Risks that have the potential to affect the performance, share price and financial position of the Tosei Group include, but are not limited to, the issues discussed below. Forward-looking statements are based on Tosei Group judgments as of November 30, 2023. The Tosei Group maintains a policy of recognizing the potential for risks to occur and working to preclude them or manage them if they arise. Furthermore, the information below is not intended to be an exhaustive list of all risks associated with the businesses of the Tosei Group or investment in the Company's shares.

The demand for office buildings and commercial facilities owned by the Tosei Group may be affected by economic trends, and willingness of customers buying houses to buy is easily influenced by economic trends and the resulting employment situation as well as by a decline in land prices stemming from a downturn in the real estate market or other cause. Due to these factors, when worsening of domestic and foreign economic conditions results in decreased motivation to invest in real estate, a drop in real estate transactions, a rise in the vacancy rate or a decline in rent, there may be an impact on the Tosei Group's operating results and financial position.

In addition to regular monitoring of economic trends and real estate market conditions, the Tosei Group aims to mitigate these risks through measures including cultivating market judgment adapted to different areas, scales, uses and property characteristics, and strengthening investment decision-making and leasing capabilities.

The occurrence of a natural disaster such as a major earthquake metropolitan area, which may happen in the future, destructive storm or flood, or a human disaster such as war, terrorism or fire, could cause substantial losses in the values of the real estate the Tosei Group invests in, manages, develops and controls, and therefore has the potential to affect the Tosei Group's operating results and financial position.

The Tosei Group is responding to these risks by establishing a business continuity plan (BCP) for each of the major companies in the Group, and carrying out preparations to ensure that vital businesses can be continued or promptly restored in the event of a disaster.

The Tosei Group procures debt financing, primarily from financial institutions, on a project-by-project basis, to fund expenses associated with business activities including acquisition of land and buildings and construction. Consequently, the ratio of interest-bearing debt to total assets is consistently at a certain level. In the future, if interest rates rise or the lending attitude of financial institutions changes, the cost of financing and the impact on funding could affect the Tosei Group's operating results and financial position.

In addition, lump-sum repayments due to conflicts with financial covenants on some loans, delays of project sales, and lower-than-expected sales revenues also have the potential to affect the operating results and financial position of the Tosei Group.

In addition to regular monitoring of interest rate movements and the lending posture of financial institutions, the Tosei Group is responding to these risks by striving to obtain stable and economical financing, through measures such as establishing credit lines and fixing interest rates to ensure flexible debt funding.

In addition to the regulations in the Companies Act and the regulations in the Financial Instruments and Exchange Act that apply to listed companies, the main legal regulations pertaining to the businesses of the Tosei Group are as follows.

If these legal regulations are strengthened in the future, the cost of legal compliance measures could increase.

The Tosei Group's businesses have obtained the following related licenses and permits in accordance with the laws listed above. As Tosei Group works to observe the current requirements imposed by administrative laws and local ordinances, there has not been any issue that could result in the revocation of licenses or permits. However, the business activities of the Group could profoundly be affected in the event that revocation of licenses or permits occurred or an administrative punishment such as suspension of operating activities for a certain period is imposed due to violation of laws and regulations.

Moreover, if the Tosei Group's business activities are restricted by the strengthening of the above regulations or the introduction of new regulations, the operating results or financial position of the Group could be affected.

The Tosei Group is responding to these risks by sharing and discussing information on changes to relevant laws and regulations and outgoing documents issued by regulatory authorities at forums such as Risk Management and Compliance Committee, and endeavoring to grasp and respond to any issues swiftly. In addition, the Group aims to ensure compliance with laws and regulations through measures such as continuing awareness programs and training related to compliance.

Changes regarding accounting standards and the real estate tax system could cause increases in the cost of holding, acquiring and selling assets, and therefore have the potential to affect the operating results and financial position of the Tosei Group.

Regarding changes in accounting standards and changes in the real estate taxation system, the Tosei Group strives to identify the effect of these changes on the Group's performance and financial position at an early stage, by collecting timely information on changes in real estate taxation.

The Group is promoting real estate business adopting crowdfunding and security tokens, in addition to the acquisition of companies and the establishment of subsidiaries, etc., for the purpose of expanding existing businesses, etc. Since the performance of these business operations involves various uncertainties, the Tosei Group has established the internal management system, developed human resources, obtained insurance, etc. on the assumption of all possible risks. However, there may be an impact on the Tosei Group's financial position and operating results, depending on the occurrence of risks beyond the assumption or changes in laws and regulations.

In addition to measures that anticipate risks as far as possible, such as establishing internal control systems, developing human resources and obtaining insurance, the Tosei Group is responding to these risks through measures such as regular monitoring of the progress of business strategy and changes in the business environment and timely reviews of strategy in accordance with changes in the environment.

Given the nature of the Group's business, human resources are an extremely important management resource, and it is essential to secure and develop excellent human resources in order to continue and expand our business.

The Group's business, financial position, and operating results may be adversely affected by a high turnover of staff or inadequate retention and development of human resources due to difficulties in securing staff as a result of the declining birthrate and aging population, changes in the labor market, and other factors.

Based on our management principle of "continue developing seasoned, true professionals based on peoplecentered management," our Group considers the health and safety of employees as an important management issue, and will establish a workplace environment where employees can work with vitality, while actively implementing measures focused on health maintenance and enhancement.

The importance of sustainability-oriented ESG management is growing every year. Any delays or deficiencies resulting from the failure of the Group to respond in an appropriate manner may jeopardize the confidence of the local community, customers, business partners, employees, investors, and the market, and impact the business strategies and operating results of the Group. In the environmental field, as the impacts of climate change are becoming increasingly apparent on a global scale, physical damage associated with climate change and stricter climate-related regulations, and the delay or inadequacy in implementing appropriate mitigation and adaptation measures regarding the transition to a decarbonized/low-carbon society, may impact the Group's financial position and operating results. Additionally, in the social sector, any delays or inadequacies in the development of systems, implementation of plans, disclosure of information, or other actions related to human capital management, including development and promotion of human resources, such as ensuring diversity of human resources, and improvement of the internal environment, could impact the Group's human resource strategy and business performance. This includes the securing of core human resources, which is a valuable source of corporate value creation, and market evaluation of the Group.

As a measure against these risks, the Group has developed and strengthened its sustainability promotion system by establishing the Tosei Group ESG Policy and ESG Action Guidelines, the Tosei Group Human Rights Policy, the Tosei Group Environmental Policy, and the Tosei Group Health Management Policy as well as the Sustainability Committee. At the same time, the Group is striving to mitigate the risks associated with sustainability issues by putting ESG management into practice and promoting initiatives to reduce the burden on the global environment.