Polaris Holdings Co., Ltd.

If the number of foreign visitors to Japan decreases due to exchange rate fluctuations or heightened geopolitical risk, hotel occupancy rates and average room rates may decline, potentially having a material impact on business performance. The Group's core business, the Hotel Operation Business, is highly dependent on inbound demand, and the impact of a demand decline would be direct and extensive. As a countermeasure, the Group seeks to reduce this risk by expanding its operating portfolio and broadening its customer base.

If large-scale earthquakes or other natural disasters cause damage to hotel buildings and facilities and temporary business suspension, or if travel and group activities are restricted due to a widespread infectious disease outbreak, this may have a material impact on business performance. By its nature, the Hotel Operation Business depends on the physical operation of facilities, and a business suspension due to force majeure would directly impact revenue. There is currently no description of specific countermeasures in the securities report.

For hotels that the Group leases on a master lease basis or operates under entrustment agreements, if the building owner is unable to continue the lease agreement or operation entrustment agreement on the same terms, or if such agreement is terminated early, due to economic conditions or other reasons, this may have a material impact on business performance. Since the revenue structure depends on contractual arrangements, the risk of contract changes due to circumstances on the owner's side is directly linked to business continuity. As a countermeasure, the Group promotes opening stores under contractual arrangements, such as long-term lease agreements, that can secure stable revenue.

For hotel properties for which the Group owns the land and buildings, or leases the land and owns the buildings, if hotel operations are suspended or property damage occurs due to disasters, or if real estate market conditions deteriorate, losses such as impairment may occur. Impairment of the value of owned real estate would directly affect the balance sheet, creating a risk of deterioration in the financial position. There is no description of specific countermeasures in the securities report.

Although the Group pays attention to health and safety in hotel operations, if an accident such as food poisoning were to occur, this may have a material impact on business performance due to temporary business suspension or damage to reputation. Since the Group operates hotels throughout the year, this risk is notable in that it may materialize at any time. As a countermeasure, the Group has established thorough accident prevention measures and response procedures for when accidents occur, in order to reduce the impact on business performance.

Hotels operated in the Philippines are exposed to risks specific to overseas locations, such as political instability, inflation, and deteriorating interest rate trends in that country. In addition, sharp exchange rate fluctuations may have an adverse effect on the Company, and there is a risk that adverse effects on the overall local economy could spread to business earnings. There is no description of specific countermeasures in the securities report.

If a serious failure occurs in IT equipment or information systems due to accidents, disasters, human error, or other causes, there is a risk of a significant impact on business operations. Depending on the extent of the damage, countermeasure costs may also be incurred, which could also be expected to affect finances. There is no description of specific countermeasures in the securities report.

In investments in hotel properties, there is a possibility that the initially expected investment returns may not be achieved due to a deterioration in hotel operating market conditions. In addition, if the fair value of an invested hotel property falls below its acquisition cost during the period, or if the property is damaged by a disaster or other cause, there is a risk of recording a valuation loss or other losses. The Hotel Investment Business is a core segment alongside the Operation Business, and the impact of a market downturn would extend to overall business performance.

Some of the loan agreements with multiple financial institutions include financial covenants, and if these are violated, there is a risk that the lending financial institutions could demand repayment, resulting in the loss of the benefit of time (acceleration), which could affect operating results and financial position. Loss of the benefit of time is a significant risk that could lead to a rapid deterioration in cash flow. As a countermeasure, the Group strives to obtain agreement from each financial institution, through negotiation, that it will not exercise its right to accelerate repayment even in the event of a covenant violation.