FJ NEXT HOLDINGS CO., LTD.

The real estate industry is subject to numerous laws and regulations, including the Building Lots and Buildings Transaction Business Act, the Building Standards Act, and the City Planning Act. If any of the licenses held by group companies, such as real estate brokerage licenses, rental housing management business registrations, or condominium management business registrations, were revoked, this could significantly disrupt core business activities. In addition, ordinances restricting the construction of one-room apartments have been enacted mainly in the special wards of Tokyo, and further tightening of regulations by local governments in the future could affect the business. The Group is committed to obtaining early information on amendments and abolishments of relevant laws and regulations and to ensuring thorough legal compliance.

Condominiums sold by the Group are primarily purchased for asset management purposes, but they carry various investment risks, including deterioration in occupancy rates, declines in rental market rates, and increased loan repayment burdens due to rising interest rates. If a customer purchases a unit without sufficiently understanding the investment risks due to inadequate explanation by sales staff, litigation from customers may arise, potentially damaging the Group's credibility. The Group addresses this by thoroughly explaining investment risks to customers and providing consistent services after sale, including tenant recruitment, rent collection agency services, and building maintenance and management.

The Real Estate Development Business, the Group's core business, is highly susceptible to economic trends, interest rate movements, sales price trends, and housing tax systems. If economic deterioration, a significant rise in interest rates, tax system reforms, or a decline in sales prices due to oversupply occurs, this could reduce purchasing intent and result in valuation losses on inventory assets, affecting business results and financial condition. Since it typically takes about one and a half to three years from land acquisition to building completion and sale, a surge in construction costs or fluctuations in the real estate market during this period could reduce project profitability. In addition, surges in material prices and supply delays due to factors such as the situation in the Middle East may also affect business results.

The Group primarily procures funds for acquiring business land through borrowings from financial institutions, and the ratio of interest-bearing debt to consolidated total assets stood at 13.0% in FY2026 (ending March 2026). In a rising market interest rate environment or when risk premiums for the real estate industry or the Company increase, interest expenses may rise and affect business results, and if fundraising is disrupted for any reason, business development could also be affected. The Group seeks to reduce this risk by not relying on specific financial institutions, instead approaching multiple institutions for financing on a project-by-project basis and proceeding with each project only after obtaining loan approval.

In acquiring business land, primarily in central urban areas, difficulty in obtaining real estate-related information or insufficient procurement of acquisition funds could affect business results and financial condition. In addition, although the Group conducts preliminary soil contamination surveys before concluding sales contracts, if soil contamination not identified in the survey is discovered after the contract is concluded, additional costs may arise or the original schedule may need to be changed. The Group conducts thorough preliminary investigations, including checking land history and designated areas under the Soil Contamination Countermeasures Act, and implements remediation work as necessary.

The Group outsources condominium construction work to construction companies, and if a contractor experiences financial difficulties or quality issues arise with a property, this could disrupt development as planned and affect business results and financial condition. Contractors are selected based on a comprehensive assessment of construction capability, track record, and financial condition, and after construction begins, group company Resitec Corporation conducts structural inspections of buildings to help prevent construction delays and improve quality control.

Litigation may be brought over issues such as noise, sunlight, and views during the condominium construction stage, or over non-conformity with contract terms after sale. If such disputes develop into litigation, this could damage the Group's credibility and cause development delays due to the response required, affecting business results and financial condition. The Group formulates development plans that emphasize harmony with the surrounding environment after thoroughly examining relevant laws and ordinances, and takes adequate measures such as holding prior explanatory meetings for local residents.

If personal information obtained by the Group is leaked externally due to unauthorized use or other unforeseen circumstances, this could damage the Group's credibility and lead to claims for damages, affecting business results and financial condition. The Group works to prevent leaks through measures such as setting data access permissions, encrypting data communications, and adopting intrusion prevention systems, and has established an "Information Security Committee" that sets internal rules regarding information security.

In the Real Estate Development Business, revenue is recognized upon delivery to customers after a sales contract is concluded, so quarterly sales and profit fluctuate depending on the timing of condominium completion and delivery, and it should be noted that performance in a particular quarter does not necessarily indicate annual performance. If delivery is delayed beyond the end of the fiscal period due to construction schedule delays caused by natural disasters or other unforeseeable events, business results may fluctuate.

If large-scale natural disasters such as earthquakes or floods, criminal acts such as terrorism, or outbreaks of unknown infectious diseases occur, this could disrupt the Group's business activities and affect business results and financial condition. Damage exceeding expectations cannot be completely avoided and could pose a significant risk to business continuity. The Group has implemented measures such as introducing a safety confirmation system and conducting disaster prevention drills, and is working to develop its risk management framework.