AMG HOLDINGS CO., LTD.

The Group is subject to numerous legal regulations, including the Building Lots and Buildings Transaction Business Act, the Building Standards Act, and the Construction Business Act, and changes or abolition of laws or the introduction of new regulations may affect business operations and financial results. In addition, if licenses such as the Real Estate Broker's License or Construction Business License are revoked or business operations are suspended, this may cause serious impediments to business continuity. As a countermeasure, the Group has established a system for advance monitoring of relevant laws and regulations and continues to disseminate information and provide training to employees.

Demand trends among purchasers are influenced by changes in the economy, real estate market conditions, mortgage interest rates, and housing tax systems, and such fluctuations may affect business performance and financial condition. In addition, rising construction material and land prices and intensifying sales competition leading to a deterioration in the supply-demand balance may cause a decline in profit margins and losses from write-downs of inventory book values. As a countermeasure, the Group carefully selects land acquisitions for project development, while striving to manage appropriate inventory levels and holding periods across the Group as a whole.

The Group relies mainly on borrowings from financial institutions to fund land acquisitions and other purposes, and changes in financial conditions leading to difficulty in raising funds, or increases in funding costs due to fluctuations in market interest rates, may affect business performance and financial condition. By receiving project financing from multiple financial institutions, the Group avoids concentration on a specific lender and also participates in the parent company's CMS (Cash Management Service) to secure flexibility in fund procurement.

Unpredictable events such as earthquakes, typhoons, and other natural disasters, global pandemics of infectious diseases, and wars may cause delays in the procurement of construction materials and housing equipment, or delays in construction work, resulting in the deferral of revenue recognition to a later period or a significant increase in construction costs. The Group strives to mitigate this risk by establishing a system that allows mutual human and material support among Group companies.

In the Real Estate Development Business, there is a risk that the bankruptcy of a construction contractor could delay property handover or incur additional costs for switching to an alternative contractor, while in the Construction Business, since the contract amount per project is large, the bankruptcy of an ordering party may impede the collection of contract payments. The Group works to mitigate this risk through measures such as thorough credit checks prior to transactions, strict progress assessments at construction sites, and sharing of credit information among departments.

Each business depends on personnel with highly specialized knowledge and extensive experience, and if the Group is unable to develop or secure such personnel, this may result in a slowdown in growth and impact business operations. The Group addresses this by actively promoting measures such as improving the working environment, introducing equipment to enhance operational efficiency, and enhancing support programs for obtaining qualifications.

In the Real Estate Development Business, under the Act for Promotion of Proper Housing Quality Assurance, the Group bears liability for non-conformity with contracts for the primary structural parts and other elements of newly built homes for a period of 10 years, and in the Construction Business, it likewise bears liability for a certain period after handover. If non-conformity occurs, repair costs and damages may arise, potentially affecting business performance and financial condition. In addition to thorough internal inspections and sharing of past case examples, the Group mitigates this risk by taking out housing defect liability insurance and construction liability insurance.

The Group actively utilizes M&A as a means of enhancing corporate value, but due to the nature of certain deals or time constraints, due diligence may be insufficient, creating a risk that unrecognized or contingent liabilities may come to light after an acquisition. In addition, if changes in the business environment prevent the original business plan from proceeding as scheduled, this may adversely affect business performance and financial condition. The Group works to mitigate this risk by conducting thorough due diligence and carefully examining the feasibility of business plans.