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

In our Condominium business and Real estate development business, we carefully select and acquire high-quality development sites, and strive to provide attractive products by making the most of their locational characteristics. Furthermore, while we carefully formulate plans considering various factors when developing properties, there is a risk that sales may not progress according to plan due to deterioration in the supply and demand balance caused by economic trends, economic conditions, interest rates, tax systems, land price trends, etc., as well as rising construction costs and difficulties in procurement.

Furthermore, if delays in delivery or unexpected cost burdens occur due to various factors such as unforeseen underground defects during the development phase or poor construction during the building phase, it could affect ES-CON JAPAN Ltd. group's operating results and financial condition.

In Real estate leasing business, in addition to the impact of economic trends and conditions, factors such as the departure of major tenants from commercial facilities and their usage status may lead to a decline in rents or a decrease in the occupancy rate of our assets, which could affect ES-CON JAPAN Ltd. group's operating results and financial condition.

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 regulations under the "National Land Use Planning Act," "Real Estate Transaction Business Act," "Building Standards Act," "Construction Business Act," "Act on Ensuring a Hygienic Environment in Buildings," "Real Estate Specified Joint Enterprise Act," "Act on the Securitization of Assets," "Trust Business Act," "Money Lending Business Act," and "Act on Prevention of Transfer of Criminal Proceeds," among others.

Furthermore, as a real estate company, ES-CON JAPAN Ltd. group has obtained licenses or registrations based on the "Real Estate Transaction Business Act," the "Act on the Promotion of Proper Management of Condominiums," and the "Act on the Proper Management of Rental Housing, etc.," and conducts real estate sales and related businesses. However, revisions or abolitions of these laws, or the establishment of new legal regulations such as the "Act on the Proper Management of Transactions Related to Specified Contracting Businesses," may affect ES-CON JAPAN Ltd. group's operating results and financial condition.

03 Dependence on interest-bearing debt, etc.

ES-CON JAPAN Ltd. group primarily finances land acquisition costs and other expenses related to our real estate business through borrowings from financial institutions, including project finance. Because it takes time from land acquisition to project development or sale, our outstanding interest-bearing debt is a high proportion of our total assets. While ES-CON JAPAN Ltd. group strives to build and maintain good business relationships with financial institutions, including our main bank, and has established a flexible financing environment since becoming a consolidated subsidiary of Chubu Electric Power Co., Inc., rising interest rates or a significant deterioration in the financial environment could lead to insufficient or unsuccessful financing, potentially impacting ES-CON JAPAN Ltd. group's operating results and financial condition.

04 About Human Resources

The real estate businesses promoted by ES-CON JAPAN Ltd. group require a wide range of expertise, making human resources an extremely important management resource. Therefore, ES-CON JAPAN Ltd. group has adopted a medium- to long-term strategy of building a strong human resource base by pursuing "securing human resources to support growth," "strengthening human resource development," and "promoting the safety and health of employees" in a unified manner. In order for ES-CON JAPAN Ltd. group to achieve steady business progress and corporate growth, it is essential to share know-how and information, strive for the continuous improvement of employees' capabilities, and secure highly specialized personnel, as well as recruiting, developing, and educating management personnel and young employees who will lead the next generation. However, if ES-CON JAPAN Ltd. group is unable to adequately secure or develop the human resources it needs, or if talented personnel leave the company at present, it may affect ES-CON JAPAN Ltd. group's operating results, financial condition, and future business development.

05 Regarding the risk of personal information leaks and information systems

As part of our diversified business operations, ES-CON JAPAN Ltd. group possesses a wide range of personal information, including that of buyers and prospective buyers of condominiums and detached houses, residents of rental apartments, buyers and prospective buyers of perpetual use rights in our columbarium sales business, and business partners. We are a personal information handling business operator as defined by the "Act on the Protection of Personal Information." ES-CON JAPAN Ltd. group recognizes the protection of this personal information as a critical issue and has established internal systems and rules (basic policies, regulations, and manuals) regarding the handling of personal information. Within our internal systems, we have implemented measures such as restricting access rights to personal data files, strengthening storage security, and introducing monitoring software. We are working to strengthen our overall information management system from both hardware and software perspectives, including the handling of information other than personal information.

Furthermore, while ES-CON JAPAN Ltd. partially entrust the sale of our condominiums to sales companies, we require these sales companies to use ES-CON JAPAN Ltd. management system and supervise them to ensure confidentiality and prohibit the use of personal information for purposes other than those intended, in order to prevent personal information from being leaked to others.

Regarding our information systems, we strive to minimize system risks by introducing the latest security tools and providing regular security training to our employees in response to the increasingly sophisticated threat of cyberattacks. However, if an unexpected cyberattack, computer virus intrusion, or equipment failure occurs, resulting in the leakage of personal information or the downtime or malfunction of critical systems, it could lead to a loss of social credibility for ES-CON JAPAN Ltd. group, liability for damages, and stagnation of business activities, which could ultimately affect ES-CON JAPAN Ltd. group's operating results and financial condition.

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

ES-CON JAPAN Ltd. group or its officers and employees violate any laws and regulations related to the conduct of our business (such as the Companies Act, the Real Estate Transaction Business Act, the Construction Business Act, the Architects Act, the Financial Instruments and Exchange Act, the Investment Trusts and Investment Corporations Act, the Act on the Protection of Personal Information, the Money Lending Business Act, the Act on the Promotion of Proper Management of Condominiums, the Act on the Proper Management of Rental Housing, etc., the Act on Prevention of Delay in Payment of Subcontracting Fees, etc. (Act on the Proper Management of Transactions with Small and Medium-Sized Enterprises from January 1, 2026), ES-CON JAPAN Ltd. Standards Act, the Employment Security Act, and the Act on the Proper Management of Transactions with Specified ES-CON JAPAN Ltd. Businesses, etc.), we may be subject to administrative penalties from the relevant authorities. In such a case, ES-CON JAPAN Ltd. ES-CON JAPAN Ltd. 's operating results, financial condition, and market valuation may be affected due to a loss of social credibility and the occurrence of liability for damages.

09 M&A-related risks

ES-CON JAPAN Ltd. group aims to expand our business areas and transform our revenue structure through strategic M&A, thereby promoting sustainable growth. However, even if we identify suitable target companies that align with ES-CON JAPAN Ltd. group's business strategy, there is no guarantee that an M&A transaction will be completed under appropriate terms. Furthermore, while we conduct thorough prior studies on the target companies' financial conditions and business activities, if the business plan does not progress as initially anticipated, it may affect ES-CON JAPAN Ltd. group's operating results and financial condition through measures such as goodwill impairment.