TOC Co., Ltd.

The Group's building leasing business accounts for the majority of operating income, and fluctuations in building supply and demand due to economic conditions directly affect the performance of the Real Estate Business. While the Group seeks to reduce risk through sales activities that leverage the characteristics of each leased building, the high degree of dependence on this core business means that the impact of market deterioration would be substantial.

The commercial buildings owned by the Group are mixed-use facilities incorporating sports clubs, bathing facilities, and the like, and their performance is influenced by trends in personal consumption and regional economic conditions. The Group seeks to reduce risk by creating attractive facilities and implementing effective sales promotion measures, but a deterioration in the consumption environment may affect customer traffic and rental income.

All of the leased buildings owned by the Group are concentrated in Tokyo, and if a natural disaster such as an earthquake or storm, or a man-made disaster such as a fire or terrorist act, were to occur, significant damage could result from deviations from expectations. Although the Group promotes BCP measures centered on the Safety Management Promotion Office, the risk of geographic concentration remains.

If changes to laws and regulations related to the business give rise to new obligations, restrictions, or cost burdens, or if changes to related tax systems increase tax payments, this may affect business performance and financial position. Since the Group operates multiple businesses including real estate, pharmaceuticals, and sports clubs, it should be noted that the scope of impact from regulatory changes is broad.

In the Pharmaceutical Business, in addition to the impact on sales from market trends, an accident occurring during the production process could cause a significant decline in corporate image. Although sufficient measures are taken for quality control, if a problem related to product safety becomes apparent, it could spread to affect the performance of the entire Group.

The Group holds customers' personal information in the Real Estate Business, Sports Club Business, Bathing Facility Business, and other businesses, and if information leaks occur due to system trouble or internal or external factors, this could lead to a decline in corporate credibility, the incurrence of compensation costs, and adverse effects on sales activities. While the Group takes thorough security measures, the risk of force majeure cannot be eliminated.

If the book value of held fixed assets falls below the recoverable amount due to deterioration in the real estate market or worsening profitability, impairment accounting will be required, which may have a material impact on business performance and financial position. For the Group, whose core business is real estate, the scale of fixed assets is large, and impairment risk in the event of market fluctuations is an important financial issue.

For investment securities held by the Group, valuation losses may arise from share price fluctuations for listed securities, or from deterioration in the financial condition of the issuing company for unlisted shares and similar holdings. There is a risk of losses arising from market trends such as an economic slowdown, and the Group seeks to reduce this risk through periodic review and reduction of its shareholdings.

In real estate development and other projects, various factors such as soaring construction costs may cause plan changes or schedule delays, and projects may not proceed as originally planned. Although the Group conducts consultations with relevant authorities and careful design and construction planning, if changes in the external environment disrupt profit plans, this will affect business performance.

A prolonged stagnation of the domestic economy due to voluntary restraint on outings and business operations accompanying the spread of infectious disease may affect each of the Group's businesses, including real estate, sports clubs, and bathing facilities. Although the Group implements infection prevention measures such as telework and staggered commuting hours, if infection spreads within the company, business operations could be suspended for a certain period, raising concerns about the impact on business performance.