CHUGOKUKOGYO CO.,LTD.

The sales prices and sales volumes of LP Gas Cylinders, the Company's core product, are affected by demand trends in the LP gas industry and competition with other companies. Declines in sales prices or reductions in volume directly impact business results and financial condition. The Company is working to reduce this risk through continuous productivity improvements and cost reductions via expense cuts.

The High-Pressure Equipment Business is subject to regulation under related laws and regulations, and if it becomes difficult to respond to significant future changes in laws, this could affect business operations. In addition, the Transportation Business is a licensed business under the Motor Truck Transportation Business Act and related laws, and there is a risk that administrative sanctions resulting from violations of laws and regulations could impede business activities. The Company has established an internal control system to ensure thorough compliance with relevant laws and regulations.

Significant fluctuations in the prices of purchased materials such as steel, parts, and transportation fuel are factors that cause changes in material costs and fuel costs, affecting manufacturing costs. If the Company is unable to appropriately pass on changes in manufacturing costs to sales prices, this could adversely affect business results and financial condition. The Company addresses this through continuous productivity improvements and cost reductions via expense cuts.

The discount rate and other assumptions used to calculate retirement benefit expenses and obligation amounts are set at the beginning of the period, but if actual results diverge from these assumptions, the difference is recognized as expenses and liabilities in the current period. Fluctuations in these assumptions or in investment returns affect business results and financial condition. The annual securities report does not describe specific countermeasures.

For some products in the High-Pressure Equipment Business, the Company continues consignment production at its local subsidiary in China, and changes in China's political and legal environment or economic conditions could cause problems in conducting business. If such changes occur more rapidly than anticipated, this could affect business results and financial condition. The Company is working to increase domestic production and reduce its dependence on consignment production.

If natural disasters such as earthquakes or typhoons exceeding expectations cause the head office plant to suspend operations, procurement difficulties due to damage to raw material suppliers, or difficulty in receiving orders due to damage to customers, this could affect business results and financial condition. The Company strives to establish a system to minimize damage and losses through thorough disaster prevention awareness and information gathering.

The Company complies with current domestic laws and regulations regarding waste and hazardous substances generated in the course of business activities, but if emission regulations and the like are tightened in the future and the Company is unable to respond, business activities could be restricted. Increased costs to respond to tightened regulations or restrictions on business activities could affect business results and financial condition.

The Company holds shares of business partners for the purpose of maintaining and strengthening business relationships, and if the stock market deteriorates sharply, a decline in the market value of held shares could affect business results and financial condition. The Company examines the transaction status of each individual stock and makes decisions on continued holding, etc., taking into account comparisons with the cost of capital.

In the Transportation Business, the Company is working to strengthen the recruitment of long-distance drivers, but if a driver shortage exceeding expectations occurs, a decline in transportation capacity could affect business results and financial condition. This is set against a backdrop of labor shortages across the industry as a whole, and no specific alternative measures beyond strengthened recruitment are described.