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Risk Factors

The primary issues that may exert a significant influence on investors' decisions regarding business risks facing our company are listed below. While recognizing the potential for these risks to occur, the Shinko Plantech Group endeavors to avoid their occurrence, and will respond appropriately in the event of their occurrence.

1. Decline in New Construction Contracts

The foundation of the Shinko Plantech Group's business is plant-related maintenance for customers in the oil and petrochemical industries. A larger-than-expected reduction in capital expenditure by our customers could have a potentially negative impact on our earnings.

2. Materials and Equipment Cost Fluctuations

In the event that a greater-than-expected surge in the cost of raw materials cannot be passed onto the customer, our earnings may be negatively affected.

3. Product Defects

We make every effort to implement quality control in design and construction. However, compensatory damages arising from our warranty against defects or product liability could have a potentially negative impact on our earnings.

4. Asset-Holding Risk

We hold assets such as real estate and marketable securities. Fluctuations in the market value of such assets could potentially exert a negative impact on our earnings.

5. Credit Risk on Counterparties

Should any of our business partners experience a credit event before we have received payment for a construction bill, our earnings may be negatively affected.

6. Increase in Retirement Benefit Obligations

Any change in the assumptions used to calculate provisions for retirement benefits, such as a decline in the market value of pension assets, the investment yield or discount rate, has the potential to exert a negative impact on our earnings.

7. Disaster Risk

We may become unable to conduct normal business activities as the result of natural disasters such as earthquakes or typhoons.

8. Legal Restrictions and Related Risks

Based on Japan’s Construction Business Act, Shinko Plantech Co., Ltd. has been granted a Special Construction License (Industry 8, Ministry of Land, Infrastructure, Transport and Tourism License (Special-22) No. 3979) and an Ordinary Construction License (Industry 1, Ministry of Land, Infrastructure, Transport and Tourism License (Ordinary-22) No. 3979).
Our corporate group strives to comply in full with the terms of these licenses and all applicable rules and regulations. At the present time, it is our understanding that there is nothing that would serve as grounds for rescinding these licenses. However, should one or more of our licenses be rescinded due to a legal or regulatory violation, our earnings may be negatively affected.

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