CURVES HOLDINGS Co., Ltd.

In Japan, cooperative relationships with franchise operators are a precondition for business expansion, and there is a risk that store opening plans may deviate from targets due to troubles, contract terminations, or lawsuits with franchise operators, or a shortage of suitable candidate properties for new store openings. In addition, if corporate criticism or reputational damage becomes apparent against a backdrop of strengthened consumer protection, this could hinder the maintenance and expansion of membership numbers given the nature of the membership-based business, potentially affecting business performance. As a countermeasure, the company continues to provide management guidance and know-how to franchise operators.

Overseas, CI operates the Curves Business as a global franchisor in approximately 30 countries, and delays in royalty collection from master licensees in each country, or troubles, contract terminations, or lawsuits with masters, could affect business performance. In Europe, Curves Europe B.V. operates the franchise headquarters business in 8 countries including Spain, the United Kingdom, and Italy, and similarly bears risks related to cooperation with franchise operators. The company strives to maintain relationships through regular meetings and other forms of communication.

The Group's core business is "Curves, 30-Minute Health Fitness for Women Only," and the majority of sales depend on this business format. If willingness to invest in health declines due to economic downturn or major changes in the consumption environment, it may significantly affect business performance, since the new businesses "Men's Curves" and "Pinto-Up" are still in the process of multi-store expansion and cannot fully cover the shortfall through other business formats. The company is working to diversify business formats by advancing multi-store expansion of new businesses.

The raw materials for protein, a major product sold by the company, are imported from overseas, and if the yen depreciates or supply decreases due to bad weather in the countries of origin, soaring raw material prices could affect business performance. This represents a structure in which foreign exchange fluctuation risk and supply risk act in combination. The annual securities report does not describe specific countermeasures such as hedging methods.

As a customer-service business operating multiple stores, securing excellent personnel such as store managers and managers is essential to maintaining member satisfaction and acquiring members. If it becomes difficult to secure sufficient personnel suited to store management due to worsening recruitment difficulties or an increase in employee turnover, this could affect business performance through a decline in service quality. The company addresses this through planned recruitment and hiring activities and by establishing education systems for each business.

The Group may change its organizational form through business transfers, alliances, capital investments, M&A, establishment of subsidiaries, and other means, with the aim of enhancing corporate value and expanding into new business formats. If unexpected losses occur due to sudden changes in the market environment, or if acquired businesses or subsidiaries perform poorly, there is no guarantee that all management measures will achieve results as planned, which could affect business performance. The annual securities report does not provide detailed descriptions of specific countermeasures such as due diligence procedures.

The Group holds trademark rights (balance of ¥17,375 million at the end of the current consolidated fiscal year), other fixed assets, and shares of subsidiaries, and if impairment is recognized for stores with continuously negative operating income or closed stores, this could affect business performance. In addition, the recognition of impairment losses resulting from stock valuation based on the performance of each subsidiary is also a factor affecting business performance. The company conducts impairment assessments every fiscal period based on impairment accounting standards and internal regulations.

In the Curves Business, which adopts a membership system both in Japan and overseas, the company acquires and manages a large amount of customer personal information, and must comply with personal information protection laws and regulations in each country, including Japan. If an unforeseen event causes external leakage of personal information, this could affect business performance through loss of credibility or claims for damages. The company aims to prevent leaks through internal training in accordance with each country's guidelines and thorough management of customer information storage.

The Curves Business is subject to regulations such as the Food Sanitation Act for quality control and manufacturing, the Act on Pharmaceuticals and Medical Devices, the Food Labeling Act, the Health Promotion Act, and the Act against Unjustifiable Premiums and Misleading Representations for labeling and advertising, the Consumer Contract Act for consumer transactions in general, and the Subcontract Act for outsourcing. If unexpected regulatory tightening or unintended improper transactions occur, this could lead to loss of credibility and affect business performance. The company aims to ensure legal compliance through establishing check systems for relevant laws and regulations, responding to legal amendments, and conducting regular employee training.

Based on experience during the COVID-19 pandemic, if a new infectious disease outbreak occurs, this could affect financial position, business results, and cash flow through restrictions on store operations. As a countermeasure, the company thoroughly implements infection prevention measures, while also securing a cash position that can respond even if such a situation becomes prolonged, and establishing a system for rapid fundraising by building good relationships with financial institutions.