TOYO DENKI SEIZO K.K.

In products for railways and other social and public infrastructure, if a life-threatening event or large-scale failure occurs, it could have an extremely serious impact on management. Failure to fulfill supply obligations due to quality defects or production delays directly leads to a decline in credibility and deteriorating business performance. The Yokohama Plant and Shiga Ryuo Plant have obtained ISO9001 certification, and the Company is working to minimize impact by taking out insurance to prepare for product liability and product recalls.

If technology succession is delayed due to the retirement or departure of skilled engineers or stagnation in recruitment and training, it could lead to a decline in quality and delays in new product development, making it difficult to maintain competitiveness in the industry. The Company has established an Engineer Development Committee to implement succession measures for each specialized technical field, and is also promoting a review of fair evaluation and treatment systems as well as engagement improvement measures based on the Medium-Term Management Plan 2026.

The business environment is changing rapidly due to a decline in railway passenger numbers caused by population decline and the spread of telework, transformation in the automotive industry symbolized by CASE, the promotion of DX, and the transition to a decarbonized society. Delays in responding to these changes could lead to a decrease in orders and sales and lower profitability. Under the Medium-Term Management Plan 2026, the Company has set forth the basic policies of

Supply disruptions and delays caused by China's rare earth export control measures, additional U.S. tariffs, and natural disasters, as well as the bankruptcy or closure of suppliers and rising raw material prices due to soaring energy prices and increasing labor costs, could affect business performance through higher production costs. In response to supply shortage risks for semiconductors, permanent magnets, and other materials, the Company continues to diversify its supply chain and change the raw materials used, and is working to reduce costs together with energy-saving measures such as the use of solar power generation.

If customer personal information or trade secrets are leaked, or if cyberattacks or virus infections result in the destruction, tampering, or shutdown of critical data or systems, it could have a serious impact on production and sales activities, and is expected to lead to deteriorating business performance due to damages compensation or suspension of business dealings. The Company has organized an Information Security Committee to conduct education, training, and audits, and established the Digital Strategy Department in December 2024 to strengthen its security and DX promotion framework.

If the launch of products incorporating advanced technology is delayed, or if the response to decarbonization is delayed, product competitiveness could decline. In addition, delays in introducing new technology into production processes could delay improvements in production efficiency and cost reductions, leading to a decline in competitiveness. The Company forms project teams centered around the Development Center to intensively allocate internal resources, and seeks to maintain and strengthen its technological and product development capabilities through industry-academia collaboration and the exploration of M&A opportunities.

Risks that could affect business performance and financial condition include foreign exchange fluctuation risk arising from an increase in foreign currency-denominated transactions accompanying overseas business expansion, the risk of increased interest payments due to rising interest rates, the risk of difficulty in raising funds due to instability in financial markets, impairment risk on fixed assets, and the risk of failure to collect trade receivables due to credit concerns regarding business partners. The Company monitors foreign exchange sensitivity, reduces foreign currency-denominated assets, manages cash flow on a monthly basis, reduces holdings of securities, and strengthens credit management, among other measures.

Violations of environmental laws or non-compliance with environmental regulations could lead to a widespread loss of trust from society as a whole. In addition, if progress is insufficient in decarbonizing products and reducing the environmental impact of production activities, it could lead to a decline in competitiveness, resulting in fewer orders and lower sales, as well as a decline in evaluation from stakeholders. The Company sets targets, promotes measures, and conducts monitoring through regular discussions at the Sustainability Committee, and formulated the

The Company has production and sales sites in China, Thailand, and the United States, and country risks such as changes in the political and economic situation in each country or the occurrence of disasters could affect business activities and the safety of employees. In addition, unexpected changes in laws, regulations, or tax systems could affect the business operations, performance, and assets of overseas group companies. The Company has established a communication and cooperation framework between the head office and overseas group companies, and seeks to respond appropriately to risks by utilizing the advice of experts well-versed in local laws and business practices.

Violations of laws and regulations in Japan and overseas could result in a loss of social credibility and significant business impacts such as suspension of business dealings, while inadequate handling of harassment could lead to decreased motivation to work, employee turnover, and declining competitiveness. Inadequate handling of conflict minerals and forced labor issues could result in the risk of exclusion from supply chains. The Company addresses these risks by distributing and providing education on the