SUBARU CO., LTD.

Due to the absolute decrease in the school-age population resulting from the declining birthrate, the cram school (juku) industry as a whole faces a structural contraction in demand. In addition to weakening motivation to attend cram schools due to the simplification of entrance examinations, intensifying competition among companies for student acquisition compounds the issue, potentially causing continued adverse effects on business performance. No company-specific countermeasures are disclosed in the securities report.

The Company owns numerous properties, and total interest-bearing debt at the end of the fiscal year under review amounted to ¥1,691 million. Depending on future changes in interest rate conditions (a rising interest rate environment), interest payment burdens may increase, potentially adversely affecting business results. The securities report does not disclose specific hedging measures or other countermeasures.

The Company holds personal information of numerous students and guardians for the purposes of instruction and student recruitment. Should any leakage occur for any reason, it could lead to a loss of social trust and have a material impact on business performance. Although insurance has been contracted as a risk mitigation measure, preventing the leakage itself remains the fundamental challenge.

In the fiscal year under review, the Company recorded an impairment loss of ¥47 million on land, buildings, and other assets at certain classrooms due to declines in land prices and other factors. If operating income deteriorates further due to future declines in land prices or intensifying competition stemming from the declining birthrate, additional impairment losses may occur, potentially affecting the Company's financial position and business results.

While social activities are normalizing following the reclassification of COVID-19 to Category V under the Infectious Diseases Control Law, a resurgence of this disease or the outbreak of a new infectious disease could lead to a declaration of a state of emergency, forcing the suspension or scaling-back of classroom operations and affecting business performance. If this were to coincide with prolonged stagnation of the domestic economy, the impact could be further magnified.