01 Impact of fluctuations in economic conditions, interest rates, real estate market conditions, etc.

In Condominium business, we carefully select and acquire prime business sites, develop them to make the most of the location's characteristics, and provide attractive products, including price advantages. When selling properties, we carefully consider the price range in the business plan for each property, taking into account various aspects. However, if sales at the prices determined in the business plan do not proceed as planned due to a sharp rise in construction costs, a worsening balance of supply and demand due to economic trends, economic conditions, interest rates, tax systems, trends in land prices, etc., or if delivery is delayed or unplanned costs are incurred due to various factors such as unforeseen defects such as underground obstacles or poor construction during the construction phase, this could affect the business performance of ES-CON JAPAN Ltd. group.

In addition, in Real estate leasing business, economic trends, the departure of major tenants from commercial facilities and the state of their utilization may cause rents to fall and the occupancy rates of the assets held to decline, which may have an impact on ES-CON JAPAN Ltd. Group's business performance.

02 Legal restrictions

In addition to regulations under the Companies Act and the Financial Instruments and Exchange Act, the real estate industry to which ES-CON JAPAN Ltd. Group belongs is subject to legal restrictions under the National Land Use Planning Act, the Real Estate Transaction Business Act, the Building Standards Act, the Act on Ensuring Sanitary Environment in Buildings, the Real Estate Specified Joint Venture Act, the Act on Liquidation of Assets, the Trust Business Act, the Money Lending Business Act, the Act on Prevention of Transfer of Criminal Proceeds, etc.

Furthermore, as a real estate business, ES-CON JAPAN Ltd. Group is licensed or registered under the Real Estate Transaction Business Act, the Act on Promotion of Proper Management of Condominiums, the Act on Proper Management of Rental Housing, etc., and engages in real estate sales and related businesses. However, the revision or abolition of these laws, or the establishment of new legal regulations such as the Act on Proper Transactions Relating to Specified Entrusted Business Operators, could have an impact on ES-CON JAPAN Ltd. Group's business performance.

03 Dependence on interest-bearing debt, etc.

ES-CON JAPAN Ltd. Group procures land acquisition costs and other expenses related to its real estate business mainly through loans from financial institutions, such as project finance, and in the condominium business, it takes time from land acquisition to commercialization or sale, resulting in a high ratio of interest-bearing liabilities to total assets. ES-CON JAPAN Ltd. Group strives to build and maintain good business relationships with financial institutions, including its main banks, and has created a flexible fund-raising environment since becoming a consolidated subsidiary of Chubu Electric Power. However, if fund-raising becomes insufficient or becomes unsuccessful due to factors such as an increase in funding interest rates or a significant deterioration in the financial environment, ES-CON JAPAN Ltd. could have an impact on the Group's operating results and financial position.

04 About Human Resources

The real estate business promoted by ES-CON JAPAN Ltd. Group requires various know-how, and human resources are an extremely important management resource. For this reason, ES-CON JAPAN Ltd. Group has set a medium- to long-term strategy of building a strong human resources base by promoting the three pillars of "securing human resources to support growth," "strengthening human resource development," and "promoting employee safety and health." In order for ES-CON JAPAN Ltd. Group to steadily promote its business and grow as a company, it is essential to share know-how and information, strive to continuously improve the capabilities of employees, secure highly specialized human resources, and hire, train, and educate management and young employees who will lead the next generation. However, if ES-CON JAPAN Ltd. Group is unable to sufficiently secure and develop the human resources it requires, or if the current talented personnel leave the company, ES-CON JAPAN Ltd. could have an impact on the Group's operating results and future business development.

05 Regarding the risk of personal information leaks and information systems

Each company in ES-CON JAPAN Ltd. group is entrusted with personal information from customers and business partners in each business, such as customers who have purchased or are considering purchasing condominiums and detached houses for sale, customers who live in rental apartments, and customers who have purchased or are considering perpetual use rights in the ossuary business, in the course of conducting business in a wide range of fields, and is a personal information handling business entity as defined by the Act on the Protection of Personal Information. ES-CON JAPAN Ltd. group has established rules (basic policies, regulations, manuals) regarding the handling of personal information and has established a system. In addition, in our in-house system, we have strengthened the system for all information management, including the handling of information other than personal information, by taking measures such as strict file storage of personal data, introducing monitoring software, and restricting access rights.

In addition, ES-CON JAPAN Ltd. outsource some of the sales of condominiums to sales agents. To prevent customers' personal information from being leaked to third parties, we have these agents use some of ES-CON JAPAN Ltd. management systems to maintain confidentiality and supervise them to prohibit the use of personal information submitted by customers for purposes other than those stated.

In recent years, cyber-attack methods have become increasingly sophisticated and ingenious, and ES-CON JAPAN Ltd. is no stranger to cybersecurity threats. However, in order to minimize system risks, we are strengthening our system-side measures by introducing the latest security tools, and we are also strengthening our overall security by regularly providing security education to our employees.

However, if an unforeseen event were to occur in which personal information were to be leaked to the outside, ES-CON JAPAN Ltd. Group's credibility could be damaged, resulting in a decrease in sales, or expenses could be incurred as a result of damages, which could have an impact on ES-CON JAPAN Ltd. Group's business performance.

06 Important litigation

Regarding risks that may become the subject of litigation, etc., the Risk Management Committee, which is composed of Director and department heads, etc., monitors the risk situation and shares information throughout the company. If an important lawsuit is filed in the future, it may have an impact on the business performance and financial position of ES-CON JAPAN Ltd. Group.

07 Climate change-related risks

It is anticipated that society will experience an increase in weather-related disasters in the future, and the risk of business continuity due to climate change may increase, which may have an impact on the business performance and financial position of ES-CON JAPAN Ltd. Group.

In 2022, we announced our support for TCFD recommendations, which call for "analyzing the risks and opportunities that climate change poses to business and promoting the disclosure of such information," and we are disclosing information about the impact of climate change on ES-CON JAPAN Ltd. business in accordance with TCFD framework.

08 Risks of legal violations

If the Group or ES-CON JAPAN Ltd. officers and employees violate laws and regulations related to the conduct of its business (Companies Act, Real Estate Transaction Business Act, Construction Business Act, Architects Act, Financial Instruments and Exchange Act, Act on Investment Trusts and Investment Corporations, Act on the Protection of Personal Information, Money Lending Business Act, Act on Promotion of Proper Management of Condominiums, Act on Proper Management of Rental Housing, Act against Delays in Payment of Subcontract Proceeds, etc., Act on Proper Transactions Involving Specified Entrusted Businesses, Labor Standards Act, ES-CON JAPAN Ltd. Security Act, etc.), ES-CON JAPAN Ltd. Group may be subject to administrative sanctions from the relevant authorities. In such a case, ES-CON JAPAN Ltd. Group may lose social credibility, be required to pay damages, etc., which could have an impact on ES-CON JAPAN Ltd. Group's financial position, business performance, and market reputation.

09 M&A-related risks

ES-CON JAPAN Ltd. group aims to expand our business domain and transform our profit structure by implementing strategic M&A, and to promote sustainable growth. However, there is no guarantee that we will be able to find suitable target companies that match ES-CON JAPAN Ltd. group's business strategies and to implement M&A with such target companies under appropriate terms. In addition, we thoroughly review the financial status and business details of the target companies before implementing M&A, but if the business plan we initially envision does not progress as planned, this may affect ES-CON JAPAN Ltd. group's operating results and financial position through the impairment of goodwill, etc.