OHARA INC.

In overseas business expansion centered on the Asian region, heightened political, military, and social tensions, tightening of regulations in various countries, and geopolitical risks may cause supply chain disruptions or the loss of business opportunities. The Company seeks to reduce such impacts by operating production lines and sales offices across multiple regions and strengthening the collection of regulatory information in various countries, while also working to build a resilient supply chain through functional transformation of overseas production sites and collaboration with overseas processing manufacturers.

Some of the raw materials used are limited in terms of manufacturers or production areas, and production may be disrupted if they become difficult to obtain. In addition, there is a risk that soaring prices of raw materials and supplies due to production conditions, exchange rate fluctuations, or market condition changes could affect business performance and financial condition. As countermeasures, the Company is maintaining higher inventory levels, strengthening communication with suppliers, and advancing research and development of new optical glass that is rare-earth-free or has low rare-earth content.

Sales in the Optics Business are highly dependent on the digital camera market, and the ongoing market contraction that has continued since previously represents a persistent risk. Further progression of market contraction or intensifying competition with domestic and overseas competitors could cause sales and profit margins to decline, affecting business performance and financial condition. The Company strives to create and expand highly profitable businesses through building highly efficient production systems, innovation in research and development, and exploration of new businesses along with business structure reforms.

Due to the high specialization and unique characteristics of optical glass and Specialty Glass (High-Homogeneity Optical Glass, Low-Dielectric Glass, etc.), sales tend to be highly dependent on certain specific customers. If order volumes from these specific customers decrease sharply, it could have a significant impact on business performance and financial condition. The Company seeks to reduce this risk by continuing research and development in new fields and actively working to acquire new customers.

Since global production and sales activities centered on the Asian region include foreign currency-denominated transactions, sharp exchange rate fluctuations may affect business performance and financial condition. In addition, sharp fluctuations in interest rate conditions and other financial markets also pose a risk of affecting business performance and financial condition. The Company addresses this through the use of risk reduction measures such as forward exchange contracts and appropriate management of consolidated interest-bearing debt.

Business activities such as glass manufacturing processes consume large amounts of energy and emit GHGs; if efforts to reduce GHG emissions lag, this could lead to a decline in market evaluation and product share. The Company has set a target to reduce GHG emissions by 50% by 2035 (compared to fiscal 2018) and is working on the utilization of renewable energy and the development of melting and combustion methods. The Company also aims to gain a competitive advantage through the early realization of melting and combustion methods that contribute to GHG emissions reduction.

If information system malfunctions or data theft, tampering, or loss occurs due to cyberattacks, unauthorized access, or other unforeseen events, this could affect business performance and financial condition. The Company addresses this by providing information security education for employees and implementing security enhancement measures for various systems.

In the event of natural disasters or accidents exceeding expectations, or pandemics such as novel influenza or COVID-19, business continuity could be affected by factory shutdowns, equipment damage, supply chain damage, and other impacts. The Company seeks to reduce such impacts through the formulation of business continuity plans, implementation of earthquake-resistance measures, regular inspections and disaster prevention drills, establishment of infection prevention guidelines, and securing inventory and multiple procurement sources.

If the Company is unable to sufficiently secure and develop personnel who contribute to sustainable growth, this could affect business performance and financial condition. The Company's policy is to create an environment where employees can take on challenges and grow with confidence, and it addresses this through securing excellent personnel and continuing to implement educational programs.

Seiko Group Corporation and Canon Inc. each hold 19.3% of the total number of issued shares (excluding treasury shares) and are the largest and second-largest shareholders, respectively, with the Company being an equity-method affiliate of both companies. If good relationships with both companies cannot be maintained, this could affect the Company's financial position and business results. The Company expects both companies to serve as stable shareholders and has a policy of seeking to strengthen relationships with them in the future.