TAIYO BUSSAN KAISHA,LTD.

The Company engages in export and import transactions, and trends in domestic economic conditions as well as trends in China's economy and monetary policy may have a significant impact on the Company's business performance and financial condition. Import transactions are mainly sales to domestic companies and thus depend on domestic economic conditions, while export transactions are particularly dependent on trends in the Chinese market. If economic deterioration or policy changes occur in major countries, there is a risk that this could lead to a significant decline in net sales.

As the Company engages in export and import transactions, it is constantly exposed to foreign exchange fluctuation risk. Although hedging is implemented through forward exchange contracts and other means, risk cannot be completely eliminated, and if sudden exchange rate fluctuations exceeding expectations occur, this may have a significant impact on the Company's business performance and financial condition. Due to the limitations of hedging measures, the risk of expanded losses remains, particularly during periods of sharp market fluctuations.

Necessary funds that are insufficient are mainly covered by borrowings from financial institutions, and most of these are procured through short-term borrowings to enable flexible fund procurement. In a future rising interest rate environment, an increase in procurement costs is expected, and there is also a possibility that changes in financial institutions' lending stance could make it difficult to procure the required amount, which may have a significant impact on the Company's business performance and financial condition. While the Company's policy is to respond while closely monitoring market trends, the high dependence on short-term borrowings constitutes a structural risk factor.

The Company manages credit for its customers in five grades based on a comprehensive assessment of financial condition and qualitative information, but it is difficult to fully grasp the financial information of customers, and risk cannot be completely eliminated. If a customer's financial condition deteriorates sharply, unexpected provisions for allowance for doubtful accounts may become necessary, which may have a significant impact on the Company's business performance and financial condition. Although a credit management system has been established, credit risk remains.

Many of the products handled by the Company are highly subject to market conditions, and supply-demand relationships can fluctuate significantly due to natural disasters, abnormal weather, disease outbreaks, and inflows of speculative funds, creating price fluctuation risk for inventory products. For products with established commodity exchanges, the Company implements hedging, and for products without such exchanges, it seeks to avoid risk by adjusting transaction terms with customers; however, complete prediction of market conditions is impossible, and unexpected price fluctuations may have a significant impact on the Company's business performance and financial condition.

The products handled by the Company are subject to various regulations, including public regulations related to livestock diseases such as BSE, avian influenza, foot-and-mouth disease, and CSF (classical swine fever), as well as import regulations such as tariffs. Strengthening of these regulations or the introduction of new regulations could constrain business activities and may force the suspension or reduction of purchasing and sales, which may have a significant impact on the Company's business performance and financial condition. For the Company, whose main handled items are food and agricultural products, regulatory risk is a critical issue for business continuity.

The products and services provided by the Company are generally in a competitive environment, and competitors may possess advanced expertise, product supply capabilities, or close customer relationships in specific fields. Additionally, there is a risk of losing customers if the Company cannot respond to the diversification and sophistication of customer needs. If these occur, they may have a significant impact on the Company's business performance and financial condition through a decline in net sales.

The Company purchases and sells products that comply with various laws and standards, such as food hygiene and safety and hygiene standards, but there is no guarantee that all handled products are entirely free of defects. If a defect occurs that leads to a large-scale product recall or product liability compensation, this may have a significant impact on the Company's business performance and financial condition. While the Company implements a certain degree of risk hedging through insurance for product liability compensation, this does not achieve complete elimination of risk.

The Company has a small workforce of 31 employees, making the recruitment and development of capable personnel an important precondition for business continuity. Due to the small-scale organizational structure, there is a high degree of dependence on specific personnel, and if the Company is unable to recruit and develop capable personnel, this may have a significant impact on the Company's business performance and financial condition through a decline in operational capability. As a human resource risk unique to small organizations, recruitment competitiveness and successor development are challenges.

If natural disasters occur at the facilities of the Company or its business partners (suppliers, customers, etc.), this could disrupt purchasing and sales activities and may have a significant impact on the Company's business performance and financial condition. Given the business characteristics centered on export and import transactions, there is a risk of supply chain disruption if a wide range of domestic and overseas facilities are affected by disasters. Specific details of countermeasures have not been disclosed at this time.