KITAKEI CO., LTD.

The Company's performance is significantly affected by increases and decreases in new housing starts, particularly owner-occupied houses and detached houses for sale. Trends in housing-related policy and tax systems, such as preferential mortgage interest rate measures and tax exemption thresholds, as well as rises in housing prices due to inflation and soaring construction material costs, may alter consumer sentiment and lead to sharp changes in housing demand. The Company is working to mitigate the impact by strengthening sales of distinctively featured products, among other measures.

If natural disasters such as earthquakes, tsunamis, or floods, large-scale accidents, or the outbreak of infectious diseases cause damage to employees, business offices, facilities, or construction sites, or if the production bases of business partners or supplier manufacturers suffer severe damage, business operations may be disrupted, potentially affecting performance. As countermeasures, the Company has introduced online sales meetings, telework, staggered commuting, and online conferencing, among other measures.

Credit risk exists in connection with commercial transactions with business partners, arising from deterioration in a partner's creditworthiness or default, among other factors. The Company evaluates credit risk for each business partner when considering whether to continue transactions, and works to mitigate risk by raising awareness within its sales departments.

If defects occur within the scope of contractual non-conformity liability in exterior wall construction and other work performed by the Company, liability for damages such as repair or replacement work may arise. As countermeasures, the Company is working to mitigate this risk by strengthening its construction management system and taking out liability insurance.

Continuation of the Company's core business requires a general construction business license under the Construction Business Act (Minister of Land, Infrastructure, Transport and Tourism License (General-7) No. 18960), which must be renewed every five years. If circumstances arise that fall under the grounds for revocation set forth in Article 29 of the Construction Business Act, it could impede the continuation of core business activities and have a material impact on performance. At present, the Company recognizes no facts that would constitute grounds for revocation.

The Company manages its sales, accounting, and human resources systems through information systems, and holds personal information and confidential business information. If equipment or software defects, computer virus infections, or similar issues cause information systems to shut down, or if personal information is leaked, business interruption, restoration work, or claims for damages may affect performance. As countermeasures, the Company has strengthened security by utilizing data centers, using cloud services, performing data backups, installing antivirus software, and prohibiting external connections to its internal network, among other measures.