Wakita & Co.,LTD.

Since the Construction Machinery Business mainly handles civil engineering and construction machinery, a significant reduction in public investment or a decrease in private-sector capital expenditure due to sudden changes in economic conditions could lead to lower utilization rates of leased assets and intensified price competition among competitors. These factors could directly affect the Group's business performance, financial position, and cash flows. The Group's policy is to flexibly formulate and implement alternative countermeasures.

Sales of equipment and audiovisual equipment in the Trading Business carry the risk of decreased demand during economic downturns. A decline in demand due to economic recession could reduce sales and thereby affect business performance, financial position, and cash flows. The Group aims to minimize the impact through the flexible formulation and implementation of alternative countermeasures.

In the nursing care products sales and rental business, the Group's business partners and long-term care insurance users are subject to the long-term care insurance system, and the Group is therefore indirectly affected by this system. If the scope of eligibility for long-term care certification, the scope of nursing care products covered by the insurance, or the user co-payment ratio is changed, demand trends could deteriorate, potentially affecting business performance, financial position, and cash flows. The Group's policy is to flexibly formulate countermeasures in response to system changes.

In the sales division of the Real Estate Business, a decrease in well-located residential subdivided lots, and in the leasing division, a decrease in tenants or rent reductions due to changes in economic conditions, are factors that could reduce rental income. If these factors occur simultaneously, they could affect the Group's business performance, financial position, and cash flows. The Group aims to mitigate the impact through the flexible formulation and implementation of alternative countermeasures.

If purchase prices for civil engineering and construction machinery, material handling equipment, commercial equipment, audiovisual equipment, nursing care products, and other sales and rental assets rise due to market fluctuations, this could affect business performance, financial position, and cash flows through increased costs. If the increase in procurement costs cannot be passed on to sales prices, there is a risk of declining profit margins. The Group's policy is to flexibly formulate and implement alternative countermeasures.

The Group holds trade receivables, including installment receivables, and if bad debt losses occur due to the bankruptcy of business partners or other reasons, this could affect business performance, financial position, and cash flows. As a risk-reduction measure, the Group sets credit limits based on the creditworthiness of business partners to prevent the occurrence of non-performing receivables; however, the effectiveness of credit management may be limited in the event of a sudden change in the economic environment.

The securities held by the Group carry various risks, including price fluctuation risk, credit risk, and risk of principal impairment. If the market value of securities declines, this could affect business performance, financial position, and cash flows through the recognition of valuation losses, among other effects. The Group's policy is to flexibly formulate and implement alternative countermeasures, but complete hedging against sudden changes in market conditions is difficult.

If the value of leased assets, real estate for lease, buildings, land, lease assets, goodwill, and other assets held by the Group declines significantly due to falling market prices or other factors, impairment processing will be required. The recognition of impairment losses could directly affect business performance, financial position, and cash flows, and the balance of leased assets and real estate for lease held in proportion to the scale of business is considered to be particularly large. The Group's policy is to flexibly formulate and implement alternative countermeasures.

Since the Group procures some products from overseas in foreign currencies, it faces the risk that procurement costs will fluctuate due to changes in exchange rates. As a risk-reduction measure, the Group hedges using forward foreign exchange contracts and other means; however, if exchange rate fluctuations exceed short-term and medium- to long-term forecasts, this could affect business performance, financial position, and cash flows.