MEIKO NETWORK JAPAN CO.,LTD.

There is a possibility that franchisees of the nationwide "Meiko Gijuku" chain may terminate their contracts, or that franchisees may commit contract violations beyond the company's direct control. Should such events occur, in addition to a direct impact on operating results, there is a risk of significant impact on the overall business development and franchise expansion through damage to brand image. The company strives to reduce this risk through regular visits to owners and classrooms and compliance guidance.

In the tutoring school industry, competition with companies such as Tokyo Individualized Educational Institute, TOMAS, and Moriju is intensifying, and there is a risk that demand for individualized tutoring may decline due to the progressing birthrate decline and new entrants from other industries. Should this decline in demand materialize, it could affect business performance through a decrease in the number of classrooms and enrolled students. The company aims to maintain its competitive advantage through made-to-order, dialogue-based individualized tutoring, leveraging its nationwide presence across all 47 prefectures and its top position in industry market share.

Education reforms are rapidly progressing, including the introduction of English as a formal subject in elementary schools, the introduction of programming education, university entrance examination reform, new high school curriculum guidelines, and the DX High School project, requiring a response to new learning formats and content utilizing AI and IoT. Against the backdrop of rapid progress in communication infrastructure development and digitalization, there is a risk that existing teaching formats could become obsolete. Should the response be delayed, it may become difficult to differentiate from competitors, potentially leading to a decrease in enrolled students.

In the course of classroom operations, personal information of students, guardians, instructors, and others is managed in a database, and there is a risk of information leakage due to various factors. Should a leak occur, it could affect business performance through loss of trust from customers and stakeholders, loss of business opportunities, and claims for damages. The company takes countermeasures through the operation of a risk management committee based on the "Personal Information Protection Regulations," regular training for all employees, and the establishment of an information security system capable of withstanding external access.

The marketable other securities held by the company group are measured at fair value and are exposed to the risk of market price fluctuations. If the future market value or substantial value declines significantly and is judged to be unrecoverable, impairment processing will be required, potentially affecting the financial position. Risk management is conducted through regular assessment of fair value, reporting to the Board of Directors, and a policy of holding only highly rated bonds for held-to-maturity purposes.

Against the backdrop of a declining working-age population due to the falling birthrate and aging population, competition for talent acquisition with competitors is expected to intensify, creating a risk that securing personnel as planned may become difficult, and a risk of losing excellent personnel to outside companies. Should stable personnel acquisition become difficult, the quality of educational services may decline, affecting business performance. The company is working to promote employee retention through respect for employees' individuality and diversity, promotion of innovation, and the development of an environment where employees can exercise autonomy.

Should a large-scale natural disaster such as a major earthquake or a widespread outbreak of an infectious disease such as COVID-19 or influenza occur, it may become difficult to carry out operations, potentially disrupting the provision of educational services. If such events occur on a scale far exceeding expectations, they may affect business performance. The company has built a business continuity system through the establishment of an online interactive individualized tutoring system and the shift to online training and meetings.

Responses are required to legal amendments such as the Labor Standards Act and to stronger guidance and supervision by regulatory authorities regarding long working hours, and thorough labor and health management is required for the company group, which employs a large number of part-time and casual workers. Should future regulatory tightening occur, labor costs and other expenses may increase, affecting business performance. The company works to prevent harassment and information leakage through the revision and distribution of its "Crisis Management Compliance Manual" and regular training conducted throughout the chain.

In the Japanese Language School Business, strict legal regulations exist regarding the operating standards for Japanese language education institutions and residency status, and should the Immigration Services Agency or the government tighten regulations, the planned acceptance of foreign students may not be approved, potentially affecting business performance. Additionally, should an unforeseen event such as the COVID-19 pandemic occur, entry restrictions and movement restriction measures could have a significant impact on business continuity. The company is working to strengthen its response capability through the development of new service formats, including online education services.

The company has a policy of promoting M&A as part of its business area expansion and new business development, and should changes in the business environment after an acquisition cause the business not to proceed as originally planned, goodwill impairment losses or valuation losses on shares may occur, potentially affecting business performance and financial position. When conducting M&A, the company performs detailed due diligence on the financial, legal, and business aspects of target companies, and conducts risk identification and analysis of normalized earning power.