MRK HOLDINGS INC.

The prolonged situations in Ukraine and the Middle East have caused exchange rate fluctuations, logistics disruptions, and sharp increases in energy and raw material prices, resulting in higher merchandise procurement costs, store operating costs, and new store opening costs, as well as delays in equipment installation. The securities report explicitly states that "this risk is currently manifesting, and the outlook remains uncertain," indicating a high likelihood of occurrence. The Group is working to secure inventory through cost reduction efforts and enhanced coordination with business partners.

The Group operates numerous stores across Japan, including 188 women's undergarment stores, 2 maternity/baby stores, 6 bridal/banquet venues, and 7 beauty salons. If profitability declines due to deteriorating business performance, impairment of fixed assets may occur. The securities report acknowledges the likelihood of occurrence as "present to a certain degree." The Group conducts regular monitoring of impairment indicators, formulates and implements improvement plans, and reviews the continued viability of held assets.

Confidential information and personal data, including customer information, are managed through the core system. Unauthorized intrusion, computer viruses, natural disasters, or similar events could result in information leakage or system outages, potentially leading to reduced operational efficiency, damage to social credibility, and liability for damages. The securities report acknowledges the likelihood of occurrence as "present to a certain degree." The Group has established a backup system, strengthened information security, and provides regular information management guidance to employees.

The Group carries out investments, financing, new business entries, subsidiary establishments, alliances, and M&A both domestically and internationally. If the business conditions of an investee diverge from expectations, this may result in unrecovered investment amounts or impairment losses, affecting business performance and financial condition. The securities report acknowledges the likelihood of occurrence as "present to a certain degree." The Group promotes early improvement measures through test marketing, prior investigations by specialized consulting firms, and post-implementation monitoring of progress and financial status.

The Group raises funds through internal capital and borrowings from financial institutions for business activities and strategic investments. Sudden changes in financial market conditions or a decline in creditworthiness due to deteriorating performance could raise funding costs and affect business performance and financial condition. The securities report acknowledges the likelihood of occurrence as "present to a certain degree." The Group has entered into overdraft agreements with financial institutions to secure a certain level of liquidity.

The Group's diverse businesses, including women's undergarments, maternity/baby products, bridal/banquet services, and beauty-related operations, are highly susceptible to domestic economic conditions and consumption trends. A continued slowdown in consumption or an increase in merchandise procurement costs could affect business results and financial condition. In response, the Group is promoting new business development, expanding sales channels through enhanced online sales, and strengthening and improving its procurement system.

Manufacturing of the Group's core product, body-shaping women's undergarments, requires advanced and skilled techniques, limiting the number of factories capable of contracted production. If a disaster, accident, bankruptcy, or similar event occurs at such a factory and an alternative contract manufacturer cannot be promptly secured, it could have a material impact on business operations and performance. The Group aims to reduce this risk by utilizing multiple factories for the same products and by strengthening cooperative relationships with, and monitoring the financial condition of, key business partners.

The Group conducts in-house installment sales, entering into installment sales contracts directly with customers. If sudden changes in economic conditions or natural disasters make receivables collection difficult and uncollected amounts increase beyond expectations, this could affect business performance. The Group has established a dedicated department to monitor the status of trade receivables and also mitigates risk by offering purchase methods other than in-house installment sales.

RIZAP Group, Inc. is the parent company holding a majority of total voting rights, and any change in its basic policy toward the Company could affect the Group's business operations. Although the Group operates independently, the risk of changes in the parent company's intentions cannot be eliminated. The Group strives to reduce this risk through appropriate information exchange with the parent company.

Given the wide range of business operations, there are numerous laws and regulations to comply with. Regulatory tightening due to legal amendments or violations of laws and regulations could affect the business, social credibility, and business performance. The securities report states that the Company does not currently recognize the possibility of this risk materializing. The Group strengthens its legal compliance system through employee training, development of a compliance framework, and utilization of external specialized organizations.