ICHINEN HOLDINGS CO.,LTD.

The Auto Leasing-Related Business raises substantial funds through interest-bearing debt, and as of the 64th fiscal term (FY2026, ending March 2026), total interest-bearing debt reached ¥106,923 million (50.5% of total assets of ¥211,603 million). A rise in interest rates would increase funding costs and affect business results. Funding costs increased from ¥325 million in the 60th fiscal term to ¥799 million in the 64th fiscal term, indicating that the impact of rising interest rates is becoming more apparent. As countermeasures, the Group is working on interest rate trend analysis, financial strategy formulation, and maintaining/improving credit ratings.

Business funds are raised through financial institution borrowings, corporate bonds, commercial paper, and other means, and in the 64th fiscal term, bonds scheduled for redemption within one year increased substantially to ¥15,200 million. If disruption in financial markets or a change in banks' lending stance makes stable fund procurement difficult, the Group may be forced to scale back new contracts, affecting business results. While the Group has established commitment line facilities among other measures, continued attention to changes in the fund procurement environment is necessary.

Since auto leasing contracts extend over long periods of three to five years, deterioration in business performance or bankruptcy of business partners due to economic fluctuations, etc., may affect business results. As the Group's main customers are small- and medium-sized companies, credit risk tends to increase during economic downturns. The Group seeks to minimize credit risk through rigorous screening at the start of transactions, setting credit limits, and monitoring business conditions after transactions begin.

Vehicles are sold in the used car market after lease expiration, and if the actual disposal price falls below the estimated residual value set at the time of the original contract due to deterioration in used car market conditions, business results would be affected. While estimated residual values are set conservatively taking into account past and current market trends, there is a risk that the Group may not be able to fully respond to sudden market changes. Since Auto Leasing is the Group's core business, the impact of this risk is relatively significant.

The auto leasing market is subject to competition from numerous industry peers, and the Group targets small- and medium-sized companies while differentiating itself through enhanced maintenance services. However, if new entrants target the Group's customer base or excessive price competition occurs, profitability could decline, affecting business results. Maintaining a differentiation strategy versus major auto leasing companies is key to sustaining competitive advantage.

Maintenance consumable parts (tires, engine oil, etc.) and fuel sales in the Auto Leasing-Related Business, as well as raw materials in the Chemical Business, are primarily petroleum-based, and procurement costs increase when crude oil prices rise. If price increases are not passed on to sales prices in a timely manner, business results in each segment would be affected. The Group seeks to reduce this risk by continuously monitoring changes in procurement prices and reflecting them in sales price decisions.

Each business is conducted based on current laws, tax, and accounting systems, and significant changes to these systems could affect business results. In particular, if mandatory application of IFRS is realized, the method of recognizing lease assets, among other things, would change, potentially causing a material impact on financial position and business results. The Group continuously gathers information and conducts studies to prepare for regulatory changes.

The Group pursues M&A aimed at expanding core businesses and cultivating new businesses, but if the initially anticipated earnings effects are not achieved, impairment of goodwill and similar losses may occur, affecting business results and financial position. Although target companies are selected after carefully verifying that cumulative earnings over a certain period will exceed the goodwill amount before executing an M&A, the risk that the assumed scenario may collapse due to changes in the business environment cannot be eliminated.

The Chemical Business (Synthetic Resin Business) sells synthetic resin products to amusement equipment manufacturers, and changes in demand for amusement equipment due to the Act on Control and Improvement of Amusement Business, etc., National Public Safety Commission regulations, prefectural ordinances, and industry self-regulation may affect business results. If the number of amusement equipment units produced decreases due to tightened regulations or stricter self-regulation, there is a risk that sales volume of synthetic resin products would directly decline.

The impact of large-scale disasters on business activities, as well as increases in raw material and energy costs associated with stricter climate change-related regulations, may affect business results. There are also concerns about impacts on the goods procurement supply chain. The Group has built a framework in which the Compliance and Risk Management Committee identifies issues and discusses countermeasures, with the Board of Directors overseeing, evaluating, and managing the process.