RIVER ELETEC CORPORATION

The Company continually examines initiatives for new businesses and business expansion aimed at sustainable growth; however, due to numerous uncertain factors, there is a possibility that plans may not proceed as intended. If targets are not achieved as planned, this may affect business performance and financial condition. As a countermeasure, strategic examination is being conducted based on the Medium-Term Management Plan.

Funds obtained from operating activities are allocated to working capital and investment funds, with shortfalls covered by borrowings from financial institutions and leases; however, fundraising may be constrained by a decline in credit ratings or turmoil in financial markets. If fundraising costs increase or it becomes difficult to secure necessary funds, this may affect business performance and financial condition. The Company strives to balance active investment with improvement of financial soundness by maintaining financial discipline.

Capital investments are made based on the Medium-Term Management Plan and recoverability assessments; however, if sudden changes in the business environment prevent developments from proceeding as planned, a decline in asset value or the occurrence of impairment losses or losses on sale may result. If such risks materialize, this may have a material effect on business performance and financial condition. The Company seeks to reduce this risk by conducting multifaceted examinations in advance.

The Crystal Products Business accounts for over 99% of consolidated net sales, with the primary market being smartphone-related applications and sales composition skewed toward major manufacturers. If competitiveness declines due to technological innovation, the emergence of substitute products, or falling sales prices amid intensified competition during economic downturns, this may affect business performance and financial condition. The Company seeks to mitigate this concentration risk by expanding sales and developing new markets in growth areas such as IoT wireless communications, mobility, medical healthcare, and next-generation digital infrastructure.

The Company strives to comply with various laws and regulations, administrative permits, and regulatory requirements in conducting business both domestically and internationally; however, violations may result in legal penalties or litigation. Violations of laws or deviations from social norms by employees may also affect business performance and financial condition. In April 2025, the "River Group Code of Conduct" was revised, and thorough dissemination and education across the group are being implemented.

The Company strives to ensure product quality, including preventing defects in procured raw materials; however, if large-scale accidents, claims, or product defects leading to product liability claims occur, this may result in substantial costs and a significant impact on social reputation. The Company strives to comply with legal regulations concerning quality and safety, and has taken measures such as obtaining product liability insurance.

Information systems and information networks are an essential foundation for business activities; however, unauthorized intrusion, falsification, theft, or destruction of information, as well as increasingly sophisticated cyberattacks, may force business operations to slow down or halt. Business performance and financial condition may also be affected if confidential information is leaked outside the Company. The Company strives to build and operate systems with sufficient security measures in place.

The group operates through one domestic manufacturing subsidiary, two overseas sales subsidiaries, and one overseas manufacturing and sales subsidiary. If natural disasters such as typhoons and earthquakes, outbreaks of disease, country risk from political instability, or geopolitical risks materialize, there are concerns about the contraction or suspension of business activities and human rights violations. The Company strives to regularly and continuously review its BCP, ensure thorough enrollment in overseas travel accident insurance for employees stationed abroad, and collect country risk information.

Securing and developing capable personnel and promoting global diversity are essential to realizing key strategies such as expanding sales in the European, American, and Chinese markets and developing products aligned with market trends. If the Company is unable to secure and develop capable personnel or promote global diversity, this may affect business performance and financial condition. The Medium-Term Management Policy positions personnel-related measures as a key strategy.

There exists both the risk of damage from unauthorized use of intellectual property by third parties and the risk of being accused by third parties of infringing their intellectual property rights through the group's products or processes. If disputes arise, in addition to litigation and settlement negotiation costs, the Company may be required to pay damages or royalties. The Company addresses this through proper management of its own intellectual property and by obtaining lawful licenses for use from third parties.