SANKYO SEIKO CO., LTD.

The Fashion-related Business and Textile-related Business, which are core segments, primarily target customers sensitive to fashion trends, operating in a market environment characterized by the most intense competition among peers. If short-term changes in fashion trends and consumer preferences outpace the Group's product planning and sales capabilities, this could adversely affect business performance. The Group addresses this through a management policy of strengthening brand power and offering high-quality products at appropriate prices.

The apparel and other products handled by the Group are highly susceptible to the effects of climate change, and unusual weather such as cool summers or warm winters directly affects sales trends. Natural disasters such as wind and flood damage or earthquakes can also disrupt production and logistics systems, potentially affecting business performance and financial condition. The Group is working to strengthen its production systems, including quick response capabilities, but complete avoidance of this risk is difficult.

The Group's core business is a brand business based on exclusive import agreements and license agreements with famous overseas fashion brands, and failure to renew contracts or changes to contract terms directly affect business performance. In particular, the Group has a high degree of dependence on its flagship brand "DAKS," creating a structure in which the sales trends of this brand have a significant impact on overall performance. There is no disclosure of measures to reduce this dependence, such as diversification of brand contracts, and concentration risk remains.

The Group bears credit risk related to accounts receivable and other claims against domestic and overseas business partners, and if a deterioration in the creditworthiness of specific partners results in bad debts, this could affect business performance and financial condition. The screening department evaluates the business scale and financial capacity of partners, sets credit limits, and works to prevent the occurrence of non-performing receivables through regular and continuous monitoring. However, the risk of a rapid deterioration in creditworthiness due to sudden changes in the economic environment cannot be eliminated.

The Group holds shares of business partners over the long term for the purpose of maintaining stable, long-term relationships, and the amount recorded for investment securities on the consolidated balance sheet as of the end of March 2026 stood at ¥38,103 million. If a decline in share prices or deterioration in the business condition of investees results in valuation losses on investment securities, this could have a material impact on business performance and financial condition. Given the large scale of holdings, losses tend to materialize readily during broad market downturns.

In the Real Estate-related Business, the Group is working to improve the quality and liquidity of held fixed assets, but if impairment accounting becomes necessary due to fluctuations in land valuation, changes in market conditions, natural disasters, or other factors, this could affect business performance and financial condition. Since real estate market conditions are influenced by external factors, it is difficult to fully control this risk through the Group's measures alone.

To address foreign exchange fluctuation risk related to import and export transactions, the Group hedges by entering into forward foreign exchange contracts within the scope of actual demand at the time of contract conclusion; however, if exchange rates fluctuate beyond expectations, this could affect business performance and financial condition. Given the business structure centered on exclusive import and license operations for overseas brands, constant exposure to foreign exchange risk is unavoidable.

The Group holds personal information and confidential information of customers and others, and has established internal management systems to ensure strict control. However, if information is leaked due to unforeseen circumstances such as accidents or crimes, this could lead to a decline in social trust and affect business performance and financial condition. In light of the increasing sophistication of cyberattacks, continuous strengthening of management systems is required.