KU HOLDINGS CO.,LTD.

The Group operates under authorized dealer agreements concluded with importers of Western imported car brands. If, for any reason, a dealership agreement cannot be continued, the Group would become unable to conduct business as an authorized dealer, which could have a material impact on its results of operations. While the Group states that its current relationships with importers are favorable, there is a risk that continuation of these agreements also depends on the intentions of the counterparties.

The Group is significantly affected by factors such as the timing of new model announcements and releases, model changeovers, buyer reluctance stemming from manufacturer vehicle recalls or serious misconduct, and trends in manufacturers' supply systems. The Group has reduced its dependence on any single brand through a multi-brand structure spanning its domestic vehicle sales business and imported vehicle dealership business, but changes in the market environment affecting the industry as a whole directly impact its business results. In particular, supply constraints and misconduct issues originating from manufacturers are risks beyond the Group's control.

With the declining birthrate, competition to acquire talent is expected to intensify, potentially making it difficult to secure excellent personnel, particularly sales and mechanic staff. A shortage of personnel could hinder the smooth transfer of skills and know-how, posing a risk to future business results. The Group is responding by strengthening new graduate recruitment activities and actively pursuing mid-career hiring as well, but there are concerns about rising recruitment costs.

The Group has its main stores concentrated in the southern Kanto region, centered on Machida City, Tokyo. In the event of a large-scale earthquake directly beneath the capital, damage to inventory and disruption to daily business operations could occur, potentially affecting business results and financial condition. Amid this geographic concentration risk, the Group has implemented measures such as introducing a safety confirmation system and formulating a business continuity plan (BCP), but there are limits to ensuring business continuity in the event of a large-scale disaster.

In the event of a global emergency such as a novel coronavirus infection, business operations themselves could become difficult due to decreased sales resulting from behavioral restrictions, and supply delays caused by overseas lockdowns or manufacturer plant shutdowns. Such events pose a risk of significantly impacting the Group's business results and financial condition. The spread of infectious diseases is a factor beyond the Group's control, and this risk is characterized by its wide-ranging impact across the entire business.

The Group is subject to regulation under numerous laws and regulations, including the Secondhand Articles Dealer Act and the Road Transport Vehicle Act, as well as regulations concerning vehicle registration and transport, the collection of end-of-life vehicles, insurance solicitation, and various taxes. Should these laws and regulations be revised or abolished, or should new legal regulations be established in the future, this could affect the Group's business results. The Group strives to ensure legal compliance through information gathering via memberships in various industry associations, as well as employee training and structural development, but there is a risk of costs arising from responding to changes in the regulatory environment.

The Group handles customers' personal information and confidential information. If such information were to leak externally due to misconduct or negligence, this could undermine trust in the Group and affect its business results. While the Group has established internal regulations and management systems to implement strict information management, it is difficult to completely eliminate risks such as cyberattacks or internal misconduct. Information leakage is a significant risk that could also lead to legal liability and customer attrition.