MATSUI SECURITIES CO.,LTD.

The Japanese equity brokerage business accounts for approximately 70% of total net operating revenue, creating a risk that sluggish equity markets, declines in individual investors' trading value and margin trading balances, and reductions in commission and interest rate levels resulting from intensified competition will directly impact business performance. While the Company is pursuing diversification into FX (Foreign Exchange Margin Trading), US Stock Trading, Investment Trusts & MATSUI Bank, and other areas, it is explicitly stated that there is no guarantee that business scale will expand as planned.

Numerous online securities firms offer free or low-priced brokerage commissions, and platform operators with large customer bases entering or strengthening their financial businesses are expected to further intensify the competitive environment. Intensified competition could adversely affect business performance through the loss of existing customers, a decrease in new customer acquisition, and increased advertising expenses.

Because margin trading involves extending credit to customers, if a customer incurs losses due to a sudden market shift or if the value of substitute securities declines, the collateral value may become insufficient, resulting in an inability to fully recover losses. Similar risks exist for stock index futures, Nikkei 225 options (short positions), and FX (Foreign Exchange Margin Trading).

The funds for general margin trading are mainly financed through borrowings from financial institutions and similar sources. If appropriate fundraising becomes difficult due to financial market conditions or a downgrade of the Company's credit rating, restrictions may be imposed on the use of general margin trading, resulting in lost opportunities for commission and interest income. In addition, if refinancing of borrowings or bond issuance cannot be conducted on appropriate terms, business performance may also be adversely affected.

Stable system operation is fundamental to the online securities trading business. If the system becomes dysfunctional due to hardware or software malfunctions, sudden surges in access, cyberattacks, or other causes, proper processing of customer orders may become impossible. In the event of a system failure, there is also a risk of administrative sanctions from regulatory authorities, damage claims, and customer attrition.

There is a possibility that malicious third parties may fraudulently obtain customers' authentication information through phishing scams, malware, or other means, resulting in unauthorized access to and unauthorized trading in customer accounts. If this occurs, it may reduce confidence in the security of the Company's systems, leading to customer attrition, and may also result in a burden of compensation for customer damages, adversely affecting business performance.

If a leakage of customers' personal information or individual numbers occurs, the Company may face damage claims and administrative sanctions from regulatory authorities, and its credibility may be significantly undermined. There is also an indirect risk in that security incidents at other companies could lower overall trust in the internet, leading to reduced confidence in the Company's systems.

The Company depends on multiple external service providers, including SCSK Corporation, to which development and operation of the equity trading system are outsourced, as well as providers of trading systems for FX (Foreign Exchange Margin Trading), Investment Trusts & MATSUI Bank, and US Stock Trading, and providers handling customer inquiries. If these providers suspend or discontinue their services, or if maintaining the contract with SCSK Corporation becomes difficult, the Company may be forced to suspend service provision until an alternative system can be established.

If new regulations are introduced through amendments to the Financial Instruments and Exchange Act, the Act on the Protection of Personal Information, the Individual Number Act, the Banking Act, or other laws, the profitability of related businesses may decline, adversely affecting business performance. Changes to the method of calculating the capital adequacy ratio (including counterparty risk) could also become a constraining factor on margin trading balances.

In the FX (Foreign Exchange Margin Trading) business, customer positions are generally covered; however, unexpected exchange rate fluctuations could result in foreign exchange losses exceeding the assumptions of the Company's algorithms. Because the margin deposited with cover counterparties and US stock trading intermediaries consists of the Company's own funds, materialization of credit risk at these cover counterparties or intermediaries could also adversely affect business performance.