Terminalcare Support Institute Inc.

The nursing care industry faces chronic labor shortages, with the effective job openings-to-applicants ratio for nursing care services standing at an extremely high 4.10x as of December 2025 (compared to the all-occupation average of 1.17x). If the Company is unable to secure managers or care staff, it may face delays in opening new facilities or suspension of resident intake after opening, which would affect business performance. As countermeasures, the Company is working on improving employee treatment, supporting qualification acquisition, utilizing its proprietary management system "CareMaster", achieving personnel sufficiency through dominant area strategy expansion, and starting recruitment of high school graduates.

Nursing care fees are revised every three years (next revision in April 2027), and medical treatment fees are revised every two years (next revision in June 2026). The April 2024 revision directly affected the business, including a reduction in the basic fee for home-visit care and expansion of the same-building fee reduction. Since nursing care insurance revenue accounts for approximately 56% of Nursing Care Business sales, any future significant fee reductions, new fee reductions, or increases in user out-of-pocket burden could have a major impact on business performance. As countermeasures, the Company is diversifying revenue sources by expanding the home-visit nursing business, securing sales from Service-Provided Senior Housing, and building an efficient operational structure utilizing "CareMaster".

Each service, including home-visit care, home-visit nursing, and home care support, requires designation (valid for six years) from prefectures, municipalities, and regional bureaus of health and welfare, and must continuously satisfy operational standards, facility standards, and staffing standards. Since "local rules" set by administrative authorities exist, if the Company's risk controls fail to function properly, it could face administrative sanctions such as revocation of designation, repayment of nursing care fees, or suspension of new intake. As countermeasures, the Company conducts ongoing consultations with administrative authorities when questions arise, along with internal audits, document reviews by superiors, and regular training; to date, the Company has not received any administrative sanctions.

As of the end of the current consolidated fiscal year, the balance of interest-bearing debt stood at ¥3,578 million, with an interest-bearing debt dependency ratio at a high level of 61.6%. Going forward, the balance and ratio of interest-bearing debt are expected to rise further due to the recognition of lease liabilities associated with the application of new lease accounting standards and the opening of new facilities on company-owned properties. If market interest rates rise due to changes in the Bank of Japan's monetary policy or other factors, increased interest payments and higher fundraising costs could slow the pace of business expansion.

Sublease contracts for Service-Provided Senior Housing generally have a lease term of 25 years with the owner, and certain restrictions apply to cancellation. This poses a risk that business performance could deteriorate if occupancy rates decline significantly or nearby rent levels fall. In addition, if the owner requests termination of the contract after the non-cancellable period has elapsed, the number of operated facilities could decrease. Furthermore, changes in lease accounting standards could result in the recognition of lease assets and liabilities for leased properties on the balance sheet, potentially worsening financial ratios or resulting in impairment losses.

The Group owns 11 "Anjesu" buildings, and depending on business performance trends, loss processing associated with the application of impairment accounting for fixed assets may occur. If unprofitable facilities increase and closures become concentrated, or if impairment processing of owned properties becomes necessary, substantial impairment losses could occur, materially affecting business performance and financial position. As a countermeasure, the Company manages profitability on a per-facility basis, holds facility managers accountable for financial results, and actively takes measures at facilities with deteriorating profitability.

Following the 2025 system revision that lifted restrictions on employment of Specified Skilled Foreign Workers (nursing care) in home-visit care, the Company began accepting such workers, with 18 employed as of the end of December 2025, and plans to expand to approximately 50 eventually. Miscommunication due to language and cultural differences could lead to serious care accidents, complaints, loss of trust, or damage claims. Additionally, early turnover or increased costs of maintaining employment due to yen depreciation, intensifying competition for talent, or changes in immigration control policy could make it difficult to recover investments in recruitment and training.

The rising costs of construction materials and skilled labor may increase the acquisition cost of company-owned properties compared to the past. In addition, in nursing care operations, inflation-driven increases in labor costs, food costs, and other operating costs may affect business performance and financial position. The Company's strength lies in keeping construction costs relatively low by providing an integrated service from design through construction, but cost increase pressures may erode this advantage.

The opening of new facilities is affected by the intentions of property owners and the actions of financial institutions providing loans, and there is a risk that openings or order intake may not occur, or may fall short of plans. In addition, if many facility openings are concentrated within a single fiscal year, overlapping periods of upfront expenses could put downward pressure on business performance. Furthermore, if construction periods are extended due to unforeseeable circumstances, the timing of sales recognition may be delayed, affecting performance for that fiscal year.

Tadao Kitayama, the founder and Representative Director and President, plays a central role in formulating and determining management policy and business strategy, and there is a risk that business performance could be materially affected if he becomes unable to continue his duties. In addition, he and his relatives within the second degree of kinship are controlling shareholders holding 61.6% of the total issued shares, and a decline in their shareholding ratio could affect the stock market price and the exercise of voting rights. As a countermeasure, the Company is promoting information sharing and delegation of authority to officers, and is developing a management structure that does not overly depend on any specific individual.