Set out below are those matters relevant to the Tokuyama Group's business status and financial conditions that could potentially have a significant influence on investor decisions. Please note that the matters listed do not cover all risks relevant to the Tokuyama Group (hereinafter referred to as "the Group"), and it is thought that there are risks other than those matters listed that could potentially influence investor decisions.
The matters listed are those regarded as relevant as at June 26, 2024.

There is no guarantee that the effects of earthquakes, tsunamis, extreme weather conditions (typhoons, storms, torrential rains, etc.), and other natural disasters on production facilities as well as logistics related to the procurement and product sales functions can be completely prevented or mitigated. Also, should events lead to a significant decrease in production volume or, in the worst case, the Group be forced to discontinue production for a protracted period, there is the possibility that any such situation greatly affects the Group's business performance and financial condition.

Countermeasures
The Group has developed a business continuity management approach and conducts BCP and safety confirmation drills in the event of a large-scale earthquake.
In addition, the Group conducts drills in cooperation with local communities and governments to identify issues and strengthen response capabilities.

In the event of a major disruption in production activities owing to such factors as a fire, explosion, leakage, damage, or breakdown of equipment and machinery, or delays in the procurement of raw materials as a result of a shipping or railroad accident, the possibility exists that the Group's business performance and financial condition may be significantly affected. In addition, accidents such as fire, explosion, leakage, etc. may cause injuries and other personal damages, as well as impacts on the environment and neighboring areas.

Countermeasures
The Group performs day-to-day and periodic facility maintenance to minimize the adverse effects from any disruption to its production operations. In addition, the Group formulated rules regarding disaster countermeasures under which it works in unison with its Group companies in an effort to prevent accidents.

In the event that novel coronavirus or other serious infection disease spreads at the Group's workplaces, partially or completely suspending operations would become necessary, and there is the possibility that any such situation greatly affects the Group business performance and financial conditions.

Countermeasures
In order to ensure the safety of executives, employees, customers, and others, and to minimize any impacts on the Company's business activities, the Group will establish an Infectious Disease Crisis Response Headquarters (headed by the President) in accordance with its infectious disease crisis management standards, share information, and evaluate countermeasures. Given the varying degrees of impact and risk due to fluctuations in the contagious nature of each pandemic and virulence, the Group will implement appropriate measures in accordance with the level of crisis.

The Group's products are sold in countries and regions that include Japan, the United States, Asia, Europe, and there is the possibility that the economic conditions in each country or structural changes in the market and industry could exert a significant influence on sales of the Group's products. In the event of risk arising, for example due to social unrest and its prolongation brought about by acts of terrorism, war or other contributory factors, there also exists the possibility that any such situation could greatly affect the Group's business performance and financial conditions.

Countermeasures
The Group aims to increase productivity and maintain high quality by transitioning toward a robust business structure that is resilient against changes in the Company's operating environment and is capable of sustainable growth, while also pursuing cost reductions. The Group consistently monitors and will take appropriate measures in response to customer trends, political and economic conditions in relevant countries and areas, and business conditions.

In the event of a failure in the IT systems used by the Group due to such factors as cyber-attacks or IT systems and/or equipment failure, the possibility exists that a wide array of business processes that rely on IT including the production, sales, R&D, procurement, and accounting functions could be disrupted and in turn have a significant impact of the continuity of the Group's continuity.
In addition, in the event that new technologies, know-how, and information obtained mainly through R&D are leaked to outside parties, it may result in a loss of public trust and the inability to recover the costs invested mainly in R&D. There is the possibility that such a situation greatly affects the Group's business performance and financial condition.

Countermeasures
The Group has installed and operates its core system servers in data centers that offer high level of security. Also, data is backed up on a regular basis in an effort to hedge against the risk of an unlikely emergency event. Furthermore, the Group has put in place a structure to promote countermeasures. While at the same time providing education. Through these and other means, the Group is taking steps to thoroughly manage confidential information and personal information in an effort to strengthen the protection of information security. Moreover, in order to mitigate risks stemming from digital data leaks caused by cyber-attacks and from IT system outages and other failures, the Group's dedicated cyber security organization is leading efforts to strengthen the cyber security management system for both normal and emergency situations. This includes the early detection and response to cyber-attacks, risk assessment for IT introduction and upgrades, and employee training.

