CENTURY 21 REAL ESTATE OF JAPAN LTD.

Service Fee revenue, which accounts for the majority of operating revenue, is linked to franchisee sales and is directly affected by external factors such as real estate market conditions, land price trends, interest rate levels, housing tax systems, and competition from major real estate brokerage companies. If these external factors deteriorate, Service Fee revenue may decline, potentially having a material impact on the Company's business performance and financial condition. The high degree of dependence on the external environment inherent in the revenue structure represents a structural vulnerability.

Steady growth in the number of franchise stores is key to the growth of the franchise business. If a failure to maintain quality services, violations of relevant laws and regulations, defections to competitor brands, or illegal acts by franchisees damage the overall image of the franchise, this could lead to a significant decrease in the number of franchise stores. A collective tendency among franchisees toward pursuing independent business ventures could also be a similar risk factor.

Approval of new franchise members requires screening of business motivation, eligibility, financial condition, and market potential, and may also require adjustments related to the 400m inter-store distance rule under franchise agreements or coordination with nearby existing franchisees. These constraints may prevent store expansion from proceeding as planned in the business plan.

The Company and all franchisees operate under the unified "CENTURY 21" brand. If deficiencies or fraud in real estate advertising, or negative rumors, occur, this could lead to a decline in brand image. As brand value damage is directly linked to the acquisition and retention of franchisees, this could have a wide-ranging impact on the Company's business performance and financial condition.

Franchisees operate under regulations such as the Building Lots and Buildings Transaction Business Act, the National Land Use Planning Act, the City Planning Act, and the Building Standards Act, among others. Legal violations or customer complaints at some franchisees could develop into a situation that damages the credibility and image of the group as a whole. The Company addresses this through training and educational awareness activities and the establishment of a "Customer Consultation Office," but it is difficult to completely control the actions of all franchisees.

The Company holds perpetual franchisor rights within Japan under its agreement with Century 21 Real Estate LLC. However, if a material breach of contract occurs, or if a violation recurs after a corrective recommendation, this would give rise to grounds for the exercise of contract termination rights by that company. If the contract were to be terminated, this could have a material impact on the Company's business activities; however, no such impeding event has occurred to date.

Support tools for franchisees and property/customer management systems form the core of the business foundation, and their development and maintenance may require substantial costs. If a system failure or information leakage occurs due to a large-scale, widespread disaster, computer virus, hacking, or similar cause, the Company could suffer damages and may be subject to claims for damages from franchisees, which could also lead to a loss of trust in the website.

The Company is a personal information handling business operator that handles a large volume of personal information, including that of franchisee officers and employees as well as that of general consumers obtained by franchisees. While the Company has implemented measures such as obtaining Privacy Mark certification and establishing management manuals, if personal information were to leak outside the Company due to unforeseen circumstances, this could impact business performance and business activities through a loss of social credibility and the burden of costs to resolve resulting troubles.

As a franchise headquarters, the Company requires personnel with specialized experience and knowledge of the real estate industry and real estate brokerage business, and it deploys the minimum necessary number of personnel in appropriate positions. If unforeseen circumstances lead to the departure of personnel or delays in recruitment plans, this could impact business performance and business activities through a decline in franchisee support functions.

ITOCHU Corporation is a major shareholder (other affiliated company) holding 49.3% of the Company's voting rights, and there are transactional relationships with the ITOCHU group, including concurrent officer positions, acceptance of seconded personnel, and office leasing. If the ITOCHU group changes its management policy or business strategy, this could have some impact on the Company's business performance and business development; however, the Company's policy and decision-making are conducted through its own independent decision-making process.