The following section describes primary risks in terms of those that our management has recognized as potentially affecting the Morinaga Milk Group’s operating results and financial position. Forward-looking statements contained herein are based on conclusions reached by the Group as of the filing date of the Securities Report.

（as of June 25, 2025)

(1) Dairy and Milk Industry

When engaging in business transactions involving raw milk used as a raw material for dairy products manufactured by the Morinaga Milk Group, subsidies are paid to producers under the system for subsidizing producers of milk for manufacturing use, pursuant to the Livestock Stabilization Act. Accordingly, the Group’s operating results and financial position could be affected by possible future changes in subsidy levels upon substantial modification or abolishment of the Livestock Stabilization Act.
Moreover, whereas a tariff system protects the domestic agricultural industry with respect to dairy products, its operating results and financial position could be affected if the government were to substantially overhaul said system.
The Group accordingly strives to achieve solutions in a manner that involves coordinating efforts with relevant ministries and agencies, as well as other relevant organizations, in order to facilitate timely and appropriate action in addressing issues and other matters pertaining to the dairy and milk industry. We also visit dairy farmers and dairy farming organizations on a daily basis and engage in activities to promote dairy production, such that involve providing them with information on techniques for managing the health of dairy cattle as well as raw milk supply and demand.

(2) Procurement of Raw Materials

The primary raw materials used by the Group are subject to factors that may affect pricing or delivery times, such that include changes in the balance of supply and demand domestically and overseas, modifications to tariff systems and currency exchange rates. Accordingly, these fluctuations may affect the Group's business results and financial position.
The Group, based on the Morinaga Milk Group Procurement Policy, places the highest priority on safety and security, closely monitors market trends, and takes various measures such as purchasing from multiple regions and suppliers, securing alternative raw materials, and entering into foreign exchange forward contracts and foreign currency settlements.

(3) Product Quality

Although the Group takes an approach to manufacturing that involves making every effort to ensure the safety and quality of food products, its operating results and financial position could be affected should an unforeseen product-related contingency arise that would result in a large-scale product recall and product liability claims.
As such, the Group remains committed to ensuring product safety and quality, and has accordingly established a Quality Policy premised on the concept of ensuring quality throughout the supply chain extending beyond manufacturing sites.

(4) Global Business, New Business, etc.

The Group is engaged in overseas M&A, new businesses, and capital investment in innovative products as means of growth. In particular, with regard to overseas M&A, we strive to gather as much information as possible on exchange rate risks, local political conditions, regulations, business practices, market uncertainties, and other factors. However, if there is a significant negative deviation between forecasts and actual results, such as failure to achieve initial business plans due to rapid changes in the external environment, impairment losses may occur, which could affect the Group's business results and financial position. The Group strives to avoid impairment risks in the future by strengthening the checks and balances for each investment project and by regularly monitoring and reviewing the progress of companies acquired through M&A and new businesses.

(5) Weather

Net sales of the Group’s respective business segments are subject to the effects of weather. The Group’s operating results and financial position could be especially affected by decreases in sales of ice cream, beverages and other similar products in the event of unseasonably low summer temperatures.
As such, the Group flexibly addresses effects of weather by striving to optimize its overall operations, which involves facilitating close coordination among each of its divisions engaged in everything from production to sales, and making adjustments to production in a timely manner in accordance with developments in sales.

(6) Unforeseen Circumstances such as Natural Disasters and Infectious Diseases

The Group’s operating results and financial position could be affected under scenarios that include potential long-term work stoppage, suspension of product supply amid disruption of logistics channels, and changes in markets and lifestyles, should a sudden and substantial disaster strike. Such potential scenarios include natural disasters such as earthquakes and storms, incidents and accidents such as fire and terrorism, and proliferation of infectious disease affecting the Group’s business sites.
In the event of such unforeseen circumstances, the Group will give top priority to protecting the lives of its employees, their families, customers, business partners, neighboring communities, and other related parties. We have also established manuals such as business continuity plans and are working to build a system that will enable us to supply products appropriately and restore business activities at an early stage.

(7) Information Systems, Information Security

The Group utilizes information systems in all aspects of its business, including order taking, raw material ordering, product manufacturing instructions, and accounting, and therefore has established rules and regulations, strengthened its support system, and implemented various information security measures. However, in the event of a disaster, power outage, computer virus infection, unauthorized access, or other incident that results in the suspension of information systems or the leakage of information, the Group's business results and financial position could be affected due to the inability to supply products and a decline in social credibility.
The Group has established an Information Security Subcommittee under the Internal Control Committee to strengthen hardware measures such as vulnerability countermeasures and backup of important data. At the same time, we are working to improve software measures such as reviewing business continuity plans and security rules and providing employee training, in order to ensure the stable operation and security of our information systems.

(8) Intellectual Property

The Group utilizes various forms of intellectual property throughout its business activities, including intellectual property owned by the Group and that legally subject to user licensing of a third party. As such, the Group’s operating results and financial position could be affected as the result of a third party unexpectedly filing a lawsuit against the Group for having violated intellectual property rights.
The Group accordingly takes action that involves showing deference toward intellectual property rights, filing and maintaining intellectual property applications that enable it to appropriately perform business activities, and consistently maintaining divisions dedicated to such matters ensure that the Group is not violating rights of third parties.

(9) Climate Change

Amid intensifying global environmental concerns as represented by climate change, the Group’s operating results and financial position could be affected if it became subject to regulations or hearsay regarding the use of fossil-fuel energy or plastics, water risks, and other issues that could call for review of its product strategy, capital investment, or responses to surging energy and raw materials procurement costs. For this reason, the Group is taking action using information it collects through various stakeholders.
The Group has identified “Resources and the Environment” as one of the  materiality theme in its Sustainability Medium- to Long-Term Plan 2030, and appropriately sets and manages goals based on the ISO 14001 standard for environmental management systems, as stipulated in the Morinaga Milk Group Environmental Policy.
The Group’s initiatives for climate change are reviewed periodically by the Climate Change Measures Subcommittee and the Sustainability Committee. For details, please refer to “Initiatives Related to TCFD” and “Initiatives Related to TNFD” on the Company’s website.

URL to Initiatives Related to TCFD
https://www.morinagamilk.co.jp/english/sustainability/resources_and_the_environment/tcfd/
URL to Initiatives Related to TNFD
https://www.morinagamilk.co.jp/english/sustainability/resources_and_the_environment/tnfd/

(10) Compliance

The Group has established a Compliance Subcommittee under the Internal Control Committee and promotes compliance activities mainly through this subcommittee. In order to raise compliance awareness among all employees of the Group, we have introduced multiple education and training programs and have established a system whereby anyone can consult with us in confidence through our internal reporting system, “Morinaga Help Line.” However, in the event of a compliance violation, etc., the Group's business performance and financial condition may be affected by a decline in social credibility.
The Group regularly monitors compliance through measures such as “Compliance Awareness Surveys,” and based on the results of audits conducted by the internal audit department, we continuously review and improve our compliance initiatives.


The above risks are not the only risks to which the Group is exposed.