First Brothers Co.,Ltd.

If interest rate levels rise, this could lead to increased funding costs, higher expected yields demanded by client investors, and reduced liquidity in the real estate market. Interest-bearing debt at the end of the consolidated fiscal year stood at ¥56,484 million (62.9% of consolidated total assets), a high level, and a significant rise in market interest rates would directly affect earnings through increased interest expense. As a countermeasure, the Group uses interest rate swap transactions to partially fix interest payments.

In line with the policy of actively expanding proprietary investments, the balance of interest-bearing debt is expected to increase further going forward. If changes in the external environment or a decline in creditworthiness prevent the Group from obtaining financing on desired terms, execution of investment plans could be constrained. While the Group is currently able to stably procure ultra-long-term borrowings from multiple financial institutions, the risk of deterioration in the funding environment persists.

If economic fundamentals deteriorate rapidly or there are major changes in tax or monetary policy, the real estate investment market could be adversely affected over the medium term, potentially dampening the investment sentiment of domestic and overseas investors. A deterioration in the investment environment directly leads to a decline in fund formation and management revenue as well as acquisition and disposition fee income. Because the Group's earnings base is heavily dependent on the real estate investment market, the impact of market fluctuations is significant.

Acquisition fees, disposition fees, incentive fees, and gains (losses) on sales recorded upon the acquisition or sale of investment properties can be substantial, and these are factors that cause significant fluctuations in quarterly and full-year results. Because the timing of acquisitions and sales is also influenced by the intentions of counterparties, the Group may not be able to execute transactions at the timing it anticipated. This creates a risk of divergence from earnings forecasts.

Competition from new entrants and existing companies may intensify, and rising market prices could make it difficult to acquire real estate expected to generate stable income. This could result in a slowdown in the pace of acquiring investment properties and a decline in investment returns, potentially affecting business performance. Changes in the competitive environment in the real estate investment market directly affect the growth of the Group's asset management business.

The Group is subject to a wide range of legal regulations, including the Building Lots and Buildings Transaction Business Act, the Financial Instruments and Exchange Act, the Money Lending Business Act, and the Hotel Business Act. Violations of laws and regulations, or amendments to or changes in the interpretation of such laws, could result in administrative dispositions such as revocation of licenses or registrations or suspension of business, potentially causing significant disruption to business activities. While the Group promotes compliance-focused management and strives to respond promptly to regulatory changes, no grounds for license revocation have arisen to date. Changes in the regulatory environment represent a risk directly connected to business continuity.

In addition to investments in rental real estate, the Group is actively pursuing new investments in areas such as renewable energy and startup companies. If investment returns deteriorate due to changes in the external environment, or if valuation losses arise on investment targets, this could affect business performance and financial condition. While investment decisions undergo careful deliberation by the Management Committee and Board of Directors, the risk of sudden changes in market conditions cannot be eliminated.

In the Facility Operations Business, amid growing difficulty securing young talent due to the declining birthrate and aging population, personnel costs are expected to rise due to minimum wage increases and higher social insurance premium rates, while labor shortages are expected to lead to longer working hours, higher turnover, and increased recruitment costs. In addition, rising crude oil prices driving up utility costs, unseasonable weather driving up food ingredient prices, and increases in outsourcing costs are also factors that will pressure profitability. If these cost increases outpace improvements in revenue, business performance could be adversely affected.

Much of the real estate held by funds managed by the Group and by proprietary investments is concentrated in Tokyo and its surrounding areas. In the event of a natural disaster such as a typhoon, flood, or earthquake, or a man-made disaster such as fire or terrorism, this could result in a decline or loss of income and impairment of real estate value. Due to this geographic concentration, the impact of an event in this region on business performance and financial condition would be particularly significant. Although measures such as insurance are in place, it is difficult to eliminate all risk.

As of November 30, 2025, the Group's total number of employees was 174, a relatively small scale, and its internal control system remains commensurate with this scale. Management, including the Representative Director, plays a critical role in driving the business, and if unforeseen circumstances were to render current officers unable to perform their duties, this could affect business performance and business development. Similar risks would arise if the Group is unable to secure and develop capable personnel as planned, and increased recruitment, training costs, and personnel expenses could also pressure profitability.