Kasumigaseki Capital Co.,Ltd.

A rapid deterioration in economic fundamentals or major changes in tax and monetary policy could adversely affect the real estate investment market over the medium term, potentially resulting in a decrease in the number of deals handled and lower property profitability. A market-wide decline in overall real estate transaction volume due to economic deterioration would directly impact the Group's sales and profits. As a countermeasure, the Group aims to strengthen its financial structure to withstand changes in the economic environment.

With respect to acquired land or developed real estate for sale, if sales to development investors become difficult due to deteriorating economic conditions or real estate market conditions, or if the value of real estate for sale falls below its book value, losses may arise from write-downs of inventory book value. This is a risk that could affect the Group's business, operating results, and financial position. As a countermeasure, the Group continues to pursue a policy of increasing consulting-type business to raise the inventory turnover rate.

Funds for acquiring real estate for sale and development funds are, in principle, procured through borrowings from financial institutions secured by the relevant properties. If market interest rates rise or borrowing on desired terms is not possible, interest expenses and other costs may increase, affecting business performance. Additionally, if creditworthiness declines due to a significant deterioration in financial position and stable financing cannot be obtained, there is a risk that business continuity could be impaired. As a countermeasure, the Group aims to build a robust bank formation, striving to maintain good relationships with existing financial institutions and secure transactions with new financial institutions.

The Group has established local subsidiaries and conducts business in the United Arab Emirates (Dubai), Thailand (Bangkok), Indonesia (Jakarta), and Malaysia (Kuala Lumpur). Business profitability may decline if rapid inflation, exchange rate fluctuations, terrorist incidents, changes in political or economic conditions, or changes in legal systems occur in these countries. There is also a risk that the scaling back or postponement of construction work due to changes in economic conditions could affect business performance. As a countermeasure, the Group works with local subsidiaries to gather information on developments in each country and region.

There are multiple compounded risks throughout the development process, including defects in title or ground/soil conditions at the time of land acquisition, delays or failure to obtain development permits and licenses, and additional construction work or sharp increases in the prices of raw materials, supplies, and labor costs during construction. If these risks materialize individually or in combination, the development plan may need to be changed, delayed, or discontinued, which could have a material impact on the Group's business, operating results, and financial position. As a countermeasure, the Group conducts thorough preliminary surveys, gives consideration to local communities, and enters into construction contracts based on meticulous design plans.

The Real Estate Consulting Business is subject to numerous laws and regulations, including the Building Lots and Buildings Transaction Business Act, the Financial Instruments and Exchange Act, the Act on Specified Joint Real Estate Ventures, and the Building Standards Act. Violations of laws or fraudulent acts could result in a loss of social trust and have a material impact on business performance. Furthermore, revocation of the real estate brokerage license (Minister of Land, Infrastructure, Transport and Tourism License (1) No. 10307, valid until December 2, 2027) or the Financial Instruments Business registration (Director-General of the Kanto Local Finance Bureau (Kinsho) No. 3178) would impede business activities. As a countermeasure, the Group has established a Risk Management and Compliance Committee and strives to raise employees' compliance awareness.

In the Real Estate Consulting Business, transaction amounts become large depending on the scale of the project, and business performance may fluctuate significantly depending on the presence or absence of large-scale projects, and sales may become concentrated with specific business partners. In addition, performance may be skewed toward specific quarters depending on the timing of revenue recognition for large-scale projects, and if projects do not proceed as planned, this could affect the Group's business, operating results, and financial position. Reducing the Group's dependence on specific projects and business partners remains a challenge.

Representative Director and President Koshiro Kawamoto and Chairman of the Board Junji Ogawa have extensive experience and knowledge in real estate and real estate finance, and play important roles across all business activities, including determining management policy and business strategy. If, for any reason, either of them becomes unable to carry out their duties, this could affect the Group's business, operating results, and financial position. As a countermeasure, the Group is working to expand and develop its management executives and build an operational structure through delegation of authority.

In the five-year medium-term management plan formulated in October 2024, the Group has set a target of ¥50 billion in net income for the fiscal year ending August 2029, with diversification of the business portfolio, layering of the profit portfolio, and accumulation of AUM as basic strategies. However, depending on future business management, fund procurement conditions, real estate market liquidity, and other external factors related to economic conditions, the plan may not be achieved. Failure to achieve the plan could disappoint investor expectations and pose a risk to the share price and creditworthiness.

In the course of business activities, the Group obtains and holds confidential information and personal information of customers and business partners. If personal information held by the Group were to leak externally due to unforeseen circumstances, there is a risk of being held liable for damages and a risk of damage to social credibility. As a countermeasure, the Group has established information management regulations and personal information protection regulations, appointed a personal information protection manager, and works to ensure compliance with relevant laws and guidelines while establishing internal regulations and a management structure.