NAC CO.,LTD.

The Company has entered into a franchise agreement with Duskin, and the proportion of borrowed/purchased products, etc. from Duskin within the ¥8,909 million cost of sales of the rental business for FY2026 (ending March 2026) reaches 41.75%. High dependence on a specific business partner carries the risk of directly affecting business continuity in the event of a deterioration in the relationship with Duskin or a change in supply conditions. The Company is seeking to strengthen the relationship through a capital and business alliance (concluded in August 2018), but the high degree of dependence itself remains a structural risk.

The Company entered into a capital and business alliance agreement with Duskin on August 30, 2018, and expects to gain synergies through the franchise business. However, there is a risk that expected earnings may not be achieved due to deterioration of the business environment or other factors, which could adversely affect the Company's business results and financial position. Whether the effects of the alliance can be realized has a significant impact on the overall performance of the Company's group, making this an item requiring continuous monitoring.

The Company's group is subject to a wide range of legal regulations, including the housing business (Construction Business Act, Building Standards Act, Real Estate Brokerage Act, etc.), the Cuchula (Cuclr) business (Food Sanitation Act, Act against Unjustifiable Premiums and Misleading Representations, etc.), the beauty and health business (Act on Specified Commercial Transactions, Pharmaceutical Affairs Act, etc.), and other businesses (import-related laws, Liquor Tax Act, etc.). If any new establishment, revision, or abolition of these laws and regulations occurs, or if any violation occurs, it may affect the Company's business results. Although legal compliance is thoroughly enforced mainly by the legal department, the breadth of the business scope also means the scope of regulatory risk is broad.

The housing business is susceptible to various macroeconomic factors such as personal consumption trends, interest rate trends, land price trends, housing-related policies, tax system trends including consumption tax, rent market conditions, and regional economic trends. If these business conditions deteriorate, it may affect business results through a decline in housing demand or worsening profitability. In particular, rising interest rate phases or stagnation in regional economies directly suppress the desire to purchase housing, making this a risk factor requiring close monitoring.

In the housing business, if prices of major structural materials such as plywood and lumber rise sharply, it may adversely affect business results through an increase in procurement costs. Material prices are also affected by international market conditions and exchange rate trends, so the risk of price fluctuations due to external factors continues to exist. There is no explicit description in the securities report regarding the Company's countermeasures, and whether cost pass-through is possible will affect profitability.

In the Cuchula (Cuclr) business, a quality control system based on HACCP has been established, but if quality problems occur with product water or water dispensers, business results may be affected through a decline in trust and other factors. In the housing business, there is a risk of significant expenses arising if liability for non-conformity with contracts exceeding expectations occurs, and in the beauty and health business, although regular on-site inspections of outsourced manufacturers are conducted, there is a risk of brand damage if product quality problems occur. Quality risks spanning multiple businesses could spread to affect the credibility of the entire group.

The Cuchula (Cuclr) business has approximately 400 franchisees nationwide, comprising both franchisees that manufacture products and those that only engage in sales. If problems occur at franchisees regarding quality control or sales, it may affect the Company's business results through deterioration of brand image. The Company provides know-how and products to franchisees, but there are limits to directly controlling franchisee behavior, making indirect risk management a challenge.

In the Cuchula (Cuclr) business, the import price of water dispensers is mainly denominated in Korean won, and if the yen depreciates more than expected, procurement costs may rise and affect business results. The Company implements risk hedging using forward exchange contracts and other means as necessary, but there remains a risk that hedging may not function sufficiently during sudden exchange rate fluctuations. In a phase of continued yen depreciation, rising import costs may continuously pressure profitability.

The construction consulting business has local construction companies as its main customers, and if there is a general deterioration in economic conditions or credit concerns arise regarding business partners, it may become necessary to increase the allowance for doubtful accounts. Local construction companies are highly susceptible to economic fluctuations and construction market conditions, making them a customer segment prone to concentrated credit risk. A substantial increase in the allowance for doubtful accounts would directly pressure current period profit, raising concerns about the impact on the financial position.

The Company's group holds a large amount of personal information and is working to ensure thorough protection through the establishment of regulations and employee training. However, in the unlikely event that a leak of personal information occurs, it may affect business results through a decline in trust and other factors. With the progress of digitalization, threats such as cyberattacks are also increasing, requiring continuous strengthening of the information security system.