TSUCHIYA HOLDINGS CO., LTD.

The Company is subject to numerous laws and regulations, including the Building Standards Act, the Building Lots and Buildings Transaction Business Act, and the Act for Promotion of Quality Assurance in Housing, and changes to or the introduction of new legal regulations may impede business activities. In addition, if licenses or registrations such as the construction business license under the Construction Business Act, office registration under the Architects Act, and the license under the Building Lots and Buildings Transaction Business Act are revoked or lapse due to disqualification from renewal, this could have a material impact on the continuation of core businesses. As a countermeasure, the Company has established a two-tier risk management structure consisting of the Risk Management Committee and the Risk Countermeasure Committee, and is working to ensure legal compliance.

Customers of the core Housing Business are individuals, and orders and sales may decline due to susceptibility to factors such as employment conditions, income trends, consumption tax trends, rising interest rates, and economic fluctuations. Changes in government housing-related policy could also have a direct impact on business performance. The Company monitors government policy and market conditions at monthly Board of Directors meetings to mitigate this risk.

In the Housing Business and Renovation Business, if prices of major raw materials and materials, including lumber, rise sharply due to foreign exchange rates or other factors, it may become difficult to pass on the increase to sales prices, which could put pressure on profitability. Each purchasing department conducts negotiation management to maintain stable procurement prices, but there are limits to responding to sudden price fluctuations.

In the Housing Business and Renovation Business, if a serious defect is found in a sold property, the Company, as the seller, may be liable for defect warranty even if the direct cause is attributable to a third party. This could affect operating results and financial condition through increased warranty repair costs and reputational damage. In addition to the statutory 10-year warranty, the Company offers a warranty of up to 20 years and has established the "Customer Center Management Division" to handle quality control and customer response.

Since sales in the Hokkaido and Tohoku regions account for approximately 80% of total sales, sales and construction activity tend to decline during the winter season, resulting in an uneven seasonal distribution of sales, with the first half accounting for 40.2% and the second half 59.8% of full-year sales. In the fiscal year under review, operating income was in deficit in the first, second, and third quarters, offset by a surplus of ¥1,195,185 thousand in the fourth quarter. As unusual weather conditions can also be a factor in performance fluctuations, the Company continues to take measures to level out results.

If a large-scale natural disaster occurs, it could affect operating results and financial condition due to restoration costs for facilities such as factories and branches, losses from business interruption, inspection costs for customers' homes, and shortages in the supply of raw materials. The Company states that it is difficult to estimate the extent to which such risks may materialize or their impact on business performance. Measures taken include formulating the "Tsuchiya Group Business Continuity Plan (BCP)" and "Disaster Prevention Manual," introducing a safety confirmation system, conducting disaster drills, and duplicating data storage.

If a compliance violation occurs, it could affect operating results and financial condition through legal liability such as damages lawsuits or reputational damage. The Company works to instill awareness through compliance training for executives, e-learning training for employees, distribution of compliance cards, and the establishment of both external and internal compliance consultation contact points.

The Company holds personal and confidential information of customers, and if information leakage or tampering occurs due to computer virus intrusion or cyberattacks, it could have a material impact on operating results and financial condition through damages claims from customers and business partners and reputational damage. Countermeasures include strengthening access control systems against both internal and external access and improving IT literacy through e-learning and other means.

If a significant impairment loss on fixed assets is recognized due to a marked deterioration in the business environment or other factors, it could affect operating results and financial condition. The Company conducts periodic monitoring each year based on the "Tsuchiya Group Impairment Accounting Manual" to properly assess asset values.

If the market value of held assets such as real estate for sale and investment securities declines significantly, it could affect operating results and financial condition. For real estate for sale, the Company conducts periodic monitoring based on the "Tsuchiya Group Inventory Valuation Standards," and for investment securities, it responds in accordance with the policy described under the status of corporate governance.