Mitsui Fudosan Co. , Ltd.

Economic fluctuations, rising interest rates, declining birthrate and aging population, the advancement of DX driven by generative AI and other technologies, growing interest in sustainability, geopolitical tensions, and similar factors may lead to a decline in real estate demand, falling land prices, and sluggish personal consumption. In addition to lower occupancy rates and rent decreases at offices and commercial facilities, as well as reduced sales of residential properties for sale, increased costs could adversely affect the financial position and operating results. As countermeasures, the Group is promoting stronger intra-group collaboration, product development anticipating customer needs, and strategic construction of an asset portfolio including overseas assets.

In a rising market interest rate environment, the cost of new fund procurement increases, and in addition, a decline in home purchasers' willingness to buy and a rise in investors' expected yields could lead to reduced sales revenue and declines in the value of owned assets. The impact on existing interest-bearing debt is mitigated because the majority is procured at long-term, fixed interest rates; however, fluctuations in cap rates driven by domestic and overseas interest rate trends directly affect asset values. The Company intends to continue mitigating interest rate rise risk through timely and appropriate fund procurement and appropriate control of the balance sheet.

Disruption in financial markets, a downgrade of the Company's credit rating, or changes in the lending/investment policies of financial institutions and institutional investors could result in constraints on fund procurement or increased procurement costs. Although the Company procures funds through a variety of means, including borrowings, commercial paper, and corporate bonds, liquidity risk could materialize in the event of a sudden change in market conditions. The Company strives to secure stable funding through maintaining a sound financial structure via D/E ratio management, diversifying funding sources and methods, and utilizing commitment lines and other measures.

If investors' expected yields rise due to increases in market interest rates or other factors, this could result in reduced gains on sale of owned real estate, the occurrence of losses, and the recognition of impairment losses or valuation losses. In addition, a decline in the value of held investment securities could lead to losses on sale or valuation losses, adversely affecting the financial position and operating results. The Company strives to mitigate this risk through appropriate control of the balance sheet, construction of an optimal portfolio, and strengthening market competitiveness through product planning and service improvement.

If various costs, such as construction costs, energy costs, and labor costs, rise, profitability could be adversely affected in cases where it is difficult to pass these increases on through sales prices or rents. There is also a risk that surges in material prices and logistics disruptions, driven by geopolitical tensions or exchange rate fluctuations, could accelerate cost increases. The Company monitors the factors and trends behind fluctuations in various costs, while taking appropriate measures within individual businesses and reflecting them in sales prices and rents.

Because substantial investments are made at each stage of land acquisition, development, and construction, and it takes a long period of time to recoup these investments, there is a risk that uncontrollable factors—such as labor shortages and rising material prices in the construction industry, natural disasters, delays in obtaining permits and approvals, and the discovery of soil contamination—could lead to increased costs and delays in development schedules. These factors could adversely affect not only the financial position and operating results but also market evaluation. The Company makes investment decisions incorporating these risks and conducts construction management on a business-by-business basis, and has established a system to promptly report to management in the event a serious issue arises.

In overseas businesses centered on the United States, the United Kingdom, and Asia, the Company is exposed to a variety of risk factors, including changes in laws, regulations, and tax systems, rising interest rates, inflation and exchange rate fluctuations, civil unrest, conflict and terrorism, and deteriorating international relations, any of which could adversely affect the financial position and operating results. In addition, since much of the business is conducted through partnerships with local companies, changes in the financial condition of partners or in partnership relationships could affect the development of local businesses. Based on the

In the event of a failure of information systems or control systems, or an information leak resulting from unauthorized access or a virus attack, operating results could be affected through delays in sales activities and business processing, loss of credibility, decreased sales revenue, and the occurrence of damages compensation costs. Leakage of personal information to outside parties carries both legal risk and reputational risk. The Company implements multi-layered measures, including vulnerability checks from an attacker's perspective, introduction of anomaly detection systems, targeted attack email training, and third-party system and security assessments.

There is a risk of administrative sanctions arising from legal violations in the real estate brokerage business, such as errors or false statements in the explanation of important matters, as well as the possibility that violations of the Companies Act, the Building Standards Act, the Act on the Protection of Personal Information, and other laws could lead to loss of credibility or fines. If misconduct or operational negligence by officers or employees becomes apparent, this could also affect operating results through decreased sales revenue and the occurrence of damages compensation costs. The Company has established the "Mitsui Fudosan Group Compliance Policy," thoroughly disseminates it through regular training, and conducts self-inspections regarding key laws and regulations.

Amid expanding diversity and individuality among customers driven by the declining birthrate and aging population, diversification of values and work styles, and the progress of the social implementation of generative AI, if the Company fails to continuously secure and develop personnel capable of responding to changes in the business environment and new social issues, this could result in a loss of competitive advantage and adversely affect the financial position and operating results. The Company positions the promotion of diversity and inclusion as an important management strategy, and has formulated the "Diversity & Inclusion Promotion Declaration" and related action policies, which it promotes on a Group-wide basis.