently available to and certain assumptions that are thought to be reasonable by ES-CON JAPAN. Accordingly, actual business performance and other results may differ materially due to various reasons. For the conditions forming the assumptions on which earnings forecasts are based and explanatory notes for use of earnings forecasts, etc., please see “Attachment 1; 1. Overview of Operating Results, Etc.; (1) Analysis of Operating Results” on page 5. – 3 – ○ Contents of Attachment 1. Overview of Operating Results, Etc. ………………………………………………………………………………………………………………… 5 (1) Analysis of Operating Results ……………………………………………………………………………………………………………………. 5 (2) Analysis of Financial Position …………………………………………………………………………………………………………………… 14 (3) Basic Policy on Distribution of Profit, and Dividend for the Fiscal Year Under Review and Next Fiscal Year ……….. 15 (4) Business Risks ………………………………………………………………………………………………………………………………………. 15 2. Management Policy …………………………………………………………………………………………………………………………………….. 18 (1) Basic Policy on Corporate Management ……………………………………………………………………………………………………. 18 (2) Medium- to Long-Term Corporate Management Strategy and Management Indicator Targets ………………………….. 18 (3) Business and Financial Issues to Be Addressed on a Priority Basis ……………………………………………………………… 18 3. Basic Policy on Selection of Accounting Standard……………………………………………………………………………………………. 20 4. Consolidated Financial Statements ……………………………………………………………………………………………………………….. 21 (1) Consolidated Balance Sheet ……………………………………………………………………………………………………………………. 21 (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ……………………………. 23 (Consolidated Statement of Income) …………………………………………………………………………………………………………….. 23 (Consolidated Statement of Comprehensive Income) ……………………………………………………………………………………… 24 (3) Consolidated Statement of Changes in Equity ……………………………………………………………………………………………. 25 (4) Consolidated Statement of Cash Flows …………………………………………………………………………………………………….. 27 (5) Notes to Consolidated Financial Statements ……………………………………………………………………………………………… 29 (Notes on Going Concern Assumption) …………………………………………………………………………………………………………. 29 (Changes in Accounting Policies) …………………………………………………………………………………………………………………. 29 (Additional Information) ………………………………………………………………………………………………………………………………. 29 (Segment Information, Etc.) ………………………………………………………………………………………………………………………… 30 5. Other …………………………………………………………………………………………………………………………………………………………. 33 (1) Status of Contracts and Sales ………………………………………………………………………………………………………………….. 33 – 4 – Attachment 1 1. Overview of Operating Results, Etc. (1) Analysis of Operating Results In the fiscal year under review (fiscal year ended December 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 the recovery trend of consumer spending. Due to concerns over the spread of COVID-19 variants in Japan and abroad, careful attention should be paid to the fluctuation of the Japanese economy and overseas economies through supply chains as well as the financial and capital markets and the impact of currency movement. In the real estate industry in which the ES-CON JAPAN Group operates, the real estate market remained strong as the policies and measures related to tackling COVID-19 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, and it is necessary to carefully develop real estate business. Despite such business environment in which the future outlook is extremely uncertain, 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, and will 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., and established a stable fundraising base. Against the backdrop of such creditworthiness, we acquired all shares of Picasso Co., Ltd., which owns numerous outstanding revenue-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 sought to strengthen the asset management business in the ES-CON JAPAN Group as well as concluded a contract on the acquisition of the entire share of FUEL Inc., whose businesses include managing online funds and providing computer systems to crowdfunding businesses in accordance with the Act on Specified Joint Real Estate Ventures of Japan, 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 participation in real estate financial business. As for the business performance for the fiscal year under review, although sales increased and profits decreased year on year, the above “change in revenue structure” was realized. In the next fiscal year and the fiscal year ending December 2023, we will proactively implement business development with the intent to improve performance and with an aim to achieve record-high profits, as a period of “Rapid Progress.” The purchase of sites scheduled to be sold in fiscal 2022 and fiscal 2023 are in progress at a pace exceeding the The business performance for the fiscal year under review, which is the first fiscal year of the fourth medium-term management plan, was generally as planned with net sales standing at 79,017 million yen (down 1.2% from initial plan) and operating income at 10,381 million yen (down 3.9% from initial plan), but ordinary income was 9,099 million yen (down 3.2% from initial plan) as a result of the recording of 516 million yen of 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. Management targets were almost as planned with ROE standing at 11.8%, ROIC at 3.2%, equity ratio at 24.8%, net assets at 62.6 billion yen, share of profits from leasing at 21.2%, and share of long-term earnings from real estate at 20.6%. In addition, due to the acquisition of many outstanding revenue-generating properties after making Picasso Co., Ltd. and its seven group companies subsidiaries, investment plans in the medium-term management plan are in progress at a pace exceeding the plan. plan. – 5 – Concerning the transition to the new market segments scheduled for April 4, 2022, at Tokyo Stock Exchange, Inc., we have decided to make a transition to the Prime Market. The details of the aforementioned fourth medium-term management plan are as follows. 