Below is a discussion of the most significant risks that could negatively affect the operating results and financial conditions of the Group. Forward-looking statements in the discussion of risks here reflect the judgment of the Group (the Company and consolidated subsidiaries) as of the date on which the securities report was submitted.

（as of June 28, 2019)

(1) Dairy Industry

• ・Tariff systems that cover the milk and milk products produced by the Group have been established to protect Japan’s agriculture, but in the event that the tariff system is significantly changed due to the results of the WTO, TPP, EPA, and FTA agriculture negotiations, the Group’s earnings and financial condition could be significantly affected.
• ・Subsidies have long been paid to producers of raw milk, which is the raw ingredient in the milk products that the Group produces, based on the Act on Temporary Measures Concerning Compensation Price for Producers of Milk for Manufacturing Use, and this became the new subsidy system for processed milk producers from 2018, based on the revised Livestock Farming Management Stabilization Act. This system change did not have any particular impact, but in the event that this law is substantially changed or is abolished in the future, resulting in changes to subsidy levels, the prices at which the Group purchases raw materials could be affected.

(2) Food Safety

The Group applies its own quality management standards that are stricter than the legal requirements in its product manufacturing and makes every effort to ensure the safety and quality of its food products, but unforeseen product incidents leading to a large-scale recall or product liability claims could have a major impact on the Group’s earnings and financial condition.

(3) Impact of Markets and Exchange Rates

The Group procures some of its raw materials and products from overseas, and purchase prices are affected by fluctuations in these markets and exchange rates. A sharp rise in these markets and/or a weaker yen in the foreign exchange market could raise the purchase price and affect the Group’s earnings and financial condition.

(4) Unseasonable Weather

Sales in the Group’s ice cream business and commercial milk business could be affected by the weather. In particular, sales in these business segments could decline in a cool summer, affecting the Group’s earnings and financial condition.

(5) Natural Disasters

Damage caused to production and logistic facilities incurred in large-scale natural disasters such as earthquakes could result in stalled production and recovery costs, which could affect the Group’s earnings and financial condition.

(6) Information Security

The Group has established and implements information security measures to protect and manage the personal information held by Group companies and to prevent fraudulent access to information systems. However, in the event of an unexpected information leak, the resulting loss of social trust could affect the Group’s earnings and financial condition.