SANKO GOSEI LTD.

The Group manufactures and sells plastic molded products and molds mainly for the automotive industry and the information & communication equipment industry, which account for a high proportion of sales, and its business performance is affected by market trends in these specific industries. In particular, in the United States, tariff increases on imported automobiles and parts have been proposed, and if such tariffs are applied, this could adversely affect the Group's business, financial position, and operating results. No specific countermeasures by the Group are explicitly stated in the Annual Securities Report.

The Group manufactures important safety parts such as body valves used in automotive brake booster devices, and if an accident occurs due to a product defect, the Group could be held liable for product liability, potentially adversely affecting business performance. Since nonconformities in important safety parts can directly cause accidents or fires that endanger human life, the impact could be substantial. As a countermeasure, the Group's business sites and consolidated subsidiaries have obtained international quality standard "ISO" certification to thoroughly implement quality control.

The Group conducts business, including through joint ventures, in 12 countries: the United Kingdom, Thailand, Singapore, Malaysia, Indonesia, China, India, Mexico, the United States, the Philippines, Hungary, and the Czech Republic. Changes in the management policies of joint venture partners or changes in the management, legal systems, or political environment of each country could adversely affect the Group's business, financial position, and operating results. Given the multinational scope of business operations, country risk and governance risk exist in a complex, compounded manner.

The Group conducts production and sales in Europe, Asia, and North America, and the sales, expenses, and assets of each region are recorded in local currency and translated into yen when preparing the consolidated financial statements. Fluctuations in the exchange rate at the time of translation may cause the value after translation into yen to fluctuate even if the value in local currency remains unchanged, potentially affecting business performance and financial position. No specific hedging measures or other countermeasures are explicitly stated in the Annual Securities Report.

The prices of raw materials used by the Group may fluctuate significantly due to trends in crude oil prices and other factors, directly affecting the manufacturing costs of plastic molded products. If there is a delay in passing on price increases to product prices, the Group may be unable to absorb the increased costs, potentially adversely affecting operating results. No specific mechanism or countermeasures for price pass-through are explicitly stated in the Annual Securities Report.

The Group has entered into commitment line agreements with financial institutions with which it does business, in order to secure stable funding for business operations, and these agreements include certain financial covenants. If the Group breaches these financial covenants due to deteriorating business performance or other factors, it may lose the benefit of the term on its debt, potentially having a material impact on its cash flow. This risk is also linked to interest rate fluctuation risk, as rising borrowing costs due to interest rate increases could heighten the risk of breaching the financial covenants.

The Group procures part of its business funds through borrowings from financial institutions, and fluctuations in interest rates affect interest expenses, interest income, and the value of financial assets and liabilities. In a rising interest rate environment, funding costs increase, potentially adversely affecting the Group's business, operating results, and financial position. No specific hedging measures against interest rate risk are explicitly stated in the Annual Securities Report.

If the profitability of fixed assets owned by the Group declines due to changes in the economic environment or other factors, losses associated with impairment processing may occur, potentially affecting business performance. As the Group has numerous production sites across 12 countries overseas, the scale of its fixed assets is large, and the potential impact of impairment risk is wide-ranging. No specific countermeasures against impairment risk are explicitly stated in the Annual Securities Report.

The Group continuously works on developing new technologies in the manufacture of plastic molded products and molds in order to differentiate itself from competitors, but if it is unable to keep pace with continuous technological innovation, it may fail to meet customer needs, potentially affecting business performance. In particular, in the automotive industry, technological transformation such as electrification and weight reduction is accelerating, and delays in responding could lead to the loss of order opportunities. Specific measures such as the amount of development investment are not explicitly stated in the Annual Securities Report.

The Group has accumulated proprietary technologies and know-how that differentiate it from other companies' products, but in certain regions and countries, legal restrictions may prevent complete protection of intellectual property rights. If technologies or know-how are leaked, the Group's competitive advantage could be undermined, potentially affecting business performance and financial condition. Given the Group's business operations across 12 countries overseas, the risk is of particular concern in countries and regions where intellectual property protection is insufficient.