Basic policy

Equity finance	New investment units will be issued for the purpose of increasing AUM and enhancing profitability after factoring in key variables such as LTV(Note1), dilution of existing investment units and unit price, as well as prevailing financial and economic market conditions.
Debt finance	Upon making borrowings and issuing investment corporation bonds (including short-term investment corporation bonds), due consideration will be given to the balance between the mobility of fund procurement and financial stability as well as to the characteristics of the property. Specifically, fund procurement means (loans/investment corporation bonds), the ratio of long-term loans, ratio of loans with fixed interest rates, diversification of maturity, unsecured or secured, etc. will be discussed.
LTV	To operate at a conservative level with an upper limit of 50% for LTV, in principle.
Cash management	Effective and proper cash management will be conducted by accurately understanding demand for funds in the portfolio through constant monitoring(Note2)

• LTV (loan-to-value) ratio means the proportion of the balance of its borrowings and outstanding corporate bonds issued against total assets
• One of the distinguishing characteristics of investing in leasehold land (sokochi) is the absence of depreciation expenses, which means that cash cannot be accumulated as much compared with a standard real estate portfolio of land and buildings. Nonetheless, ESCON REIT intends to accurately calculate accumulated cash from both leasehold land and building assets to implement effective and proper cash management.

Distribution in excess of earnings

If ESCON REIT determines it to be appropriate by taking into consideration account trends in the economic environment, the real estate market, and the prevailing circumstances of our assets-under-management and financial profile, ESCON REIT may make distributions of funds in excess of the distributable amount to unitholders (hereinafter Distributions in excess of earnings), by adding an amount determined by ESCON REIT, up to the amount prescribed in the rules of the Investment Trusts Association, Japan. As a general rule, ESCON REIT has no intentions to make distribution in excess of earnings. However, in the event that a significant drop in the distributable amount caused by extraordinary events is observed, ESCON REIT will decide whether to implement distribution in excess of earnings after giving due consideration to capital expenditures and cash on hand.