KYOCERA CORPORATION

While conducting business globally across the U.S., Europe, Asia and other regions, the Company faces risks of encountering unforeseeable changes in laws and regulations, such as economic security policies, investment restrictions, import/export controls, and tariff increases. The Company addresses these risks through enhanced country risk monitoring, prevention of leakage of important technical information, and diversification of the global production system (Japan, U.S., Europe, Vietnam, China, etc.); however, a sudden change in the geopolitical situation could have a material impact on business continuity and financial condition.

In addition to the risk of information leakage or system shutdown due to malware intrusion or sophisticated cyberattacks, there exist risks such as leakage of confidential information, generation of misinformation, and infringement of intellectual property rights associated with the active introduction of AI technologies including generative AI. In the event of an incident, substantial security countermeasure costs and damages may arise, potentially leading to a decline in social credibility and business competitiveness. The Company addresses these risks through the establishment of an Information Security Basic Policy, the establishment of an AI Ethics Committee, and the promotion of AI use via an internal cloud environment.

Economic slowdown and sharp exchange rate fluctuations continue, mainly due to soaring raw material prices and geopolitical risks such as the situation in the Middle East. While AI-related investment remains solid in the semiconductor and information/communications-related markets, a slowdown is expected in the automotive-related market. Amid heightened uncertainty in demand outlook, if adverse effects beyond expectations materialize, financial condition and business results may fall below expectations. The Company addresses this through business portfolio reform based on "selection and concentration," improvement or withdrawal from unprofitable businesses, and strengthened priority investment in growth areas.

As the Company conducts business both domestically and internationally, it is constantly affected by foreign exchange rate fluctuations, and sharp fluctuations are anticipated due to financial market uncertainty stemming from the situation in the Middle East and other factors. Exchange rate fluctuations affect business results, the value of overseas assets, production costs, and price competitiveness against competitors, and may impact financial condition, business results, and cash flows. The Company seeks to mitigate this impact through the use of short-term foreign exchange forward contracts based on its foreign exchange risk management policy and by promoting local procurement of materials at overseas production sites.

There is a wide range of competitors, from major international corporations to emerging market companies, and there is a risk that the competitive environment will constantly change due to the rise of emerging market companies with an advantage in cost structure. Because the Company operates diversified businesses, concentrated investment in individual business fields may be inferior to that of competitors, and since demands for price reductions on products have become the norm, further price declines are expected going forward, which may affect financial condition and business results. The Company strives to secure competitive advantage by providing high-value-added products through strengthened intra-group collaboration and by reducing costs through Amoeba Management.

There is a risk that rising raw material prices and increased transportation costs due to higher crude oil prices will push up manufacturing costs, and if these cannot be passed on to sales prices, profitability may decline. In addition, dependence on specific suppliers and supply shortages caused by geopolitical risk may cause production delays and disruptions, making it difficult to secure alternative sources of procurement. The Company follows a basic policy of multi-vendor procurement and strives for stable procurement through improved price negotiation power leveraging scale merit and by switching to intra-group procurement.

Investment in KDDI shares (holding ratio of 13.42% as of March 31, 2026) accounts for approximately 33% of the Company's total assets, and fluctuations in the market price of the shares of that company may have a significant impact on financial condition. Cross-shareholdings in general also carry stock price fluctuation risk, and valuation losses may arise in the event of deterioration in the economic environment. The Company proceeds with the appropriate reduction of shares with no holding significance based on regular stock price monitoring and a reduction plan (targeting a net asset ratio of cross-shareholdings of less than 20% by FY2031 (ending March 2031)).

The Company holds substantial property, plant and equipment, goodwill, and intangible assets, and if an impairment determination is made due to deterioration of the market environment or failure to achieve business plans after an acquisition, an impairment loss based on the difference between book value and recoverable amount may affect financial condition and business results. In particular, goodwill and intangible assets with indefinite useful lives require an annual impairment test and are susceptible to changes in the business environment. The Company strives to avoid the risk of loss through external expert review at the time of investment decision-making and performance monitoring through PMI (post-merger integration).

If violations of laws and regulations or actions contrary to social norms occur, this may affect financial condition, business results, and cash flows through the suspension of transactions by customers, payment of penalties, and claims for damages. As the Company conducts business globally, it is required to comply with laws and regulations of various countries, and there also exist risks of unforeseeable changes in laws and regulations, such as transfer pricing taxation and anti-tax haven taxation. The Company addresses these risks through the establishment of a Global Compliance Promotion Department, the introduction of an internal whistleblowing system, and the regular holding of Global Legal, Compliance, and Intellectual Property meetings.

With the strengthening of climate change countermeasures, environmental laws and regulations may become further tightened and their scope of application expanded, and there is a risk that manufacturing costs will increase due to the introduction of carbon taxes and expanding customer demands for carbon-free operations. There are also physical risks such as operational suspension due to the intensification of extreme weather events, increased facility restoration costs, and reduced production due to water shortages, which may affect financial condition and business results. The Company addresses these risks through deliberation on long-term environmental targets at the Sustainability Committee chaired by the Representative Director and President, and through the promotion of energy conservation and the introduction of renewable energy.