The main risk factors that may affect the performance and financial condition of our group are as follows:

Our group develops and introduces unique technologies to the market, particularly in the field of vacuum equipment used in the manufacturing processes of semiconductors, electronic components, and FPDs. We have grown by acquiring market share in this field. However, if there is a significant reduction in capital investment or deterioration in the financial condition of our customers, who are semiconductor and electronic device manufacturers and FPD manufacturers, due to changes in market conditions, it may adversely affect our group's business performance and financial condition. In our mid-term management plan, starting from the fiscal year ended June 2024, we have established two basic policies: "Creating social value through vacuum technology" and "Enhancing profit and capital efficiency oriented management". Under these two policies, we aim to achieve sustainable growth by improving profit margins through productivity enhancement amidst market fluctuations and concentrating on development in growth areas. Additionally, by building a stable revenue base, particularly in the semiconductor and electronic device fields, with diverse products used in a wide range of fields, we are enhancing our ability to respond to market fluctuations.

Our group has continued to introduce new products using cutting-edge technology to the market through ongoing aggressive research and development investment. However, if we are forced to significantly delay development and the introduction of new products to the market is delayed, it may adversely affect our group's business performance and financial condition. We are accelerating necessary development for growth through selective investment and concentration, and we conduct regular monitoring to manage progress and prevent significant delays.

Our group operates globally, providing products to customers in various countries and regions worldwide. However, competitors are also expanding globally, and in a competitive environment with new entrants, competition is intensifying not only in terms of product performance but also in terms of pricing. This competitive environment may adversely affect our group's business performance and financial condition. Our group maintains competitiveness by timely introducing products using cutting-edge technology that are required in customers' manufacturing processes, thereby responding to the competitive environment.

Securing human resources is positioned as the most important factor for our group to continue growing in a global business environment. If we are unable to continuously secure the human resources necessary for business growth, it may lead to a decline in competitiveness and adversely affect our group's business performance and financial condition. Our group views human resources as "human assets" and strives to create an environment where diverse human resources can continue to challenge themselves. We promote recruitment and development of human resources, and through health management, we create a working environment where diverse human resources can be healthy both physically and mentally, full of vitality, and able to maximize their individual abilities, thereby securing the necessary human resources.

If there is a surge in parts and material prices or delays in supply due to tight supply and demand for parts and material necessary for product production, or if production activities are halted or delayed due to supply chain disruptions caused by large-scale disasters, it may affect our group's business performance and financial condition. Our group strives to secure necessary parts and material by building cooperative relationships with suppliers and arranging early procurement of parts and material.

Our group operates globally and is subject to various laws and regulations in different countries and regions, including export and import regulations, competition laws, anti-corruption and bribery laws, labor laws, environmental laws, transfer pricing taxation, and more. Our group is committed to complying with these laws and regulations. If violations of these laws and regulations are recognized, it may lead to a decline in our group's social credibility, as well as the possibility of fines or liability for damages. Additionally, if unforeseen amendments or strengthening of laws and regulations occur in the future, based on national security policies or other factors, it may result in costs related to corrective measures for inadequate responses or restrictions on business activities. Our group has established corporate ethics action standards to educate domestic and international group companies on the importance of compliance with various laws and regulations, and we utilize internal and external whistleblowing systems to ensure early detection and response to violations. Furthermore, compliance committees and risk management committees established within our group companies report on actions that may violate laws and regulations, and we have a system in place to take necessary actions as needed. Particularly important laws and regulations are reported to our management meetings, and a system is in place for our executives to lead the deployment to group companies.

Our group has established a quality assurance system, including obtaining ISO9001 certification, an international standard, and has continued to provide high-level services. However, as we constantly provide products using cutting-edge technology, there are many developmental elements, and if unforeseen defects occur, leading to additional costs, liability for damages, or a decline in trust resulting in decreased sales, it may adversely affect our group's business performance and financial condition. In our mid-term management plan, starting from the fiscal year ended June 2024, we are strengthening manufacturing capabilities and enhancing upstream processes where cost, reliability, and specification standards are determined. We incorporate mechanisms for quality improvement, such as value engineering to enhance product completeness and horizontal deployment of non-conformities, and we are advancing the implementation and thoroughness of measures to prevent recurrence.

