ASAX CO.,LTD.

The Group, whose core business is real estate-secured loans, is strongly affected by real estate market conditions. In the event of a market downturn, there is a risk that new lending will decrease due to declining collateral property prices. In addition, land price declines directly lead to an increase in under-collateralized receivables and a decline in customers' repayment capacity, which may affect the Group's financial position and business results.

The balance of operating receivables expanded to ¥112,014,265 thousand at the end of the 57th fiscal period, with the allowance for doubtful accounts ratio remaining at 0.11%. While the Group seeks to diversify risk by keeping the average loan amount per customer in the ¥20 million range, if collateral values decline due to fluctuations in the economy, interest rates, or land prices, credit losses may increase, which may affect the Group's financial position and business results. Note that there have been no write-offs of bad debts over the most recent five fiscal periods.

While know-how in assessing real estate value and customer risk serves as a barrier to entry in the real estate-secured loan business, new entrants from other industries as well as competitors within the same industry, including financial institutions, may intensify competition for customer acquisition. If the Group fails to acquire quality customers or experiences customer attrition, its revenue base may be impaired, which may affect its financial position and business results.

The Group operates under registration with the Kanto Local Finance Bureau (Registration No. Kanto Local Finance Bureau (15) No. 00035) pursuant to Article 3 of the Money Lending Business Act, and there is a risk of administrative sanctions such as business suspension or registration revocation in the event of violations of laws and regulations. In addition, if future legal amendments change business regulations, this may impede business activities and affect the Group's financial position and business results. The Group positions compliance as its most important management priority and addresses this through the development of internal regulations and awareness-raising activities.

The maximum interest rate under the Investment Deposit and Interest Rate Act is 20% per annum, and under the Interest Rate Restriction Act, 15% per annum applies where the principal loan amount exceeds ¥1 million; the Group already lends at rates below these caps. However, if the maximum interest rate is further reduced in the future, interest income on loans may be squeezed, which may affect the Group's financial position and business results.

The Group relies primarily on borrowings from financial institutions to fund its operating loans, and if major lenders change their lending policies or financial markets become unstable, there is a risk that funding costs will increase or that securing necessary funds will become difficult. In addition, some borrowings are subject to financial covenants, and a breach of these covenants may result in the loss of the benefit of the term and require lump-sum repayment.

If unexpected and sharp fluctuations in market interest rates occur, funding costs may rise, and the resulting imbalance with the interest rate levels on operating loans may squeeze profitability. The Group strives to manage this risk by constantly adjusting the balance between funding costs and lending rates, but it may be difficult to respond to abrupt interest rate fluctuations.

The Group is a personal information handling business operator subject to the Act on the Protection of Personal Information and Financial Services Agency guidelines, and in the event of an information leak, there is a risk of legal sanctions as well as loss of social credibility. The Group has established a management framework through the development of internal regulations, strengthening of system security such as access restrictions, and awareness-raising activities for employees.

If computer systems are damaged by unauthorized external access, fire, line failures, or other causes, business operations may be disrupted. In addition, losses may arise if officers or employees make administrative errors or engage in improper conduct. The Group is working to strengthen security and develop its compliance framework based on its Basic Policy on Information Security and system management regulations.

Since the Group's branches are concentrated in the greater Tokyo metropolitan area, there is a risk that normal business operations could become difficult in the event of a large-scale earthquake or wind/flood damage. In addition, given the nature of the business, which requires specialized knowledge of finance and real estate, recruiting, developing, and retaining excellent personnel is key to business continuity, and personnel attrition or recruitment shortfalls may affect the Group's financial position and business results.