MABUCHI MOTOR CO., LTD.

An economic downturn or contraction in demand in major markets, including Japan, North America, Europe, and Asia, may adversely affect the Group's business results and financial condition. Since the Company's products are incorporated into customer products across diverse markets, they are highly sensitive to macroeconomic fluctuations. In response, the Company periodically reviews market conditions and order status at important meetings such as the Board of Directors, and works to optimize capital expenditure, personnel, and inventory levels.

When translating the local-currency financial statements of overseas subsidiaries into yen, fluctuations in exchange rates directly affect consolidated business results. In particular, yen appreciation against the US dollar adversely affects business results, and currency appreciation in production regions increases manufacturing and procurement costs, reducing profit margins and price competitiveness. The Company mitigates foreign exchange risk to an acceptable level by utilizing forward exchange contracts based on internal regulations.

Price competition is intense in the electrical/electronic equipment and machinery manufacturing industries, and has intensified further due to the rise of Chinese competitors. Amid continued global increases in material prices and logistics costs, if inappropriate pricing or cost reduction activities fail to keep pace with market changes, this may have a significant impact on business results and financial condition. The Company works to maintain and improve average unit prices and profitability through cost management from the product design and development stage, globalization of parts procurement, and continuous introduction of high-value-added products.

The majority of business activities are conducted in Europe, North America, and various Asian countries, which inherently carries risks such as changes in political and economic conditions, changes in legal and tax systems, and social unrest. Heightened geopolitical risk has led to rising raw material prices, energy supply uncertainty, and disruption of international supply chains, which may cause significant problems in production and sales activities. The Company has established a system to timely collect and respond to information on environmental, product safety, and import/export regulations in each country, including the establishment of a global five-region structure.

If the Company fails to adequately anticipate changes in market needs and to timely develop attractive new products, or if technological innovation renders the Company's products obsolete, this may have a significant impact on business results and financial condition. The new product development process is by nature complex and uncertain, and involves various risks. The Company has built an R&D organizational structure aimed at expanding competitive advantage, and by strengthening business division activities integrated with the sales department, is promoting improved capability to develop new models by application market and global customer support.

Some raw materials, such as rare earths, depend on a limited number of suppliers, and if a supply disruption or shortage occurs due to an accident or a sudden increase in demand, this may hinder production activities and the delivery of products to customers as well as quality assurance. In addition, sharp increases in the prices of commodity materials may raise manufacturing costs, which may have a significant impact on business results and financial condition. The Company promotes stable supply by procuring from multiple suppliers, stabilizing prices through forward purchase contracts for some materials, and giving consideration to CSR procurement.

If a product defect occurs that leads to a large-scale product complaint, recall, or product liability claim, this may result in substantial costs and a decline in sales due to loss of reputation, which may have a significant impact on business results and financial condition. Since the amount of damages depends on the impact on the quality of the final products in which the Company's products are incorporated, it is difficult to predict the scale of potential losses. The Company has obtained ISO9001 and IATF16949 certification at all production sites, and is pursuing continuous improvement of its management systems as well as thorough root cause analysis and recurrence prevention measures when defects occur.

As the Company holds confidential information and personal information of customers, business partners, and employees, if an information leak occurs due to human or technical error, unauthorized access, or other causes, this may result in substantial costs and a decline in sales due to loss of reputation, which may have a significant impact on business results and financial condition. The Company has established a system for continuous information security assessment and improvement through the Risk Management Committee, and implements measures according to the importance of information assets as well as ongoing education and training for officers and employees.

Damage to business activities from extreme weather events (storms, floods, droughts, etc.) associated with global climate change, as well as the tightening of greenhouse gas emission regulations (such as emissions trading systems), may have a significant impact on business results and financial condition. The tightening of environmental regulations due to growing awareness of sustainability also poses a risk of generating additional response costs. The Company obtained SBTi certification in September 2025, and is promoting measures such as solar power generation, the introduction of renewable energy, and internal carbon pricing toward carbon neutrality by 2050, while continuing information disclosure based on TCFD.

If the Company is unable to secure and develop, as planned, engineers with advanced scientific and technical expertise and personnel with excellent management capabilities, this may have a significant impact on business results and financial condition. While proactively recruiting and continuously developing excellent personnel requires substantial costs, competition with other companies for talent is also intensifying. The Company strives to retain and develop employees through planned new graduate recruitment and year-round hiring, expansion of educational systems to support skill development, aptitude-based placement, and the establishment of work-life balance support systems.