TAKAMATSU CONSTRUCTION GROUP CO., LTD.

Rising construction costs driven by global increases in raw material and energy prices, yen depreciation, and uncertainty stemming from the situation in the Middle East and U.S. tariff policy raise concerns that reduced investment appetite and diminished home-purchasing intent could lead to a decline in orders received. Should reductions in public investment be implemented, this could also affect business performance and financial condition. In response, the Group is promoting the expansion of its business portfolio into upstream and downstream areas such as development business and stock (recurring revenue) business, along with cultivation of new client relationships.

If construction material prices or labor unit costs rise significantly after conclusion of a contract, intensifying competition may make it difficult to pass these increases on to contract prices, potentially lowering profit margins. Difficulty in securing construction engineers and skilled workers could also be a factor in profit margin deterioration. Each operating company is working to incorporate price-escalation clauses into contracts and to negotiate and consult with suppliers and clients.

Across the construction industry as a whole, the aging of engineers and skilled workers, a decline in new entrants, and an increase in workers leaving the industry are progressing. If the Group is unable to secure sufficient personnel, construction delays and other issues could affect business performance and financial condition. Under the long-term vision of "Aspiring to be a Top-Class Employee-Friendly Company," the Group is promoting improvements to the working environment and the hiring of diverse talent, while also responding through early information sharing with partner companies and the development of new contractors.

If key systems are halted due to cyberattacks or unauthorized access, or if an information leak occurs, business performance and financial condition could be affected through business suspension or loss of credibility. The Group is working to raise security levels across the entire Group through periodic review of information security regulations and rules and the continuous implementation of risk assessment and training.

Insufficient improvement of the working environment could lead to excessive workloads or harassment, causing harm to employee health and a decline in engagement. This could result in administrative sanctions, resignations, reduced productivity, and construction delays, potentially affecting business performance and financial condition. The Group is responding through review of business processes, establishment of internal and external reporting channels, and the regular implementation and utilization of engagement surveys.

Both construction delays caused by rising summer temperatures and the intensification of natural disasters (physical risk), and cost increases due to greenhouse gas emission regulations and the introduction of carbon taxes (transition risk), could affect business performance and financial condition. The Group has expressed support for the TCFD recommendations and is disclosing related information, while focusing on renewable energy-related construction and the development of low-carbon materials, as well as promoting energy conservation and renewable energy use within its own operations.

As of FY2026 (ending March 2026), the Group holds ¥38.1 billion in real estate for sale and ¥9.6 billion in investment securities domestically and overseas. Should market prices decline more than expected or exchange rates fluctuate, business performance and financial condition could be affected. When acquiring assets above a certain amount, decisions are made following thorough deliberation by the Board of Directors and the Investment Committee, and appropriate monitoring is conducted after acquisition to reduce risk.

The Group is subject to a wide range of legal regulations, including the Construction Business Act, the Building Standards Act, the Building Lots and Buildings Transaction Business Act, the Antimonopoly Act, and environmental and labor-related laws. Should illegal conduct occur, this could have a significant impact on social credibility, business performance, and financial condition. The Group continues to properly operate its internal reporting system, manage progress through the Compliance Committee, promote awareness of its code of conduct, and conduct educational activities for officers and employees through training and e-learning.

If the Board of Directors and Board of Corporate Auditors, including at group companies, fail to exercise effective oversight, there is a risk that unilateral or inappropriate conduct by management could go unchecked, potentially leading to serious misconduct. The Group is working to reduce this risk through annual evaluations of Board of Directors effectiveness, the appointment of outside directors, and requiring important matters at group companies to be decided by resolution of the Company's Board of Directors.

If serious defects or construction deficiencies occur in design and construction, or if serious accidents such as industrial accidents or public accidents occur, business performance and financial condition could be affected through repair costs, damages, and loss of credibility. Group companies are working to conduct regular safety and health education and guidance, and to identify and address issues early through quality and occupational safety patrols.