TOKYO KIKAI SEISAKUSHO,LTD.

With the spread of the internet, the number of newspaper subscribers and advertising revenue has been declining, and newspaper companies continue to take a cautious stance toward capital investment. As a result, the market for offset printing presses for newspapers, the Group's core product, is on a shrinking trend, which could adversely affect business performance and financial condition. The Group is working to diversify its business portfolio by focusing on new businesses such as the FA business.

The Group's sales are composed of made-to-order production centered on domestic and overseas newspaper companies, and individual contracts can be extremely large. Sales in a given fiscal year may fluctuate significantly depending on the timing of customers' capital investment decisions and delivery schedules, which could affect business performance and financial condition. Due to the nature of made-to-order production, there is also an inherent risk of increased dependence on specific customers.

The Group sells products to overseas markets such as the United States and Asia, and the yen-converted value of contracts denominated in local currencies is affected by exchange rate fluctuations. Since some long-term contracts extend more than one year from order receipt to payment collection, the risk of exchange rate fluctuations during the contract period is significant, and generally a stronger yen adversely affects business performance. In the current consolidated fiscal year, the Group recorded a foreign exchange gain of ¥691 thousand.

When large-scale orders are received for overseas markets such as the United States and Asia, the ratio of overseas sales increases, but there is a risk that installation and inspection may be unexpectedly delayed due to delays in the customer's factory construction, among other factors. Delivery delays cause shifts in the timing of sales recognition, which could affect business performance and financial condition. The Group states that it strives to avoid such risks and to respond appropriately when they occur, but specific details of countermeasures are not disclosed.

The Group is focusing on the FA business as a new business, manufacturing and selling AGVs (automated guided vehicles) that apply technology used for newspaper printing plants. The FA market is still developing and highly competitive, making continuous development and research investment essential to keep up with technological innovation, and the investment burden could adversely affect business performance and financial condition. Establishing a competitive advantage in the market is expected to require considerable time and cost.

The Group holds investment securities, and valuation losses may arise due to declines in stock prices or deterioration in the business performance of issuing companies. The recording of valuation losses could adversely affect the Group's business performance and financial condition. Detailed disclosure regarding the specific holdings and the scale of valuation loss risk in the securities report is limited.

The Group recognizes that securing and developing specialized technical personnel is important in order to sustainably provide the social infrastructure that supports the highly public newspaper publishing business. If the succession of technology or the securing of human resources becomes difficult, it could hinder the maintenance of product and service quality and business continuity, which could adversely affect business performance and financial condition. The Group states that it is working to improve the employment environment for its employees.