JAPAN LOGISTIC SYSTEMS CORP.

There exists a major customer group accounting for more than 10% of operating revenue, with contracts under a one-year automatic renewal system. If contract termination occurs due to unforeseen events, it could have a significant impact on business performance. The Company strives to maintain contract continuity through the provision of high-quality logistics services and the establishment and maintenance of strong relationships of trust.

Given the high proportion of labor-intensive businesses, addressing the medium- to long-term labor shortage resulting from the declining working-age population due to the falling birthrate and aging population has become an urgent task. If the Company is unable to secure human resources as planned, or if costs increase significantly due to intensifying competition for talent, it may affect business performance and financial condition. The Company is promoting proactive recruitment activities, expansion of education and training systems, on-site efficiency improvements through logistics DX, and the development of a more comfortable working environment.

In business activities centered on the Motor Truck Freight Transportation Business, energy costs such as fuel prices and electricity rates are an important factor, and price increases may raise transportation and facility operating costs. If the Company is unable to pass on such increased costs through freight rates or other charges, it could affect operating results and financial condition. The Company works to mitigate this impact through the promotion of eco-driving, the introduction of energy-saving equipment, and rate revision negotiations with customers.

In the course of business operations, the Company handles important information such as customer-related and confidential information. If increasingly sophisticated cyberattacks, unauthorized access, information leaks, or system failures occur, it could significantly disrupt business operations. A loss of social trust could also affect operating results and financial condition. The Company is strengthening its information security framework through measures such as penetration testing to address system vulnerabilities and targeted attack training for employees.

The Company is subject to various licensing, safety, and environmental regulations, including the Motor Truck Transportation Business Act and the Warehousing Business Act, and may incur costs to respond to legal amendments or new legislation. If a violation of laws or regulations is found, the Company risks penalties such as business suspension or revocation of licenses. While the Company strives to ensure legal compliance, the occurrence of such events could affect operating results and financial condition.

If a serious traffic accident or industrial accident occurs, the Company may face a decline in customer trust and social credibility, administrative sanctions such as revocation of business licenses, and damage claims from victims. These could affect operating results and financial condition. Under a safety policy based on the principles of legal compliance and safety first, the Company is working on strengthening safety training, accident elimination campaigns, and accident prevention measures.

The Company conducts business activities in Japan, Vietnam, Thailand, Laos, Myanmar, Cambodia, and the Greater China region. Political instability, deteriorating public security, or sudden changes in economic conditions in these regions could affect operating results and financial condition. The Company strives to gather information and understand the situation through monthly meetings and other means with group companies. The overseas sales ratio was 12.2% in FY2026 (ending March 2026) (13.6% in FY2025 (ended March 2025)).

In the Asset Business, the Company leases a certain scale of logistics real estate through operating lease transactions. If the application of new lease accounting standards results in a significant increase in right-of-use assets and lease liabilities, it could affect operating results and financial condition. There are concerns that an increase in the fixed cost burden may impact financial indicators.

In the Asset Business, the Company operates warehousing and real estate leasing, with facility and equipment costs constituting fixed costs. If utilization rates decline due to economic fluctuations or changes in customer cargo movement trends, it could affect operating results and financial condition. The Company works to maintain a certain level of utilization through sales activities, but the fixed-cost structure means the impact on earnings is direct.

In the logistics business, the Company strives to introduce environmentally compliant equipment when installing new facilities and vehicles or renewing existing ones. However, if environmental regulations are tightened rapidly, additional investment to improve energy efficiency may be required. If the Company's environmental response is perceived as inadequate, it could lead to a decline in social credibility and a deterioration in customer evaluation, which could affect operating results and financial condition.