Maruhachi Securities Co., Ltd.

If the Company falls under the requirements set forth in Articles 52, 53, and 54 of the Financial Instruments and Exchange Act, revocation of registration may be ordered, which could impede major business activities and have a material impact on business results. The Company operates under Registration No. 20 (Kinsho) of the Director-General of the Tokai Local Finance Bureau, and currently recognizes no matters that would constitute grounds for revocation.

If the Company violates the Financial Instruments and Exchange Act or other laws and regulations, it may face litigation, mediation petitions, or administrative dispositions from regulatory authorities, which could affect its business results and financial condition. The Company formulates a compliance program every fiscal year and strives to enhance compliance awareness through the establishment of an internal control system and annual training sessions.

If the capital adequacy ratio falls below 120%, changes to business methods, among other measures, may be ordered; if it falls below 100%, the Company may be subject to a business suspension order, and if there is no prospect of recovery, its registration may ultimately be revoked. The Company conducts daily monitoring, including daily measurement of risk-equivalent amounts and reporting to the general manager in charge of internal control.

A decline or stagnation in domestic and overseas stock and bond markets, or exchange rate trends, could reduce trading volume in the secondary market and decrease brokerage commissions and other fees received. The Company seeks to stabilize earnings by handling a diverse range of financial products and striving to make optimal proposals suited to market conditions.

Profit and loss from Trading Operations in stocks, bonds, and other instruments conducted for the Company's own account may fluctuate significantly depending on stock, bond, and foreign exchange market conditions, which could affect the Company's business results and financial condition. The Company has established a risk management system in which the Board of Directors sets trading limits and loss-cut rules, and profit/loss and position status are reported to management on a daily basis.

The Company raises funds through its own capital as well as borrowings from financial institutions; however, if credit concerns spread widely, the Company could be forced to raise funds at significantly higher interest rates or may become unable to raise funds at all. The Company thoroughly manages its daily funding and prepares for unforeseen circumstances by building good relationships with its transacting financial institutions.

If stock market prices fluctuate sharply in margin trading and a customer does not respond to a request to post additional collateral, the Company disposes of open positions and collateral; however, it may not be able to fully recover amounts advanced to the customer, which could affect the Company's business results and financial condition. The Company strives to minimize this risk by increasing the frequency of contact with customers to encourage maintenance of appropriate investment amounts, as well as through daily monitoring by the relevant department.

If a significant malfunction occurs in the information systems or communication lines used by the Company or its outsourcing partners, or if unauthorized access from outside parties or a disaster causes a failure, it could disrupt business operations and affect the Company's business results and financial condition. The Company seeks to mitigate this risk by raising awareness among officers and employees through information security education, continuously updating software, and establishing an emergency business execution structure.

As the Company handles highly confidential personal information, if customer information were to leak, it could result in compensation payments and loss of social credibility, affecting the Company's business results and financial condition. The Company has established and maintained internal regulations concerning the storage of customer information and takes every measure to ensure thorough management.

Because the Company's head office and branches are concentrated within Aichi Prefecture, if a disaster such as an earthquake, storm or flood damage, or terrorism occurs, it could disrupt business operations depending on the region and scale, affecting the Company's business results and financial condition. Based on its Business Continuity Plan (BCP), the Company has established a system to continue business operations and promptly resume critical operations in the event of a disruption.