Toubujyuhan Co.,Ltd.

There is a risk that customers' willingness to purchase pre-owned homes could decline due to economic deterioration, reduced real income from price increases, rising interest rates or land prices, and changes in tax systems or policies. The Company strives to stimulate demand through analysis of external trends, timely procurement tailored to regional characteristics, renovation construction, and advertising and sales activities; however, if such changes in the external environment coincide, it could have a material impact on the Company's financial position, business results, and cash flows.

Since the Company's Real Estate Sales Business is not based on technical uniqueness and entry barriers are not high, there is a risk that similar operators, such as buy-and-resell franchise chains, may enter the market, leading to intensified competition in the procurement of pre-owned homes and rising procurement prices. The Company addresses this through building track records, networks, and information networks in the Chugoku and Kyushu regions, manualizing know-how, and strengthening its financial base; however, if differentiation measures become necessary or customers judge the Company to lack competitiveness, business performance could be affected.

If procurement prices surge due to intensified competition or rising commodity market conditions, building material prices increase, or labor costs rise due to a shortage of construction workers, there is a risk that the profitability of the Proprietary Real Estate Sales Business could deteriorate. Business performance could also be affected if the Company cannot secure sufficient pre-owned homes meeting its renovation criteria. The Company addresses this by securing direct procurement routes through web advertising and TV commercials, and by lowering renovation costs through reuse of existing components; however, depending on changes in the economic environment, such measures may become difficult to sustain.

As of the end of the fiscal year under review, real estate for sale and real estate for sale in process accounted for a high proportion of total assets at 64.3%, and there is a risk that stagnant inventory could increase significantly if delivery is delayed or falls through due to changes in the economic environment or customers' failure to pass housing loan screening. Prolonged inventory stagnation could lead to worsening cash flow and the occurrence of valuation losses. The Company aims to improve inventory turnover through advanced inventory management and enhanced sales capabilities, but the impact of external factors cannot be entirely eliminated.

Funds for real estate procurement are mainly raised through borrowings from financial institutions, and interest-bearing debt accounted for 14.1% of total assets as of the end of the fiscal year under review. There is a risk that business operations could be hindered if the burden of interest payments increases due to changes in the financial environment, or if timely fundraising through borrowing becomes difficult. The Company aims to maintain an equity ratio of 60% or higher and addresses this through building good relationships with financial institutions; however, an increase in funding costs is unavoidable in a rising interest rate environment.

Since renovation work is outsourced to external construction partner companies, there is a risk of construction delays if partner companies cannot be secured in a timely manner as the sales area expands or the number of properties handled increases. A similar impact could also occur if a prolonged stagnation of economic activity due to a resurgence of infectious disease, natural disasters, or security crises leads to the bankruptcy of construction partner companies. The Company addresses this by adopting substitutable standardized products and thoroughly managing quality and schedules; however, the costs of coordinating with alternative contractors and the risk of construction delays remain.

Based on the Building Lots and Buildings Transaction Business Act and the Act for Promotion of Proper Quality Assurance in Housing, the Company bears liability for non-conformity with contract for two years after delivery for pre-owned homes and ten years after delivery for newly built homes; there is a risk that repair costs or damages could be incurred if non-conformities are discovered after delivery. The Company strives to maintain quality through current condition surveys at the time of procurement, quality control during renovation construction, and inspections at the time of delivery; however, it is difficult to completely eliminate potential defects.

Operation of the Real Estate Sales Business requires a real estate brokerage license (Minister of Land, Infrastructure, Transport and Tourism License (7) No. 5407, valid until November 8, 2028) and a general construction business license (Yamaguchi Prefectural Governor's License, valid until March 26, 2027); there is a risk of significant disruption to business activities if regulations are tightened, such as the July 2024 amendment to the Building Lots and Buildings Transaction Business Act, or if there is a failure to comply with laws and regulations or a license revocation occurs. The Company addresses this through compliance activities (recitation at morning meetings, development of internal regulations, internal audits and whistleblowing systems, etc.); however, increased costs to respond to legal amendments and the risk of violations continue to exist.

The Company holds a large amount of personal information, such as addresses and names of suppliers and customers, and there is a risk that reputational damage and response costs could arise if an unforeseen incident leads to external leakage or improper handling of the My Number system occurs. The Company has implemented leakage prevention measures, including development of internal regulations on personal information management, restrictions on the use of electronic recording media, and strict limitation of personnel and devices handling My Number information; however, threats such as cyberattacks and internal misconduct cannot be completely eliminated.

Toshihiro Ogino, the founder and Representative Director and President, is the largest shareholder, holding 1,047,700 shares (a 38.65% shareholding ratio) out of 2,712,400 total issued shares (including 1,914 treasury shares) as of May 31, 2025, and plays a central role in determining management policy and strategy. There is a risk that the continuity of management could be materially affected if he becomes unable to perform his duties for any reason. The Company is working to reduce this dependence by promoting collegial decision-making and delegation of authority and enhancing management tools; however, dependence on him remains high at present.