1) Overview of the Fourth Medium-Term Management Plan 1. Basic Management Strategy Policies 1) Establish business foundations able to withstand unexpected changes in economic conditions Establish a sound business and financial standing that can maintain its fund-raising abilities under any economic 2) Simultaneously change the revenue structure and expand business domains Transform the revenue structure from one based on flows to one based on stock by strengthening the real estate leasing business while the same time realizing business diversification and expanding business environment. territories. 2. Basic Policy: Transformation and Rapid Progress 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) 3. Management Strategies 1) Transformation to a structure of sustained and stable profit revenues 2) Stable growth in existing core businesses through business diversification and area strategies 3) Growing new businesses into core businesses through area strategies 4) Taking on the challenge of new business domains 5) Enhancing synergies with the ES-CON JAPAN Group 6) Expanding business bases, primarily in the five major urban areas 7) Enhancing synergies with the Chubu Electric Power Group 8) Promoting ESG initiatives 4. Performance Plan Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2021 Fiscal year ending Dec. 2022 Actual Actual Plan Difference from plan Increase/decrease Plan Initial plan Difference from initial plan Increase/decrease 77,308 79,017 80,000 (982) (1.2%) 100,000 98,000 2,000 2.0% 110,000 12,202 10,381 10,800 (418) (3.9%) 14,000 14,000 － － 16,000 Net sales Operating income (Unit: million yen) Fiscal year ended Dec. 2023 Plan – 6 – 5. Management Targets Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2021 Fiscal year ending Dec. 2022 Fiscal year ending Dec. 2023 Actual Actual Plan Plan Initial plan Plan Share of profits from leasing*1 14.2% 21.2% 23.0% 26.0% 24.0% 26.0% Return on equity (ROE) 21.2% 11.8% 12.0% 13.0% 13.0% 13.0% Equity ratio 25.8% 24.8% 29.0% 23.0% 26.0% 23.0% 6.6% 3.2% 4.0% 4.0% 4.0% 4.0% Return on invested capital (ROIC)*2 Share of long-term earnings from real estate*3 9.5% 20.6% 12.0% 21.0% 14.0% 18.0% Net assets 38.6 billion yen 62.6 billion yen 61.0 billion yen 67.3 billion yen 66.0 billion yen 72.0 billion yen Notes: 1 Share of profits from leasing: Leasing segment profits / Total segment profits (excluding adjustments) 2 Return on invested capital (ROIC): After-tax operating income / (Shareholders’ equity + Interest-bearing 3 Share of long-term earnings from real estate: Real estate generating leasing revenues recorded as non-liabilities) current assets / Total assets 6. Investment Plan Fiscal year ended Dec. 2021 Actual Plan Difference from plan Increase/ decrease (Unit: million yen) Fiscal year ending Dec. 2022 Fiscal year ending Dec. 2023 Three-year cumulative total Plan Plan Plan 76,799 30,000 46,799 156.0% 40,000 60,000 130,000 19,191 25,000 (5,809) (23.2%) 30,000 35,000 90,000 Gross investment 95,990 55,000 40,990 74.5% 70,000 95,000 220,000 2) Status of Demonstration of Synergy Effect with the Chubu Electric Power Group As previously mentioned, we became a consolidated subsidiary of Chubu Electric Power Co., Inc. in April 2021, and we are aggressively developing our business in the Chubu area. In a joint venture with Chuden Real Estate Co., Inc. (hereinafter “Chuden Real Estate”), we are undertaking the development of condominiums and commercial facilities in Shirakabe, Higashi Ward, Nagoya City, Ichinomiya City, Aichi Prefecture, Kakegawa City, Shizuoka Prefecture, and Suita City, Osaka Prefecture. In Higashi Ward, Nagoya City, the Company is promoting sales of “Grand Le JADE Shirakabe Getsuronotei” (24 units in total) and “Grand Le JADE Shirakabe Rinzennotei” (34 units in total) in the Shirakabe area, which is a particularly rare and valuable area. Synergistic effects are being stably generated, as evidenced by having sold out the contract for “Le JADE Kakegawa Ekimae” (Kakegawa City, Shizuoka Prefecture; 83 units in total) within four months of the start of sales. In June 2021, a consortium of businesses led by Chubu Electric Power of which ES-CON JAPAN is a member was selected as the preferred candidate contractor in bidding organized by Aichi Prefecture and the city of Nagoya. The winning bidder will operate the site of the 20th Asian Games Aichi-Nagoya 2026 Athletes’ Village after the games. In this project, we aim to create a next-generation community which connects diverse people who help each other to solve various issues facing society and foster happiness together. Plans call for ES-CON JAPAN to develop retail complexes as part of this community development project. Investment in revenue-generating real estate Investment in other development – 7 – In addition, in July 2021, Chubu Electric Power and Spread Co., Ltd. (hereinafter “Spread”) established TSUNAGU Community Farm LLC (hereinafter “new company”), which will construct and operate completely artificial vertical farms. In October 2021, the new company 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 Fukuroi City, Shizuoka Prefecture. The aim is to launch production in January 2024. By combining Chubu Electric Power’s capital power and knowledge in energy management with our development know-how, we will make efforts toward decarbonization and cost reduction and contribute to the production of cheaper vegetables at plants. At the same time, in collaboration with Spread – which has a track record in cultivation and logistics – we will strive to produce “safe and clean” lettuce efficiently and stably. We will continue to strengthen our partnership with the Chubu Electric Power Group and actively work to achieve large-scale urban development and realize a “new form of community” not only in the Chubu area, but across Japan. 