Kufu Company Inc.

In the internet industry, changes in user needs occur very rapidly, making agile and flexible responses essential. If the Company Group is slow to respond to such changes, its appeal may decline, leading to a decrease in the number of users, which could affect business operations, operating results, and financial position. As a countermeasure, the Company Group thoroughly pursues a user-first approach and continuously works to expand functions and content and develop new services.

Since many users access services through the search sites, AI, and smart device apps of major platform operators, changes in the business strategies of such platform operators—including regulatory changes—as well as changes in partnership fee rates, termination of partnerships, or reputational damage could have a material impact on business operations, operating results, and financial position. As a countermeasure, the Company Group closely monitors trends among major platform operators and strives to build a system capable of responding flexibly.

Building and operating user-facing services requires personnel with advanced technical skills. If the Company Group is unable to secure and train the necessary personnel as planned, or fails to prevent a decline in the productivity of existing employees, this could result in reduced competitiveness or constraints on business expansion. As a countermeasure, in addition to active recruitment activities, the Company Group strives to secure and develop human resources through in-house education, enhancement of the workplace environment, and strengthening internal communication.

System downtime caused by unpredictable factors such as overload from a surge in access, cyberattacks including ransomware, computer virus infections, natural disasters, or human error could disrupt business activities. Furthermore, such incidents could lead to loss of trust, resulting in suspension of transactions or claims for damages. As a countermeasure, the Company Group continuously implements multi-layered security measures, including improving system redundancy and reliability and preparing for cyberattacks.

If personal information or confidential information obtained through business activities is lost or leaked externally due to computer virus infection, unauthorized access, theft, human error, misuse of AI agents, or other causes, this could result in a decline in social trust and claims for damages, potentially affecting business operations, operating results, and financial position. As a countermeasure, the Company Group works to build an information management system and prevent information leakage by raising awareness and providing education to officers and employees through obtaining ISMS certification.

Mr. Yoshiaki Akita, the controlling shareholder, held 65.1% (38,978,520 shares) of the total number of issued shares (excluding treasury shares) as of the end of the fiscal year under review, giving him significant influence over important management decisions. If a major change not currently anticipated occurs in the relationship with the controlling shareholder in the future, this could affect the management of the Company Group. No specific countermeasure is described in the Annual Securities Report.

In the internet industry, technological change is constant, and new services are being created on a daily basis. If the Company Group is slow to respond to technological innovation and the competitiveness of its services declines, this could affect business operations, operating results, and financial position. As a countermeasure, the Company Group actively works to strengthen its technological capabilities through securing and training talented personnel, and continues to enhance usability by adding new functions in line with IT advancements.

The Company Group promotes M&A as part of its growth strategy and records a substantial amount of goodwill and other assets on its consolidated balance sheet. If the profitability of acquired businesses deteriorates due to changes in the business environment, or if actual results diverge from the initial plan due to changes in business policy, the Company Group may need to recognize impairment losses, which could affect its financial position and operating results. As a countermeasure, the Company Group conducts detailed due diligence at the M&A consideration stage and strives to identify and resolve issues at an early stage through regular monitoring of acquired businesses after acquisition.

The Company Group is subject to a wide range of laws and regulations, including the Act on the Protection of Personal Information, the Unauthorized Computer Access Law, the Building Lots and Buildings Transaction Business Act, the Banking Act, the Financial Instruments and Exchange Act, and the Act on Ensuring Proper Transactions with Specified Freelance Workers. Changes to or new enactment of laws and regulations, as well as administrative sanctions, could affect business operations, operating results, and financial position. As a countermeasure, the Company Group closely monitors developments such as regulatory changes and works to reduce risk through cooperation with legal counsel and the establishment of internal education systems.

Although each operating company operates independently under the pure holding company structure, discrepancies between the overall group business policy and the direction of individual operating companies, violations of laws and regulations due to deficiencies in the internal management systems of individual operating companies, or unnecessary duplication of work within the Group could affect business operations, operating results, and financial position. As a countermeasure, the Company Group promotes strengthened communication through the dispatch of officers and employees to each operating company, regular information gathering, and information sharing at executive officer meetings, as well as the establishment of internal management systems and the strengthening of internal control functions in accordance with the Group's basic rules.