Entrust Inc.

Changes in the external environment affecting the rental housing market, such as the number of rental housing starts, economic conditions, and demographic trends, may impact business performance. The Company recognizes that the growth trend in the number of rental housing units may plateau within roughly the next 10 years, potentially slowing the growth rate of Rent Guarantee. As countermeasures, the Company is promoting market penetration through solution services and expanding Rent Guarantee know-how into other markets.

If negative rumors spread about the Rent Guarantee industry as a whole or about the Company's group, regardless of their truthfulness, this could lead to a loss of trust from customers and business partners, potentially affecting business performance. Given the nature of the guarantee business, which involves collection activities, the Company recognizes that it constantly bears reputational risk, and new guarantee services such as Nursing Care Fee Guarantee, Medical Expense Guarantee, and Child Support Guarantee carry similar risks. As countermeasures, the Company has established receivables management regulations, conducts internal audit monitoring of collection call records, and performs regular monitoring of internet bulletin boards and similar sources.

Currently, there are no laws or licensing obligations that directly regulate the guarantee business; however, the future introduction of new regulations or changes in the interpretation of existing laws could make it difficult to continue offering certain services or continue the business itself. In FY2026 (ending March 2026), sales of the guarantee business amounted to ¥11,049,738 million (note: the original source is stated in thousand-yen units), accounting for 90.0% of consolidated net sales, meaning the impact of any regulatory introduction would be extremely significant. As countermeasures, the Company gathers information and discusses responses through its membership in the Japan Association of Rental Housing Management's Rent Guarantee Business Council and in cooperation with retained legal counsel.

Due to the nature of the business, which involves making subrogation payments when a guarantee client defaults, there is a risk that a portion of advance payment receivables may become uncollectible. As of the end of March 2026, advance payments reached ¥6,048,255 thousand (47.1% of total assets), and if the allowance for doubtful accounts (¥3,277,419 thousand) or the allowance for guarantee performance (¥868,226 thousand) is exceeded due to a significant deterioration in the economic environment, this could materially affect business performance and financial condition. As countermeasures, the Company conducts prior screening based on guarantee screening regulations, utilizes personal credit information agencies, cooperates with major credit sales companies, and normalizes receivables through early collection efforts.

Due to the nature of its business, the Company holds a large amount of personal information, including that of guarantee clients, and if such information were to be leaked due to a cyberattack by a third party or human error by employees or outsourcing partners, this could result in a loss of trust and affect business performance. As countermeasures, the Company has obtained Privacy Mark certification, thoroughly manages information in accordance with personal information protection regulations, and implements security measures based on its basic information security policy.

Sales of guarantee services related to properties managed by Daiwa Living Co., Ltd. accounted for 61.9% of consolidated net sales in FY2026 (ending March 2026), and if there were changes in the number of properties managed by the company, changes in the business relationship, or changes in its management policy, this could significantly reduce the number of new guarantee contracts and materially affect business performance. As countermeasures, the Company strives to maintain a good business relationship while promoting growth in services other than Rent Guarantee in order to mitigate sales concentration.

In the solutions business, the Company depends on Daiwa Living Co., Ltd. (3.9% of consolidated net sales) and Daiwa House Financial Co., Ltd. (1.0% of consolidated net sales), and if changes occur in the number of properties managed by these two companies, their business relationships, or their management policies, this could reduce the volume of business handled and affect business performance. Combined with the guarantee business, dependence on the Daiwa Living group reaches over 66.8% of consolidated net sales. As countermeasures, the Company strives to maintain and further develop good business relationships by providing high-quality services.

The Company's group is a consolidated subsidiary of Prestige International Inc., which indirectly holds 56.8% of voting rights. If changes occur in the parent company's management policy, this could affect the business development of the Company's group. Currently, business relationships (such as system usage fees of ¥33,760 thousand in FY2026, ending March 2026) and personal relationships (one director and one auditor holding concurrent positions) are limited, and the Company judges that its independence is ensured.