Shinhokoku Material Corp.

Approximately 70% of the Company's net sales are derived from the semiconductor and FPD industries, resulting in an extremely high degree of dependence on specific industries. If order volumes in these industries decline sharply, this could have a material impact on the Company's business performance. The Annual Securities Report does not describe any specific diversification measures taken by the Company.

The manufacture of components for semiconductor and FPD manufacturing equipment uses rare raw materials such as nickel, and sharp increases in purchase prices due to market fluctuations could affect business performance. In many cases, it is difficult to source alternative supplies of rare raw materials, and if cost increases cannot be passed on to product prices, profitability may deteriorate. The Annual Securities Report does not describe any specific hedging measures or supplier diversification measures taken by the Company.