YUKIGUNI FACTORY CO.,LTD.

If product incidents such as foreign object contamination or mislabeling occur, this may affect the financial position and operating results through health damage to consumers and erosion of social credibility. Although the Company has established a system for conducting heavy metal, pesticide, radioactivity, and hygiene inspections, along with a corrective follow-up system through the Quality Assurance Department, risks remain that cannot be fully addressed in cases of accidental events or situations beyond the scope of these initiatives. The Company also provides technical guidance, conducts planned audits, and performs shipment inspections for external manufacturing contractors to prevent recurrence.

With 21 domestic sites and 1 overseas site in the Netherlands, if a large-scale natural disaster such as an earthquake or storm/flood damage causes destruction of production facilities or paralysis of logistics functions, this may have a material impact on the financial position and operating results. The Company has established an initial response manual and recovery process manual assuming a large-scale earthquake targeting Maitake production sites, and conducts disaster drills using a safety confirmation system. However, the risk cannot be eliminated in cases where damage exceeds the scope anticipated by crisis management measures.

As of the end of March 2026, the consolidated amount of goodwill recorded was ¥5,469 million (14.5% of total assets), and under IFRS, goodwill is treated as a non-amortizing asset subject to an impairment test every period. If business profitability declines, an impairment loss may occur, potentially affecting the financial position and operating results. On a non-consolidated financial statement basis, a balance of ¥16,627 million is recorded under 20-year amortization, and the Company is working to reduce this risk by strengthening business profitability.

As of the end of March 2026, the interest-bearing debt ratio (borrowings + current portion of long-term borrowings due within one year + lease liabilities ÷ total equity) stood at a high level of 107%, and rising interest rates or breach of financial covenants may have a material impact on the financial position. If financial covenants are breached, there is a risk that the Company could lose the benefit of the term at the lender's request and be required to make immediate repayment. To mitigate interest rate risk, the Company has entered into loan agreements with fixed interest rates.

There is a risk that labor costs will increase due to intensifying competition for human resources amid a declining workforce and wage increase pressure driven by rising prices. In addition, since the Company employs a large number of foreign technical intern trainees, the abolition of the Technical Intern Training Program and transition to a new system may worsen labor shortages at production sites. Although the Company implements thorough new graduate and mid-career recruitment based on hiring plans, tiered training programs, and follow-up through employee surveys, business activities could be significantly affected if recruitment becomes difficult or personnel attrition occurs.

Core operations such as order receipt, production, and shipping depend on information systems, and if core systems are halted due to cyberattacks, unauthorized access, ransomware infection, or similar incidents, this may affect the financial position and operating results through operational disruption, impact on the supply chain, and erosion of social credibility from customer information leaks. As countermeasures, the Company has implemented multi-layered data backups, introduced EDR, established a 24-hour monitoring system, conducted vulnerability assessments, and provided security training for employees.

There is a risk that market share may decline due to the shrinking domestic food market driven by the declining birthrate and aging population, downward price pressure from increased production by competitors, and changes in consumer needs. Furthermore, since Maitake mushrooms account for approximately half of revenue, reflecting a heavy reliance on a key product, a significant decline in Maitake demand would directly affect the financial position and operating results. Although the Company is diversifying revenue sources through innovation in production technology, functional research, and development of value-added products (such as mushroom-based meat substitutes), responding to changes in market conditions remains a challenge.

Rising raw material costs due to soaring crude oil prices associated with climate change, as well as the impact of changing consumer preferences on sales trends, may affect the financial position and operating results. In addition, since demand for mushrooms is influenced by general vegetable market conditions, a prolonged downturn in vegetable markets caused by climate and weather conditions poses a risk of directly impacting business performance. The Company has expressed support for the TCFD recommendations, established a Sustainability Promotion Committee, introduced a GHG emissions calculation system, and switched to renewable energy-derived electricity at major production sites, targeting net zero by FY2050.

Handling of raw materials, wastewater, odor, and other factors in production activities may affect the surrounding environment, and if environmental regulations are tightened or concerns are raised by local residents, this may necessitate additional capital investment or constraints on business activities. In response, the Company complies with relevant laws and regulations, maintains facilities, and engages in dialogue with government agencies and local stakeholders; however, depending on the content and extent of regulatory tightening, this may affect the financial position and reputation.

Shinmei Holdings Co., Ltd. holds 50.05% of the Company's issued shares, giving it significant influence over shareholder resolutions such as the appointment and dismissal of officers. There is a risk that if Shinmei Holdings changes its management policy or shareholding policy in the future, this could affect the liquidity of the Company's shares and share price formation. To protect minority shareholders, the Company has established a Nomination and Compensation Committee with a majority of independent outside directors, a Special Committee composed of independent outside directors to deliberate and confirm the appropriateness of related party transactions, and a management framework based on resolutions of the Board of Directors.