Financial Partners Group Co.,Ltd.

Under the FY2026 Tax Reform Outline (announced December 19, 2025), the inheritance and gift tax valuation of Fractionalized Real Estate Products (Trust Beneficiary Interests) may be revised from January 1, 2027 to be based on actual transaction prices, which could significantly reduce or eliminate the tax benefits these products have traditionally offered. Fractionalized Real Estate Products (Trust Beneficiary Interests) account for the majority of the Domestic Real Estate Fund Business's net sales of ¥95,988 million and gross profit of ¥10,076 million for the fiscal year ended September 2025, so a significant decline in investor demand would have a severe impact on business performance. The Company states that it will continue sales while carefully monitoring the details of the tax reform, and will flexibly consider policies to enhance the value of these products as investment management offerings.

Three factors—foreign exchange fluctuations (yen appreciation), non-payment of lease fees by lessees (shipping, aviation, and leasing companies), and declines in the sale price of leased assets at the end of the lease term—may cause the profit or loss attributable to investors in the Operating Lease Business to deteriorate more than initially expected, which could reduce investor appetite and sales of investment units, thereby decreasing the Company's fee income. The Company addresses this risk by selecting major shipping, aviation, and leasing companies with high creditworthiness as lessees, and by utilizing residual value guarantees from guarantee providers and enhancing its remarketing capabilities.

When structuring transactions, the Company Group temporarily records anonymous partnership investment interests (product investment capital), money trusts (aircraft for structuring), and voluntary partnership investment interests for overseas real estate on its balance sheet. If the value of leased assets declines, lessee creditworthiness deteriorates, or the yen appreciates before these interests are transferred to investors, the value of these assets may decline, resulting in valuation losses. In particular, during periods of rapid yen appreciation, the yen-denominated transfer price determined based on the exchange rate at the time of structuring may become relatively high, creating risks of delays in the sales plan or, ultimately, an inability to find investors. The Company seeks to shorten holding periods by striving to structure transactions that can be transferred to investors within a short period.

In the Domestic Real Estate Fund Business, real estate and real estate trust beneficiary interests acquired for structuring Fractionalized Real Estate Products (Trust Beneficiary Interests) (real estate held for structuring) may, if they cannot be transferred as initially planned due to sudden changes in economic conditions, natural disasters, tenant departures, or other factors, affect business performance through the recording of valuation losses. Similarly, in the Overseas Real Estate Fund Business, the portion of voluntary partnership investment interests acquired on an advance basis (product investment capital) is exposed to valuation loss risk from foreign exchange fluctuations and deterioration in real estate market conditions. The Company addresses this by carefully selecting high-quality properties and adopting a policy of transferring them within a short period after acquisition.

The Company Group raises funds for structuring transactions and working capital through borrowings from financial institutions, corporate bonds, and commercial paper, utilizing commitment line agreements and overdraft agreements (the majority of which have terms of approximately one year). If deterioration in the global economy or other factors make it difficult to obtain individual borrowings or renew commitment lines, the Company may be unable to raise funds in a timely manner. In addition, if the Company breaches financial covenants, it could lose the benefit of term extensions and be required to repay debt in full, which could have a material impact on business operations. The Company addresses this risk through diversification of fundraising methods and liquidity management.

Leased assets in the Lease Fund Business are limited to aircraft, marine transport containers, and vessels, so capital expenditure trends and business performance in the aviation and shipping industries directly affect transaction structuring trends. A deterioration in performance in either industry could lower confidence in lessees and cause declines in the sale price of leased assets, which could reduce investor appetite and sales of investment units, thereby decreasing the Company's revenue. The Company seeks to mitigate this risk by selecting major companies with high creditworthiness as lessees, but structural industry concentration risk remains.

The Company Group conducts its business by obtaining numerous registrations, permits, and licenses, including for Type II Financial Instruments Business, Type I Financial Instruments Business, investment management business, real estate brokerage business, real estate specified joint enterprise business, trust business, and air transport business. If the Company were to receive an administrative disposition such as a business suspension order or revocation of a registration, permit, or license for any reason, it could have a material impact on business continuity. In addition, consolidated subsidiary FPG Securities is required to maintain a capital adequacy ratio of 120% or higher, and if it falls below this level, it could also be subject to dispositions such as business suspension. The Company thoroughly ensures legal compliance through regular compliance training for officers and employees.

If personal information or confidential information held by the Company Group were to be leaked externally, it could affect business performance through administrative dispositions, damages claims, or a decline in creditworthiness. In addition, if an information system failure occurs due to external factors such as disasters or cyberattacks, or due to human error, it could cause the suspension of important operations and services or the theft or leakage of confidential information, potentially disrupting business continuity. The Company has implemented measures such as protection against unauthorized access and virus infection and the establishment of backup systems, but complete prevention cannot be guaranteed.

Naganaga Tanimura, the founder and Representative Director and President, plays a central role in driving the business and is also a major shareholder, holding, together with his asset management company HT Holdings Co., Ltd., 31.62% of the total number of issued shares. If any unforeseen event were to occur involving him, it could disrupt the smooth operation of the business. The Company is working to establish a management structure that does not overly rely on him by strengthening information sharing at board of directors and internal meetings and reinforcing its management organization.

The Company excludes from its scope of consolidation the SPCs (anonymous partnership operators) for the Operating Lease Business, voluntary partnerships, and overseas real estate investment vehicles. However, the establishment of new accounting standards or practical guidelines, or changes in the Company Group's degree of involvement, could result in significant changes to the policy for determining the scope of consolidation. If these entities become subject to consolidation, the profit or loss, assets, and liabilities of the leasing business could also be recorded in the non-consolidated financial statements, potentially causing significant fluctuations in the content of the financial statements. The Company addresses this by continuously reviewing its degree of involvement in light of accounting standards and other relevant guidance.