Japan Resistor Mfg.Co.,Ltd.

The Group has implemented measures to address interest rate fluctuation risk for a portion of its interest-bearing debt; however, debt not covered by such measures is directly affected by interest rate fluctuations. In a rising interest rate environment, increased interest expense payments may adversely affect the Group's financial position and operating results.

The Group has implemented measures to hedge and mitigate foreign exchange fluctuation risk, but complete avoidance is not guaranteed. In addition, because exchange rate fluctuations affect the consolidated financial statements when translating the assets and liabilities of overseas consolidated subsidiaries, including those in China and Thailand, into yen, this may impact the Group's financial position and operating results.

The Group continuously reviews the recoverability of the residual value of fixed assets held by each company based on future cash flows. If the assets in question fail to generate sufficient cash flow, recognition of impairment losses may become necessary, which could have a material impact on operating results and financial position.

Because the Group primarily engages in build-to-order production, it may not be able to respond promptly to changes in customers' product lineups or product development trends. If customers undergo strategic shifts, this could result in the loss of orders or a decline in sales.

The Group faces intense price competition in both domestic and overseas markets, and it is often difficult to set prices that ensure sufficient profit, particularly in the Hybrid IC and Electronic Equipment fields. If downward price pressure continues or intensifies, it could significantly affect the Group's ability to secure profits.

The Group has subsidiaries in China and Thailand, and in addition to foreign exchange risk, is exposed to risks such as political instability, uncertainty in economic trends, differences in religion and culture, and local labor relations. If these risks materialize, they could adversely affect the continuity of local operations and business performance.

The Group manufactures and manages its products based on internationally recognized quality control standards, but it cannot be guaranteed that all products will be free of defects. If a product defect occurs, it could result in substantial costs and a decline in corporate reputation, which could have a material adverse effect on operating results.

New regulations concerning the raw materials used by the Group in the manufacture of electronic components could result in restrictions on their use in production or outright prohibition. If suitable substitutes cannot be procured immediately, this could disrupt production and adversely affect sales and profit.

Under the Group's separated manufacturing and sales structure, each company shares distinct roles, but this may prevent a swift response to sudden shifts in overall economic trends or rapid changes in product cycles. The structural rigidity may lead to a decline in competitiveness or lost business opportunities in the event of sudden market changes.

The Group prepares consolidated financial statements, but if changes occur in relationships among group companies with respect to capital contributions, personnel, funding, or technology, it may become impossible to maintain consolidation with the company in question. Changes in the scope of consolidation could affect the comparability of financial statements and operating results.