3) Efforts to Establish a Flexible Fundraising System Based on our having received a certain level of recognition from external agencies and financial institutions since we became a consolidated subsidiary of Chubu Electric Power, we are now in a position to flexibly and stably procure funds necessary for the future growth of our group. Specifically, as previously mentioned, the Company received a rating of “A-” (stable) from Rating and Investment Information, Inc. and “A” (stable) from Japan Credit Rating Agency, Ltd. in July 2021, and was newly selected as a constituent of the JPX-Nikkei Index 400 for FY2021 (August 31, 2021 to August 30, 2022). Given the recognition and other factors, the Company concluded a commitment line agreement with The Nishi-Nippon City Bank, Ltd. in September 2021 with a maximum borrowing amount of 10 billion yen, and a syndication-type commitment line agreement in November 2021 for a maximum borrowing amount of 5.5 billion yen with The Shiga Bank, Ltd. serving as the arranger. Furthermore, in December 2021, we submitted a shelf registration statement for issuance of corporate bonds to secure a more flexible means of fundraising in addition to indirect financing from financial institutions. The Company has the capacity to issue 50 billion yen in bonds and will continue to do so in a flexible and agile manner while considering the market environment. By establishing these flexible fundraising systems, we will proactively consider various investment opportunities to further raise our corporate value. 4) Progress of Projects under Hokkaido Ballpark Concept In January 2020, we concluded a ballpark naming rights agreement with Hokkaido Nippon-Ham Fighters Baseball Club Co., Ltd. and Fighters Sports & Entertainment Co., Ltd. for the new Hokkaido Nippon Ham Fighters stadium, “ES CON FIELD HOKKAIDO,” scheduled to open in March 2023 in Kitahiroshima City, Hokkaido. The area surrounding the new stadium is a large-scale development area called HOKKAIDO BALLPARK F VILLAGE (total development area: approx. 36.7 ha; hereinafter “F VILLAGE”) with construction of a new station also planned. We are involved in various real estate development projects in this area on approximately 9,400 m2 of land adjoining the ballpark. We are involved in urban development of which the new stadium will serve as the centerpiece. In August 2021, as part of the F VILLAGE urban development concept, we opened to the public our first new condominium in Hokkaido, “Le JADE Hokkaido Ballpark.” The project is located in a rare location in close proximity to the new baseball stadium, about 80 meters from the outfield stands of the new stadium. This will allow enjoyment of the rich nature of Hokkaido. The concept of the project is to provide a new lifestyle (“living in a ballpark”). Media reporting on the project has been extensive – including newspapers and TV programs – and has attracted a great deal of attention. Sales activities are progressing smoothly, with the number of requests for information exceeding 4,600 as of January 7, 2022. In addition, in March 2021, we concluded a partnership agreement with the city of Kitahiroshima for the JR Kitahiroshima Station “Train Station West Exit Area Revitalization Project.” In November 2021, we acquired a portion of the development site for the project. The site will be used for three development projects: a station square in front of JR Kitahiroshima Station, an exchange center complex comprising commercial facilities and a hotel, and a three-dimensional indoor/outdoor plaza and park. Of the development projects on this site, the commercial facilities are scheduled for completion in 2024. – 8 – JR Kitahiroshima Station is conveniently situated between JR Sapporo Station and New Chitose Airport Station – approximately 20 minutes from the airport and approximately 16 minutes from Sapporo by train – and is expected to become a key access point to the ballpark. In addition to the development of the ballpark area, we will also develop the area around JR Kitahiroshima Station, the gateway to the ball park, to promote community-based urban development that will create a bustling atmosphere throughout Kitahiroshima. We will continue to cooperate in the promotion of sports and culture and contribute to the revitalization and development of the entire Hokkaido region for the happiness of its residents. 5) Status of Implementation of Growth Strategy of ESCON JAPAN REIT Investment Corporation In August 2021, ESCON JAPAN REIT Investment Corporation (hereinafter “EJR”) conducted the second public offering, following the first in February 2020, with ESCON Asset Management Ltd. (hereinafter “EAM”), a consolidated subsidiary, as the Company entrusted with asset management. Asset size steadily expanded, from 41.6 billion yen at the time of listing to 69.6 billion yen after the capital increase. As the sponsor of EJR, the ES-CON JAPAN Group transferred the following seven properties and has supported the enhancement of EJR’s income and stable growth. The details of the assets in the second transfer from the Company to EJR are as follows, with a total transfer Location Type Site area (total floor area) Transfer price (million yen) price of 11,947 million yen. (1) Kumamoto City, Kumamoto Prefecture (Suroy Mall Nagamine) (2) Hatsukaichi City, Hiroshima Prefecture (Fuji Grand Natalie) (3) Sapporo City, Hokkaido (4) Neyagawa City, Osaka (5) Amagasaki City, Hyogo Prefecture Prefecture Prefecture (6) Kobe City, Hyogo Prefecture (7) Hikone City, Shiga Prefecture