The Group maintains a coal-fired power plant and operates a range of businesses that use natural resources and energy in large quantities. In the event that stricter environmental regulations are introduced, situations arise that require new social responsibilities for environmental protections, and/or carbon pricing and other measures are introduced, there is the possibility that efforts to address any such situation through equipment and R&D investment, and existing business reassessment greatly affects the Group's business performance and finance condition. In addition, the possibility exists that ESG concerns and other non-financial information may have a significant impact on the Group's ability to procure financing.

Countermeasures
In the Medium-Term Management Plan 2025, the Group raised the target "achieve carbon neutrality by FY2050" as part of priority Issues "Contribute to mitigation of global warming." To achieve this target, the Group aims to decarbonize raw material/fuel inputs, develop/deploy green products, and accelerate technological development and commercialization of next-generation energy such as hydrogen and ammonia. The Group will also implement measures to improve the Tokuyama Factory's processes as well as promote the development and utilization of biomass fuels in Japan and overseas to achieve a 30% reduction in total GHG emissions (Scope1,2) in fiscal 2030 compared to fiscal 2019.
The Group set up a taskforce to take action on these risks, as well as to observe global affairs and trends, and to provide advice to management within the Sustainability Committee.

In the event that the Group's products lose competitiveness due to such factors as changes in market needs, a failure in or lack of marketing, the emergence of new competitors, a failure in or obsolescence of development activities, and delays in responding to rapid technological innovation or overseas expansion, the possibility exists that the Group's business performance and financial condition may be significantly affected.

Countermeasures
In addition to conducting market research relating to the Group's products on an ongoing basis, we will work to strengthen exchanges of information and our relationships with our customers, while advancing the drafting and review of business plans that will facilitate responses to the risks of market fluctuations.

There is the possibility that retaining personnel necessary for future production activities will become difficult due to expected decline in the labor force as the birthrate decreases and population ages within Japan. In this event, there is the possibility that the Group's business performance and financial condition would be greatly affected. In addition, retaining personnel engaged in advanced materials R&D and DX or cyber security promotion could become difficult. In this event, achieving the Group's growth strategies would become difficult and, in turn, there is the possibility that any such situation greatly affects the Group's business performance.

Countermeasures
In addition to regular hiring in a planned manner, the Group also introduced a job-based hiring system as a mechanism to secure highly skilled professionals, and is actively engaged in hiring experienced individuals. The Group will also promote DX to advance labor-savings and streamlining, and will shift the resulting manpower surplus to business portfolio transformation. Moreover, the Group is expanding systems to support a balance between work and childrearing, as well as other systems to support work-life balance, and is pursuing comfortable, rewarding work, in an effort to retain the necessary personnel.

The Group raises the financing necessary for its business operations by borrowing from financial institutions and issuing corporate bonds. In the event that borrowings or bond issuances cannot be carried out in a timely and appropriate manner due to changes in the financial environment or the status of external credit ratings, there exists the possibility that this could have a significant impact on the Group's financing activities. If the costs of financing were to increase due to changes in market conditions such as interest rates, there exists the possibility that any such situation could greatly affect the Group's business performance and financial conditions. The Group also exports products and imports raw materials, fuels, etc. in foreign currencies. There is a possibility that performance and financial content of the Group will be greatly affected by fluctuations in exchange rates. There is also the possibility that it will adversely affect the yen converted value of the financial statements of overseas consolidated subsidiaries when preparing consolidated financial statements.

Countermeasures
The Group takes in preparation for changes in the market environment such as interest rates, in principle, measures to mitigate risks by hedging transactions such as fixed rate contracts or fixed interest rate swaps. In addition, in preparation for unforeseen circumstances, we set up commitment lines as necessary to secure liquidity funds and strive to operate a sustainable business that takes ESG perspectives into consideration. The Group takes measures to mitigate risks associated with fluctuations in foreign currency exchange rates by balancing foreign currency denominated assets and liabilities, managing foreign exchange exposure, and hedging transactions through the use of such instruments as foreign exchange forward contracts.

A significant portion of the Group's production facilities have been in operation for a considerable period of time. In the event that production facility operations are suspended for an extended period due to the aging of equipment, the possibility exists that the Group's business performance and financial condition may be significantly affected.

Countermeasures
In addition to routine maintenance, the Group undertakes periodic maintenance to ensure the safe and stable operation of production facilities.

