DAITO TRUST CONSTRUCTION CO.,LTD.

Instability in global conditions, foreign exchange fluctuations, domestic and international inflation, and labor shortages in the construction and logistics sectors may cause raw material and materials price surges and procurement delays, potentially affecting business performance. As countermeasures, the Group is expanding its procurement sources by establishing a timber procurement company in Canada, engaging in joint development and consolidated ordering with suppliers, securing multiple procurement routes, setting appropriate and safety stock levels, and continuously monitoring procurement lead times.

If related tax systems such as fixed asset tax, inheritance tax, and income tax are revised, resulting in an increased tax burden, the attractiveness of the Real Estate Leasing Business may decline, potentially causing fluctuations in order volume. As countermeasures, the Group has built a system to continuously collect and analyze information on tax system reforms, while also working to maintain high occupancy rates and profitability through improving the commercial value and added value of buildings, thereby sustaining demand from both owners and tenants.

Since many customers procure construction funds through financial institution borrowings, a sharp rise in interest rates due to changes in economic conditions or monetary policy may affect customers' investment decisions and could worsen business performance. As countermeasures, the Group is strengthening collaboration with financial institutions to shorten the period from order placement to securing project funds (interest rate fixing), and is working to prevent order cancellations by presenting rigorous business income and expenditure simulations that account for interest rate rise risk at the negotiation stage.

If the Construction Business Act, Building Standards Act, Real Estate Brokerage Act, labor-related laws, environmental laws, or other regulations are revised or new regulations are introduced, additional compliance costs may arise, potentially affecting the Group's business performance. As countermeasures, each specialized department continuously monitors information from competent authorities and industry associations, analyzes company-wide impacts before enforcement, and incorporates these into budget plans for subsequent fiscal years.

As the Group expands its Real Estate Development Business domestically and internationally as a mid- to long-term strategy, prolonged development periods and market fluctuations may result in development costs exceeding expectations and project delays. The expansion of investment scale and the lengthening of capital recovery periods increase the importance of managing changes in financial balance, increased funding burdens, and credit risk. As countermeasures, the Group has established investment criteria to verify area, investment amount, and profitability, formulated investment limits and exit strategies according to project scale, continuously tracks project progress and funding status, and, overseas, manages risk through collaboration with local experts and local partners.

If demand significantly declines in specific areas due to changes in demographics, economic conditions, or the rental market environment, rents may fall as vacancies increase. Since the majority of managed buildings are under sublease contracts, this would directly reduce Group revenue and affect business performance. As countermeasures, the Group optimizes proposed rents through continuous analysis of market trends and surrounding rent levels, strengthens collaboration with brokerage companies, conducts regular equipment upgrades and renovations, and formulates supply plans that take long-term demographic trends into account.

The increasing sophistication and cunning of cyberattacks such as targeted attacks and ransomware pose a risk of external information leakage, as well as internal information leakage risk due to operational errors or misconduct. These could lead to serious consequences such as leakage of confidential information and personal data, disruption to business continuity, and loss of social credibility. As countermeasures, the Group implements multilayered measures including network monitoring and blocking, terminal encryption and multi-factor authentication, maintenance of ISO27001 certification, external assessments, BCP development, employee education, phishing drills, and thorough education throughout the supply chain.

In the event of a large-scale natural disaster such as an earthquake, typhoon, or flood, business performance may be affected by direct damage to employees, construction sites, business offices, and information equipment, indirect damage from disruptions to communications and logistics, substantial costs for inspecting and repairing damaged buildings, interruptions to construction material supply, and stagnation in contract, construction, and tenant placement activities due to employees being affected by the disaster. As countermeasures, the Group has formulated the "Group Disaster Prevention Vision 2030," established BCP regulations and manuals, conducts annual training for all employees from management down, stores emergency supplies at all business offices, and has built a business continuity system utilizing telework.

The declining numbers and aging of construction skilled workers is worsening, making it difficult to secure site supervisors and skilled workers, which may cause construction schedule delays and delivery delays. Increases in inexperienced workers may lead to deteriorating construction quality and defects, rising labor and outsourcing costs may worsen profitability, and weakened supervisory systems may increase the risk of legal violations. As countermeasures, the Group is strengthening the recruitment and training of young people and inexperienced workers, improving productivity through the introduction of labor-saving construction methods and digital technologies such as BIM, and implementing diverse workforce measures including promoting the hiring of foreign skilled workers and rehiring retirees.

If fraudulent acts or compliance violations occur in violation of laws or internal regulations, this may result in economic losses such as reputational damage, deteriorating business relationships, stock price decline, and litigation costs, potentially affecting business performance. As countermeasures, the Group formulates and practices a code of conduct based on its purpose, has its dedicated compliance department develop regulations, create checking mechanisms, and verify their operation, and works to raise employees' compliance awareness and prevent fraud through regular training.