ESLEAD CORPORATION

Economic conditions, interest rate trends, price declines due to oversupply, and changes in housing tax systems could reduce purchasers' motivation to buy condominiums. There is also a risk that rising costs for business land acquisition and construction could squeeze business profits. As countermeasures, the Company conducts detailed studies of supply-demand balance and appropriate price levels through marketing research before land acquisition, and seeks to maximize profit by controlling the holding period of each property.

Since funds for acquiring development land are procured mainly through borrowings from financial institutions, the Company's reliance on interest-bearing debt tends to be higher than in other industries, meaning that rising interest rates could affect its business results. Because the period from land acquisition to completion is approximately three years, the fund recovery period is long, creating a risk that the impact could persist over an extended period. As countermeasures, the Company maintains a level of readily available funds sufficient for prompt land acquisition and seeks to improve the efficiency of group fund management through intra-group financing.

If demand declines due to the falling birthrate and aging population, changes in social structure, and diversification of customer needs progress, it may become difficult to achieve sustained growth through the core Condominium Development Business alone. As a countermeasure, the Company is promoting diversification of revenue sources by expanding and enhancing the 12 subsidiaries responsible for condominium-related businesses and the comprehensive real estate business.

If a serious compliance violation such as harassment or a legal violation occurs, it could affect business results and financial condition through loss of credibility or claims for damages. As countermeasures, the Company has established the "S-LEAD Group Code of Conduct," consults appropriately with its retained attorneys and accounting auditors, and conducts employee training and awareness activities regarding power harassment, sexual harassment, insider trading, and personal information protection.

Revisions or abolitions of regulations, or the establishment of new legal regulations, under laws such as the Building Lots and Buildings Transaction Business Act, the Building Standards Act, the City Planning Act, the Act on Advancement of Proper Condominium Management, and the Construction Business Act, could affect business results and financial condition. As a countermeasure, the Company strives to grasp industry trends and regulatory developments in advance by joining various industry associations and participating in training sessions.

If systems become unusable due to cyberattacks or unauthorized access, or if personal information is leaked, this could result in delays to sales activities and business operations, loss of credibility, decreased sales, and claims for damages. As countermeasures, the Company has developed personal information management regulations and conducts internal training, continuously monitors its internal network and controls access, and has taken out cyber insurance.

When the 12 subsidiaries responsible for condominium-related businesses and the comprehensive real estate business enter new businesses, changes in the business environment or unforeseeable events could prevent recovery of investment, potentially resulting in impairment losses on fixed assets or valuation losses on inventory assets. As a countermeasure, the Company has established and operates regulations requiring approval by the Board of Directors of S-LEAD Co., Ltd. according to the significance of new businesses undertaken by subsidiaries, and has built a system for making investment decisions after appropriately identifying risks.

Chronic temperature increases and the intensification of natural disasters could cause physical and human damage at construction sites and managed or owned properties. In addition, during the transition to a low-carbon society, changes in consumer preferences could reduce sales, and stricter environmental regulations could increase costs. As countermeasures, the Company discloses information based on TCFD recommendations, conducts scenario analysis and strategy formulation, and has established a monitoring framework through its Risk Management Committee.

In the event of a large-scale earthquake or other natural disaster, physical and human damage could occur at construction sites and managed or owned properties, and dysfunction of social infrastructure or deterioration of the economic environment could affect business results and financial condition. As countermeasures, the Company has formulated a business continuity plan (BCP) and manuals tailored to various situations, and has established a system aimed at minimizing human and physical damage and achieving rapid recovery.

Since much construction work is outsourced, accidents during construction, bankruptcy of subcontractors, non-performance of contracts, or other unforeseen events could result in the suspension or delay of construction, or increased construction costs. As countermeasures, the Company's design department conducts regular on-site supervision and holds regular meetings with subcontractors, and the Company utilizes multiple subcontractors to avoid dependence on any single subcontractor.