WASEDA ACADEMY CO.,LTD.

The progression of the declining birthrate resulting from a falling birth rate may not only reduce the number of enrolled students, but also, through reduced school capacity and easier entrance examinations, weaken motivation to enroll in cram schools and lower attendance rates. The Company Group's business areas are centered on the greater Tokyo metropolitan area, where the declining birthrate is progressing relatively slowly, and the number of applicants aspiring to elite top-tier schools has remained stable. However, if the birthrate declines further or if demand for elite school entrance exam preparation decreases, this may affect business performance through a decrease in the number of students, among other factors. As a countermeasure, the Company is working to secure students through extending its track record of admissions to elite top-tier schools and planned expansion of school locations.

The continuous provision of high-quality educational services and business expansion are essential to the recruitment and development of human resources. If the Company is unable to sufficiently secure the necessary personnel due to sudden changes in the recruitment environment, or if personnel development does not proceed as planned, this may affect business performance through delays in the execution of management plans or a decline in the quality of educational services. The Company is working on planned recruitment of new graduates, mid-career hires, and part-time staff, building personnel systems, and early-stage development through training programs organized by rank and job type.

The Company Group holds and uses a large amount of personal information related to customers and staff. Should information ever be leaked, this may have a material impact on business performance through a decrease in the number of students due to loss of credibility, or through claims for damages, among other factors. The Company has obtained Privacy Mark certification, continuously reviews its management systems across the Group and improves management standards, and provides leading management guidance to subsidiaries.

As dependence on information systems in business activities increases year by year, threats such as cyberattacks and computer viruses are also increasing. Should a serious system failure occur, this may result in loss of trust and an impact on financial position and business performance due to leakage of personal information or trade secrets, or business interruption. The Company has implemented measures such as strengthening security countermeasures, regular maintenance inspections, and employee training, but it is difficult to completely eliminate this risk despite these measures.

There is a structural tendency for profitability in the first quarter to be lower than in other quarters, as net sales increase during periods when seminars and training camps are concentrated, while fixed costs such as rent and personnel expenses are incurred every month from the beginning of the fiscal year. In the consolidated fiscal year under review, ordinary loss for the first quarter was ¥314,128 thousand (△7.9% of total ordinary income), and this seasonal fluctuation pattern may affect investors' evaluation of business performance. The number of students enrolled tends to increase month by month from the start of the fiscal year, reaching a peak in January.

Since September 1997, the Company has entered into a partner cram school agreement with Yotsuya Otsuka Co., Ltd., and provides instruction in accordance with the company's curriculum for junior high school entrance examination preparation. Should the Company ever be unable to renew this agreement, this may affect business performance through disruption to the provision of official test venue services or the time required to transition to a new curriculum, among other factors. As Yotsuya Otsuka is a wholly owned subsidiary of Nagase Co., Ltd., and the Company has the top-class track record of successful admissions among partner cram schools, the Company judges that there will be no impediment to the renewal of the agreement. However, it also explains that the impact of non-renewal would be limited to matters such as being unable to purchase discounted teaching materials or operate official test venues.

The Company Group has entered into a franchise agreement with Nagase Co., Ltd. for Tōshin Satellite Prep School and conducts university entrance examination preparation instruction. Should the Company ever be unable to renew this agreement, this may affect business performance through the time required to provide a new service to replace Tōshin Satellite Prep School, among other factors. The agreement is automatically renewed every five years, and the Company judges that there will be no impediment to renewal given the growth in its track record of admissions to elite universities, but launching an alternative service would require a certain transition period.

Should a serious accident or breach of contract occur at a school operated by a franchisee of the Waseda Academy Kobetsu Shingakukan brand, this may not only damage the image of that brand but also lead to a decline in the credibility of the Waseda Academy brand as a whole, potentially affecting business performance. The Company provides ongoing guidance and support to franchisees in the areas of school operations, academic systems, and instructor development, and strives to establish a system for providing high-quality, uniform instructional services.

The Company Group holds fixed assets such as tangible fixed assets and goodwill. Should an acquired company fail to achieve its business plan, this may result in an impairment loss on goodwill or similar assets, and should the profitability of a business significantly decline, this may result in an impairment loss on held fixed assets, thereby affecting business performance. The Company conducts a thorough review of indicators of impairment each year and appropriately records impairment when judged necessary, but there is a risk that unforeseen impairment losses may arise depending on future changes in the business environment.

There is a possibility that litigation may be brought seeking damages or other remedies based on relevant laws and regulations, including the Act on Specified Commercial Transactions, the Act on the Protection of Personal Information, youth protection and nurturing ordinances, the Copyright Act, and the Act against Unjustifiable Premiums and Misleading Representations. Should such circumstances arise, this may affect business performance. The Company strives to strengthen its legal compliance system through establishing systems to prevent legal violations and providing continuous training to employees, but it is difficult to completely eliminate this risk going forward.