The Group procures the raw materials and fuels essential to conduct production operations from various area in the world. Also, for some of its products, the Group uses special raw materials and materials which have a limited number of suppliers. In the event that a soaring market or resource nationalism causes the tight supply of raw materials and fuels or delays in delivery hinders the Group's production operations causing manufacturing costs to rise drastically, there is the possibility that any such situation greatly affects the Group's business performance and financial condition. In addition, in each of the business that the Group conducts, competitors are present all over the world. In the event that low-priced imported products flood the market or a price war breaks out between rival companies due to unforeseen circumstances, and that the situation continues for a prolonged period of time deteriorating the Group's profitability, there is the possibility that any such situation greatly affects the Group's business performance and financial condition.

Countermeasures
To ensure a stable and continuous supply of its products to customers, the Group believes it is important to maintain competitive advantage in areas such as quality and price. With regard to the procurement of raw materials and fuels, the Group engages in long-term, stable, low-cost procurement by combining, for example, medium- to long-term contracts and purchases on spot markets. At the same time, the Group secures multiple suppliers and investigates alternative raw materials and materials procurement options.

In the event that, due to unexpected circumstances, a quality problem leads to a product recall or a product safety-related product liability (PL) issue arises, there is the possibility that any such situation greatly affects the Group's business performance and financial condition.

Countermeasures
The Group makes an honest effort to strengthening quality control, chemical management, and product safety in order to ensure the proper quality in accordance with product characteristics. In addition, the Group has taken out product liability insurance just in case product defects occur.

The Group runs the risk of having a negative impact on the environment and biodiversity at each stage of its business, from raw materials procurement to product manufacturing, distribution, sales disposal, and recycling. These risks include environmental accidents, the leakage of harmful pollutants due to improper handling, soil and groundwater contamination, complaints from local residents about noise and odors, and the illegal dumping and disposal of waste. There is also the possibility of effects on operations, such as reduced-volume production, due to the emergence of water risks that include the drying up of water sources. If any of these serious environmental accidents or incidents were to occur, there is the possibility that they could greatly affect the Group's business performance and financial conditions.

Countermeasures
In addition to management in accordance with legal regulations, to prevent environmental accidents and pollution we are also implementing management based on voluntary control measures, regular monitoring, equipment calibration and other initiatives. To maintain water resources, we are doing our utmost to conserve the environment, as exemplified by having also set new targets for freshwater usage, managing water usage and water quality, and engaging in activities to protect biodiversity. As regards our supply chains, to fulfill our social responsibility and achieve sustainable procurement we have established and published CSR Procurement Guidelines and are also working to engage with our suppliers.

The Group recognizes the potential for its business activities to have or to provoke an adverse effect on the human rights of various stakeholders, as well as the potential for the Group's businesses, products, or services to be directly involved in adverse effects on human rights. The Group procures raw materials and fuels essential to its production activities from all over the world, and sells its products on a global basis. In the event that the supply chain is directly or indirectly involved in human rights abuses, there is a risk that this may lead to a suspension of business, boycotts, business downsizing or withdrawal, and a deterioration in corporate value. In this case, the possibility exists that the Group's business performance and financial condition may be significantly affected.

Countermeasures
The Group places respect for human rights at the foundation of all of its business activities, and in order to fulfill its responsibility to respect human rights as a company, the Group formulated the Group Human Rights Policy in accordance with the UN Guiding Principles on Business and Human Rights on December 1, 2022, with which all executives and employees comply. The Sustainability Committee takes the lead in promoting cross-organizational initiatives regarding human rights and other issues. Especially, in the supply chain, where negative impacts on human rights are arguably more likely to occur, the Group has prepared and disclosed details of its CSR procurement guidelines, with which it requires suppliers to comply. At the same time, the Group conducts human rights due diligence initiatives, including engagement using self-assessment sheets.

In both its domestic and overseas businesses, there exists the possibility that the Group becomes the subject of a legal dispute or litigation. In the event that a major lawsuit is filed, there is the possibility that such a situation greatly affects the Group's business performance and financial condition. In addition, in the event that a violation of compliance by an employee or officer of the Group is uncovered, the possibility exists that the Group's management and other performance may be affected owing to such factors as a deterioration in its social credibility and brand image or payment of fines.

Countermeasures
The Legal Department and the Intellectual Property Department of the Groups take lead in day-to-day precaution against patent or contract disputes and litigation. To reduce compliance risks, the Group conducts statutory responsibility training for newly appointed Group company directors and Corporate Auditors, as well as various compliance training programs for employees on the Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade and on the Act against Delay in Payment of Subcontract Proceeds, Etc.