MARUBUN CORPORATION

As an electronics trading company whose main customers are manufacturers of consumer equipment, industrial equipment, automobiles, and medical equipment, significant fluctuations in demand from customer companies or the electronics market as a whole could materially affect operating results. The Company is working to expand its customer base and develop and enhance high-value-added products, but recognizes that complete avoidance of such risk is difficult in the event of a sudden market change.

The electronics industry is characterized by extremely rapid technological innovation and changes in the business environment, and customer needs are becoming increasingly diverse and complex. If the products handled become obsolete or the Company's response is delayed, or if compensation costs or additional expenses arise due to defects or deficiencies in products or services, operating results could be affected. The Company addresses this through expanding its product lineup, strengthening technical support capabilities, establishing quality control systems, and transferring risk through insurance coverage.

The Company is highly dependent on its major suppliers, Infineon Technologies Japan K.K. (13.5% of total purchases) and Analog Devices International Unlimited Company (10.4% of total purchases). If these suppliers revise their distributor policies, resulting in changes to contract terms or contract termination, operating results could be significantly affected depending on the transaction volume with the relevant supplier. The Company continuously works to develop new suppliers and new products, and strives to maintain good relationships with each supplier.

Because the Company maintains a certain level of inventory at all times to enable just-in-time supply, discrepancies between initially projected requirements and actual demand—arising from fluctuations in customer demand or changes in suppliers' supply conditions—could result in inventory valuation losses or disposal losses. The Company works to thoroughly manage inventory and monitor demand and supply conditions; however, when formulating business plans, it makes provisions of a certain amount based on inventory holding status and turnover periods, and recognizes that it is difficult to accurately estimate the impact in advance.

The Company has a high proportion of import and export transactions denominated in foreign currencies, and utilizes natural hedging for transactions in the same foreign currency and forward exchange contracts for transactions involving different currencies. However, if exchange rates fluctuate significantly, this could have a major impact on net sales, gross profit, and inventory valuation when converted into yen, as well as on the translation of the financial statements of overseas consolidated subsidiaries. In addition, while the Company utilizes interest rate swaps and other instruments for working capital procurement through borrowings from financial institutions, large fluctuations in interest rates on borrowed currencies could affect operating results and financial condition.

The Company makes equity investments in and provides development funding loans to suppliers for the purpose of securing sales rights for new products and strengthening relationships. If the business plans or performance of these investees deviate significantly from expectations, this could lead to impairment losses or difficulty in collecting loans, thereby affecting operating results. The Company manages this risk by deliberating and deciding on investments and loans through the Board of Directors or other bodies according to the amount involved, and by regularly monitoring the management condition and business progress of investees.

Retirement benefit expenses and pension obligations are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on plan assets. If actual investment returns decline or these assumptions change, this could affect operating results and financial condition. The Company recognizes that it is unavoidable to be subject to a certain degree of impact each fiscal year due to the annual recalculation of expected retirement benefits based on actuarial differences and actual pension asset investment performance.

The Company conducts business under a wide range of laws and regulations, including those related to national security, import/export controls, product liability, antitrust, patents, and environmental regulations. Failure to comply with these could restrict business activities and affect operating results. The Company implements measures such as obtaining the latest information, providing compliance training to all employees, and conducting awareness activities through seminars for related parties, and recognizes that the likelihood of this risk materializing at present is not high.

Securing and developing talented personnel is important for maintaining and improving competitiveness. The Company conducts recruitment of new graduates and experienced mid-career hires, company-wide training and OJT, and appropriate personnel placement. However, if it becomes difficult to secure and develop personnel, this could affect future operating results. While the Company recognizes that the likelihood of this risk materializing at present is not high, it notes that estimating the degree of impact in advance is difficult.

The Company has its core computer system located in Tokyo and its logistics center in Sanbu-gun, Chiba Prefecture. It has implemented measures such as establishing a BCP framework, conducting regular drills, ensuring redundancy of lifelines, system backups, and other protective measures against large-scale natural disasters such as earthquakes and typhoons, as well as cyberattacks and computer virus infections. However, if such risks materialize on an unexpected scale due to the increasing severity of disasters caused by recent climate change or the spread of infectious diseases, this could significantly affect operating results and financial condition, including through the contraction of business activities.