HouseFreedom Co.,Ltd.

The Company relies on financial institution borrowings for working capital such as funds for acquiring land for subdivision sales, and the balance of interest-bearing debt reached ¥11,766 million at the end of FY2025 (ended December 2025). As business scale expands going forward, the number of project land acquisitions is expected to increase, leading to a further rise in interest-bearing debt, and a rise in market interest rates or deterioration in the fund-raising environment could affect business performance. As countermeasures, the Company is working to maintain and strengthen good relationships with financial institutions, secure liquidity on hand, and improve capital efficiency.

As of the end of FY2025 (ended December 2025), the Company actively holds real estate consisting of ¥7,841 million in inventories and ¥3,823 million in property, plant and equipment, and there is a risk that significant deterioration in real estate market conditions or a decline in customer needs could result in stagnant inventory, discounted sales, valuation losses, or impairment. In particular, if the acquisition of subdivision land for the New Detached House Development Business does not proceed as planned, this could also affect business results. As a countermeasure, the Company works to mitigate risk through prior consultation among relevant departments before acquisition and early sale of properties.

The housing and real estate related businesses are susceptible to trends in the economy, employment, interest rates, land prices, tax systems, and other factors, and rising interest rates or the reduction or abolition of housing tax incentives could reduce customers' purchasing intentions. In addition, the decline in Japan's population and number of households, particularly the shrinking pool of first-time home buyers, is recognized as a factor that could affect business results and financial position over the medium to long term. As a countermeasure, the Company is promoting the expansion of stock-type businesses (the Real Estate Leasing Business).

The Company operates in the major cities of Osaka, Fukuoka, Aichi, and Okinawa, all of which are highly popular areas, and there is a possibility that a decrease in the number of properties available and price competition could lead to rising acquisition prices and falling sales prices. There are numerous competitors with superior capital strength, sales capabilities, and brand power, and intensifying competition may prevent the Company from expanding its business as planned. Expansion of the Real Estate Leasing Business to stabilize earnings is positioned as a countermeasure.

The housing and real estate industry is subject to numerous legal regulations, including the Building Lots and Buildings Transaction Business Act, the Building Standards Act, the Construction Business Act, and the City Planning Act, and a material violation of laws and regulations or the revision, introduction, or strengthening of public regulations could affect business results and financial position. The Company and its subsidiaries hold licenses and registrations such as the Building Lots and Buildings Transaction Business license, the Specific Construction Business license, and registration as an architectural design office, and revocation of these would directly affect the continuation of business. The Company is working to ensure thorough legal compliance by strengthening its compliance framework.

Domestic and overseas market trends could cause raw material and materials prices, labor costs, logistics costs, and other expenses to rise, and subcontracting costs could also increase due to the raw material procurement conditions faced by subcontractors. If such cost increases cannot be passed on to sales prices, this would adversely affect business results and financial position. As a countermeasure, the Company hedges against the risk of rising procurement prices by diversifying its suppliers.

The Company bears warranty liability or liability for non-conformity with contract for 10 years with respect to the primary structural parts and water-intrusion prevention parts of newly built houses, and for 2 years after delivery with respect to used real estate. If a significant problem is discovered, the Company may bear seller liability even where the direct cause is not attributable to the Company. There is a risk that an increase in warranty repair costs or a decline in creditworthiness could affect business results and financial position. The Company works to mitigate this risk through quality control using process-by-process checklists and by taking out liability insurance.

In the course of business operations, the Company holds a large amount of personal and confidential information, and it is recognized that the threat of information leakage is increasing against the backdrop of increasingly sophisticated cyberattacks and the expansion of telework in recent years. Should an information leak occur, the resulting substantial costs and decline in social credibility could affect business results and financial position. The Company implements appropriate security measures by strengthening its management framework and providing employee training.

The Company conducts M&A as part of its business strategy, and while it carries out careful investigation and consideration of synergies with existing businesses, business plans, and financial conditions before execution, there are cases where expected synergies are not realized or business cannot be developed as originally planned due to significant changes in market or competitive conditions. As a result, this could affect the Group's business results and financial position. The Company addresses this through detailed due diligence prior to execution.

Transition risks are anticipated in the form of stricter legal regulations such as carbon taxes, declining demand, and reputational damage, while physical risks include the intensification of natural disasters, abnormal weather, and health damage such as heatstroke suffered by construction workers. Should these risks materialize, there is a possibility of incurring response costs and opportunity losses due to the suspension of production activities. Large-scale natural disasters such as earthquakes, typhoons, and floods also directly lead to a decline in the value of held and sold real estate. The Company promotes climate change countermeasures, including taking out non-life insurance and positioning the SDGs as a key management issue.