Commercial facility (land, building) Commercial facility (land, building) 28,546.00 m² (13,130.23 m²) 21,083.66 m² (28,543.96 m²) Commercial facility (land) 8,154.00 m² Commercial facility (land) 2,743.65 m² Commercial facility (land) 1,491.47 m² Commercial facility (land) 2,634.83 m² Commercial facility (land) 2,012.30 m² 6) Initiatives for Formation of Private REIT Total 4,600 3,950 1,300 702 565 530 300 11,947 In addition to the public REIT business of EJR, we plan to form and commence operation of a private real estate investment trust, with EAM as the Company entrusted with asset management. Starting with rental apartments in Higashiyamato City, Tokyo, and Fujisawa City, Kanagawa Prefecture, in 2020, we have formed private funds operating a total of 10 buildings in metropolitan areas of Tokyo, Kanagawa, and Saitama, respectively. The market for rental apartments has been strong even amidst the COVID-19 pandemic, and stable needs are expected in the future. As such, we will be preparing for the formation of a private REIT by leveraging the Group’s expertise in condominium development. 7) Acquisition of Shares of Picasso Co., Ltd. and Seven Group Companies (Making Them Our Subsidiaries) On October 29, 2021, ES-CON JAPAN acquired all shares of Picasso Co., Ltd. (“Picasso”), a company engaged in the real estate leasing business, and seven of its group companies (“Group Companies”), and made them subsidiaries. apartments and office buildings. Picasso, founded in 1991 in Osaka City, along with its group companies is engaged in the real estate leasing business mainly in the Kansai region. It owns numerous outstanding revenue-generating assets such as rental This acquisition of subsidiaries will rapidly progress the abovementioned basic management strategic policy of “Transforming the focus from flows to stock” in the fourth medium-term management plan by enhancing the leasing business and securing stable revenues, and thus we believe it will contribute dramatically to the sustained growth of the ES-CON JAPAN Group. – 9 – 8) Acquisition of Shares of FUEL Inc. (Making It Our Subsidiary) On January 21, 2022, the Company acquired all shares of FUEL Inc. (hereinafter “FUEL”) and made it a subsidiary, with the aim of strengthening and expanding the Group’s asset management business and paving the way for future participation in the real estate finance business. FUEL is engaged in the operation of online funds that provide opportunities for retail investors to easily invest in real estate or real estate businesses in small units over the Internet, as well as the provision of systems for crowdfunding businesses based on the Real Estate Specified Joint Enterprise Act. Making FUEL a subsidiary will enable the Group to enhance the quality and quantity of its existing businesses and expand its domain in terms of human resources, functions, and systems. It will also make possible the rapid establishment of a system that will enable it to take on the challenge of new real estate digital transformation (DX) businesses (such as ST and CF*1) 5 to 10 years in the future. *1 ST (Security Token) refers to investment management through the issuance of digital securities using blockchain technology. CF (Crowdfunding) refers to a crowdfunding business. 9) Take on the Challenges of New Business Domains In October 2020, with an eye toward resolving issues facing modern society such as the shortage of burial grounds in a society with a large number of deaths due to the aging of the population, the current situation where there is no one to look after graves due to small families with the declining birthrate, and the considerable difficulty in obtaining graves – particularly in urban areas – we acquired shares of Ryomon Co., Ltd., a company engaged in the management of an urban columbarium in Minato Ward, Tokyo. We began selling permanent use rights for the Ryomon columbarium in March 2021. We are also active in business overseas while carefully assessing the impact of the spread of COVID-19. In August 2021, the Company, through its subsidiary ESCON USA III LLC, invested and participated in Waikiki Galleria Tower, a retail and office complex value-add project located in Honolulu, Hawaii. The project is primarily being carried out by BlackSand Capital, LLC, a real estate investment advisory company. Furthermore, in October 2021, we invested in Crow Holdings Realty Partners IX, L.P., a real estate investment fund formed by Crow Holdings Capital, a real estate company in Texas, U.S.A., through our subsidiary ESCON USA II LLC. In December 2021, we also entered into a basic agreement on the world’s most advanced housing development with Serendix Inc. (hereinafter “Serendix”), a company that aims to develop housing using 3D printers. We also invested in the firm. Serendix aims to develop “Sphere,” the world’s most advanced house using 3D printing technology originating from Japan. We will cooperate in the research toward the development of Sphere and, in the future, apply the Sphere technology to other fields such as stores, offices, and warehouses. We will continue to focus on initiatives in new business fields with a view to the next era and globally implement a multifaceted real estate business that can contribute to society. 10) Status of ESG Initiatives 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, leads ESG initiatives. In July 2021, we established the Health & Culture Fostering Team for further promotion of health management. 