Fantasista Co., Ltd.

The Group promotes an M&A strategy as a means of business expansion, and although it conducts due diligence on acquisition targets, there is a possibility that anticipated profits may not be realized, or that contingent liabilities that could not be foreseen at the time of acquisition may materialize, which could affect business performance. While the Group strives to avoid such risks through rigorous review of the target company's management and financial condition, complete elimination of such risks is difficult.

The real estate sales business is susceptible to fluctuations in land prices and the supply and pricing trends of competitors, and the value of held assets may decline due to changes in economic conditions such as economic downturns, rising interest rates, or changes in real estate-related tax systems. Such fluctuations pose a risk of directly affecting the Group's business performance. As a countermeasure, the Group has real estate appraisal companies conduct periodic appraisals to maintain appropriate valuations.

The Group holds non-marketable shares, and if the valuation of these shares declines significantly due to deterioration in the performance of the invested companies, impairment losses may occur, which could affect business performance. Because these shares lack marketability, liquidity risk is also inherent, and it is conceivable that losses could not be avoided through sale. As a countermeasure, the Group selects target companies through sufficient due diligence and rigorous internal procedures at the time of investment.

The Group handles a large volume of personal information in the course of its business, and if such information were to leak externally due to unforeseen circumstances, it could affect business performance and financial condition through loss of credibility, decline in sales, and occurrence of damages liability. The Group strives to ensure proper acquisition, management, and handling of personal information in accordance with the Personal Information Protection Act and related laws and regulations, but complete prevention cannot be guaranteed. The Group continues to develop mechanisms for appropriately managing personal information, paying close attention to information security.

Because the Group operates a wide variety of businesses, there is a possibility that litigation may arise from troubles occurring in the course of business operations. If significant litigation is brought, there is a risk that the outcome may differ from the Group's assertions, and if an unfavorable judgment is rendered, it could have a material impact on the Group's financial position, business results, and cash flow situation. The diversity of the Group's businesses is a factor that broadens the opportunities for such risks to arise.

If new infectious diseases such as COVID-19 were to spread, domestic and international economic activity could stagnate and may take a long time to recover, potentially affecting the Group's business performance. Such stagnation in economic activity is expected to have wide-ranging effects across the Group's business segments, including the real estate sales business. The securities report does not describe specific countermeasures, and this is recognized as an external environmental risk.

Internal control systems have inherent essential limitations, and there is no guarantee that their objectives will be fully achieved. In addition, costs for compliance with laws and regulations may increase due to changes in laws, regulations, or authorities' interpretations thereof, and if the Group were to violate applicable laws and regulations, it could become subject to administrative sanctions such as fines, which could adversely affect its business, performance, and financial condition. As the Group operates a diverse range of businesses, the scope of applicable laws and regulations is also extensive.