Business Risks

With regard to matters relating to the status of businesses, accounting, etc., that are described in the securities report, the Taikisha Group assumes the following risks that may have a significant impact on investors’ decisions.Please note that descriptions of risks include forward-looking statements that are based on decisions made at the end of the fiscal year ended March 31, 2010.

Automobile, IT-related, and other companies that are major customers of the corporate group still show little appetite for domestic capital spending, although there are signs of recovery in some countries. Going forward, a slow recovery in their appetite for domestic capital spending may affect our business results.

With regard to businesses being developed in various countries, unexpected laws and regulations, political uncertainty, economic fluctuations, etc., might have an impact on our business results. In addition, foreign exchange movements might also pose a risk, although we avoid such risk by all possible means such as hedging through forward exchange contacts for receipts and payments of contract fees relating to foreign currency construction contracts. Furthermore, as we convert foreign currency denominated amounts in the financial statements of our overseas consolidated subsidiaries into Japanese yen during preparation of consolidated financial statements, currency fluctuations may affect our business results.

With regard to contracted construction, we assume liability under a defect warranty for a certain period after completion in accordance with construction contract agreements with our customers. For expenses incurred under this liability, we report reserves for after-care warrantees of construction based on past results. However, actual expenses may exceed the reserve amounts.

Although we ensure that credit for customers is properly managed, our inability to collect accounts receivable for construction fees due to their bankruptcy, etc. could have an adverse effect on our business results.

Due to severe competition to receive orders in the construction contracting business, we are sometimes obliged to receive below-cost orders. In such cases, we report reserves for losses on construction contracts and endeavor to reduce costs so that the contracts remain profitable. However, some contracts may turn out to be unprofitable and affect our business results as losses may exceed our reserves.

In cases where prices of materials are rising sharply when we procure construction materials, etc., and we have difficulty reflecting such higher materials prices in contract amounts, our business results may be affected.

In domestic businesses conducted by the corporate group, most construction works are completed in the second half of every fiscal year. Consequently, most sales and profits are also reported in the second half of every consolidated fiscal year, although we report profits on a percentage-of-completion basis.

Because we hold assets including real estate and securities in relation to our operations, fluctuations in the market values of these assets may affect our business results.

Decreases in the market values of pension assets or retirement benefit trusts, deterioration of investment returns, or changes in assumptions for use in actuarial calculations such as discount rate may have an impact on our business results.

Losses from natural disasters, accidents, etc., may have an adverse effect on our business results.

The corporate group ensures, as a whole, that management is conducted in strict compliance with laws and regulations. However, if any of an employee of the group commits an illegal act, it may affect our business results as it may restrict the group’s operations, increase costs, decrease revenues, etc.

In cases where prices of materials are rising sharply when we procure construction materials, etc., and we have difficulty reflecting such higher materials prices in contract amounts, our business results may be affected.