KOBAYASHI YOKO CO.,LTD.

Of gross operating profit, commission income from financial instruments trading (Click 365 and Click Stock 365) accounts for approximately 49%, and commission income from commodity futures trading accounts for approximately 14%, making the business structure highly susceptible to trends in domestic and overseas financial markets and economic conditions. In particular, if a low-volatility environment persists over an extended period, commission income could decline significantly, potentially having a material impact on business performance. Given the nature of transactions involving market-linked products, dependence on the external environment is high, presenting challenges to the stability of earnings.

The Company is subject to regulation under related laws such as the Financial Instruments and Exchange Act and the Commodity Derivatives Act, as well as various rules of exchanges, the Japan Securities Dealers Association, the Japan Commodity Futures Association, and other bodies. Violations of these could result in administrative sanctions such as revocation of licenses/registrations or suspension of business. The Company is also required to maintain a net asset regulation ratio (under the Commodity Derivatives Act) and a capital adequacy ratio (under the Financial Instruments and Exchange Act) of 120% or higher; falling below this threshold would also affect business performance. There is also a risk that the introduction of new regulations or amendments to laws could result in additional cost burdens or business restrictions.

In the course of business operations, the Company handles a large volume of customer personal information via computer systems. Should such information be leaked due to unauthorized external access or other causes, this could lead to legal liability and loss of social trust. Although measures such as appointing a personal information protection management officer, establishing personal information protection regulations and internal system management rules, strengthening system security, and conducting awareness activities for officers and employees have been implemented, these do not guarantee complete prevention. Should an information leak occur, it could affect business performance through customer attrition or business suspension.

The Company relies on computer systems for many operations, including order acceptance and placement via home trading systems and financial instrument trading tools. Should a system failure occur due to line failure, equipment malfunction, program defects, unauthorized access, natural disasters, or other causes, business operations could be disrupted. Depending on the scale of the failure, this could have a material impact on business performance. While the Company strives for system investment and stable operation while considering cost-effectiveness, it is difficult to completely eliminate this risk. There are also concerns about customer attrition resulting from lost trading opportunities and diminished customer trust.