MINATO HOLDINGS INC.

In addition to intense price competition in the electrical equipment, electronic components, and ICT-related markets, there is a possibility that requests for price reductions on delivered goods may arise from major electrical equipment manufacturers and others. In addition, foreign currency-denominated operating receivables and payables in Digital Devices and ICT Products are affected by exchange rate fluctuations, and in the event of sharp exchange rate movements, it may become difficult to pass on purchase price increases to selling prices. Although measures such as derivative transactions are being implemented, if price decline pressure or exchange rate fluctuations exceed expectations, profitability may be impaired, potentially affecting business results.

In each of the semiconductor-related, electronic component, ICT, promotion, and digital content markets, there are numerous domestic and overseas competitors, and price competition may intensify in areas where differentiation is difficult. If there are rapid changes in the market environment, the introduction of new products or services by competitors, or changes in customer needs, there is a risk that the competitiveness and market share of the Group may decline. The Group responds through comprehensive solution provision leveraging collaboration among Group companies, but the impact on business results cannot be entirely eliminated.

In the semiconductor, electronic equipment, ICT, system development, and digital content-related markets, the pace of technological innovation is rapid and customer needs are diversifying. If disruptive innovation occurs at existing companies or new market entrants, or if the Group fails to accurately capture changes in market needs and cannot introduce effective products or services in a timely manner, the competitive advantage of existing products and services may decline. The Group is engaged in continuous market trend research and collaboration with companies possessing technological capabilities, but delays in responding to technological changes may affect business results.

Semiconductor-related products such as DRAM and NAND in Digital Devices, as well as various digital devices in ICT Products, may experience sharp fluctuations in prices and procurement environments due to global supply-demand fluctuations, raw material price fluctuations, rising logistics costs, geopolitical risks, and trade policies of various countries. If price fluctuations or supply constraints beyond expectations occur, the stable supply of products and merchandise, as well as profitability, may be impaired. The Group responds through appropriate pass-through of prices to selling prices, diversification of suppliers, and thorough inventory management, but cannot entirely avoid the impact of external factors.

The Group is actively pursuing M&A and business alliances toward realizing its "Digital Consortium Concept," and in recent years the number of consolidated subsidiaries and business areas has expanded. If expected synergies are not achieved due to the occurrence of contingent liabilities at target companies, the departure of key personnel, or failure to achieve planned business progress, impairment losses on goodwill may occur, potentially affecting business results and future business development. Risk assessment is conducted through due diligence, but it may be difficult to respond to subsequent changes in the environment.

As the number of consolidated subsidiaries increases through M&A and business areas expand into semiconductors, electronic equipment, ICT, system development, and music and video content, strengthening group management, internal controls, and compliance systems centered on the holding company has become an important issue. If the rapid expansion of business or increase in consolidated subsidiaries outpaces the establishment of sufficient internal management systems, it may become difficult to ensure appropriate business operations, compliance, and timely and appropriate financial reporting. The Group promotes internal control reviews prior to acquisitions and the establishment of management systems after acquisitions, but the risk of delays in system establishment remains.

To meet funding needs for capital expenditures, M&A, global expansion, and other purposes, the Group relies on borrowings from financial institutions and equity financing, but there is a possibility that procuring funds under expected terms may become difficult due to sudden fluctuations in financial markets, rising interest rates, deteriorating business performance, or changes in the credit policies of financial institutions. If fund procurement costs or interest burdens increase, there is a risk of impact on cash flow, business results, and financial position. The Group strives to manage liquidity through the use of multi-year commitment line agreements and the consolidation of Group funds at the holding company.

The Group handles important information such as customer information, business partner information, personal information, and confidential information across a wide range of business activities, and there is a risk that information leakage, tampering, or service disruption may occur due to cyberattacks, unauthorized access, computer virus infection, human error, or inadequate management by outsourcing partners. If an information leak or similar incident occurs, it may affect business results and financial position through damages, administrative penalties, or loss of credibility. The Group is working to establish information management systems, manage access privileges, provide employee training, and implement security measures.

In businesses such as system development, advertising production, digital content production, video editing, and music content, securing and developing IT personnel and creative personnel with advanced technical, planning, and production capabilities is essential, but there is a possibility that securing the necessary personnel may become difficult due to intensifying competition for talent and changes in employment conditions. As the number of Group companies increases through M&A, delays in organizational integration or declines in employee engagement may become constraining factors for competitiveness and business expansion. The Group is working to instill a group-wide human resource utilization policy while respecting the corporate culture of each company.

The Group is subject to a wide range of laws and regulations, including the Companies Act, the Financial Instruments and Exchange Act, the Act on the Protection of Personal Information, the Antimonopoly Act, import/export-related laws, and advertising-related laws, and as business areas expand, compliance with laws specific to each business, such as electrical wire, electronic components, system development, advertising and marketing, and music and video content, has become increasingly important. If there are revisions to laws and regulations or changes in their interpretation, or if a violation of laws occurs at the Group, its business partners, or outsourcing partners, it may affect business results and financial position through administrative penalties, damages, or loss of credibility. The Group is working to establish a compliance system, operate internal regulations, and provide employee training.