FUJITA KANKO INC.

The Group holds marketable securities totaling ¥16,500 million, mainly in business partners, and is exposed to equity price fluctuation risk. As of the end of the current consolidated fiscal year, these holdings are in an unrealized gain position, but depending on future stock price trends, this could adversely affect the Group's business results and financial position. The company has indicated a policy of striving to recognize and address this risk.

The Group held tangible fixed assets such as hotel buildings totaling ¥51,200 million as of the end of the current consolidated fiscal year. If real estate values decline beyond a certain scale or business profitability deteriorates in the future, an impairment loss may be recognized on a portion of the tangible fixed assets. Since the profitability of the hotel business is directly linked to maintaining the book value of fixed assets, the financial impact could be significant in a business downturn.

In the hotel business, including Washington Hotel, the Group leases real estate under long-term contracts. If continued use becomes difficult due to the bankruptcy or other issues of the property owner, it could adversely affect business results. Additionally, if the Group decides to terminate a lease early, a portion of the unexpired rent of ¥65,300 million for the remaining contract period could result in an obligation to pay or compensate the rent. The potential financial burden inherent in long-term lease agreements is extremely large, constraining the flexibility of business strategy.

In the event of natural disasters such as major earthquakes, volcanic eruptions, typhoons, or abnormal weather, or epidemic diseases such as COVID-19 or new strains of influenza, temporary suspension of operations, cancellation of travel, and a decline in inbound demand may occur, adversely affecting the Group's financial position and business results. For the Group, whose core business is hotels and tourism, sudden changes in the external environment represent a structural vulnerability that directly impacts revenue. The company has indicated a policy of making maximum efforts to avoid such risks and to respond when they occur.

The Group continues to operate ancillary businesses such as roads, water infrastructure, and real estate management associated with past real estate subdivision development businesses, many of which are low-profit or unprofitable. If a decision is made to withdraw from these businesses, a corresponding loss may be temporarily incurred. While the disposal of unprofitable businesses could contribute to improved finances, the withdrawal costs carry the risk of depressing short-term business results.

In the Group's hotel and restaurant businesses, should an accident such as food poisoning occur, it could damage customer trust and lead to a temporary suspension of operations. While the company states that it pays sufficient attention to health and safety, an accident could affect business results through brand damage and reduced sales. No specific countermeasures such as recurrence prevention measures are disclosed in the securities report.

Of the ¥27,600 million in borrowings as of the end of the current consolidated fiscal year, ¥9,300 million is floating-rate debt. If yen interest rates rise in the future due to a domestic economic recovery or other factors, this could result in increased interest expenses. Floating-rate borrowings account for approximately 33% of total borrowings, meaning changes in the interest rate environment have a direct impact on financial expenses.

The Group's revenues, expenses, receivables, and payables arising from overseas business operations are denominated in foreign currencies, and the Group may be affected by exchange rate fluctuations when translating the financial statements of overseas consolidated subsidiaries into Japanese yen. In a yen appreciation phase, yen-converted revenue from overseas operations would decrease, potentially adversely affecting consolidated business results. No specific countermeasures such as hedging methods are disclosed in the securities report.