Our group raises funds through borrowings from financial institutions, but due to market conditions or a decline in our creditworthiness, fundraising may become difficult. Additionally, some of our group's borrowings are subject to financial covenants with financial institutions, and while our group's current financial condition is at a level that poses no issues in light of these covenants, if we breach these covenants, it may hinder fundraising. If fundraising does not proceed as expected, it may adversely affect our group's business performance and financial condition. Our group strives to level annual repayment amounts in fundraising, reducing refinancing risk and repayment burden. Furthermore, amid uncertain social and economic conditions, we secure sufficient liquidity to prepare for unforeseen circumstances and establish commitment lines to ensure additional funds can be secured, maintaining a very low fundraising risk for the time being. We will continue to maintain a system that allows us to secure necessary funds in a timely manner to respond to rapid changes in the business environment.

Our group holds important business information, as well as personal information and confidential information of business partners obtained in the course of business. If this information is unintentionally leaked, it may result in loss of customers, a decline in social credibility, or liability for damages. Additionally, due to theft, loss, unauthorized use by third parties, cyberattacks, or other unforeseen circumstances, there is a possibility of destruction or alteration of important data, information leakage or outflow, or system shutdowns. These factors may adversely affect our group's business performance and financial condition. Our group advances security measures through regular risk assessments and monitoring of information systems and networks. We also establish an appropriate information management system based on various regulations related to information management and ensure thoroughness through employee education.

Although our group has a high overseas sales ratio, we primarily conduct transactions in yen. However, in yen-denominated transactions, we may be at a disadvantage in terms of price competitiveness compared to overseas manufacturers during periods of yen appreciation. Additionally, there are some foreign currency-denominated transactions, and in these transactions, there is a possibility of foreign exchange risk due to sudden exchange rate fluctuations. These factors may adversely affect our group's business performance and financial condition. Our group strives to reduce the impact of exchange rate fluctuations on performance by hedging risks through foreign exchange contracts.

Our group holds numerous patents related to various vacuum equipment and actively seeks to acquire new rights. However, if unexpected patent infringement lawsuits are filed by third parties, it may adversely affect our group's business performance and financial condition. To prepare for this, our group conducts regular patent surveys on our products and technologies.

Safety issues related to our group's products may lead to damage to customers, liability for damages, decreased sales, or a decline in social credibility. Additionally, if unforeseen circumstances result in labor accidents affecting employees or facilities, leading to disruptions in product supply or service provision, it may adversely affect our group's business performance and financial condition. Our group considers "safety first" as the foundation of corporate management and aims to create a vibrant workplace where various products and services used by customers are safe, and we ourselves can work safely, brightly, and energetically through the operation of a safety management system centered on risk assessment.

Our group is committed to complying with domestic and international environmental laws related to global warming prevention, water pollution, air pollution, noise, soil contamination, waste disposal, and the use of hazardous chemicals. However, if future environmental regulations become difficult to adapt to or unforeseen circumstances occur, it may lead to increased environmental response costs, business activity suspension, or a decline in social credibility, adversely affecting our group's business performance and financial condition. Regarding climate change response, we consider it one of the important management issues and support the recommendations of the "Task Force on Climate-related Financial Disclosures (TCFD)," predicting risks and opportunities based on scenario analysis and promoting activities. Furthermore, we aim to reduce greenhouse gas emissions by 40% by 2030 (compared to 2020) and achieve net-zero emissions by 2050, conducting regular monitoring and progress management. We will continue to promote initiatives to comply with environmental laws and regulations, reduce environmental impact based on environmental philosophy and policies, and achieve greenhouse gas emission reduction targets, while appropriately disclosing environmental information.

Like other companies with global business operations and extensive business activities, various force majeure factors such as economic environment, natural disasters, wars, terrorism, and infectious diseases in different countries and regions may adversely affect our group's business performance and financial condition.