1. Environment (E) ・ EcoAction 21 Certification In May 2020, ES-CON JAPAN acquired EcoAction 21 Certification, a Japanese environmental management system (EMS) established by the Ministry of the Environment. By continuing to conduct environmentally friendly management through EcoAction 21 initiatives, companies are expected to fulfill their social responsibilities to reduce their environmental burden. This is also expected to provide management benefits such as cost reduction and improved productivity, as well as enhancement of corporate value. – 10 – ・ Green Building In April 2011, “tonarie Yamato-Takada,” “tonarie Toga-Mikita,” “tonarie Minamisenri,” “tonarie Seiwadai,” and “Asumigaoka Brand New Mall,” which are commercial facilities owned by EJR, obtained DBJ Green Building Certification (a certification system created by Development Bank of Japan Inc. (hereinafter “DBJ”) to support environmentally and socially conscious real estate (Green Building)). Our group as a whole is working to improve the value of the facilities, and the five properties that have obtained the certification are being operated and managed by our subsidiary ES-CON PROPERTY Ltd. ・ “Rank S” Certification for CASBEE for Real Estate In July 2020, “tonarie Fujimino,” a commercial facility owned by ES-CON JAPAN, obtained “Rank S,” the highest rank of the Certification for CASBEE(*2) for Real Estate from a CASBEE accreditation body authorized by the Institute for Building Environment and Energy Conservation. *2 CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a system to comprehensively assess the quality of a building, which evaluates and ranks the environmental performance of the building by taking into account not only environmental considerations such as energy savings and use of environmentally-friendly materials, but also comfort in the building, and its visual impact on the area. ・ Efforts to Promote Environmentally Friendly ZEH-compatible Housing In November 2021, ES-CON JAPAN obtained ZEH(*3)-M Oriented certification for its new condominium, “Le JADE Yao Sakuragaoka” (Yao City, Osaka Prefecture; 72 units in total). The property features excellent heat insulation performance and helps reduce annual primary energy consumption. This is our second ZEH condominium following “Le JADE Okurayama” (Kohoku Ward, Yokohama City; 25 units in total), which won the Good Design Award for fiscal year 2021. We will continue to develop ZEH condominiums with the goal of building one per year. Moreover, in November 2020, ES-CON Home Co., Ltd. and ES-CON Craft Co., Ltd., which are consolidated subsidiaries of ES-CON JAPAN, were registered for ZEH Builder Certification. *3 ZEH (Net Zero Energy House) is a house aiming to make the annual primary energy consumption zero by introducing 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. ・ Received Award for Excellence in the Environmental Human Resource Development Corporate Awards 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 human resources) hosted by the Ministry of the Environment and the Environmental Consortium for Leadership Development (EcoLeaD). ・ Construction and Operation of “Techno Farm Fukuroi,” a Vertical Farm Utilizing Fully Artificial Light As mentioned above, we are collaborating with Chubu Electric Power and Spread to develop Techno Farm Fukuroi, which will be the world’s largest vertical farm utilizing fully artificial light and capable of producing 10 tons of lettuce per day. The three companies will solve issues in food and agricultural fields through the plant factory business while also contributing to the realization of a sustainable and livable society and the achievement of SDGs by making efforts towards decarbonization such as the proactive use of green energy and effective use of CO2 in the process of cultivation. 2. Social (S) ・ Contributing to Healthcare diseases and accidents. Since 2020, we have been providing monetary donations to the Kyoto University “iPS Cell Research Fund” to support activities realizing provision of early and inexpensive treatment using iPS cells for people suffering from We have also been providing monetary donations to Osaka University’s Graduate School of Medicine since 2019 to support clinical trials for cancer vaccines showing promise for the treatment of cancer. ・ Contribution to Sports Promotion In April 2021, we invested in Ryukyu Football Club Co., Ltd. (hereinafter “Ryukyu FC”) which operates FC Ryukyu, a professional soccer team. With this investment, we will contribute to the local community through sports promotion by securing a foothold for the creation of business opportunities in Okinawa as well as supporting Ryukyu FC‘s regional revitalization activities in Okinawa Prefecture. – 11 – 3. Governance (G) ・ Establishment of Voluntary Committee on Nomination and Remuneration of Directors In January 2020, we established the “Nomination and Remuneration Advisory Committee” with the aim to strengthen the independence and objectivity of functions as well as the accountability of the board of directors with regard to nomination and remuneration of directors and other matters. We have secured impartiality and transparency concerning election and remuneration of directors. ・ Nurturing Successors We also launched initiatives for a succession plan called the candidate successor system. We appointed a total of eight employed executive officers; seven in January 2021 and one in September 2021. ・ Diversity of the Board of Directors In order to secure diversity of the board of directors, two independent directors were appointed at the 26th Regular General Meeting of Shareholders held on March 26, 2021, and the number of independent directors was increased to four. In addition to the traditional certified public accountant, tax accountant and attorney, a director experienced in corporate management and a female independent director who is also a securities analyst have been newly added for a diverse board composition. ・ New Disclosure Items in Accordance with the Revised Corporate Governance Code In June 2021, Tokyo Stock Exchange, Inc. revised its Corporate Governance Code. This code requires companies, especially those transitioning to the Prime Market, to be more proactive in disclosing information on items such as fulfillment of the functions of the board of directors, ensuring diversity in core corporate personnel, and addressing sustainability-related issues. ES-CON JAPAN revised its corporate governance report in December 2021. The report newly discloses the proportion of female employees in its workforce, the results of appointing female employees to managerial and executive positions, and the Company’s efforts to cultivate human resources and comprehensively manage intellectual property. This includes efforts for disclosure based on the framework of the Task Force on Climate-related Financial Information Disclosure (TCFD). 