MARUZEN CO.,LTD.

The Group's primary customers are in the food service and prepared food industries, and the general restaurant market, its largest market, may see a significant decline in private-sector capital investment if business closures are prolonged due to external factors such as deteriorating economic conditions, BSE, or infectious disease outbreaks, which could affect the Group's operating results and financial condition. As a countermeasure, the Group seeks to avoid this risk by diversifying its customer base across various industries, including welfare and long-term care facilities and the prepared food industry.

The Group strives to ensure product safety and quality through measures such as strengthening its internal inspection system, but should a problem occur, it could affect operating results and financial condition. In 2003, a recall was conducted for one model, and the search for a portion of unaccounted units is still ongoing. As a countermeasure, the Group has strengthened inspection of finished products, conducting unit-by-unit inspection for gas equipment.

The Group is subject to a wide range of legal regulations, including the Product Liability Act, the Consumer Product Safety Act, and the Electrical Appliance and Material Safety Act, and changes to or strengthening of these regulations, or the enforcement of unforeseen new regulations, could affect the Group's operating results and financial condition. As a countermeasure, each department—head office, sales, factories, R&D, and logistics—participates in seminars hosted by specialized industry organizations to gather information early, and consults with the accounting auditor, legal counsel, and tax advisors to respond to regulatory changes.

As a manufacturer, the Group sells both its own products and sourced products, but maintaining a high proportion of in-house product sales is key to securing profits, and if this proportion declines significantly for any reason, it could affect operating results and financial condition. As a countermeasure, the Group leverages its industry-leading, extensive and diverse lineup of proprietary in-house products and its price competitiveness to strengthen sales of in-house products.

In procuring materials such as steel and parts, a surge in crude oil and raw material prices is expected to prompt requests from suppliers to raise purchase prices, and if market prices surge significantly and it is difficult to pass the increase on to sales prices, this could affect operating results and financial condition. As a countermeasure, the Group continuously monitors market prices while conducting price negotiations as needed, considers selecting new suppliers, and, when profit cannot be secured through internal efforts alone, seeks to avoid the risk by passing the increase on to sales prices.

The Group's manufacturing plants are located at four sites in Fukuoka, Aomori, Saitama, and Hyogo prefectures, and if a disaster or infectious disease outbreak occurs in these regions and production cannot be adequately covered by other plants, this could disrupt not only production activities but also sales activities, affecting operating results and financial condition. As a countermeasure, the Group reduces risk by establishing production systems at other plants outside the affected area and diversifying sales activities geographically in the event of a disaster, and by restricting the flow of people through measures such as remote work and staggered commuting during infectious disease outbreaks.