Mullion Co., Ltd.

Upon redemption of real estate securitization products, leased real estate is sold on the market, but depending on real estate market conditions, sudden changes in the financial environment, and the fund-raising capacity of purchasers, sales at the intended amount and timing may not be realized. It is explicitly stated that if a sudden change of a scale that causes all sales to fail were to materialize at an early stage of the fiscal year, depending on the weight of real estate sales in each fiscal year, this could affect the majority of the company's business performance. The company particularly strongly recognizes the risk of sudden market changes following the unwinding of the monetary easing policy, and is responding by conducting sales activities with sufficient lead time before the redemption date arrives.

The real estate industry includes numerous operators, including major companies and J-REITs, and competition is intense in the acquisition of prime leased real estate, which may lead to deterioration in the investment yield of leased real estate. In the real estate securitization business conducted under the Act on Specified Joint Real Estate Ventures, there is also a risk that events and rumors related to other operators or their products could spill over to affect the design, cost, and sales of the company's products. The company responds through early acquisition of information on leased real estate available for sale, promotion of direct transactions, and close monitoring of other companies' trends, but competitive risk is inherent in business operations and is recognized as difficult to eliminate completely.

The company belongs to the real estate industry, which is susceptible to economic trends, interest rate trends, land price trends, financial institutions' lending stance, tax reform, demographic changes, etc., and sudden market changes may affect its business performance and financial condition. It is explicitly stated that there is concern that real estate market conditions may change abruptly due to the unwinding of the long-continued monetary easing policy, and the company is further strengthening its assessment of market conditions. Although the company conducts prudent operations in selecting the timing, area, and scale of acquisitions and in judging the timing of sales, this risk is recognized as being of a nature that cannot be completely eliminated through management measures.

The company relies on borrowings from financial institutions for a substantial portion of the funds used to acquire leased real estate, and as of the end of the fiscal year under review (September 30, 2025), the balance of interest-bearing debt reached ¥8,343,731 million, with the interest-bearing debt ratio reaching 44.4%. Long-term borrowings at variable interest rates also exist, and if interest rates rise further in the future, this may affect business performance and financial condition. While the company seeks to mitigate this through close cooperation with existing financial institutions and close monitoring of monetary policy trends, risks arising from the financial markets as a whole are recognized as difficult to mitigate or eliminate through the company's own measures alone.

The acquisition funds necessary to maintain and expand the leased real estate portfolio are mainly financed through borrowings from financial institutions or contributions via real estate securitization products, but depending on sudden changes in market conditions, changes in financial institutions' lending stance, changes in investors' risk appetite, etc., funding may become insufficient, making it impossible to realize acquisitions as originally intended. It is explicitly stated that the possibility of this risk materializing has increased due to the unwinding of the monetary easing policy, and since the degree of impact varies depending on the timing and scale of materialization and the degree of impact on competitors, a definitive estimate is difficult to make. The company responds through measures such as maintaining confidence in its financial condition, maintaining good relationships with financial institutions, and improving the product features of its real estate securitization products.

Some borrowings from financial institutions include financial covenants committing the company to not record an ordinary loss, to maintain net assets above a certain level, and to maintain the occupancy status of collateral assets above a certain level; a breach of these covenants may affect business performance and financial condition. Currently, a considerable safety margin is maintained relative to the required levels of the financial covenants, and the risk of breach is recognized as minimal. The company continues to appropriately manage compliance status and conduct business operations aimed at stable fulfillment of these covenants.

In carrying out its principal business, the company holds four licenses and permits: a Real Estate Broker's License (Tokyo Governor License (7) No. 72526, valid until February 24, 2028), Type II Financial Instruments Business registration (Director-General of the Kanto Local Finance Bureau (Financial Instruments) No. 1502), a Real Estate Specified Joint Enterprise permit (Commissioner of the Financial Services Agency and Minister of Land, Infrastructure, Transport and Tourism No. 100), and Rental Housing Management Business registration (Minister of Land, Infrastructure, Transport and Tourism (1) No. 001736, valid until October 5, 2026); if any of these were to be revoked for any reason, this would impede the company's principal business activities and could have a material impact on its business performance. The company strives to conduct business operations that do not give rise to grounds for revocation through thorough legal compliance and the development of internal management and internal control systems, and the possibility of this risk materializing is recognized as minimal.

Real estate for sale (inventory) is subject to inventory valuation standards, and leased real estate is subject to impairment accounting standards for fixed assets; if valuation losses or impairment losses are recorded, this may affect business performance and financial condition. While risks arising from external factors such as sudden changes in real estate market conditions, natural disasters, and environmental changes cannot be mitigated or eliminated through the company's risk management alone, the possibility of impairment risk materializing due to factors specific to individual properties is judged not to be high, given careful consideration of the location and occupancy status of individual properties at the time of acquisition and portfolio management.

As of the end of the fiscal year under review, the company had 20 employees, a small organization in which operations may depend on specific individuals; in particular, founder and Representative Director and President Keiji Fukuda has played an important role in management policy, management strategy, fund procurement, and other matters. If the development of an organizational structure commensurate with business expansion is delayed, or if an unforeseen event occurs that prevents him from performing his duties, this may affect business performance and financial condition. The company is strengthening its governance structure, including transitioning to a company with an audit and supervisory committee, appointing outside directors, clarifying the scope of authority for duties, and delegating authority, and the possibility of this risk currently materializing is recognized as low.

The company holds personal information obtained from tenants of leased real estate and investors in real estate securitization products, and if information leakage occurs due to unauthorized use or other unforeseen events, this may affect business performance and financial condition through loss of credibility and claims for damages. The company has implemented measures such as establishing personal information protection regulations, adopting systems to prevent external intrusion, setting physical and logical access privileges, and thoroughly disseminating awareness through education and training, and the probability of this risk materializing is recognized as low.