TOKAI Corp.

Amendments to the Long-Term Care Insurance Act (once every three years) and revisions to medical service fees and drug prices (once every two years and annually, respectively) may significantly change the revenue structure of the welfare equipment rental services in the Silver business and the dispensing pharmacy business. In addition, the hospital-related business, food service business, and cleaning business serving medical institutions and long-term care welfare facilities face the risk of indirect impact through deterioration in the business conditions of their customers. As countermeasures, the Company continues to gather information from relevant government ministries and industry associations, and seeks to minimize the impact through the execution of business strategies based on the medium-term management plan.

Most of the revenue in the dispensing pharmacy business comes from insurance-covered dispensing sales, and depending on the content of the biennial revisions to medical service fees and the annual drug price revisions, the revenue structure could change significantly. The high degree of dependence on the insurance system is a risk factor that undermines the stability of revenue. The Company addresses this by gathering information from relevant government ministries and industry associations and executing its business strategies.

Many of the Group's businesses depend on "the provision of services and products through people," and if the Group is unable to secure the necessary personnel amid an increasingly severe labor shortage, this could result in lost business opportunities in key operations and increased labor costs associated with improving working conditions, either of which could affect business performance. Securing specialized personnel who support medical and long-term care settings (such as pharmacists) is a particularly important challenge. The Company addresses this by focusing on developing a work environment where diverse personnel can thrive, actively recruiting, and developing human resources, as well as by promoting DX to improve operational efficiency and productivity.