AKEBONO BRAKE INDUSTRY CO., LTD.

The company is promoting the development of next-generation products such as electric parking brakes, xEV-compatible brakes, and low-dust friction materials compliant with Europe's EURO7 standard. However, if it is unable to develop necessary new technologies and products in a timely manner due to rapid changes in market and customer needs and industry technology, this could adversely affect its business, results of operations, and financial condition. As countermeasures, the company is promoting the shortening of development lead times through the use of computer simulation, as well as the development of copper-free friction materials and brake pads that reduce CO₂ emissions during the manufacturing process by 50%.

Due to the reorganization of production sites and specialization of plants under the business revitalization plan, mutual production support among domestic plants has become difficult. There is a risk that natural disasters such as earthquakes, typhoons, and floods, or large-scale fires or explosions, could delay or halt product supply to customers. Although a complementary system has been established with overseas plants (Mexico, China, Thailand, Indonesia, and the U.S.), extended lead times remain an issue, and the company plans to implement countermeasures based on its BCM (Business Continuity Management).

Since brake products are directly related to safety, if a product defect reaches customers, the resulting significant costs and loss of social trust could have a material adverse effect on the business, results of operations, and financial condition. There has been a past instance of improper conduct related to periodic inspection reports at a domestic production subsidiary, and the company is working to restore trust through thorough in-process quality assurance and the reliable implementation of recurrence prevention measures.

The company procures raw materials, steel materials, and parts from numerous external suppliers. Price surges or shortages due to market changes, and supply disruptions caused by suppliers' deteriorating business conditions, accidents, or natural disasters, could lead to higher manufacturing costs and production delays or stoppages. In addition, the risk of increasing supply chain complexity and cost as electrification progresses is also growing. The company is working to re-verify appropriate inventory levels and to accelerate the process of assessing supply impact by creating supplier maps.

As of the end of the previous consolidated fiscal year, the company did not meet the Prime Market listing maintenance criterion for tradable share ratio (35% or more), and has received a special exemption from the Tokyo Stock Exchange with a plan period through the end of March 2030. The JIS Fund held 50.32% of the company's common shares as of March 31, 2026, and there is a possibility that the tradable share ratio could decline further if the fund exercises its right to request acquisition of Class A shares. If the criteria are not met within the plan period, there is a risk that the company's Prime Market listing could be delisted.

The Group engages in raw material import and product export transactions in each region and holds assets and liabilities denominated in foreign currencies, so exchange rate fluctuations could adversely affect its results of operations and financial condition. There is a risk that, when translating the financial statements of overseas affiliated companies into yen, the amounts on the consolidated financial statements could fluctuate even if the local currency amounts remain unchanged. The company monitors its foreign exchange balance, but considers it difficult to hedge all such risks.

A decline in automobile demand due to economic downturns in major markets, social and economic disruption caused by war, terrorism, or disease, and unexpected changes in laws and regulations could adversely affect the business, results of operations, and financial condition. The company also recognizes the risk that changes in the industry structure resulting from various governments' decarbonization policies and initiatives toward mobility transformation could transform the competitive environment.

The company holds confidential information and personal data related to product development, manufacturing, and management on a global basis. Leakage of important information due to cyberattacks, theft or loss of information devices, or operational errors could lead to loss of trust, damages claims, and reduced competitiveness. The company addresses this through an ISMS committee, continuous global security monitoring by external experts, mandatory encrypted communication and secure network environments for telework, and the establishment of emergency response flows.

Insufficient development and recruitment of young employees, the departure of personnel with specific skills, and increased leave of absence and turnover due to stress from rapid changes in the business environment could adversely affect the business, results of operations, and financial condition over the long term. Developing and securing human resources capable of supporting global business expansion is an urgent priority, and the company is undertaking active recruitment activities both domestically and internationally, enhancing training and education, and implementing measures to prevent the departure of core personnel.

If compliance issues, including violations of laws and regulations, occur, this could adversely affect the business, results of operations, and financial condition through legal penalties, litigation, damages claims, and a decline in stakeholder trust. The company addresses this through the establishment of the akebono Global Code of Conduct and standards of conduct, approval and promotion of an annual activity plan by the Compliance Committee, training on harassment and long working hours prevention and insider trading prevention, and the establishment of internal and external whistleblowing contact points.