OZU CORPORATION

The Nonwoven Fabrics Business's main products are for the electronics/semiconductor, medical, and cosmetics industries, and demand trends and market conditions in these industries have a significant impact on performance. Due to the high degree of dependence on specific industries, there is a risk that an economic downturn or contraction in demand in any of these industries could directly lead to a decrease in sales and profit. The Company's securities report explicitly states that the impact on performance is "significant."

A change in the basic policy of Ozu Shoten Co., Ltd., a major shareholder holding 28.1% of the Company's voting rights, could affect the business and performance of the Group. Currently, a division of business domains is maintained, with the Group handling nonwoven fabrics, disinfectant preparations, etc., while Ozu Shoten specializes in real estate and Japanese paper (washi) businesses; however, there is a risk should this arrangement change. The Group operates its business based on independence and autonomy, and it is the Company's policy to continue this division of business domains.

At Nihon Plant Seeder Co., Ltd. (agricultural sector), sales peak during the summer months of the second quarter (June to August), causing the Nonwoven Fabrics Business's operating income to tend to be concentrated in the second quarter. This seasonal fluctuation causes significant skew in quarterly performance, which may affect the accuracy of full-year performance forecasts and investor evaluations. No countermeasures are described.

The Group purchases materials for nonwoven fabric products from many suppliers, both domestic and overseas, and processes them into finished products. If, for any reason, the procurement of materials is disrupted, there is a risk that the Group would be unable to provide products and services to customers. A disruption in procurement would directly and adversely affect performance and financial condition. Although materials are procured from multiple suppliers, no specific countermeasures such as alternative procurement methods or inventory policies are described.

Nonwoven fabric products are manufactured from materials purchased from domestic and overseas suppliers, processed into finished products at three domestic processing affiliates and overseas cooperating factories. If large-scale claims arise due to defects in products or services, product recall costs and product liability compensation costs may be incurred, which could adversely affect performance and financial condition. Although each processing site is said to implement sufficient quality control, the production structure spanning multiple locations increases the complexity of quality control.

If a large-scale earthquake or other disaster causes damage to distribution centers, material suppliers, the three domestic processing affiliates, or overseas cooperating factories, there is a risk that sales and profit could decrease due to reduced utilization rates at distribution centers or diminished production capacity. In addition, increased facility restoration costs could worsen the financial condition. At Nihon Plant Seeder Co., Ltd. in the agricultural sector as well, unusual weather and natural disasters are factors that could reduce sales and profit.

Electronics wipers are also produced at overseas cooperating factories and sold mainly in China, Taiwan, and Southeast Asia. Unexpected changes in the political, economic, or social conditions of the countries in which products are sold could disrupt sales activities and adversely affect performance and financial condition. Dependence on regions with high geopolitical risk, including China and Taiwan, is a particular concern. No specific risk mitigation measures are described.

The Group is strengthening its procurement and sales structure in the Asian region, and the proportion of overseas transactions is expected to continue to increase. Since a portion of export and import transactions is conducted in foreign currencies, there is a risk that fluctuations in exchange rates could affect performance. As the proportion of overseas transactions rises, exposure to foreign exchange risk is expected to expand going forward, but no specific hedging measures are described.