NipponCareSupplyCo.,Ltd.

Welfare Equipment Rental Wholesale and Welfare Equipment Sales Wholesale, the Group's core businesses, transact with operators subject to the long-term care insurance system and with users of long-term care insurance, and are therefore strongly and indirectly affected by the long-term care insurance system. If demand trends deteriorate due to changes in the scope of long-term care needs certification, the scope of insurance coverage for welfare equipment, or the user co-payment ratio, this could have a material impact on business results and financial condition. Under the system's structure, in which half of the costs are covered by insured persons' premiums and the remaining half by public funds (25.0% national government, 12.5% prefectures, 12.5% municipalities), the risk of policy changes is a persistent, structural feature of the business.

The welfare equipment rented out by the Company is cleaned and disinfected after use before being re-rented to another customer. If an infectious disease outbreak or a serious defect in maintenance occurs, this could lead to substantial damages liability and loss of social trust. As countermeasures, the Company actively participates in the "Certification System for Disinfection Process Management of Welfare Equipment" operated by the Silver Service Promotion Association (a general incorporated association), and works to improve and standardize the quality of maintenance through its employee training programs. However, there is no guarantee that these measures eliminate all risk, and if an incident occurs, it could affect the Group's business results and financial condition.

Some of the welfare equipment that the Company rents out and sells consists of original products, and since many users are elderly persons requiring long-term care, product malfunctions carry a risk of directly leading to serious accidents. If a product defect or a large-scale recall occurs, this could result in substantial damages and recall costs, as well as significant damage to the Company's credibility. The Company carries product liability (PL) insurance, but this does not guarantee that it will be sufficient to cover the ultimate amount of damages.

The Group holds a large number of fixed assets nationwide, including welfare equipment for rental as well as cleaning and disinfection facilities, and applies impairment accounting standards to these assets. If existing welfare equipment becomes obsolete due to changes in the long-term care insurance system or the emergence of groundbreaking new technologies, this could lead to a significant deterioration in corporate earnings accompanied by impairment losses, affecting business results and financial condition. Given the large scale of fixed assets, the financial impact of any impairment is expected to be correspondingly significant.

Against the backdrop of an ultra-aging society, entry into the long-term care business from other industries has become increasingly active. If the Group is unable to sufficiently differentiate itself against entry by major companies, this raises concerns about a decline in competitive advantage and deteriorating profitability due to intensified price competition. The Company's core business requires substantial financial strength and expertise, such as bulk purchasing of rental products and building a maintenance service infrastructure, and the Company believes that nationwide new entry is not easy; nevertheless, the risk of entry by major capital cannot be eliminated. If competition intensifies, this could affect the Group's business results and financial condition.

For the Elderly Life Support Business, securing human resources is fundamental to business continuity, and stable recruitment and retention of the personnel necessary to execute business plans is a prerequisite for sustained growth. The Company seeks to promote personnel retention through improvements to the working environment and enhancement of training systems; however, if these efforts are not achieved, this could lead to a decline in service quality and constraints on business expansion, affecting business results and financial condition. As labor shortages across the entire long-term care industry become more severe, intensifying competition for recruitment has become a common challenge across the industry.

The Company sells frozen bento meals and similar products as part of its meal services. If an incident such as contamination by foreign matter during distribution or false labeling occurs, or if food poisoning occurs due to hygiene management issues, this could damage trust and credibility and give rise to liability for damages. The Company strives to build relationships of trust with suppliers and thoroughly manage product and hygiene standards, and carries PL insurance; however, if management responsibility is found in the event of food poisoning, damages exceeding insurance coverage could arise. If an incident occurs, this could affect the Group's business results and financial condition.

The Company conducts a wide range of operations, including product procurement and sales, using communication networks and IT systems, and system failures caused by cyberattacks, unauthorized access, natural disasters, or employee error could affect business performance. In particular, the electronic order management system "e-KaigoNet" is used by operators accounting for approximately 40% of the Company's net sales as well as major suppliers, and if a serious failure occurs in this system, it could disrupt the smooth operation of sales-related business and damage trust and credibility. While the Company makes every effort to ensure thorough operation and management of its systems, there is no guarantee that all risk can be eliminated.

The Company may obtain the personal information of numerous long-term care insurance users through operators, and if an information leak occurs, this could result in legal liability and significant damage to corporate credibility. As a countermeasure, the Company has obtained Privacy Mark certification from JIPDEC and works to establish and thoroughly implement regulations concerning the management of personal information. However, should a leak occur, this could affect business results and financial condition.

If natural disasters such as earthquakes, heavy rain, or flooding, large-scale accidents, or the spread of infectious disease occur, this could cause damage to operating assets such as employees, business offices, facilities, and rental assets, as well as disrupt business activities due to supply chain disruptions. As countermeasures, the Company has implemented an employee safety confirmation system, established disaster response regulations, conducted disaster preparedness drills, stockpiled necessary supplies, and diversified procurement; however, these measures cannot necessarily avoid all damage and impact. If a natural disaster or similar event occurs, this could affect the Group's business results and financial condition.