HEIWADO CO.,LTD.

Unseasonable weather conditions such as cool summers and warm winters directly affect consumer spending trends for Heiwado, a general consumer-facing retailer, and may impact business results and financial condition. Combined with economic fluctuations, such conditions are a factor in variations in sales and profit. While the Company has established internal systems for emergencies, there are limited means to avoid weather-related risk itself.

In the event of a large-scale natural disaster such as an earthquake or wind/flood damage, significant disruption to store operations may occur, potentially having a material impact on financial condition and business results. Although the Company has established internal systems for emergencies, the risk remains that response capabilities may not keep pace with a large-scale disaster. In particular, given the characteristics of a retail business model with numerous physical stores, physical damage tends to directly affect business performance.

The Company is required to comply with a wide range of laws and regulations, including the Large-Scale Retail Store Location Act, the Antimonopoly Act, food safety management regulations, and environmental recycling-related laws, and if any violation occurs, corporate activities may be restricted. In addition, increased costs of compliance with laws and regulations may affect business results and financial condition. While the Company conducts its business operations with due care regarding each applicable law and regulation, continued response to tightening regulations will be necessary.

The Company holds and processes customers' personal information mainly in its retail and restaurant businesses, and manages the personal information of members of its proprietary point card (HOP Card) using computer systems. Should a leakage of personal information occur, it could lead to a decline in corporate reputation and affect business results and financial condition. Although measures have been taken through the appointment of information management officers, establishment of internal regulations, and employee training, the risk of external threats such as cyberattacks continues to exist.

The Group holds substantial fixed assets, including tangible fixed assets related to stores, and in the event of a significant change in the business environment, deterioration in earnings, or a significant decline in the market value of held assets, it may become necessary to record impairment losses. The recording of impairment losses would temporarily have a material impact on business results and financial condition. Given a business model based on multi-store expansion, the scale of fixed assets is large, and the potential impact of this risk is relatively significant.

The Group conducts overseas business operations, and business results and financial condition may be affected by changes in policy or in the political, social, and economic environment of the countries in which it operates. Country-specific risks unique to overseas operations (such as political instability, regulatory changes, and exchange rate fluctuations) are more difficult to predict and manage compared with domestic operations. Disclosure of specific risk mitigation measures in the securities report is limited, and the Company's ability to respond to changes in the environment is called into question.