J-LEASE CO.,LTD.

If vacancy rates rise or rent levels decline in rental real estate due to population decline, the falling birthrate and aging population, economic deterioration, or other factors, there is a risk that the earnings base of the core rent guarantee business could be impaired. A general downturn in the rental real estate market, including suppression of office and store openings, could affect the Group's financial position, business performance, and cash flows. The Group continuously monitors market trends, but direct countermeasures against a structural decline in demand are limited.

The rent guarantee industry is highly competitive, with numerous competitors of various sizes, including guarantee services provided by real estate management companies. The Company seeks to differentiate itself through AI-based screening, community-focused sales, whole-building guarantee services, and smart home service agency sales, but if competitors introduce new products or services or engage in price competition that erodes the Company's advantage, this could affect the Group's financial position, business performance, and cash flows. Intensifying competition in the residential rent guarantee segment in particular is recognized as a key risk.

While no laws or regulations currently directly restrict rent guarantee operations, the revised Housing Safety Net Act, effective October 2025, established a certification system for rent guarantee providers, requiring responses to housing-insecure individuals, which could affect subrogation advances and related items. While this is also expected to expand guarantee needs, there is a risk that further legal amendments or new regulations could affect the Company's business content and business performance. The Company has obtained certification from the Minister of Land, Infrastructure, Transport and Tourism and is proceeding with its response.

If the economic and employment environment deteriorates significantly, there is a risk that tenant rent non-payment will increase, causing a surge in subrogation payments along with a decline in collection rates. The Company strives to improve collection efficiency through the development of an AI screening model and classification management of short-term and medium- to long-term receivables, but in a scenario of sharp macroeconomic deterioration, improvements in credit management precision alone may not be sufficient to address the situation. An increase in subrogation payments is a major financial risk that directly worsens business performance.

The Company records an allowance for doubtful accounts against subrogation advances and related items based on its accounting policies, but if actual bad debt exceeds estimates due to deterioration in the economic or employment environment, additional provisioning may be required, which could affect business performance. Similar risks may also arise if changes are required to the method of calculating or classifying the allowance for doubtful accounts. Since the accuracy of allowance estimates depends on the predictability of the economic environment, this risk is particularly heightened during sudden changes in the external environment.

In the rent guarantee business, maintaining sufficient fund liquidity for subrogation payments is essential, and if there is a sharp surge in subrogation payments due to rapid economic deterioration, or if maintaining or expanding borrowing lines from financial institutions becomes difficult, this could have a material impact on the Group's financial position, business performance, and cash flows. The Company addresses this through management of guarantee obligations and indemnity receivables, and by securing borrowing lines with financial institutions, but there is a risk that maintaining borrowing lines could become difficult during a credit contraction phase.

Due to the nature of its rent guarantee business, the Group manages databases containing large amounts of personal information, and if information leakage occurs due to unauthorized access by third parties or human error by officers, employees, or outsourcing partners, there is a risk of reputational damage and impact on financial position and business performance. The Company has implemented measures such as obtaining Privacy Mark certification, introducing internal information monitoring systems, and restricting access privileges, but complete defense is difficult given the increasing sophistication of cyberattacks.

Since the Company utilizes information systems for business management, if a serious system failure occurs due to virus infection, unauthorized external access, accidents, disasters, or human error, this could affect business operations, financial position, and business performance. Although appropriate information security measures have been implemented, continuous response is required in light of the diversification and sophistication of cyber threats. Since system failures directly affect the screening and management functions of the guarantee business, this is an important risk for business continuity.

Business expansion through corporate acquisitions and capital alliances is one of the Company's strategies, but if contingent liabilities, unrecognized liabilities, defects, or other issues come to light after an acquisition, or if expected synergies are not achieved, this could affect business performance through amortization or impairment of goodwill or impairment of investment securities. The Company works to reduce such risks by conducting due diligence with lawyers, tax accountants, and certified public accountants, but the risk of deteriorating performance after making a company a subsidiary cannot be completely eliminated.

The Company is pursuing related and peripheral businesses leveraging its rent guarantee business expertise, as well as overseas expansion, but if changes in the business environment, including geopolitical risk, prevent results from being achieved as planned and investments cannot be recovered, this could affect the Group's financial position, business performance, and cash flows. While the Company maintains a policy of careful consideration before proceeding, country risk specific to overseas operations and differences in regulatory environments constitute additional risk factors.