ASIAN STAR CO.

The Group operates its business under numerous legal regulations, including the Building Lots and Buildings Transaction Business Act, the Financial Instruments and Exchange Act, and the Act on Management of Rental Housing, and holds a real estate broker's license, condominium management company registration, rental housing management company registration, and financial instruments business operator registration. Amendments to or abolition of existing regulations or the enactment of new laws could increase business operation costs and constraints. In addition, if a license or registration is revoked or fails to be renewed, this could cause material disruption to core business activities and have a material impact on business performance.

In the purchase and resale business, the Group conducts prior investigations of property conditions and marketability before entering into sales contracts; however, hidden defects may be discovered after the contract is concluded, or the marketability and liquidity of the product may decline due to changes in market conditions. This could result in the incurrence of additional costs and prolonged inventory holding of purchased real estate. Prolonged inventory holding could affect business performance through a deterioration in capital efficiency.

In carrying out its Real Estate Sales Business, the Group procures funds for the acquisition of land and land/buildings and for construction costs mainly through financial institution loans, while also seeking diversification through new financial institution relationships and corporate bond issuance. However, if the Group is unable to obtain loans at the desired amount or terms for any reason, it may not be able to secure properties for sale as planned, which could affect business performance.

Interest-bearing debt balances were ¥430,861 million for FY2023 (ended December 2023), ¥239,201 million for FY2024 (ended December 2024), and ¥822,348 million for FY2025 (ended December 2025), with the interest-bearing debt dependency ratio rising to 20.4% in FY2025 (ended December 2025). Interest-bearing debt may increase further as real estate procurement expands going forward, and if market interest rates rise beyond expectations, this could affect business performance through an increase in interest burden.

Investment condominiums are sold for asset management purposes, and the Group explains to customers the risks involved, such as vacancies, declines in market rents, and increased repayment burden due to rising interest rates, while also providing after-sales services such as rent collection agency services, building maintenance and management, and tenant recruitment. However, if a customer files a claim or lawsuit for any reason, this could affect the Group's credibility regardless of the veracity of the facts, and could affect business performance.

If the rental occupancy rate of investment condominiums sold by the Group declines, this could reduce the purchasing intent of new buyers who expect rental income, adversely affecting the sales business. The Group works to secure new tenants in cooperation with itself and nearby real estate agents, but if the occupancy rate declines due to unforeseen circumstances such as deterioration of the surrounding living environment, this could affect business performance.

The Group works to retain talented personnel through recruitment centered on mid-career hires and the establishment of department-specific evaluation systems and incentive compensation structures for the sales department. However, if employee retention does not improve, or if the Group is unable to secure necessary personnel due to a tight labor market, this could affect business performance. This is particularly impactful for sales department personnel responsible for real estate sales, sales brokerage, and leasing brokerage, as they are directly linked to business performance.

The Group holds personal information of existing and prospective customers, and works to prevent leakage through the establishment of a privacy policy, stricter storage of personal information files, introduction of IT system monitoring software, and restriction of access rights. However, if personal information is leaked externally due to unforeseen circumstances, this could result in the incurrence of costs such as damages, as well as a decline in the Group's credibility, which could affect business performance.

The Company has issued stock acquisition rights as incentives for directors and employees (5th, 6th, 8th, and 9th stock acquisition rights) and for fund procurement purposes (7th stock acquisition rights). As of December 31, 2025, the total number of unexercised shares was 7,195,000 shares (71,950 voting rights units), equivalent to 30.3% of the total number of voting rights. If these stock acquisition rights are exercised, this could dilute the value of shares held by existing shareholders and their voting rights ratio.

The Group operates a serviced apartment operation and management business (consolidated subsidiary) and a studio apartment leasing business (consolidated subsidiary) in China. If changes in the Chinese economic situation lead to a decline in management income or a slump in occupancy rates, the profitability of these overseas businesses could deteriorate, affecting the Group's business performance. In addition, with respect to investments in domestic and overseas operating companies, depending on the business conditions of the investee, concerns may arise regarding the recovery of invested funds.