F&M CO.,LTD.

The number of life insurance company sales representatives, who are the primary customers of the Accounting Service Business, has fluctuated between 180,000 and 200,000 over the past 10 years, but there is a possibility of future decline due to changes in the policies and management environment of each life insurance company. In addition, in the small and medium-sized enterprise market targeted by the Consulting Business, the challenging management environment continues due to soaring crude oil and raw material prices and labor shortages, and if government support measures are significantly reduced, the Company may be forced to reconsider some service content. The Group is working to strengthen product competitiveness in order to capture growth opportunities.

The Group outsources part of the data entry work for each segment, including bookkeeping processing work in the Accounting Service Business, to companies in Shenzhen, China. If unexpected legal or regulatory changes, terrorism, war, or other social disruptions occur, it may become difficult to provide services smoothly, which could adversely affect operating results. At present, no specific alternative measures have been disclosed, and the Group's dependence on geopolitical risk continues.

In its services for individuals and corporations, the Group manages personal information of employees and others on servers, and while it employs various network security measures, there remains a possibility of information leakage due to unauthorized access or other causes. In the event of an information leak, in addition to the pursuit of liability such as claims for damages, litigation, administrative sanctions, and criminal penalties, there is a risk of loss of social trust. The Group states that it has implemented security measures, but this does not guarantee complete prevention.

The Group holds business-use fixed assets, including its head office property, sales branches nationwide, and directly-operated PC school locations, and each period actively invests in the development of internal business systems and sales systems. If, in the future, a decline in real estate prices or a deterioration in operating results necessitates impairment of these assets, this could have a material impact on operating results. At present, the specific scale of impairment risk and the book value of the relevant assets have not been disclosed.

Some of the Group's businesses require licenses and permits from relevant government ministries and agencies, such as those related to management innovation support organizations, and continuation of such services may become difficult depending on amendments to relevant laws and regulations. If licenses or permits are revoked or cannot be renewed, there is a risk that the suspension of provision of the relevant services will directly impact revenue. The Group states that it is monitoring regulatory trends, but details of specific countermeasures have not been disclosed.

The Group's services are aimed at back-office support, and procedures such as year-end tax adjustments and final tax returns, which serve as triggers for service adoption, tend to be concentrated in the second half of the fiscal year. As a result, fluctuations occur in quarterly net sales and operating profit, with the second half's performance having a greater impact on full-year results than the first half, and this trend is expected to continue in the future. It is difficult to judge full-year performance based solely on first-half results, and investors need to take seasonality into account when making evaluations.

The "Office Station" Series developed by the Business Solutions Business is benefiting from accelerated IT investment driven by administrative digitalization and labor shortages, but competition may intensify due to the entry and strengthening of competitors in the same market. Although the Group states that it is increasing its presence in the market, maintaining competitive advantage requires continuous investment in product development, and if such investment fails to keep pace with competitors' progress, there is a risk that it could lead to a decline in market share. The Group states that it will promote efforts to strengthen product competitiveness.