Aichi Tokei Denki Co., Ltd.

The Company manufactures products in accordance with international quality management systems, but cannot guarantee that all products will be free of defects. If a product defect occurs, recall response may become necessary, and there is a risk that expanding damages and loss of credibility could adversely affect business performance. The Company's policy is to minimize damages through prompt response and fundamental countermeasures.

The Company operates in diverse markets both domestically and internationally, requiring prompt responses to changing needs in each country, intensifying competition, revisions to laws, regulations, standards and certifications, and changes in communication infrastructure trends. If market environment changes occur that differ from expectations, business performance may be adversely affected. The sales and technical departments coordinate to actively gather information and respond accordingly.

The Company uses copper, aluminum, petrochemical products, and other materials as key purchased raw materials, which are susceptible to international market conditions. If raw material prices surge beyond expectations, the increase may not be fully absorbed through productivity improvements or cost reductions, potentially adversely affecting business performance. Fluctuations in raw material procurement costs are recognized as a risk that directly impacts the profit structure.

The Company has production bases in Asian countries and inherently faces unavoidable risks such as unexpected regulatory changes, political upheaval, war, and terrorism. If these risks materialize, problems may arise in business execution, potentially adversely affecting business performance. Due to the high degree of dependence on local bases, there are concerns about impacts on the entire supply chain.

The Company holds personal and confidential information of business partners, as well as its own confidential information related to technology, contracts, personnel, and other matters, and faces risks of unauthorized access, information leakage, or destruction due to cyberattacks and similar threats. If an information leak occurs, business continuity may be disrupted, potentially adversely affecting business performance. The Company is strengthening information security through the establishment of a strict management system, development and enhancement of information handling regulations, and thorough employee awareness efforts.

As of the end of the current fiscal year under review, the Company held marketable securities with a book value of ¥12,197 million, accounting for 17.4% of total assets, in addition to holding retirement benefit trust assets with a fair value of ¥4,772 million. If stock prices decline sharply due to worsening economic conditions or other factors, this could result in significant valuation losses, a decline in the equity ratio, and an increase in retirement benefit expenses, potentially adversely affecting business performance and financial position.

The Company is subject to various environment-related laws and regulations concerning air pollution, water pollution, hazardous substances, waste, climate change, and other matters, and faces risks of environmental pollution caused by natural disasters or accidents, or difficulty adapting to future environmental regulations. Should such circumstances arise, business performance and financial position may be adversely affected due to loss of credibility, incurrence of damages compensation costs, business suspension, and other consequences. The Company undertakes measures such as product development and manufacturing in accordance with environment-related laws and regulations, and the establishment of checking systems and implementation of audits.

Aichi Prefecture, where most of the Company's major production bases and affiliated companies are located, has been designated as a region for enhanced disaster prevention measures against the Nankai Trough earthquake, and significant damage from an earthquake is anticipated. If an unexpected major earthquake or natural disaster such as a typhoon occurs, production activities may be halted, potentially adversely affecting business performance. In addition to hardware measures such as earthquake-resistant buildings and facilities, the Company is also advancing software measures such as preparing earthquake response manuals and conducting earthquake drills.

The Company positions the acquisition, securing, and development of human resources as an important element for sustainable growth, and implements measures such as tiered education, specialized education by job type, DX promotion, and mid-career hiring. If the Company is unable to secure and develop sufficient human resources, business performance may be adversely affected. The Company is also working to develop environments and systems that accommodate diverse working styles and to promote work-life balance.

The Company places importance on corporate social responsibility and has established an internal control system; however, if officers or employees fail to comply with laws and regulations, or if misconduct occurs, there is a risk that business activities could be restricted due to sanctions from regulatory authorities, litigation, or loss of social credibility. Should such circumstances occur, business performance and financial position may be adversely affected. The Company continuously works to raise compliance awareness.