IMURAYA GROUP CO., LTD.

Products in the distribution business have a high proportion of seasonal items and are susceptible to abnormal weather and abnormal temperatures during the sales period. In addition, since agricultural-derived raw materials such as azuki beans and sugar, which are key ingredients, are affected by market conditions, rising raw material costs could pressure business performance. As countermeasures, the Group is strengthening collaboration with suppliers, selecting global procurement sources, and improving order accuracy through demand forecasting.

The main sales channels for heated products such as "Nikuman" (steamed pork buns) and "Anman" (steamed sweet bean buns) are a small number of major convenience store chains, and changes in the business policies or sales strategies of these channels could directly impact the Group's business performance. In addition, the confectionery and food sector has low barriers to entry, presenting risks of competitors entering with similar products and intensifying price competition. As countermeasures, the Group is working to develop new sales channels including major supermarkets, and to reduce dependence through expansion into various product categories.

Long-selling products such as "Azuki Bar," "Mizu Yokan" (chilled sweet bean jelly), "Yude Azuki" (boiled sweet red beans), and "Nikuman/Anman" account for the core of sales, but in an industry where product cycles are shortening, continuous development of new products that meet market needs is required. The confectionery and food sector has low barriers related to patent rights, making new entrants and the sale of similar products relatively easy, and intensifying price competition with competitors could affect business performance. The Group has adopted a policy of responding to competition through differentiation and improvements in technology and service.

If a product incident or quality complaint occurs, it could lead to a decline in customer trust and the spread of negative reputation, potentially affecting business performance and financial condition. FSSC22000 certification was obtained at the Imuraya Foods Nane Plant (FY2014) and at all Imuraya Co., Ltd. plants (FY2015), and the Group strives to establish traceability and enhance the inspection system for raw materials used; however, product incidents due to accidental causes or events beyond the expected scope cannot be ruled out. The Group works to reduce risk by taking out liability insurance.

Since production, sales, and management information is managed by computer, and customer information is held through route sales, mail-order sales, and consumer campaigns, there is a risk of information leakage due to computer virus infection or hacking. If information leaks to the outside, it could lead to a decline in the Group's credibility and affect business performance and financial condition. The Group responds by establishing systems such as antivirus software and strengthening information control systems.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on pension assets; if actual results differ from these assumptions or the assumptions are changed, the cumulative effect could impact future expenses and obligations. In particular, a decline in the discount rate or deterioration in investment returns could affect business performance and financial condition. The Group responds through moderate diversification of investments and investing in highly safe investment vehicles.

If the value of held assets such as land and investment securities declines based on market prices, etc., it could affect business performance and financial condition. There is also a risk of impairment arising from the failure to achieve business plans at acquired or established subsidiaries, or from a sharp rise in interest rates. The Group responds through deliberation on appropriate pricing at management meetings and regular monitoring aimed at realizing synergies.

In overseas businesses conducted in China, the United States, and Malaysia, if sales cannot be achieved as planned due to local consumption trends, etc., it could affect business performance and financial condition. Risks such as trade regulations, the occurrence of war, conflict, or civil unrest, as well as market changes and insufficient technology and know-how regarding local markets, are also recognized as challenges. The Group responds through appropriate diversification of countries of entry, phased implementation of investments, and value creation through external partnerships.

Fluctuations in foreign exchange rates and interest rates could cause a slowdown in overseas business activities and affect the yen-converted results of overseas subsidiaries. In particular, for the Group, which has multiple overseas locations (China, the United States, and Malaysia), foreign exchange fluctuations directly affect consolidated business performance. The Group responds through forward exchange contracts, swaps from floating to fixed interest rates, and fundraising in countries with low foreign exchange fluctuation risk.

Changes in laws, regulations, or policies related to import restrictions, antitrust, patents, consumer protection, raw materials used, taxation, environmental recycling, and other areas could affect business operations and performance, and the content and extent of such changes are difficult to predict and beyond the Company's control. The Group responds through information gathering via participation in various industry associations, and through strengthening risk management, developing systems, and providing employee education via various meetings.