FUJI ELECTRIC INDUSTRY CO. , LTD.

The Company's products depend on the heavy electrical equipment market, primarily serving electric power companies, and capital expenditure trends among electric power companies directly affect business performance. The Company is promoting diversification of its revenue base by developing general industrial markets such as the railway vehicle market and expanding into overseas markets (the Middle East, Asia, the U.S., Europe, and Oceania). However, intensified price competition due to the inflow of inexpensive overseas products and fluctuations in the political and economic conditions of various countries may adversely affect the Company's financial position and business results.

The ratio of overseas sales to total net sales is approximately 10% (including sales via trading companies), and direct foreign exchange risk is currently avoided mainly through yen-denominated sales. However, if the yen continues to appreciate, this could lead to a decline in purchasing power among overseas customers. In the future, when the Company implements foreign-currency-denominated sales as part of its overseas expansion, sharp exchange rate fluctuations may adversely affect its financial position and business results.

The prices of the Company's main raw materials, molding materials and metals, fluctuate depending on the economic conditions of resource-exporting countries and the international supply-demand balance, and sharp price increases caused by exchange rate movements or geopolitical risk may put pressure on earnings. In addition, prolonged natural disasters, conflicts, or political instability in overseas regions could tighten supply-demand conditions, leading to procurement difficulties and extended delivery times, which poses a risk of delayed deliveries to customers. The Company continues to work on strengthening cost competitiveness, but it is difficult to avoid all such risks.

At the end of the fiscal year under review, the combined balance of securities and investment securities was ¥1,702 million, accounting for approximately 15% of total assets, making this a matter of significant financial importance. For equities, valuation losses may arise due to poor performance of investee companies or deterioration in securities market conditions, while for bonds, losses may arise from price declines caused by rising interest rates or deterioration in the creditworthiness of issuers.

All of the Company's production sites are concentrated in Shiga Prefecture, and there is a risk that production and sales activities could be halted due to an earthquake along the Biwako-seigan fault zone or similar faults, fire, or the outbreak of a new infectious disease. Although the Company has implemented preventive safety measures and early recovery/business continuity measures, it is impossible to avoid all risks in the event of a large-scale disaster of the magnitude of the Great East Japan Earthquake or a prolonged infectious disease outbreak, which may have a material adverse effect on the Company's financial position and business results.

Securing personnel engaged in product development, quality control, and sales activities is extremely important for the continuity and development of the business, but there is a risk that the Company may not be able to secure sufficient necessary personnel at the necessary times due to labor shortages. The Company is promoting internal talent development, external recruitment, improved engagement, and diversity as key strategies, but if personnel outflow occurs, future business development may be constrained, which may adversely affect the Company's financial position and business results.

The Company strictly manages confidential business information and personal information based on its confidential information management regulations and other rules; however, if information leakage occurs due to unauthorized external access or unauthorized removal of confidential information by related parties, social trust in the Company would be impaired. As a result, this may adversely affect the Company's financial position and business results.

The Company strives for quality control through obtaining ISO9001 certification and conformity certifications such as the U.S. safety standard (UL), but there is no guarantee that product defects, recalls, or repairs will not occur in the future. Although the Company has product liability (PL) insurance, there is no guarantee that it will fully cover the final amount of damages, which may adversely affect the Company's financial position and business results.

In conducting business both domestically and overseas, the Company is subject to various public regulations concerning trade, foreign exchange, taxation, the environment, and other matters, and strives to comply with them. If the Company is unable to comply with regulations in the future, or if new public regulations that affect business continuity are imposed, this may adversely affect the Company's financial position and business results.

The Company manages the credit risk of its business partners by determining and periodically reviewing credit limits based on its credit management guidelines; however, if a business partner goes bankrupt due to a sudden change in the business environment, this could disrupt the collection of receivables. In such a case, there is a risk of an adverse effect on the Company's financial position and business results.