JAPAN ELEVATOR SERVICE HOLDINGS CO.,LTD.

Some of the parts required for elevator and other maintenance are, for quality control purposes, limited to purchases from manufacturers (including affiliated companies) only. If the Group is unable to secure parts in a timely manner and in sufficient quantities for any reason, it may become difficult to carry out maintenance operations. As countermeasures, the Group maintains a certain level of inventory, recycles parts, and considers procurement from overseas markets; however, if increased costs due to rising raw material prices cannot be passed on to service prices, this may affect the Group's financial position and operating results.

The maintenance market includes numerous competitors such as elevator manufacturers, manufacturer-affiliated maintenance specialist companies, and independent maintenance companies. Intensifying competition may lead to a decrease in new customer acquisitions or contract switching, resulting in a decline in market share. If service prices decline, this would directly affect the financial position and operating results of the Group, which operates a single maintenance business. Because of this single-business structure, there is a high risk that deterioration in the market environment will spread to overall business performance.

New models of elevators and escalators are continually released and installed, and the Group strives to improve its technical capabilities to be able to service all models of major domestic manufacturers. However, if manufacturers undergo rapid technological innovation and the Group is unable to respond in a timely manner, this may affect the Group's financial position, operating results, and future business development. Maintaining technical response capability is fundamental to the Group's competitive advantage as an independent maintenance company, and any delay in response poses a risk directly linked to customer attrition.

Among maintenance and upkeep services, statutory inspections are required under the Building Standards Act to be performed by qualified personnel such as elevator inspectors. If the Group is unable to secure a sufficient number of qualified personnel, this may impede the performance of its operations. In addition, the Group conducts its maintenance and Renewal Services business under a license for machinery and equipment installation work obtained pursuant to the Construction Business Act. If there are amendments or abolitions of the Construction Business Act, the Building Standards Act, or other related laws and regulations, responses such as changes in product specifications may be required. Such regulatory changes and shortages of qualified personnel may affect the Group's financial position and operating results.

In the course of maintenance, upkeep, and Renewal Services for elevators and other equipment, equipment damage accidents or personal injury accidents may occur due to disasters such as earthquakes, usage methods of users, equipment defects, or human error by workers. The Group strives to avoid such risks by complying with the Ministry of Land, Infrastructure, Transport and Tourism's

The Group is working to secure highly specialized engineers and to strengthen its sales and administrative personnel in anticipation of business expansion. However, if personnel expansion precedes business growth resulting in upfront cost burdens, if the Group fails to secure the necessary personnel, or if progress in human resource development is delayed, this may affect the Group's financial position and operating results. Elevator maintenance is a labor-intensive business requiring specialized technical skills, and securing and developing engineers is a fundamental risk factor for business continuity.

As of the end of the consolidated fiscal year FY2026 (ending March 2026), the balance of interest-bearing debt (including lease obligations) stood at ¥3,004 million, with an interest-bearing debt ratio of 7.5%. Disruption in financial markets, an economic downturn, difficulty in refinancing due to changes in financial institutions' lending stance, or a rapid increase in interest expenses due to a sharp rise in market interest rates may affect the Group's financial position and operating results. In addition, some borrowings are subject to financial covenants, and in the event of a breach, the Group would lose the benefit of the term and be required to immediately repay its debts, posing a risk to cash flow.

The Group conducts business overseas and is exposed to a complex set of risks, including unexpected changes in laws and regulations, changes in social, political, and economic conditions, unfavorable changes in various tax systems, credit risk arising from differing business customs, changes in the labor environment and difficulty in securing human resources, and foreign exchange risk. In response to these risks, the Group's policy is to establish a system for promptly obtaining information from local advisory attorneys and accounting firms; however, if these risks materialize, it may become difficult to provide services, which may affect the Group's financial position and operating results.

The Group actively pursues acquisitions of other companies, joint ventures, and business alliances. If such acquisitions or alliances do not proceed smoothly, or if the businesses of acquired companies, joint ventures, or business alliances fail to achieve the initially expected results within the expected timeframe, this may affect the Group's financial position and operating results. For the Group, which utilizes M&A as part of its growth strategy, failure of the integration process or failure to achieve expected synergies is a risk that directly affects business performance.

The Group handles a large amount of customer information related to maintenance, upkeep, and Renewal Services contracts. In the event of an unforeseen information leak, this may result in loss of trust or claims for damages. In addition, the Control Center monitors elevators and other equipment on a 24/7, 365-day basis; however, if trouble occurs in the computer systems due to natural disasters, unforeseen accidents, sudden increases in access, or other causes, this may disrupt operations and affect the Group's financial position and operating results. The Group addresses these risks through the establishment of information security policies and regular backups, but complete prevention is difficult.