APPLE INTERNATIONAL CO., LTD.

The used car export business is highly dependent on dealers for procurement, and if transactions with dealers, used car retailers, and domestic auto auctions do not proceed smoothly, procurement may stagnate, potentially affecting operating results and financial condition. In the reuse distribution business as well, there is a risk that stable securing of reuse items may become difficult due to changes in purchase prices caused by economic conditions and the emergence of competitors, as well as changes in consumer sentiment. The Group is addressing this by diversifying procurement channels (home delivery, in-store, on-site purchasing, and use of domestic auto auctions).

In Southeast Asian countries, which are the Group's main export destinations, regulations such as import tariffs and import permits have been established for the purpose of protecting domestic industries and the natural environment, and the Group conducts its export business by clearing these standards. However, if such regulations change, it may hinder the continuation and expansion of the export business, potentially affecting operating results and financial condition. The Group addresses this through continuous monitoring of regulatory trends, but it is difficult to completely eliminate the risk of policy changes.

Ocean freight rates have risen due to soaring international crude oil prices and the buoyancy of export industries, and further increases would directly impact the Group's cost structure. In addition, since the vessel capacity of car carrier ships depends on new car export trends, it may become difficult to load vehicles onto the originally planned transport vessels, which could lead to delivery delays and vehicle inventory buildup, worsening cash flow. Since the Group adopts the shipment basis for revenue recognition, insufficient vessel space secured near the fiscal year-end also carries the risk of pushing revenue recognition into the following period.

In the used car markets of Southeast Asian countries, other export businesses have been entering the market, and if competitors introduce similar vehicle models in the same sales regions while lowering prices or offering similar services, the Group's sales and profit margins may decline. In the domestic used car purchase business as well, competition has been intensifying further due to an increase in new entrants such as specialized purchasing companies, automaker-affiliated dealers, and domestic auto auction-affiliated companies. The Group seeks to differentiate itself by enhancing after-sales support, including the supply of repair parts, and by expanding franchise stores, but the impact on performance cannot be denied if competition continues to intensify.

Currently, transactions with overseas importers are basically settled in yen, and foreign currency-denominated settlements are minimal, so no foreign exchange risk hedging is currently implemented. However, if foreign currency-denominated settlements increase due to business expansion, foreign exchange losses may arise depending on exchange rate trends caused by changes in financial market conditions such as rising interest rates, potentially affecting operating results and financial condition. The Group's policy is to implement appropriate risk hedging measures such as forward exchange contracts, currency swaps, and currency options within the scope of actual demand in the future.

In overseas operations, there are cases where payment collection is delayed due to differences in settlement cycles between accounts receivable and accounts payable, as well as delays in overseas import procedures, and increases in trade receivables and inventories tend to put pressure on cash flow from operating activities. As an actual result, operating cash flow was negative ¥1,208 million in the previous consolidated fiscal year (FY2024, ended December 2024) and remained negative at negative ¥70 million in the current consolidated fiscal year (FY2025, ending December 2025). If working capital needs increase rapidly due to a sharp rise in sales, there are limits to addressing this through borrowing, which could affect cash flow.

Export business partners are companies or users engaged in used car import and sales in various foreign countries, and the Group mitigates collection risk by securing advance payments or letters of credit at the start of transactions and sending bills of lading accordingly. In addition, risk management is conducted by checking research reports from private research institutions for major continuing business partners, but if bankruptcy, payment delays, or fraud occur among overseas business partners, it may affect operating results and financial condition. The risk of difficulty in collecting receivables due to geographical and institutional distance is higher compared to domestic transactions.

Personal information is handled in the business of processing ownership transfer on behalf of customers in connection with the purchase and sale of used cars, and if an information leak occurs, it may lead to legal liability and a decline in social credibility, potentially affecting operating results and financial condition. As countermeasures, the Group has established the "Basic Personal Information Protection Regulations," obtains written pledges at the time of hiring and resignation, implements security measures through software and equipment, and conducts employee training. However, it is difficult to completely eliminate risks such as cyberattacks and internal misconduct.

Changes in general consumers' automobile usage patterns—such as declining interest in car ownership due to lifestyle changes, longer holding periods, a shift away from ownership due to the spread of car sharing, and demographic changes from the declining birthrate and aging population—may affect demand for the used car sales and purchase business. These structural changes are difficult to address with short-term measures and could pose a risk that threatens the Group's business foundation over the medium to long term. Continuous review of the business portfolio in response to changes in the market environment is required.

If a scandal occurs at a franchise store, the brand image of the "Apple" chain as a whole may be damaged, potentially affecting business performance. In addition, a loss of trust with franchisees could lead to the termination of FC agreements with many franchisees, and the closure or bankruptcy of franchisees could also become a factor in business deterioration. The Group has established a policy of prompt disclosure in the event of a scandal, and strives to maintain the quality of franchisees by setting screening standards for new franchise applicants.