NEW ART HOLDINGS Co., Ltd.

The number of marriages has declined from a peak of approximately 1.10 million couples in 1972 to approximately 480,000 couples in 2024, and a medium- to long-term contraction of the bridal jewelry market is expected. Since bridal jewelry accounts for the majority of net sales, market contraction directly affects business performance. As countermeasures, the Group is considering overseas expansion and development of products and services outside the bridal category.

Since many transactions involving loose diamonds, artworks, and other items are denominated in foreign currencies, a weaker yen is a major factor increasing procurement costs. Although the Group has established a risk hedging system using derivative transactions such as forward foreign exchange contracts, the current substantial yen depreciation has a significant impact on overseas procurement and may become a factor requiring price increases. Similar foreign exchange risks exist in the Food Business and the Art Business.

The prices of bullion such as platinum and gold, as well as the procurement prices of loose diamonds, fluctuate due to international supply-demand trends, geopolitical risks, exchange rate movements, and other factors, affecting business performance through increased procurement costs. Given the current difficulty in procuring diamonds from Israel and Russia, stabilizing prices through new supply sources has become a challenge. The Group aims to mitigate the impact through appropriate inventory management and pass-through to selling prices, but may not be able to fully absorb the effects of sharp price fluctuations.

Consolidated subsidiary Israel Shiraishi Ltd. is located in Israel, and recent changes in the global situation have made it difficult to procure diamonds from Israel and Russia. The Group is currently diversifying its supply sources, including to India and elsewhere, but changes in the international situation, logistics disruptions, exchange rate fluctuations, and other factors may lead to increased procurement prices or a deteriorating procurement environment. The Group is working to build a stable procurement system through diversification of supply sources.

Esthetic Salon services are subject to a wide range of laws and regulations, including the Act on Specified Commercial Transactions, the Consumer Contract Act, the Act against Unjustifiable Premiums and Misleading Representations, and the Act on the Protection of Personal Information. Responding to legal amendments or new regulations requires considerable cost and effort, and violations could result in business suspension orders, administrative sanctions, or loss of social credibility, thereby affecting business performance. The Group addresses this through manual development, employee training, and strengthened information system security.

If personal information is leaked due to unauthorized external access, if the company website is tampered with, or if important data is lost due to computer virus infection, business operations could be disrupted, the corporate image could be damaged, and damages claims could arise, affecting business performance. Both the Jewelry Business and the Esthetic Salon Business hold large volumes of customer personal information, so the risk is broad in scope. The Group addresses this through dissemination of internal rules, employee training, and building network security.

If foreign matter contamination, inadequate temperature control, food poisoning incidents, or other issues occur during the manufacturing, processing, or distribution of food products, in addition to recall and response costs, damage to brand image and loss of customer trust could affect business performance and future business development. In Hong Kong, laws such as the Food Safety Ordinance apply, and violations could result in fines, business suspension, or criminal liability.

The Esthetic Salon business's workforce is primarily composed of women in their early twenties, and the industry is characterized by few veteran staff and a high turnover rate. If the necessary personnel cannot be secured, the business may be unable to handle customer reservations, affecting operating results. The Group is actively recruiting new graduates and mid-career hires nationwide to secure personnel, but structural challenges remain.

In the overseas expansion of existing businesses centered on emerging Asian countries, there are unforeseen risks beyond expectations, including international political risk, exchange rate fluctuations, trade regulations, and labor and social risks stemming from differences in culture and customs. Should these risks materialize to a significantly greater extent than anticipated, business performance could be affected. In the Resort Development Business as well, there is high uncertainty regarding sales to affluent overseas customers.

In the Esthetic Salon business, course contract fees are received from customers as a lump-sum advance payment, which is used as operating funds and store expansion capital. If future legal amendments require segregated management of such funds as customer assets and thereby restrict their use as operating capital, this could affect the Group's business performance and financial condition.