ICHISHIN HOLDINGS CO.,LTD.

With the ongoing decline in the birthrate, the potential decrease in the number of students continues even in the greater Tokyo metropolitan area (Chiba Prefecture, Ibaraki Prefecture, and eastern Tokyo), which is the Company Group's priority area. If the weakening of motivation to enroll due to the easing of entrance examinations and a decline in the cram school attendance rate occur simultaneously, this would directly damage the sales of the Educational Services Business. Delays in responding to intensifying competition with other companies in the same industry and industry restructuring trends could also become factors in the deterioration of business performance.

The Educational Services Business has low barriers to entry and numerous competitors exist. If the quality of educational services and admission track records of competitors relatively improve, this may lead to a decrease in the number of students. In recent years, industry restructuring trends have also become active, and if the Company Group is slow to respond to changes in the business environment, this could result in a competitive disadvantage. The Company Group strives to pursue admission track records and differentiation, focusing on Chiba Prefecture, Ibaraki Prefecture, and eastern Tokyo as priority areas.

In the Educational Services Business, revisions to the entrance examination system and the course of study guidelines occur frequently, and if the Company fails to respond in a timely manner or if unexpected large-scale system changes occur, this may lead to a decrease in the number of students. The Long-Term Care & Welfare Services Business depends on public revenue based on the long-term care insurance system, so amendments to the system and laws directly affect earnings. In both businesses, government policy trends are structurally fundamental to business performance.

In the Educational Services Business, substantial management resources are invested from recruitment through training of new graduates, mid-career hires, and part-time staff, but if the Company is unable to secure the necessary personnel due to rapid changes in the employment environment, this could lead to a decrease in the number of students through a decline in service quality. In the Long-Term Care & Welfare Services Business, labor shortages accompanying the increase in demand across the industry as a whole are a concern, and a shortage of personnel could also constrain the expansion of locations. In both businesses, human resources are fundamental to competitiveness, and failure in recruitment and retention directly affects business performance.

The Company Group holds a large amount of personal information belonging to customers, employees, business partners, shareholders, and others, and in the event that such information is leaked externally, this could result in a loss of social trust and claims for damages, potentially affecting business performance. The Company implements internal regulations and employee training utilizing e-learning, but this does not guarantee complete prevention. Because both the Educational Services and Long-Term Care & Welfare Services businesses handle information of minors and individuals requiring long-term care, the social impact is particularly significant.

The Company Group actively pursues M&A and business acquisitions to expand its business scope, making decisions after detailed due diligence and deliberation at management meetings and the Board of Directors. However, if unrecognized contingent liabilities or unrecognized debts arise after contract execution, this may make it difficult to develop the business as planned. In addition, if internal controls cannot be appropriately applied to acquired companies, fraudulent conduct or compliance issues may arise, potentially affecting business performance and credibility. This risk is also linked to the risk of impairment of fixed assets including goodwill.

The Company Group records tangible fixed assets such as land, buildings, and equipment, intangible fixed assets such as video content, and goodwill arising from business acquisitions. Impairment losses may occur if there is a significant decline in business profitability or a marked drop in real estate market prices. Additionally, if the relocation or renovation of existing locations due to aging is concentrated within a certain period, extraordinary losses such as losses on retirement of fixed assets could pressure business performance. This risk is underpinned by the fact that the Company operates numerous leased locations in both the Educational Services and Long-Term Care & Welfare Services businesses.

The Company Group primarily raises working capital, capital investment funds for opening new locations, and M&A funds through borrowings from financial institutions, and business performance may be affected if interest rate levels fluctuate or if fund procurement cannot proceed as planned. In a rising interest rate environment, increased interest payment burdens would pressure earnings, and stagnation in fund procurement could also constrain growth investment. Amid the continuation of an active M&A strategy and multi-location expansion, the Company Group's structure has a high degree of dependence on financial leverage.

The Company Group operates cram school businesses, language-related businesses, Japanese language schools, and travel service businesses overseas, and business continuity could be hindered by changes in each country's laws, regulations, and tax systems, changes in political and economic conditions, natural disasters, and the occurrence of wars, conflicts, or terrorism. Differences in business customs and culture are also risk factors in business operations. The Company strives to continue appropriate business operations by gathering information on trends in each country and region, but geopolitical risks are external factors that are difficult to control.

In the event of large-scale natural disasters such as earthquakes, tsunamis, or floods, fires, the spread of infectious diseases, or other social disruptions, business activities of the Company Group and its major business partners may be halted or hindered in their continuation. In the Educational Services Business, the suspension of cram school attendance and in-person classes, and in the Long-Term Care & Welfare Services Business, the suspension of facility operations, would directly lead to a decrease in earnings. Based on past experience with the spread of infectious diseases (such as COVID-19), the Company Group is required to have a structure in place to develop business continuity plans (BCPs).