BAROQUE JAPAN LIMITED

The apparel specialty store industry faces intense competition from domestic and overseas competitors, and because trends and preferences change rapidly with short product life cycles, delays in responding to customer needs or a decline in purchasing intent due to a sharp economic downturn may affect business performance. As a countermeasure, the Company has built a system to swiftly reflect customer needs in products through EC member data analysis and daily communication between store staff and customers.

Products are outsourced for production to manufacturers and sewing factories in Asian countries, primarily China, and if changes occur in the political situation or economic environment of the production countries, or if war, terrorism, or natural disasters occur, procurement may be disrupted, potentially affecting business performance. As a countermeasure, the Company strives to build a stable product supply system by diversifying production bases across multiple countries.

Given the procurement structure centered on production outsourcing to Asian countries, sharp fluctuations in exchange rates directly affect procurement costs and may worsen business performance. As a countermeasure, the Company states that it will consider appropriate foreign exchange hedging measures to mitigate risk.

If core systems, information systems, EC sites, etc. experience system malfunctions due to cyberattacks or other causes, it may become difficult to continue business operations, potentially affecting business performance. As a countermeasure, the Company implements enhanced security to prevent unauthorized external access, encryption and backup of critical information, and thorough information security education and awareness-raising for employees.

The Company has received an investment of 20.11% of its issued shares (excluding treasury shares) from MUTUAL CROWN LIMITED, a wholly-owned subsidiary of Belle, and if there is a change in the business alliance policy with Belle, it may affect the business of the Company's group. As a countermeasure, the Company strives to maintain a good relationship with Belle and has taken measures to continue the brand license and exclusive sales agency agreement for 10 years.

If commercial facilities where stores are located in Japan and overseas reduce operating hours or temporarily close due to the impact of a large-scale infectious disease, sales may decline and adversely affect business performance, and if the situation expands or becomes prolonged, profitability may also be affected. As a countermeasure, the Company is working on building infection control measures and a management system for product movement, etc., in response to pandemics.

If the Company is unable to adequately respond to stricter regulations related to environmental impact, such as reductions in greenhouse gas emissions, or to rising consumer environmental awareness, social trust may decline and affect business performance. As a countermeasure, the Company promotes initiatives to reduce environmental impact, such as the use of recycled materials and plastic reduction.

The occurrence of natural disasters or accidents may cause business activities such as store operations, logistics, and production outsourcing partners to be suspended or restricted. This is listed in the securities report as a general business risk, with no detailed description of specific countermeasures.

If a production outsourcing partner, supplier, or other business partner becomes insolvent, it may result in a halt in product procurement or an inability to collect accounts receivable, potentially affecting business performance. This is listed in the securities report as a general business risk, with no detailed description of specific countermeasures.

Changes in legal regulations or the occurrence of litigation in Japan or overseas may impose constraints on business operations and affect business performance. This is listed in the securities report as a general business risk, with no detailed description of specific countermeasures.