HIGASHI HOLDINGS CO.,LTD.

The Group operates its business based on licenses and permits obtained under various laws and regulations, including the Trucking Business Act, the Warehousing Business Act, and the Waste Management and Public Cleansing Act. If a violation of laws or regulations is found, the Group may be subject to administrative dispositions such as suspension of vehicle operations, business suspension, or revocation of licenses. There is also a risk that amendments to or new enactments of laws and ordinances may result in additional compliance costs. As countermeasures, the Group has established a "Compliance Manual" and continues to conduct training programs for officers and employees.

Sales to Amazon Japan G.K. account for 22.1% of the Group's total consolidated net sales, resulting in a high degree of dependence on a specific customer. If the contractual relationship with this company is revised for any reason, it could have a material impact on the Group's business, financial condition, and results of operations. Transaction terms are determined based on general conditions that take market prices into account, but the concentration risk has not been resolved.

The ratio of outsourcing (partner companies) to cost of sales in the transportation business was extremely high at 81.6% as of the end of the fiscal year under review, and it may become difficult to secure the necessary outsourcing contractors during periods of concentrated demand. A rise in outsourcing unit prices is also a risk factor that directly affects financial condition and results of operations. The Group strives to build close and favorable relationships with outsourcing contractors, but its room for maneuver in situations of tight supply and demand is limited.

As of the end of FY2026 (ending March 2026), the outstanding balance of borrowings was ¥9,771 million, representing 26.7% of total liabilities and net assets. For borrowings procured at variable interest rates, a rise in interest rates would increase the interest payment burden, potentially affecting financial condition and results of operations. This is underpinned by a structure in which capital expenditures for warehouses and logistics centers depend on borrowings from financial institutions.

In M&A transactions and capital and business alliances aimed at business expansion and enhancing corporate value, there is a possibility that the synergies and results anticipated at the time of due diligence may not progress as planned. In such cases, impairment losses on goodwill or equity-method investments may occur, posing a risk of adverse effects on financial condition and results of operations. The Group conducts detailed due diligence and examines the reasonableness of acquisition prices in advance, but future uncertainties cannot be completely eliminated.

As the scale of the company expands, securing and developing excellent personnel has become an urgent priority, and a shortage of personnel or delays in development could affect the speed of business development. Increases in personnel recruitment costs also directly affect financial condition and business performance. The Group is focusing on developing next-generation talent through active recruitment activities and enhanced in-house training systems, but intensifying competition in the labor market remains an ongoing challenge.

In the course of undertaking logistics operations and relocation services, the Group handles client company information and a large amount of personal information. If information is leaked externally or data is lost, there is a risk of a decline in social credibility and liability for damages claimed by client companies. The Group has obtained Privacy Mark certification and established a management system based on its compliance manual, but continuous response to external threats such as cyberattacks is required.

As the Group's core business is truck-based transportation, a major accident could lead to a decline in customer trust and a slowdown in business activities due to administrative dispositions. The Group strives to eliminate accidents through the installation of digital tachographs and drive recorders and initiatives related to transportation safety management, and has also taken out various insurance policies, but the risk cannot be completely eliminated.

If warehouses, vehicles, information systems, transportation networks, and other assets are damaged by large-scale natural disasters such as earthquakes or typhoons, or by an infectious disease pandemic, logistics operations may be disrupted, impeding business activities. There is also a risk that if client companies are affected by a disaster and their business activities become difficult, this could affect the Group's financial condition and results of operations.

The Group is subject to environment-related laws and regulations concerning air pollution, waste disposal, and other matters, and future amendments to these laws could tighten regulations or increase cost burdens, potentially affecting financial condition and results of operations. As the Group owns a large number of business vehicles, it promotes eco-driving and monitors operational data using digital tachographs, but depending on policy trends such as carbon neutrality, additional response costs may arise.