Akatsuki Corp.

As a pure holding company, the Company's income depends in principle on dividends received from subsidiaries. If subsidiaries continue to be unable to record sufficient profits and pay dividends, the Company's distributable amount will decrease, potentially making it impossible to pay dividends to shareholders. This embodies a structural risk in which the earnings capacity of the entire group directly affects the Company's financial foundation.

Akatsuki Securities Co., Ltd. is subject to the Financial Instruments and Exchange Act and the rules of the Japan Securities Dealers Association. If a violation of laws or regulations is identified through periodic inspections and the company receives an administrative disposition, its creditworthiness could decline, potentially affecting business performance. In addition, the Company itself is regulated as a major shareholder, and in the event of a significant legal violation, the Company could be subject to "measures to cease being a major shareholder," which could have a material impact on group management.

To secure investment income and respond to customer needs, the Company holds domestic and foreign equities, bonds, foreign exchange, and derivatives thereof for its own account. There is a risk that sharp fluctuations in interest rates or market prices could prevent the Company from achieving expected investment returns, or could cause significant fluctuations in the value of financial assets. This could adversely affect the Group's business performance and financial condition.

In the used condominium business conducted by the Bautec Group and others, the period from purchase through renovation construction to sale may become prolonged, and if real estate market prices decline during this period, valuation losses or losses on sale of inventory assets may occur. In addition, if construction costs increase due to rising building material and labor costs, profit at the time of sale may decrease, potentially affecting business performance.

Competition with other companies is intensifying in the Tokyo metropolitan area, the main business area of the Bautec Group and others, and there is a risk that profitability could deteriorate due to a decrease in the number of properties purchased and sold, or due to rising acquisition prices and falling sales prices. Domestic and overseas economic conditions, tax and legal regulations, and interest rate and market trends also significantly affect the real estate market, creating a risk of a decrease in entrusted assets and brokerage transactions.

The Group raises business funds through borrowings from financial institutions and the issuance of corporate bonds. However, if business performance and financial condition deteriorate, creditworthiness declines, or if domestic or overseas economic conditions worsen or financial markets become turbulent, the Group may be forced to raise funds at higher interest rates than usual, or may be unable to secure necessary funds, resulting in difficulty with cash flow management. An increase in fundraising costs could adversely affect business operations as well as business performance and financial condition.

If operations cannot be conducted normally due to a computer system outage caused by a failure or unforeseen disaster, or due to data tampering resulting from unauthorized external access, this could affect business performance and financial condition through claims for damages and a decline in social credibility. In addition, amortization costs from large investments in system acquisition and construction, as well as maintenance and operating costs, are also factors that could affect business performance.

Violations of laws and regulations caused intentionally or negligently by officers and employees cannot be completely eliminated even through internal controls and compliance training, and in some cases intentional illegal acts may go undetected for long periods, potentially leading to future claims for damages. The Company also holds a large volume of customer information, and if an information leak occurs due to misconduct or other causes, it could damage the Company's credibility, leading to a decrease in transactions and a deterioration in the Group's overall business performance.

The Group's growth is heavily dependent on capable personnel, and if the Group is unable to secure and develop talented personnel, this could adversely affect its future prospects, business performance, and financial condition. On the other hand, actively securing talented personnel is a factor pushing up personnel expenses, and recruitment activity costs are also on an increasing trend year by year, creating a risk that increases in these costs could adversely affect business performance and financial condition.

The Group plans to engage in active investment activities, including capital alliances, establishment of subsidiaries, and fund investments, through initiatives such as expanding assets under custody at Akatsuki Securities Co., Ltd., strengthening procurement and finances at the Bautec Group and others, and formulating asset sale and growth strategies at EW Asset Management Co., Ltd. If the initially envisioned plans are not achieved and returns commensurate with the investments cannot be recorded, this could affect the Group's business performance.