JAPAN PURE CHEMICAL CO., LTD.

The Company's products are mainly for electronic components such as printed circuit boards, connectors, and lead frames, and its business performance is significantly affected by trends in the smartphone and personal computer markets. High dependence on specific industries carries the risk that fluctuations in demand in those markets will directly spread to sales and profits. There is no specific description in the Annual Securities Report regarding diversification efforts.

Gold, silver, and palladium, which are the Company's main raw materials, are significantly affected by international commodity market conditions, and geopolitical risks such as the invasion of Ukraine, the situation in the Middle East, and a potential Taiwan contingency, as well as mining accidents, may cause price surges or supply restrictions that could affect business operations. Purchases and sales of precious metals are based on the day's quoted price, with orders placed simultaneously with receipt of orders to minimize the impact on profit amounts, but price fluctuation risk related to revolving inventory remains.

The export ratio for FY2026 (ending March 2026) reached 51.9%, and as dollar-denominated transactions increase, the risk that exchange rate fluctuations will affect business performance is rising. Although the Company principally settles transactions in yen and implements hedges such as forward exchange contracts, there is no guarantee that the risk can be completely avoided.

To respond to rapid technological innovation in the electronics industry, research and development of plating chemicals for cutting-edge devices and environmentally friendly products is essential; however, if such development does not proceed as planned, it may lead to a decline in competitiveness and affect business performance. The Company is making every effort to promote new product development and improvement of existing products, but there is no guarantee of certainty of results.

The Company previously followed a policy of not actively obtaining patents for precious metal plating chemicals, but in response to advances in organic analysis technology, it has shifted its policy toward filing parameter patent applications to protect its technology. There is no guarantee that all filed patents will be registered, and if the Company is determined to have infringed on a third party's intellectual property rights, or if a new patent by another company is granted, this may affect the Company's business strategy and business performance.

If confidential information such as the composition and ingredients of plating chemicals, or technical data shared with customers, leaks to outside parties, it could enable the manufacture of similar products through comparison with ingredient analysis results, thereby impairing the Company's competitive advantage. With the spread of web conferencing and remote work, opportunities for using IT tools have increased, and although the Company has established strict internal management rules, the risk of information leakage due to security incidents or by former employees cannot be eliminated.

If the Company is unable to sufficiently secure and develop the human resources necessary to expand its business scope, including strengthening its research and development structure, overseas expansion, and entry into new business fields, this may affect the promotion of its business. Currently, the Company has been able to secure excellent personnel through enhanced brand recognition, strengthened recruitment, and expanded education and training, but its ability to respond to future increases in demand is uncertain.

The Company bears various registration obligations under the Poisonous and Deleterious Substances Control Act, and is also required to respond to risk-assessment-based autonomous chemical substance management under the revised Industrial Safety and Health Act. Should a violation of laws or regulations occur, it could affect business performance, and the Company is working to establish a thorough chemical substance management system and ensure legal compliance.

Waste liquids and exhaust gases generated during manufacturing and experimental processes are appropriately managed through wastewater treatment equipment, outsourcing, and local exhaust treatment equipment, and to date the Company has not received any administrative guidance or complaints from local residents. However, if problems arise in the future regarding management of emissions, this may affect business performance.

The Company maintains a structure in which all departments are concentrated at a single site, and if a large-scale earthquake or similar disaster occurs in the greater Tokyo metropolitan area, manufacturing and shipment of products could be temporarily disrupted, affecting business performance. As BCP measures, the Company maintains inventories of key products, operates external warehouses, and has secured an emergency manufacturing site in the south wing of its head office; in FY2026 (ending March 2026), it began reorganizing manufacturing space at its head office (expanding floor space and improving efficiency) to strengthen stable supply.