4. Other We have been participating in Global ESG, an annual benchmark assessment measuring ESG consideration in the real estate sector, every year since 2018 with an aim to continuously improve the assessment results. As a result, in October 2021, we acquired “2 Stars” in the GRESB Rating, a five-grade evaluation system that reflects the applicant’s relative evaluation based on the overall score, for efforts on environmental consideration and sustainability in the “Development Benchmark.” (applicable period: January 1, 2020 to December 31, 2020) In addition, we acquired the “Green Star(*4)” rating upon receiving high marks in both “Management Component” and “Development Component” for three consecutive years. *4 The “Green Star” in the “Development Benchmark” is awarded to participants who score 50% or more in the absolute assessment based on the two main points, “Management Component” and “Development Component.” 11) Business Development by Segment In the real estate sales business, our core business, we are selling revenue-generating real estate and other properties, in addition to achieving progress in condominium sales. In the condominium sales business, we have commenced selling of new sales projects including “Le JADE bio Makuhari Hongo” (Hanamigawa Ward, Chiba City; 70 units in total), “Le JADE Kyoto Shijo Omiya” (Shimogyo Ward, Kyoto City; 43 units in total), “Le JADE Yao Sakuragaoka” (Yao City, Osaka Prefecture; 72 units in total), “Le JADE Kamishinjo” (Higashiyodogawa Ward, Osaka City; 60 units in total), “Le JADE Takatsuki Minami Matsubara The Front” (Takatsuki City, Osaka Prefecture; 74 units in total), “Le JADE Times Core Kawagoe” (Kawagoe City, Saitama Prefecture; 56 units in total), and “Le JADE Kawagoe The Residence” (Kawagoe City, Saitama Prefecture; 23 units in total). – 12 – As for the progress of sales, “Le JADE Nagaikoendori” (Sumiyoshi Ward, Osaka City; 108 units in total),” “Le JADE Neyagawa Koen” (Neyagawa City, Osaka Prefecture; 60 units in total),” “Le JADE Mukonosohonmachi” (Amagasaki City, Hyogo Prefecture; 33 units in total), “Le JADE Yamato-Takada Ekimae” (Yamato-Takada City, Nara Prefecture; 205 units in total), “Ost Residence Karuizawa” (Karuizawa Town, Kitasaku District, Nagano Prefecture; 33 units in total), were sold after completion in the fiscal year under review. “Le JADE Hirano (Hirano Ward, Osaka City; 58 units in total), “Le JADE Tsukuba Station Front (Tsukuba City, Ibaraki Prefecture; 218 units in total), “Le JADE Kakegawa Ekimae” (Kakegawa City, Shizuoka Prefecture; 83 units in total), “Le JADE Urawa” (Urawa Ward, Saitama City; 44 units in total), “Le JADE Takatsuki Bessho” (Takatsuki City, Osaka Prefecture; 49 units in total), which are scheduled for completion in the following fiscal year, and “Park Le JADE Residence Shirokane” (Minato Ward, Tokyo; 55 units in total), which is scheduled to be completed in 2023, have been sold out. In addition to acquiring its first new land for sale in the Kyushu and Hokkaido areas (Minami Ward, Fukuoka City and Higashi Ward, Sapporo City), ES-CON JAPAN also started development of its first logistics facility sites in the Kanto area, including “Chiba Research Park” (Wakaba Ward, Chiba City), “LOGITRES Narashino Shibazono” (tentative name) (Narashino City, Chiba Prefecture), and “LOGITRES Sano” (tentative name) (Sano City, Tochigi Prefecture). Furthermore, we are expanding and diversifying our business areas by acquiring land for business use (“Repro Shimbashi Project” (tentative name) in Minato Ward, Tokyo), which is located near JR Shimbashi Station, eyeing rental and development business over the medium to long term. In the real estate leasing business, we acquired shares of Picasso and seven other group companies (making them our subsidiaries) that own numerous outstanding revenue-generating assets such as rental apartments and office buildings, thereby securing stable earnings by strengthening the leasing business. In other areas, we acquired a new community-based shopping center, “tonarie Yokkaichi” (Yokkaichi City, Mie Prefecture), opened “tonarie Fujimino” (former name: Soyoca Fujimino, Fujimino City, Saitama Prefecture), and opened “tonarie CREO” at “tonarie Tsukuba Square” (Tsukuba City, Ibaraki Prefecture), a redevelopment project in front of Tsukuba Station, Ibaraki Prefecture, in phases. We also reopened “tonarie Minami Senri Annex,” a commercial facility in Suita City, Osaka Prefecture, where only the upper floors had been open due to the closure of the AEON Minami Senri Store. We are working to secure stable rent income and improve the asset value of our commercial facilities. Furthermore, the ES-CON JAPAN Group is actively pursuing the acquisition of outstanding revenue-generating assets as evidenced by the acquisition of three rental apartment properties: “Sol Plaza Sakai” (Sakai Ward, Sakai City; 168 units in total), “Tomei Apartments Esaka” (Suita City, Osaka Prefecture; 66 units in total), and “Amity Tsukaguchi” (Amagasaki City, Hyogo Prefecture; 60 units in total). In the real estate planning agency and consulting business, we have started selling permanent use rights for columbaria. Leveraging our strength in planning, we are focusing on non-asset, high-margin business, such as the commissioning business and the planning agency and consulting business. As a result, for the consolidated fiscal year under review, 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%), and profit attributable to owners of parent of 5,961 million yen (down 22.2%). Operating results by segment are as follows. 