KYOTO KIMONO YUZEN HOLDINGS Co.,Ltd.

Furisode Sales & Rental, which accounts for approximately 30% of total sales, is directly affected by the decline in the population reaching adulthood as a result of the falling birthrate. If the declining birthrate trend continues going forward, it could have a material impact on the Group's business performance. No specific countermeasures by the Company are explicitly disclosed in the annual securities report.

Under the revised Civil Code that came into effect in April 2022, the age of adulthood was lowered to 18, which may lead to changes in the target age group and timing of coming-of-age ceremonies hosted by local governments. Demand related to coming-of-age ceremonies is fundamental to the furisode business, and if there are significant changes to the format of such ceremonies, it could affect the Group's business performance.

The cost of kimono products and processing fees, the Company's core business, is on an upward trend, and the cost ratio is also rising against a backdrop of labor shortages, rising labor costs, domestic and international inflation, and increased logistics costs. The Company is responding by strengthening relationships with manufacturers, diversifying its procurement sources, and conducting cost analyses, but if the upward price trend continues, it could affect business performance.

If the operating income or loss of stores using owned fixed assets deteriorates and no short-term recovery is expected, an impairment loss may arise from the application of impairment accounting. This would affect the Group's business performance and financial condition.

In the kimono sales business, the timely securing and development of talented personnel is directly linked to business performance, and if recruitment falls short of staffing plans, it could have a material impact on business performance. In new business development as well, insufficient staffing, combined with a lack of know-how, could become a factor delaying business progress.

The Company has strengthened its internal control systems, including security measures for its customer database, employee training, and access authorization settings, but if personal information were to be leaked, it could affect business performance. It is reported that no leakage of personal information has occurred to date.

Under the revised Act on the Protection of Personal Information that came into effect in April 2022, it has become more difficult to newly obtain personal information (such as addresses and names) necessary for sending direct mail for sales promotion purposes. The Company is shifting to digital marketing initiatives, but this could affect business performance due to increased advertising expenses.

The spread of social media has created an environment in which reputational damage to companies can spread easily, and if the Company's social credibility is damaged, it could affect its financial condition and business results. The Customer Consultation Section and the Sales Headquarters work together to establish a system that can promptly respond to complaints and cancellation requests.

New businesses aimed at medium-term growth are expected to incur costs such as marketing costs, IT investment, and advertising expenses. If insufficient staffing or lack of know-how causes delays in launching new businesses or failure to achieve plans, it could affect business performance and business development.

The Company regards strengthening its compliance systems and internal control systems as an important management issue, and has established a system in which the Risk Management Committee considers and decides on countermeasures, and an emergency response headquarters is set up in the event a risk materializes. Nevertheless, if a risk materializes, it could affect business results and financial condition.