ANRITSU CORPORATION

The information and communications market is characterized by rapid technological innovation, and if the Group is unable to provide solutions that enhance customer value in a timely manner, this could have a significant impact on the Group's financial position and operating results. The primary concerns are delayed responses to customer needs and loss of market share to competitors, with the timely provision of cutting-edge products and services being key to maintaining competitiveness.

The performance of the Test and Measurement Business is affected by capital expenditure trends among service providers, network equipment manufacturers, smartphone and mobile phone manufacturers, and others, while the PQA Business depends on capital expenditure trends among food manufacturers (over 80% of revenue), and the Environmental Measurement Business depends on capital expenditure trends among EV and battery-related manufacturers. External factors such as changes in economic and market conditions and technological innovation could affect the revenue of each business, potentially causing significant fluctuations in the financial position and operating results of the Group as a whole. The structural risk lies in the fact that each business segment is highly dependent on the investment cycles of specific customer groups.

Overseas sales accounted for approximately 70% of the Group's total sales in the current period, and economic trends in overseas countries, changes in international circumstances, and the need to comply with applicable laws and regulations could have a significant impact on the Group's financial position and operating results. This includes import/export control risk and legal violation risk, requiring responses to changes in regulatory environments and geopolitical risks in each country. Since many of the Group's customers also operate globally, changes in international circumstances have a structural indirect impact through the business activities of these customers as well.

The Group is strengthening strategic growth investments, including external partnerships and M&A, to develop new areas beyond "measurement," conducting due diligence and business plan verification in advance and formulating PMI plans. However, there is a risk that unexpected changes in the external environment or changes in market and competitive conditions may prevent the achievement of initially expected results, which could affect the Group's financial position and operating results. There is a risk that failures in launching new businesses after investment or goodwill impairment, among other factors, may materialize as financial impacts.

If supply chain disruptions caused by disasters or a sharp increase in demand lead to tight supply of components, procurement of electronic components and manufacturing of key products could become difficult, creating a risk of delays or stoppages in product supply. The Group has implemented measures such as building strong relationships with suppliers, establishing mechanisms for early identification of component procurement risks, securing strategic component inventories, and switching to alternative components for high-risk parts. This risk is also linked to infectious disease and disaster risks, and the impact could be significant if vulnerabilities in the global production and procurement system become apparent.

If an information security incident occurs due to a cyberattack, this could affect the Group's financial position and operating results through loss of social trust, litigation, and damage to the brand, among other factors. The Group connects offices around the world via networks, and since a vulnerability in even one location could affect the security level of the entire system, the Group is working to build a globally robust and uniform security system. The Group has established an information security management structure, is committed to thorough management and continuous improvement, and conducts ongoing information security training.

The Group is subject to legal regulations in each country in which it operates, and violations of laws and regulations or actions contrary to social expectations could affect the Group's financial position and operating results through legal penalties, litigation, social sanctions, and damage to the brand, among other factors. The Group has established the "Anritsu Group Code of Conduct" and conducts education and awareness activities, built a compliance promotion structure led by the Group CEO, and established a global promotion structure through the Corporate Ethics Promotion Committee. The internal audit department audits the proper functioning of the compliance promotion structure and makes recommendations and requests for improvement as necessary.

For the Group, with overseas sales accounting for approximately 70% of total sales, sharp fluctuations in foreign exchange rates could affect the Group's financial position and operating results. The Group works to hedge risk through forward foreign exchange contracts for foreign currency transactions arising from the collection of accounts receivable and other activities, but there are limits to fully addressing sharp fluctuations. As the Group's global business expands, exposure to foreign exchange risk remains at a high level.

The acquisition, retention, and development of talent are extremely important factors in the Group's sustainable growth, and if this does not proceed as expected, it could affect the Group's financial position and operating results. The Group is engaged in recruiting diverse talent regardless of nationality or gender, developing an education and training system that supports employees' voluntary growth, and creating a work environment that emphasizes work-life balance. Securing highly specialized talent is fundamental to maintaining competitiveness in the rapidly innovating information and communications market, and intensifying competition for recruitment remains an ongoing challenge.

Particularly in the Test and Measurement Business, product lines are subject to extremely rapid technological innovation, making products and components prone to obsolescence, which could lead to prolonged inventory holding periods and inventory deterioration, affecting the Group's financial position and operating results. The Group strives to provide products and services to the market that carefully address customer needs, but the difficulty of inventory management remains high due to shortening technology cycles. There is a risk that recording of inventory valuation losses could directly affect profitability.