1. Real Estate Sales Business income of 13,039 million yen (down 8.5%). 2. Real Estate Leasing Business In the real estate sales business, activities including selling of condominiums and revenue-generating real estate, resulting in net sales of 70,334 million yen (down 1.6% from the previous fiscal year) and segment In the real estate leasing business, we secured rental income of revenue-generating real estate by making Picasso and seven other group companies our subsidiaries and focused on leasing activities and the property management business in view 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%). – 13 – 3. Real estate planning agency and consulting business In 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 business and 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). (Earnings outlook for the next fiscal year and progress of the medium-term management plan) Based on the fourth medium-term management plan, “IDEAL to REAL 2023,” ES-CON JAPAN is promoting its business toward achieving the plan under the management strategies of “Establishing business foundations able to withstand unexpected changes in economic conditions” and “Simultaneously changing the revenue structure and expanding business domains.” For details on the results for the fiscal year under review and the plan for the next fiscal year and beyond, please see “1. Overview of Operating Results, (1) Analysis of Operating Results, 1) Overview of Fourth Medium-Term Management Plan.” (Dividend for the next fiscal year) For the next fiscal year, the dividend forecast is 38 yen per share. (2) Analysis of Financial Position 1) Assets, Liabilities and Net Assets Assets at the end of the fiscal year under review increased by 103,348 million yen compared with the end of the previous fiscal year to 252,771 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. This was 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). 2) Cash Flows review. (Cash flows from operating activities) million yen. (Cash flows from investing activities) Cash and cash equivalents (“net cash”) in the fiscal year under review 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 the fiscal year under Cash flows from operating activities in the fiscal year under review 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 to the 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 Cash flows from investing activities in the fiscal year under review 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 to purchase of investment securities of 2,265 million yen, purchase of non-current assets of 4,763 million yen and purchase of shares of subsidiaries resulting in change in scope of consolidation of 24,070 million yen. – 14 – (Cash flows from financing activities) Cash flows from financing activities in the fiscal year under review 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 proceeds of 32,611 million yen, proceeds from issuance of shares of 20,361 million yen and payment of cash dividends of 2,645 million yen. Reference: Changes in cash flow indicators Equity ratio (%) Equity ratio on market capitalization basis (%) Equity ratio: Equity / Total assets Fiscal year ended Dec. 2017 Fiscal year ended Dec. 2018 Fiscal year ended Dec. 2019 Fiscal year ended Dec. 2020 Fiscal year ended Dec. 2021 24.8 54.0 24.9 42.2 25.3 50.7 25.8 39.3 24.8 30.5 Equity ratio on market capitalization basis: Market capitalization / Total assets Notes: 1 Each is calculated using consolidated financial figures. 2 Market capitalization is calculated by multiplying the closing share price at end of fiscal year by the number of shares issued and outstanding at end of fiscal year. (3) Basic Policy on Distribution of Profit, and Dividend for the Fiscal Year Under Review and Next Fiscal Year Positioning the return of profit to shareholders as a key management task, ES-CON JAPAN makes it a basic policy to strive for uninterrupted and stable return of profit in line with corporate growth potential based on decisions that take into account the status of business performance, availability of internal reserves, dividend payout ratio and other factors in a comprehensive manner. ES-CON JAPAN has introduced a progressive dividend policy to “not decrease the dividend amount, but rather only maintain or increase the dividend amount” in principle with DPS of the previous fiscal year as the lower limit, from the second medium-term management plan, and continues to implement the progressive dividend policy in the fourth medium-term management plan. For the fiscal year under review, the year-end dividend forecast will remain unchanged at 38 yen per share as initially scheduled. The dividend payout ratio is 56.3%. For the fiscal year ending December 2022, the dividend forecast is 38 yen per share. (4) Business Risks The main risks that could impact the ES-CON JAPAN Group’s operating results, share prices, financial status, etc., are listed below. Statements concerning future matters are based on the judgements of the ES-CON JAPAN Group as of the end of the fiscal year under review. 