TOMITA ELECTRIC CO.,LTD.

A deterioration in economic conditions or product demand trends in Japan and the East Asia region, the Company's principal sales destinations, could result in decreased sales. Because sales are concentrated in specific regions, the structure is directly susceptible to demand fluctuations, which could affect the Company's financial position and operating results. The Annual Securities Report does not describe specific countermeasures.

Fluctuations in exchange rates affect the yen-equivalent value of assets and liabilities arising from foreign currency-denominated transactions, as well as the prices and sales of foreign currency-denominated products. Given the Group's structure, with East Asia as its principal market and production based in China, exposure to foreign exchange risk is extensive. The Annual Securities Report does not describe specific countermeasures such as hedging instruments.

The Company is exposed to intense price competition in the electronic components industry. While it responds through the development of products using advanced technology and cost reductions from overseas production, intensifying competition could make it difficult to set favorable prices. Should a situation arise in which the Company is unable to counter price competition, this could have a material impact on its financial position and operating results.

The Company is actively making upfront investments in the development of new materials and products to secure growth, but it is difficult to reliably forecast the returns on such investments, entailing the risk that demand falls short of forecasts. If results and returns commensurate with the investment are not achieved within a certain period, this could affect the Company's financial position and operating results.

Among the principal raw materials, iron oxide and non-ferrous metals, non-ferrous metals are affected by international trading prices, which have been on an upward trend in recent years. Although the Company seeks to absorb this through thorough cost reduction, if it is unable to fully absorb increases in raw material prices, this could affect its financial position and operating results.

All investment securities recorded on the consolidated balance sheet are held by the Company. Securities with market prices carry the risk that their fair value will fluctuate depending on economic conditions and corporate earnings trends. For securities without market prices, changes in the financial condition of the issuing company affect their valuation, and in either case, this could affect the Company's financial position and operating results. The Company reviews its holdings from time to time from the perspective of their significance and asset soundness.

The Company owns multiple parcels of land and buildings as business-use real estate and applies the accounting standards and application guidance related to impairment of fixed assets. Should an impairment loss occur on owned fixed assets due to deterioration in the economic environment or changes in the business environment, this could affect the Company's financial position and operating results.

In the event of a large-scale natural disaster or a prolonged power outage, manufacturing sites and production systems both in Japan and overseas could suffer serious damage, which could have a significant adverse impact on sales activities. Because manufacturing sites are dispersed both domestically and internationally, there is a risk that multiple sites could be affected simultaneously in the event of a wide-area disaster. The Annual Securities Report does not describe specific countermeasures such as a business continuity plan (BCP).

Since the Company's principal production sites are subsidiaries and subcontractors in China, changes to laws, tax systems, and regulations by the Chinese government, as well as revisions to minimum wages by local governments, directly affect production costs and the operating environment. Because production is concentrated in China, if regulatory changes or wage increases occur, it may become difficult to transition to an alternative production system, which could affect the Company's financial position and operating results.