Care Service Co., Ltd.

The long-term care insurance system is reviewed every three years, and the fiscal foundation is deteriorating due to the increase in the elderly population aged 75 and above. If care fee reductions or increases in the co-payment ratio are implemented, this could directly affect the earnings of the core home care services business through declines in average revenue per service, among other factors. As a countermeasure, the Company is actively expanding its comprehensive senior services business (including Angel Care Service, etc.) and developing new businesses outside of long-term care insurance coverage.

Provision of services under the Long-Term Care Insurance Act requires designation from the prefectural governor or other authority for each business location, and if staffing standards can no longer be met due to employee turnover or other factors, there is a risk of business suspension or reduction of care fees. Furthermore, if the joint liability system is applied following designation revocation due to fraudulent billing or similar misconduct, new designations and renewals could become impossible for all business locations of the same service type, potentially making it difficult to achieve planned revenue. As a countermeasure, the Company is establishing a multi-layer checking system by a dedicated billing department, building mutual support arrangements among business locations, and enhancing various manuals and training programs.

More than 20 years have passed since the enforcement of the Long-Term Care Insurance Act, and entry by diverse operators, including medical corporations and companies from other industries, has become active again; if securing users becomes difficult, the performance of the home care services business could deteriorate. In the comprehensive senior services business as well, there are risks of declining usage due to entry by other operators into the Angel Care Service and diversification of funeral formats. As a countermeasure, the Company is holding various classroom activities led by professional instructors at day care centers, launching a care facility referral service, and expanding the service area of Angel Care Service, among other initiatives.

The long-term care business requires securing personnel holding specialized qualifications such as care managers, nurses, and certified care workers, and depending on economic conditions, competition for talent, including from other industries, may intensify, making it difficult to secure sufficient personnel. A shortage of personnel is directly linked to failure to meet legally mandated staffing standards, creating a risk that currently provided services could become unsustainable, and rising labor costs may also affect business performance. As a countermeasure, the Company is working to enhance its recruiting capabilities through continuous increases in salary levels, development of a more comfortable work environment, and a focus on personnel development and promotion.

Users of long-term care services are elderly individuals certified as requiring support or care, and there is a possibility of accidents such as falls, choking incidents, or outbreaks of infectious disease. If an accident or infectious disease outbreak occurs, in addition to a decline in social credibility, the Company could face claims for damages if found liable for negligence, which may affect its business performance. As a countermeasure, the Company pays close attention to safety and health management during service provision and thoroughly educates employees through training and manual development.

In the course of providing long-term care services, the Company handles important personal information of users and their families, and if information leakage occurs from systems or otherwise, it could lead to a decline in social credibility and claims for damages, affecting business performance. As a countermeasure, the Company is implementing measures to prevent information leakage through the development of various regulations and employee training.

When opening new business locations, if favorable locations cannot be secured due to rising land prices or other factors, or if significant deviations arise in the opening business plan due to changes in the business environment or economic factors, this could affect earnings forecasts. As a countermeasure, the Company conducts timely and appropriate market analysis of economic conditions and regional demographic trends, maintaining a store development system capable of responding quickly to change.

The Company's capital investment strategy for developing business locations is based primarily on leasing, but certain agreements impose restrictions on withdrawal for a fixed period; violating such restrictions would result in the payment of penalties for early termination or similar costs, potentially affecting business performance. As a countermeasure, the Company avoids properties with long-term withdrawal restrictions wherever possible, and where such restrictions are unavoidable, seeks to minimize the duration of the restricted period in the contract.

If the profitability of buildings and other assets held by the Company significantly declines in the future, recognition of impairment losses may become necessary, potentially affecting business performance and financial condition. As a countermeasure, the Company conducts thorough market research when selecting areas for opening new business locations, choosing sites with high asset profitability to preemptively prevent the occurrence of impairment losses.

If business operations are suspended or buildings and equipment are damaged due to natural disasters such as earthquakes, typhoons, heavy rain, or heavy snow, this could affect business performance; in particular, if a large-scale disaster exceeding expectations occurs in the greater Tokyo metropolitan area, a key business location, continuation of business operations could become difficult. As a countermeasure, the Company has prepared and thoroughly disseminated emergency response manuals and conducts regular disaster preparedness drills at each business location.