ETS Group Co., Ltd.

Amid a harsh market environment, competition for orders among contractors is intensifying, and if price competition becomes even more severe, it may lead to a decline in order prices. This may adversely affect the Group's business performance and financial position. The annual securities report does not describe specific countermeasures.

There is a high degree of customer concentration, with two companies—Tohoku Electric Power Network Co., Inc. (31.8% of net sales, ¥3,583,505 million) and Tokyo Electric Power Grid Co., Inc. (13.1% of net sales, ¥1,475,968 million)—accounting for approximately 45% of net sales. If the order trends of these customers change, it could have a direct and material impact on the Group's overall business performance. The annual securities report does not describe specific diversification measures.

If private capital investment or public investment declines more than expected and the size of the construction market shrinks, competition for orders with competitors will further intensify. As a result, this may adversely affect the Group's business performance and financial position. The annual securities report does not describe specific countermeasures.

If material prices and labor costs surge due to the impact of domestic and overseas economic conditions, profitability will be squeezed since there are limits to cost reduction and passing on costs to construction contract amounts. This may affect the Group's business performance and financial position. The annual securities report does not describe specific hedging methods or countermeasures.

If contact is made with antisocial forces at construction sites and transactions are conducted due to error or otherwise, this poses risks of loss of social credibility and restrictions on business activities. As countermeasures, the Company implements the execution of written pledges at the time of transactions and periodic distribution of alert emails to all officers and employees. In the event of unreasonable demands, the policy is to promptly report to and coordinate with external organizations such as the police, and if discovered after contract conclusion, to promptly terminate the contract after consultation with the police.

The occurrence of a large-scale disaster may cause unforeseen circumstances such as the suspension of lifelines, shortages of fuel, materials, and personnel, leading to interruption or delay of construction work and damage to office buildings and equipment/materials. This may affect the Group's business performance and financial position. The annual securities report does not describe specific countermeasures such as a BCP (business continuity plan).