TOBU RAILWAY CO.,LTD.

Under the Railway Business Act, approval from the Minister of Land, Infrastructure, Transport and Tourism is required for the authorization of routes and business categories, as well as for setting the upper limit of passenger fares, which is subject to review under the total cost method. If costs that arise despite thorough cost control cannot be reflected in fares in a timely and appropriate manner, this may adversely affect business performance. Group companies outside the railway business are also subject to various laws and regulations, and there is a risk that changes in legal regulations could affect the financial condition.

Japan's total fertility rate has been on a declining trend since 2016, and the decline has been accelerating further due to recent economic and social conditions. For the Group, which operates its business primarily in the market along the Tobu railway lines, a sharp decline in the population that forms the basis of consumption activity could have a significant impact on business performance and financial condition, particularly in the railway business. As a countermeasure, the Group is working to enhance the value of areas along its lines, promote residential settlement, and create population inflows through visitors and exchange.

Due to the impact of the COVID-19 pandemic, lifestyles that do not presuppose travel, such as telework, have become widespread and entrenched, and it is expected that needs and values will continue to change and diversify going forward. A persistent decline in travel demand may affect business performance and financial condition, particularly in the transportation business. The Group is working to strengthen profitability through business structure reform, cost reductions, strengthening of non-railway businesses, and capturing tourism demand.

If new competing services or competitors emerge due to rapid technological innovation or major changes in the business environment, this could lead to a deterioration in the supply-demand relationship or intensified competition, potentially affecting business performance and financial condition. Under the long-term management vision "Evolving Society and the Areas Along Our Lines through Challenge and Co-creation," the Group is working to improve services and productivity by leveraging digital technology and external expertise.

If restrictions on going out or voluntary refraining from outings occur due to a pandemic or similar event, the number of users may decline sharply, particularly in the transportation and leisure businesses, potentially affecting business performance and financial condition. There is also a risk that widespread infection among employees could disrupt business operations. As countermeasures, the Group continues to implement infection prevention measures, develop business continuity plans, and carry out infection control measures to ensure the continuation of the railway business as a social infrastructure.

In the event that a major accident occurs and the business becomes unable to operate over the long term, this could have a significant impact on business performance and financial condition. Based on the belief that "safety is the foundation of all businesses," the Group continuously implements the establishment of a safety management system, investment in safety equipment, and education and training.

If the business becomes unable to operate over the long term due to external factors such as natural disasters, terrorism, or war, this could affect business performance and financial condition. The Group continuously implements the development of business continuity plans in preparation for large-scale natural disasters, enhancement of crisis management systems, development of infrastructure resilient to natural disasters, and countermeasures against terrorism.

If rising labor costs and difficulty in recruitment become apparent due to population decline and an aging population, this could affect business performance and financial condition. As countermeasures, in addition to the recruitment and development of diverse personnel and the establishment of flexible working environments, the Group is promoting productivity improvement and the construction of an efficient business operation structure through the expansion of one-person train operation sections and the use of digital technologies such as automated driving.

The Group raises necessary funds for capital expenditures and other purposes through corporate bonds and borrowings from financial institutions, and holds a high level of interest-bearing debt due to growth investments and other factors. If interest rates rise further or credit ratings are downgraded, this could increase interest expenses and worsen fundraising conditions, potentially affecting business performance and financial condition. As countermeasures, the Group appropriately manages its consolidated interest-bearing debt balance, diversifies its fundraising methods, and pursues optimal fundraising taking into account medium- to long-term interest rate conditions.

If the market value of held assets declines significantly due to a decrease in their cash flow generating capacity or a sharp drop in stock prices, this could result in the recognition of impairment losses or valuation losses, potentially affecting business performance and financial condition. The Group aims to enhance asset value through thorough revenue and expenditure management, business structure reform, and the verification of the rationale for holding investment securities followed by their gradual reduction.