TOAGOSEI CO., LTD.

If a Tokai, Tonankai, or Nankai earthquake or an earthquake directly beneath the Tokyo metropolitan area were to occur, there is a possibility that buildings and equipment could be damaged and operations suspended at production and sales sites in the Tokai, Kinki, Shikoku, and Kanto regions, including the Nagoya Plant, a major production site. As countermeasures, the Company has implemented seismic reinforcement construction, conducts regular disaster prevention drills, and has taken out insurance to prepare for earthquakes, fires, and wind and flood damage; however, these measures cannot completely eliminate potential damage.

At the Group's domestic and overseas plants, whose main business is the manufacture of chemical products, equipment trouble or human error could result in fires, explosions, or chemical substance leaks, potentially causing damage to buildings and equipment, suspension of operations, and compensation liabilities to affected persons and local communities. Countermeasures include the installation of emergency automatic shutdown devices, holding of disaster prevention meetings, regular disaster prevention drills, and the taking out of accident insurance.

General-purpose chemical products are difficult to differentiate from competitors' products, and price competition has intensified, raising the possibility that the Company may no longer be able to maintain an advantage over competitors. High-value-added products (Polymer & Oligomer, Adhesive Materials, High-Performance Materials) are affected by demand trends in the mobility and electronics fields, and sales volumes and prices could fluctuate significantly. Under the medium-term management plan "Connect and Create 2028," the Company has set a target to expand net sales from ¥162,312 million in 2025 to ¥180,000 million in 2028, but depending on market conditions, this target may not be achieved.

In relation to Japan's Antimonopoly Act, Foreign Exchange and Foreign Trade Act, chemical substance-related regulations, and various laws and regulations of other countries, violations, changes in interpretation, or differences in views with authorities could result in suspension of operations, criminal penalties, administrative fines, litigation, and other consequences. There is also a risk that institutional reforms, tighter regulations, and trade restrictions could increase response costs, and that heightened international tensions could affect business activities. The Company has established a supervisory and investigative structure through its Compliance Committee, as well as a cooperative structure with specialized departments for chemical substance-related regulations.

The Group holds substantial fixed assets for the manufacture of chemical products, and under the medium-term management plan, plans to invest a cumulative total of ¥59,000 million in capital expenditures over the three years from 2026 to 2028. Significant deterioration in the business environment leading to lower profitability, declines in market prices, or reduced synergy effects from joint ventures or acquisitions could result in impairment losses. The Company has established a system to thoroughly examine the cost of capital when making decisions regarding capital expenditures and other investments.

If important management, sales, or technical information, or personal information, were to be leaked, or if malicious third parties were to illegally access information management servers, this could result in a decline in competitive advantage, sanctions and compensation payments, and costs to recover information. There is also a risk that cyberattacks could affect core systems. The Company continuously improves its information security measures, including entering into confidentiality agreements, providing employee training, and implementing computer virus countermeasures.

A sharp rise in crude oil and naphtha prices raises manufacturing costs, particularly for Acrylic Monomer products in the Basic Chemicals Business, and could pressure profits if insufficient price pass-through or rationalization measures are taken. Conversely, price declines could lead to lower selling prices and inventory valuation losses. While the Company has agreed on price formulas primarily with domestic business partners, these measures may not function effectively during periods of sharp price fluctuations or in overseas competitive markets.

If raw materials and fuel essential for manufacturing become unobtainable due to accidents, production stoppages, or bankruptcy at suppliers, the Group's operations could be suspended. There is also a risk that operations and business activities could be restricted if the business activities or logistics of customers or suppliers are disrupted due to a widespread outbreak of infectious disease. The Company strives to build a stable supply system through multiple sourcing, ongoing communication with suppliers, and the establishment of a telework system.

If soil, air, or water pollution is discovered at a chemical plant, this could result in suspension of production activities and compensation costs. In addition, there is strong social demand from an SDGs and ESG investment perspective for further reductions in carbon dioxide emissions and other measures, raising the risk of increased response costs. The Company has formulated a roadmap targeting a 50% reduction versus 2013 levels (215 thousand tons) by 2030 and carbon neutrality by 2050, and is pursuing these efforts centered on its Sustainability Promotion Committee.

Because the value of imported raw materials exceeds the value of exported products, the Group's overall cost structure is such that costs increase when the yen depreciates. Under the medium-term management plan, the Company plans to raise the ratio of overseas sales from 18% in 2025 to 23% in 2028, and the nature of this risk may change as global expansion progresses. As a countermeasure, the Company has implemented a funding plan under which foreign currency obtained through exports and dividends from overseas affiliated companies is allocated to import payments.