Measures Against Conflict of Interest

ES‐CON ASSET MANAGEMENT (hereinafter, the "Asset Manager") takes measures to prevent conflicts of interest through the formulation of selfimposed rules and multi‐tiered checks in transactions with interested parties (defined in the Asset Manager's Interested‐Party Transaction Rules).

Interested‐Party Transaction Rules (self‐imposed rules)

Acquisition/Transfer	Acquisition price ≤ Appraisal value by third party Transfer price ≥ Appraisal value by third party*1
Bridge or warehousing*2 requests	Confirm the necessity and appropriateness of the negotiation process and scheme at the time of LOI presentation Offer price at the time of LOI presentation and acquisition price ≤ Appraisal value by third party

• When tranferring assets under management to an interested party at a price less than the appraisal value, it must be possible to explain the reasonableness of the gap between the appraisal value and the transfer price, and the reason why it was determined that the transfer should be implemented (including the basis for determining the reasonableness of the gap between the transfer price and the appraisal value) must be explained in the timely disclosure of the transfer.
• Those in which a third parties other than the interested parties are the subject are called "bridges" and those in which the interested parties are the subject are called "warehousing".

Decision‐making process for property acquisitions by ESCON REIT

• In the case of a transaction with an interested party, directors who are not external members must attend the meeting.
• If the property is a healthcare facility(serviced housing for the elderly set forth in Article 5 of the Act on Securement of Stable Supply of Elderly Persons' Housing, paid nursing homes set forth in Article 29 of the Act on Social Welfare for the Elderly, or elderly group homes for those with dementia based on Paragraph 2 (6) of Article 5-2 of the same law.), the Investment Management Committee obtains a report on the property from an external expert prior to the resolution and makes an investment decision based on the advice of the external expert, if necessary.

Compliance System

To strengthen the auditing and supervisory functions of the Board of Directors, the Asset Manager transitioned from a system with one Corporate Auditor to an Audit and Supervisory Committee system with an audit committee (three directors who are members of the audit and supervisory committee, including two outside directors) as of June 28, 2022.

Management structure aimed at maximizing unitholders' profit

Our asset management fee is linked to two separate components; total assets and income before income taxes.
We believe that this fee structure will provide enough incentive for the Asset Manager to maximize unitholders’ value by the same target sight for improving profit.

Fee	Criteria for calculation
Management fee 1	Total assets at the end of previous period×0.4%
Management fee 2	Income before income taxes×3%
Acquisition fee	Acquistion price×1% (However, 0.5% in the case of transactions with interested parties as defined by ESCON REIT and in the case of transactions with such third parties concerning real estate‐related assets acquired by third parties from interested parties for the purpose of selling them to ESCON REIT)
Transfer fee	Transfer price×1% (However, 0.5% in the case of transactions with interested parties as defined by ESCON REIT)