VT HOLDINGS CO.,LTD.

The Group operates as an authorized dealer for automobile manufacturers, primarily Honda and Nissan, and if a dealership agreement is terminated or a manufacturer makes a significant change to its dealership policy, this could affect business performance. The proportion of Honda-affiliated and Nissan-affiliated dealers in consolidated revenue is high, resulting in a structure with a high degree of dependence on specific manufacturers. On the other hand, the Group is building a stock-type business model by strengthening its used car, service, and rental car divisions, and is working to reduce excessive dependence on new car sales.

The proportion of Honda-affiliated dealers and Nissan-affiliated dealers in consolidated revenue is high, and the Group has no control over manufacturer policies such as new model launches, model changeovers, and supply conditions by Honda Motor Co., Ltd. and Nissan Motor Co., Ltd. If a disruption in product supply occurs due to disasters or other causes, this could also affect business performance. The Group is working to build a corporate structure that is not affected by new car sales trends by strengthening its used car, service, and rental car divisions.

The Group primarily raises funds for M&A and strategic alliances through borrowings from financial institutions, and holds a certain level of interest-bearing debt. If funding costs increase due to future rises in market interest rates or a decline in creditworthiness, or if necessary funds cannot be secured, this could affect business performance. The Group is pursuing a balanced cash flow strategy that combines diversification of funding methods, expansion of operating cash flow, and debt reduction.

The Group applies IFRS accounting standards, under which straight-line amortization of goodwill is not required; however, if the recoverable amount falls below the carrying amount due to deterioration in the business results of an acquired company or other factors, impairment of goodwill becomes necessary. If an M&A transaction fails to generate profits as planned, a significant impairment loss may arise, which could have a material impact on business performance. Prior to acquisitions and alliances, the Group conducts the necessary review of business content, profitability, financial condition, risks, and legal compliance, and makes decisions accordingly.

The Group may engage in business acquisitions and strategic alliances, including capital alliances, for the purpose of expanding and reinforcing its business base or entering new business fields. If an acquisition or alliance does not proceed as originally planned, this could affect business performance. The Group reviews the target transaction's business content, profitability, financial condition, investment scheme, risks, and legal compliance in advance, and makes decisions based on consistency with the Group's business objectives and management strategy.

The Company's stand-alone revenue depends on administrative service fees, dividends, and rent income from leased real estate received from subsidiaries, and thus may be significantly affected by the business development and earnings trends of its subsidiaries. There is a structural risk in that the performance of the Group as a whole, consisting of 59 subsidiaries and 3 affiliated companies, affects the Company's stand-alone financial condition. As a pure holding company, the Company specializes in Group management functions such as planning of Group business strategy, auditing, and public relations/IR.

The Group operates businesses in the United Kingdom, Europe, Australia, South Africa, and other regions, where risks differ from those in Japan due to country-specific laws, regulations, social conditions, exchange rates, and customs. If these risks materialize, or if the Group is unable to appropriately address potential risks, this could affect business performance. The Group is working to reduce risk through diversification of overseas businesses and improvement of the import-export balance.

The Group's local subsidiaries in the United Kingdom, Europe, Australia, and South Africa conduct sales activities, and domestic subsidiaries import and export automobiles, making it difficult to completely eliminate foreign exchange rate fluctuation risk in business activities. If significant exchange rate fluctuations occur, this could affect the valuation of foreign-currency-denominated revenue, expenses, profit, assets, and liabilities, causing business performance to fluctuate. The Group is working to reduce foreign exchange rate fluctuation risk through diversification of overseas businesses and improvement of the import-export balance.

The Group is subject to a wide range of legal regulations, including licenses and certifications under the Secondhand Articles Dealers Act and the Road Vehicles Act, as well as regulations relating to insurance solicitation agency business, construction business, taxation, labor, and the environment. If these laws and regulations are amended or abolished, or if new legal regulations are established in the future, this could affect business performance. In addition to regular confirmation of legal and regulatory amendment information by responsible departments, the Group has established a system for timely acquisition of information through lawyers and external organizations.

As the transition to a decarbonized society accelerates, the introduction of systems and regulations requiring reductions in greenhouse gas emissions may lead to decreased revenue and increased costs, and there is also a risk of reputational decline if the Group fails to respond to changes in societal and customer needs. The Group is working to identify risks and opportunities in line with the TCFD recommendations and reflect them in its business strategy. It has set a target of reducing total Scope 1 and Scope 2 greenhouse gas emissions by 42% by fiscal 2030 compared to fiscal 2020, and is promoting activities to achieve this target.