UCHIYAMA HOLDINGS Co., Ltd.

The long-term care insurance system undergoes a system review every five years and a revision of long-term care fees every three years, and changes in laws and regulations may necessitate stricter regulations or changes to service content. Against a backdrop of rising insurance premium burdens due to the declining birthrate and aging population and deteriorating long-term care insurance finances, if the framework of the system is significantly changed in the future, this could have a material impact on the business development of the Group. Although the Group has stated a policy of striving to avoid such occurrences and to respond promptly, the risk of response costs and deteriorating profitability due to system changes continues to exist.

As an operator under the Long-Term Care Insurance Act, staffing standards including the placement of qualified personnel are set forth, and while the Group strives to acquire and train personnel, if it becomes difficult to secure sufficient personnel during business expansion or if existing personnel leave, this may result in reductions in long-term care fees, deterioration in service quality, or difficulty in continuing to provide long-term care services. In addition, reviewing treatment conditions and increased recruitment costs to secure personnel may affect operating results and financial condition. The Group recognizes that no material disruption has occurred at present, but the risk is increasing as the labor shortage across the industry as a whole becomes more severe.

As of the end of FY2026 (ending March 2026), the consolidated balance of interest-bearing debt was ¥12,594 million, reaching 41.1% of total assets. Much of the funding for opening new nursing care facilities, opening new Karaoke Business and Food & Beverage Business outlets, and acquiring and constructing properties for the Real Estate Business has been procured through borrowings from financial institutions, and the Group plans to continue similar fundraising going forward. If significant interest rate fluctuations occur or if the lending stance of financial institutions with which the Group transacts changes, this may affect store opening plans and business development.

The Group utilizes sale and leaseback transactions to reduce the capital expenditure burden of nursing care facilities, adopting a scheme in which self-developed facilities are sold to an SPC and then leased back. If, due to changes in accounting standards or other factors, off-balance-sheet treatment is no longer permitted, nursing care facilities and unexpired lease payments would be recorded on the consolidated balance sheet, which could have a material impact on financial condition, including an increase in total assets and a significant deterioration in the equity ratio. While the Group adopts an appropriate method based on the judgment of accountants and other experts, depending on the external environment and the terms and conditions with contractual counterparties, it may not always be possible to implement the intended response.

After a new nursing care facility is opened, it takes a considerable period of time to secure residents and users, so there tends to be a period during which costs precede revenue until a certain level is reached. The opening of new facilities may put pressure on the Group's profits in the short term, and if it takes a long time or becomes difficult to secure residents and users, this may affect operating results and financial condition. As the Group continues its policy of opening new facilities centered on Nursing Care Homes (Specified Facility Residential Care), this risk represents a structural challenge that is inseparable from business expansion.

The majority of residents and users of the Group's Nursing Care Business are elderly persons who have received a certification of requiring support or long-term care, and accidents such as falls, food poisoning, and outbreaks of infectious disease may occur. Should an unforeseen incident occur, the Group may be held liable for negligence, resulting in claims for damages or administrative guidance or sanctions, as well as a significant loss of trust in facility operations. The Group strives to ensure sufficient staffing at facilities, provide education and training, develop manuals, and strengthen hygiene and safety management, but it is difficult to completely eliminate this risk.

The Group operates its Nursing Care Business, Karaoke Business, and Food & Beverage Business segments primarily centered on the Kyushu area, resulting in a structure in which business performance is affected by economic and consumer trends and the elderly population trends in that area. If earthquakes, typhoons, or other natural disasters or large-scale disasters, or the spread of infectious diseases such as COVID-19, occur, this may have a concentrated impact on the Group's operating results and financial condition. Since regional diversification is limited, a challenge is that the impact is significant when a risk specific to a particular region materializes.

Due to a decline in consumer spending amid concerns about the future of the economy and intensifying price competition among operators, both the leisure market and the dining-out market are trending downward, and the business environment surrounding the Group's Karaoke Business and Food & Beverage Business continues to be severe. Although the Group is implementing measures such as expanding course menus, strengthening low-priced products, and changing business formats or renovating stores, if these measures are not accepted by customers or if competition intensifies due to new entrants by competitors, this may affect operating results and financial condition. In the Nursing Care Business as well, there is a risk that intensifying competition will continue due to the relatively low barriers to entry.

The majority of the Group's nursing care facilities are leased (including sale and leaseback transactions), with contract terms mainly ranging from 20 to 30 years, a long-term period. Since it is difficult to close facilities or revise rents in a short period of time, if a significant decline in occupancy rates or a decline in the local market rent occurs at any facility, this may result in deteriorating profitability, which could affect operating results and financial condition. There is a trade-off between the stability secured through long-term contracts and the lack of flexibility, and this limited capacity to respond to changes in the external environment poses a risk.

The Nursing Care Business and Karaoke Business handle customers' personal information, and while measures such as blocking external access to data containing sensitive information and centralized management are implemented, if personal information is leaked to outside parties for any reason, the Group may face criticism and accountability regarding its information management capabilities, and customer trust may be undermined. Since a decline in trust directly affects facility occupancy rates and customer acquisition, there is a risk that this could spread to affect the operating results and financial condition of both the Nursing Care Business and Karaoke Business. Although the Group strives to comply with relevant laws and regulations, responding to external threats such as cyberattacks remains an ongoing challenge.