MUSASHI SEIMITSU INDUSTRY CO.,LTD.

The pace of automotive electrification progress varies by region, and uncertainty in market trends is increasing as automakers review their EV strategies, which may affect the Group's net sales. The Group aims to reduce this risk by building a business structure resilient to change that can respond to demand for EVs, hybrid vehicles, and internal combustion engine vehicles alike, and by developing and manufacturing high-value-added products.

In FY2026 (ending March 2026), the ratio of net sales to the Honda Group reached approximately 51%, and changes in the Honda Group's business strategy or purchasing policy could directly affect the Group's business performance. The Group aims to reduce this dependence through proactive customer proposals leveraging its high technological capabilities and global production structure, as well as growth in new businesses.

The Group exports products and semi-finished products to its overseas group bases, and fluctuations in exchange rates may affect its financial position, business results, and competitiveness. The Group utilizes hedging measures such as forward exchange contracts to mitigate this risk.

In exports to overseas group bases, fluctuations in tariff policy may affect the Group's financial position, business results, and competitiveness. In addition to gathering local information through overseas subsidiaries, the Group aims to reduce this risk through negotiations with business partners and reviews of the supply chain.

If profitability declines due to a significant deterioration in the business environment or other factors regarding fixed assets held by the Group, impairment losses may occur, which could affect its financial position and business results. The Group manages this risk through strict verification of investment decisions at management meetings and continuous monitoring of business plans.

The Group conducts M&A and joint development involving investments in startups to acquire new technologies and improve the speed of business development. If the business activities of a target company do not proceed as expected, or if unexpected problems are discovered, impairment losses may occur, affecting business results. The Group addresses this through strict verification of investment decisions at management meetings and continuous monitoring of the progress of investees' business plans.

If a product defect occurs that leads to a large-scale recall or product liability claims, substantial response costs would be required, and it could significantly damage the Group's reputation, resulting in lower sales. The Group has established multiple verification gates in the process from development to mass production to build a quality evaluation and assurance system, and has also established a management and reporting system for change points during the mass production stage.

Cyberattacks from outside parties or unauthorized access to information systems could result in the tampering with or leakage of confidential information, or the suspension of critical operations and services, potentially affecting business results through a decline in social credibility or the occurrence of liability for damages. The Group aims to minimize damage and achieve early resolution by building a security system for prevention and establishing response procedures for when risks materialize.

The Group, which operates businesses in countries around the world, could be affected in its business results if problems arise in securing materials, production activities, or product supply due to political instability, regulatory tightening, or other factors. The Group aims to reduce this risk by strengthening the gathering of local information through overseas subsidiaries and by building a production structure and supply chain that allows for mutual complementation among group companies.

The Group aims to achieve carbon neutrality across its entire value chain by 2050, and rising capital expenditure and management costs for energy conservation and expanded use of renewable energy may affect business results. The Group aims to reduce the impact of this risk by appropriately managing target values at each stage and implementing effective environmental measures.