KIKUKAWAENTERPRISE, INC.

The performance of various manufacturing industries is affected by exchange rate fluctuations, tax systems, and international resource price trends, creating a risk that capital investment appetite, which is closely related to the Company's business, may fluctuate significantly. A slowdown in capital investment directly leads to a decrease in demand for the Company's manufacturing machinery and may adversely affect business performance. While the Company states that it strives to avoid this risk after recognizing its possibility of occurrence, specific details of countermeasures are not disclosed.

In export transactions of manufacturing machinery, a significant appreciation of the yen becomes a factor reducing international competitiveness, while a significant depreciation of the yen becomes a factor increasing procurement costs, meaning that movements in either direction may adversely affect business performance. This structure carries bidirectional exchange rate risk, and the impact becomes larger when the export ratio is high. Specific countermeasures such as hedging methods are not explicitly disclosed in the securities report.

Restrictions on economic activity accompanying international conflicts may adversely affect the Company's business performance. For the Company, which engages in export transactions, conflicts in specific regions could lead to lost sales opportunities and constraints on logistics and settlement. Specific countermeasures are not explicitly disclosed in the securities report.

The Company recognizes that it bears bad debt risk on accounts receivable from its customers, and depending on payment terms, this may adversely affect business performance. As countermeasures, the Company conducts credit management on an ongoing basis, monitors changes in customers' investment plans, and, when concerns about collection arise, sets up an allowance for doubtful accounts by individually assessing collectibility. However, despite the implementation of credit management, the risk of loss occurring remains depending on payment terms.

In the event of a large-scale natural disaster, production activities may be restricted or interrupted. As a risk mitigation measure, the Company constructed a new factory on elevated ground within Ise City in May 2012; however, it remains difficult to fully respond to unpredictable large-scale disasters. Damage to production facilities could lead to a halt in product supply, potentially causing delivery delays to customers and loss of sales opportunities.

The Company recognizes the risk of serious industrial accidents occurring involving equipment and machinery within its factories as well as manufacturing machinery delivered to customers. The Company states that it is necessary to thoroughly implement preventive safety education on an ongoing basis, and the occurrence of industrial accidents could lead to suspension of production activities, legal liability, and damage to corporate credibility. Specific details such as the content and frequency of safety education are not explicitly disclosed in the securities report.

Extended lead times for purchased components may cause shipment delays over a certain period, and since such projects account for a high proportion of annual net sales, period performance may fluctuate significantly from initial projections. Manufacturing machinery often forms part of plant equipment, and delays in parts procurement tend to have a ripple effect on the overall final delivery schedule. Specific countermeasures such as diversification of procurement sources are not explicitly disclosed in the securities report.

If delays occur in the construction plans of delivery destination factories, whether domestic or overseas, shipment of the Company's manufacturing machinery may be delayed, and period performance may fluctuate significantly from initial projections. The Company's manufacturing machinery often forms part of plant equipment, and changes in the customer's plans directly affect the timing of the Company's recognition of sales. Delays in projects that account for a high proportion of annual net sales have a particularly large impact on business performance.