1) Impact of Change in Business Environment Including the Spread of COVID-19 There are concerns over the resurgence of COVID-19 caused by variants, and careful attention should continue to be paid to the future real estate market trend. If the pandemic resurges or continues over a long term, the economy is expected to deteriorate from a recovery trend. In such a case, the operating results, financial position, and status of cash flow of the ES-CON JAPAN Group may be materially impacted due to posting of appraisal loss of inventories and impairment loss, etc. a. Condominium sales In the condominium sales business, the actual demand for housing is high and remains strong even amid the spread of infection. However, sales may become stagnant due to the decline in consumer sentiment on purchase resulting from concerns over the resurgence of infection by variants as well as the reduction of borrowing limit and deduction rate of housing loan caused by the amendment of tax system for fiscal 2022. b. Real estate (other) sales business There is a risk of possible decrease in real estate prices due to a reduced appetite for investment among investors, the worsening of the financing environment resulting from financial contraction, and other factors. – 15 – c. Retail properties The ES-CON JAPAN Group owns and manages retail properties centering on community-based shopping centers with supermarkets as the core tenant. Retail properties continue to be operated even amid the COVID-19 pandemic as facilities supporting daily lives, and supermarkets, drug stores, etc. maintain strong sales while the customers of tenants including restaurants, apparel stores, sports clubs, etc. which had struggled are gradually returning. On the other hand, depending on the situation of the resurgence of variants, there may be a risk of decease in the planned real estate leasing income such as the difficulty in soliciting new tenants. d. Hotels ES-CON JAPAN has been promoting hotel development projects in recent years, and has completed sales for 15 out of its 17 projects. As to the 2 properties owned (Fukuoka City Project opened in March 2020 and Osaka City Project opened in January 2021), there is a risk of possible delay in the sales period or decrease in sales prices due to the sluggish occupancy rate and difficulty in predicting the time needed for recovery. e. Columbarium Business ES-CON JAPAN has started to sell permanent use rights of Ryomon, a columbarium, in March 2021 in an effort to solve problems facing modern society such as the fact that it is particularly difficult to obtain graves in central Tokyo. There are delay in the sales plan with purchasers refraining from going outside and other factors and depending on the situation of the spread of COVID-19 variants, there is a possibility that the sales to slow down. 2) Legal Restrictions, Etc. In addition to the restrictions of the Companies Act and the Financial Instruments and Exchange Act, the real estate industry to which the ES-CON JAPAN Group belongs is subject to the restrictions of the National Land Use Planning Act, Real Estate Brokerage Act, Building Standards Act, Act on Maintenance of Sanitation in Buildings, Act on Specified Joint Real Estate Ventures, Act on Securitization of Assets, Trust Business Act, and Money Lending Business Act, etc. In addition, the ES-CON JAPAN Group conducts real estate sales and related business as a real estate company licensed under the Real Estate Brokerage Act and the Act on Advancement of Proper Condominium Management, etc., but the abolition of these or creation of new legal restrictions could affect the ES-CON JAPAN Group’s business performance. 3) Dependence on Interest-Bearing Liabilities The Group procures funds for land acquisition, etc. related to its real estate business primarily through borrowings from financial institutions involved in project finance. In our condominium sale business, it takes time to get from land acquisition to commercialization or sale, so the ratio of interest-bearing liabilities to total assets is relatively high. We are committed to building and maintaining good business relationships with financial institutions including the main banks and strengthening and stabilizing our financial foundation, but raising insufficient or unreliable capital due to increased interest rates or a significant deterioration of the financial environment could affect the Group’s business performance and financial condition. 4) Human Resources Rather than vertical integration, the Group seeks to build an organizational structure that is closely linked horizontally, oriented toward efficiency and agile management, able to flexibly promote business and manifest the greatest value and performance with the smallest number of people. Our real estate-related business requires diverse expertise, making personnel an extremely important business resource. In order to conduct reliable business and grow as a Group, it is indispensable that we strive to share expertise and information and continue to improve employees’ abilities as well as secure highly specialized personnel and employ, nurture and educate executives and young employees who will be the leaders of the next generation. However, failing to secure or nurture the human resources sought by the Group or losing outstanding personnel could affect the Group’s business performance and future business development. – 16 – 5) Management of Personal Information In the course of the Group’s business, we receive the personal information of customers and clients in each business when developing businesses in a multidimensional way, including customers who have purchased condominiums or detached houses, have considered doing so, or reside in rental apartments as well as customers who have purchased permanent use rights in the columbarium business, have considere