NIHON HOUSE HOLDINGS CO., LTD.

The Group operates a business centered on contracted housing construction for individuals, and is therefore susceptible to changes in personal consumption trends driven by economic conditions, interest rate and land price fluctuations, and changes in housing-related policies and tax systems. If interest rates rise sharply, land prices surge, or policy changes with a negative impact on consumer sentiment occur, customers' purchasing intent may decline, potentially affecting business results and financial condition. Housing demand is highly susceptible to the external environment, and a downturn in the macroeconomy is expected to directly impact performance.

The Group holds multiple licenses and permits essential to the continuation of its core businesses, including a Specific Construction Business License under the Construction Business Act (Minister of Land, Infrastructure, Transport and Tourism License (Specific-6) No. 4959, valid until January 16, 2030), a Real Estate Brokerage License (Minister of Land, Infrastructure, Transport and Tourism License (13) No. 2167, valid until December 26, 2026), and registration of a first-class architectural design office. Revisions to related laws and regulations or the establishment of new regulations may give rise to new obligations and costs, and if any license or registration is revoked or expires for any reason, it would significantly impede core business activities. The Hotel Business is also subject to regulations such as the Hotel Business Act, the Food Sanitation Act, and the Hot Springs Act, and changes to or abolition of such regulations may affect business results.

In materials procurement for the Housing Business, the materials procurement functions of all branches, sales offices, subsidiaries, and partner factories have been consolidated and are managed by the Materials Procurement Department in order to maintain stable procurement prices. However, if prices of raw materials and materials, including timber, the primary material, rise sharply, the resulting increase in costs may affect business results and financial condition. Although a centralized procurement management system has been established, there may be situations where it is difficult to respond to sudden changes in global materials market conditions.

The Group focuses on quality control, including offering its proprietary "60-Year Warranty System," but if a serious defect is found in a sold property, the Group, as the seller, may bear liability for non-conformity with the contract even if the direct cause lies outside the Group. This could result in increased warranty repair costs and reputational damage, potentially affecting business results. While offering a long-term warranty system provides a competitive advantage, it also carries an inherent risk of increasing future warranty costs.

In the Hotel Business, the Group operates restaurants within its hotels and thoroughly manages the sanitation of ingredients and food served; however, in the event food poisoning or similar incidents were to occur, compensation costs and reputational damage could affect business results. Operations are conducted under regulations such as the Food Sanitation Act, and inadequate sanitation management could also lead to administrative sanctions or suspension of business. This represents a direct risk factor to the earnings base of the Hotel Business.

The Group holds customers' personal information and important management-related information, and has implemented system security measures, established and operated personal information protection rules, and conducted employee training. However, in the event of an information leak, loss of customer trust and other consequences could affect business results. Given the nature of the contracted housing business, the Group holds a large volume of customers' personal and asset information, and the scope of impact in the event of a leak would be extensive.

The Group conducts a wide range of business activities, any of which could become subject to litigation or disputes. If litigation or disputes arise, the costs required for resolution and the impact on operations could affect business results. Given the consumer-facing nature of businesses such as contracted housing construction and hotel operations, there is a potential risk of legal disputes arising from contract issues or quality complaints.

If a large-scale natural disaster occurs, facility restoration costs, business interruption losses, costs of inspecting customers' homes, and shortages in the supply of timber and fuel, which are key structural materials, may arise, potentially affecting business results and financial condition. In addition, the spread of an infectious disease for which no established treatment exists could lead to a slowdown in social and economic activity due to voluntary restrictions on outings and a cooling of consumer sentiment, resulting in decreased housing demand and hotel guests. This is a compound risk affecting both the Housing Business and the Hotel Business.

If the investment environment for pension assets deteriorates due to fluctuations in the stock and bond markets, or if the discount rate for pension obligations is revised due to significant changes in interest rate levels, increased retirement benefit expenses and expansion of unrecognized obligations could affect business results and financial condition. Changes in market conditions are a factor outside the Group's control, and the risk of expanding obligations increases particularly in a prolonged low-interest-rate environment or during a stock market downturn.

If impairment processing becomes necessary for the Group's business fixed assets due to declining profitability or other factors, a substantial impairment loss may be recorded, potentially affecting business results and financial condition. The Group holds real estate-related assets such as those used in the Hotel Business, and impairment risk is more likely to materialize during a deterioration in the business environment or a decline in land prices. The occurrence of impairment could be a factor that significantly worsens financial indicators on a temporary basis.