Japan Ecosystem Co., Ltd.

There is a risk that the number of visitors to off-track betting venues will decline due to the shift toward online betting. Under comprehensive outsourcing contracts, revenue is calculated by multiplying betting ticket sales revenue by a fee rate, creating a structure in which declines in visitor numbers and online betting users directly lead to revenue decreases. As countermeasures, the Company is opening new off-track betting venues and offering sales for multiple sports, but if these measures fail to succeed, business performance may be affected.

Renewable Energy Power Generation Facilities in the Environmental Business are exposed to the risk of decreased power sales revenue due to changes in the purchase price and purchase period under the Feed-in Tariff (FIT) system and the Feed-in Premium (FIP) system, as well as delays in responses to grid interconnection applications and changes in connection refusal rules. In addition, the design and construction of industrial solar power generation facilities requires obtaining permits such as farmland conversion and forest land development, and if forming consensus with landowners and neighboring residents takes longer than expected, project plans may be delayed. Government policy, changes in laws and regulations, and exchange rate fluctuations may also cause procurement price surges and performance delays.

The industrial solar power plants held by the Company's group are naturally variable power sources and may be subject to output curtailment rules applied by electric power companies. If output curtailment is implemented, the expected power sales revenue may not be obtained, potentially directly affecting the performance of the Environmental Business. Combined with power generation fluctuations due to climatic conditions, this represents a risk factor that undermines the stability of earnings.

The Transportation Infrastructure Business depends on capital investment trends such as public investment, and there is a risk that the market will shrink and order amounts will decrease due to reductions in government investment. In addition, intensified order competition with competitors may lead to lower profitability and reduced earning power. In particular, sales to the NEXCO Central Japan group account for 19.1% of consolidated net sales, creating a structural dependency risk in which trends at that company and changes in government policy directly affect business performance.

The Company's group holds a specific construction business license under the Construction Business Act, and if the license was obtained through fraudulent means or the Company falls under disqualification requirements, the license would be revoked under Article 29 of the Construction Business Act, making re-acquisition impossible for five years. Revocation of the license would seriously impede business continuity and could have a severe impact on creditworthiness and business performance. The Company strives to ensure legal compliance through the establishment and operation of a Risk and Compliance Committee, but the risk of violations cannot be entirely eliminated.

The Company's group raises funds through bank borrowings and corporate bonds for real estate acquisition, capital investment, and M&A, and it recognizes that outstanding borrowings are at a high level in line with the pace of corporate expansion. While the Company aims to mitigate risk mainly through fixed interest rates on long-term borrowings, if interest rate levels rise, fundraising costs may increase, and if fundraising as planned becomes difficult, this may affect business performance and financial condition.

The Facility Business operates online betting sites for public sports and handles personal information. If confidential customer information or personal information is leaked due to loss, theft, or other incidents during the transmission or transport of information, this may result in costs from damage claims and loss of customer trust, potentially affecting business activities and performance. While the Company strengthens management through compliance with international standards and the Privacy Mark system as well as enhanced infrastructure security, the risk cannot be completely eliminated.

Business expansion for the Company's group requires personnel holding public qualifications such as electrical工事士 (electrical工事士) [licensed electricians] and various construction management engineer licenses; securing and developing such qualified personnel is a prerequisite for business execution. Amid an ongoing labor shortage across the construction industry, if the Company becomes unable to secure and develop the necessary personnel, its construction capability may decline, potentially affecting business performance. While the Company works to develop personnel through enhanced internal and external training, the effectiveness of such measures has limits in the short term.

The Company's group may acquire or take over businesses from other companies in the same industry to expand its business, and goodwill arising from such acquisitions may affect its financial condition. There is no guarantee that acquisitions will produce the initially expected results due to changes in market trends and the economic environment, and if impairment of goodwill becomes necessary, this may have a material impact on business performance and financial condition. This is also linked to the risk of impairment of fixed assets, and if estimates of future cash flows deteriorate, additional losses may be recorded.

Representative Director and President Joh Matsushima and his family members and asset management company hold 68.6% of the total number of issued shares, giving them significant influence over voting rights at shareholders' meetings. If the shareholding of the major shareholder were to decrease significantly for some reason, this could affect the market price of the shares and the state of voting rights exercised. In addition, from the perspective of protecting the interests of minority shareholders, a high degree of dependence on the controlling shareholder may pose a challenge from a corporate governance standpoint.