CENTRAL GENERAL DEVELOPMENT CO.,LTD.

Since design and construction of condominiums for sale are outsourced to dedicated contractors, if a subcontractor experiences credit concerns, construction delays may occur and disrupt sales plans. In addition, if a subcontractor goes bankrupt after completion of construction, defect repair obligations may not be fulfilled, resulting in the Company bearing the associated costs. The Company addresses this risk by comprehensively reviewing the financial condition, construction capability, and management stability of subcontractors when selecting them.

Since the real estate sales business recognizes revenue at the time of property handover, quarterly performance tends to fluctuate significantly depending on the timing of completion and handover. If changes in sales plans or construction delays due to natural disasters, etc. alter the handover timing, this directly affects performance. Because the Group's core business is concentrated in real estate sales, the impact of this fluctuation risk is particularly significant.

Although preliminary surveys are conducted before signing purchase agreements for condominium development sites, hidden defects such as soil contamination are sometimes discovered after the contract is concluded. In such cases, additional costs are incurred, which may affect performance. Although the frequency of occurrence is described as "rare," depending on the scale of costs involved, the impact on performance cannot be ignored.

Funds for acquiring condominium development sites and purchasing rental office buildings are procured mainly through borrowings from financial institutions, resulting in a financial structure highly dependent on interest-bearing debt. If interest rate levels fluctuate significantly or if borrowing conditions are breached, the Company may be unable to raise funds as planned, potentially affecting its business performance and financial condition.

The Group's business is highly susceptible to economic conditions, interest rate trends, trends in new property supply, and real estate sales price trends. If a deterioration in the economic outlook or a significant rise in interest rates reduces willingness to purchase housing, this directly affects the performance of the real estate sales business, the Group's core business. Since the real estate sales business accounts for the majority of Group revenue, sensitivity to changes in the market environment is high.

The Company operates its real estate sales business under a real estate brokerage license (Minister of Land, Infrastructure, Transport and Tourism License No. (13)2432, valid until October 24, 2028). If grounds for revocation under Articles 66 and 67 of the Building Lots and Buildings Transaction Business Act are met, the license may be revoked, making it difficult to continue operations and significantly impacting performance. It is stated that no grounds for revocation currently exist.

Real estate transactions are subject to a wide range of laws and regulations, including the Building Lots and Buildings Transaction Business Act, the Building Standards Act, the National Land Use Planning Act, and the City Planning Act, while the leasing and management business is also subject to regulations such as the Electricity Business Act, the Building Maintenance and Sanitation Act, and the Act on Advancement of Proper Management of Condominiums. Future amendments to or new enactment of these legal regulations may increase compliance costs or impose business constraints, potentially affecting performance.

Under the Act for Promotion of Quality Assurance in Housing, the Company bears a 10-year defect liability for the structural load-bearing components and rainwater intrusion prevention components of newly built homes. If defects occur in properties supplied, an increase in the number of claims and the cost of remedial construction work may affect performance. The Company has consistently pursued quality control from the architectural design stage onward and responds to post-sale claims based on its legal obligations.

In the course of sales activities, the Company acquires and manages various information, including customers' personal information. If an information leak occurs due to unforeseen circumstances, this could result in claims for damages and a decline in credibility, potentially affecting performance. The Group states that it exercises the utmost care in managing personal information, although specific details of its management system are not disclosed.

If natural disasters such as earthquakes, tsunamis, or wind and flood damage directly damage owned assets, this could result in additional construction costs, repair costs, and revisions to sales plans due to construction delays. Furthermore, if a pandemic disrupts economic activity and leads to reduced personal income, decreased purchasing intent, construction delays, or a slowdown in sales activities, this could also affect performance. The Group has established a policy prioritizing human life above all else, but details of its business continuity plan are not disclosed.