JINUSHI Co., Ltd.

The Company relies on financial institution borrowings for the majority of its real estate acquisition funds, and the balance of interest-bearing debt stood at ¥84,568 million at the end of the 26th fiscal period (FY2025, ending December 2025), with the interest-bearing debt ratio remaining at a high level of 57.8%. Fluctuations in financial markets and monetary policy (particularly rising interest rate phases) directly affect financial position and operating results through increased funding costs. As countermeasures, the Company is pursuing securing borrowing capacity through commitment line agreements, extending borrowing terms, and expanding the number of financial institutions it deals with.

The JINUSHI Business faces the risk of being unable to secure buyers if tenants' willingness to open new stores declines, if land acquisition decreases due to soaring land prices, or if investor demand for Jinushi REITs weakens. If sales stagnate, the foundation of the turnover-based business model could be impaired, potentially having a material impact on the company's financial position and business performance. As countermeasures, the company has made it a principle to conclude reservation agreements for establishing fixed-term land lease rights before land acquisition and to conduct hearings with prospective buyers, while pursuing three growth strategies: diversifying tenant industries, expanding business areas, and proposing JINUSHI Leaseback.

External environmental changes such as economic fluctuations, deterioration in the real estate market, and rising interest rates could have a material impact on the profitability of the JINUSHI Business as a whole. Although the company has adopted a stable-revenue model based on land-only investment and long-term fixed-term land lease contracts, it remains vulnerable to sudden changes in the macro environment. As countermeasures, the company is leveraging the high-turnover characteristics of its business to respond swiftly, and has established a multifaceted risk deliberation framework at the Board of Directors.

If large-scale rent non-payment occurs due to deterioration in tenant creditworthiness or other factors, an impairment loss may be recorded due to a significant decline in profitability, which could have some impact on the financial position and business performance. Because the Jinushi Land-focused model does not involve holding buildings, physical deterioration risk is low; however, given the structural reliance on tenants, the Company is directly exposed to the impact of deterioration in tenant finances. As countermeasures, the Company places emphasis on land conversion potential at the time of acquisition, conducts tenant credit investigations and share analysis, and continuously monitors key tenants.

Severe competition with major real estate developers and others has arisen in the acquisition of properties in the Tokyo metropolitan area and the vicinity of major cities, and if the Company is unable to maintain a competitive advantage, this may affect its financial position and operating results. In particular, acquisition competition tends to intensify during phases of soaring land prices. As countermeasures, the Company relies on its Jinushi-specialized know-how and trust relationships with tenants built since its founding in 2000, as well as the first-mover advantage derived from "JINUSHI REIT," Japan's only private REIT specializing in Jinushi Land, established in 2016, as sources of competitive advantage.

Amendments or new enactments of legal regulations, tax systems, and accounting standards related to the real estate business and financial products may give rise to new obligations, changes in business content, or additional costs, potentially affecting the financial position and operating results. In addition, if grounds for disqualification or revocation arise with respect to licenses and permits held by the Company, this could seriously affect its business and performance through damage to its social credibility. As countermeasures, the Company is strengthening its corporate governance and compliance promotion structure, conducting internal audits, and gathering and analyzing information from industry associations and experts.

The company has consolidated subsidiaries in the United States, and changes in the U.S. economy, political situation, or government regulations, as well as deterioration in the financial condition of JV partners or tenants, may lead to reduced profitability or schedule delays. While the current proportion of overseas business is limited, risk exposure may expand as assets increase alongside future business expansion. As a countermeasure, the company has limited overseas business to the United States and has established a system for the board of directors to periodically monitor individual projects.

Given the nature of its business handling personal information, if a cyberattack, information leakage by officers or employees, or system outage due to system failure occurs, it could have a non-negligible impact on the financial position and business performance through a decline in social credibility and other factors. As countermeasures, the company has introduced the latest endpoint security and network security services, established a 24-hour monitoring and management system, and built an emergency support framework through contracts with external specialist firms.

The JINUSHI Business involves many operations requiring specialized knowledge and experience. If the development and hiring of excellent personnel does not proceed as planned, or if existing personnel leave, this could have a material impact on future business development. Because the business model is elite and small in scale, it also inherently carries a structural risk of relatively high dependence on key personnel. As countermeasures, the company is actively engaged in human capital management, including an enhanced compensation system incorporating stock-based compensation, engagement surveys, human capital investment, workplace environment improvement, and health promotion.

If soil contamination or buried objects not identified in prior surveys are discovered on acquired land, changes to the business schedule and additional costs may arise, potentially affecting the financial position and operating results. Given the nature of the business model, which involves acquiring only land, underground risk is an unavoidable, potential challenge. As countermeasures, the company adheres in principle to having prior surveys and removal conducted at the seller's expense; when contamination is confirmed, it maintains a policy of either canceling the acquisition or acquiring the land only after removal at the seller's expense, and it has established a system for reporting survey details of individual projects to the Board of Directors.