Primo Global Holdings Co., Ltd.

The population of marriageable age in Japan is projected to continue declining due to the falling birthrate, which may affect business performance and financial condition over the medium to long term through a contraction of the domestic bridal jewelry market. As a countermeasure, the Group has pursued overseas expansion into Hong Kong, mainland China, and Singapore starting with its entry into Taiwan in 2007, while in Japan it is diversifying its business foundation through tie-ups with bridal companies and the development of non-bridal products for existing customers.

The prices of bridal jewelry products are linked to international commodity market prices for diamonds, platinum, gold, and other materials, and rapid price fluctuations may temporarily affect business performance and financial condition. Although a system for timely price pass-through has been established, there is a risk that the company may not be able to respond promptly to sudden changes caused by shifts in supply volume or economic trends. The Group strives to maintain appropriate price levels by maintaining close relationships with suppliers and continuously monitoring market trends.

Raw materials such as diamonds are purchased mainly in U.S. dollars, and the financial statements of overseas subsidiaries are translated into yen upon consolidation, so exchange rate fluctuations directly and indirectly affect business performance. Although there is a natural hedge between domestic U.S. dollar-denominated purchases and foreign currency-denominated sales in the Overseas Business, significant fluctuations in the value of each currency against the yen may affect business performance and financial condition.

As of the end of the consolidated fiscal year ended August 2025, the ratio of borrowings to consolidated total assets reached 29.3%, and since the Group holds principal subject to variable interest rates, financial costs may increase when market interest rates rise. There is also a risk that existing borrowings may constrain new borrowing or refinancing, and a competitive disadvantage may arise relative to competitors with stronger financial positions. The Group strives to build stable fundraising relationships by securing sufficient liquidity on hand and regularly disclosing financial and management information to its correspondent financial institutions.

Amid a worsening domestic labor shortage due to the declining birthrate, there is a risk that it will become difficult to secure personnel capable of delivering high-quality customer service. If the Group is unable to secure sufficient personnel with the necessary capabilities due to intensifying competition for talent, business performance may be affected through a decline in service quality. As a countermeasure, the Group hires most of its employees as full-time staff and provides long-term development of hospitality-oriented personnel through its proprietary 10-year education program, Primo College (Talent Development Program).

Integral Corporation and its group hold 24.9% of the Company's shares, and depending on their future holding or disposal policy, this may affect the liquidity of the Company's shares and share price formation. In addition, as long as Integral Corporation continues to hold the shares, it may have a significant influence on resolutions at shareholders' meetings, such as the election and dismissal of officers, organizational restructuring, and amendments to the articles of incorporation. The Company has been informed by Integral Corporation that it intends to dispose of the shares using methods that minimize the impact on market price, but the specific timing and method of disposal have not been determined.

As of the end of the current consolidated fiscal year, goodwill amounted to ¥16,491 million (35.9% of total assets), and under IFRS, as a non-amortizable asset, it is subject to an impairment test every period. The recoverable amount would equal the carrying amount if estimated future cash flows declined by 74.4% in the Domestic Business or by 67.8% in the Overseas Business, meaning that a decline in business profitability could result in a substantial impairment loss. As a countermeasure, the Group is working to improve its earnings structure and stabilize its financial foundation.

The Group operates businesses in Taiwan, Hong Kong, mainland China, and Singapore, and business performance and financial condition may be affected if political or economic conditions in these markets deteriorate, if political upheaval, terrorism, or war occurs, or if the Group fails to respond promptly to rapidly changing local market conditions. As the proportion of overseas business is expected to increase, the materialization of country risk has a structure in which the impact on the overall business could expand. The Group strives to gather information on political and fiscal conditions, changes in laws and regulations, conflicts, and other matters, and to identify political instability at an early stage.

The Group holds a large volume of customers' personal information through its select-order services and proprietary membership program operations, and if an information leak were to occur, business performance and financial condition could be affected through claims for damages or a decline in reputation. Although the Group has implemented security measures based on the Act on the Protection of Personal Information and related laws and regulations, responding to external threats such as cyberattacks remains a challenge.

The Group utilizes information systems for customer management, inventory management, and store operations, and if a failure occurs due to a program defect, computer virus, cyberattack, or other cause, business performance may be affected through disruption to store operations, loss of important data, and the incurrence of response costs. In addition, continuous system investment is necessary to maintain competitiveness, and if development is delayed, fails, or encounters problems such that the expected effects are not achieved, business performance and financial condition may also be affected. The Group addresses these risks through the establishment of its Information Security Management Regulations and the development and maintenance of a highly reliable in-house development system.