The following primary risk factors to which the KASAI Group is subject may have a significant influence on investor's decisions. The issues relevant to the future are judged as of the submitted date of a financial report (June, 21, 2019).

1. (1) Financial situations

   The overseas sales ratio of our consolidated sales amount has been increasing due to the accelerated overseas expansion and shift to overseas production of our customers. Therefore the demand of automobile interior parts produced by the KASAI Group has been affected by economic situations not only in Japan but also in the countries and the regions where we have expanded our business into. Especially the ratio of North America in our total consolidated sales amount is high. Therefore both business trend and demand fluctuation of the automobile market in North America may also have a huge effect on our financial results.

2. (2) Dependence on the specific customers

   Currently Nissan Group and Honda Group are our main customers. Sales of these two groups make up 83.3% of the total consolidated sales amount of this fiscal year. The KASAI Group has been promoting the expansion of customers while maintaining the business relationship with Nissan and Honda. However the sales trends of these two companies may have a great impact on our financial results.

3. (3) Globalization

   The KASAI Group has been promoting the overseas expansion until now and intends to increase the number of overseas production bases with expanded sales destinations in the future. However, some unexpected political and economic instabilities, changes in law or tax system or social confusions arising from terrorism, war or other factors in overseas production bases may cause some trouble in the implementation of our business and impact on our financial results.

4. (4) Exchange rate fluctuation

   The overseas sales amount makes up 71.2% (71.4% previous year) of the total consolidated sales amount of this fiscal year, and it is susceptive to the influence of exchange rates. Should the exchange rate fluctuate bigger than our group's assumption, it might have impact on our group's financial results.

5. (5) Natural disasters, Accidents

   The KASAI Group has appropriate disaster prevention equipment and checks production facilities on a regular basis. However, it is possible that some fire, breakdown or electric power failure of our own or business partner’s production facilities arising from unexpected natural disaster or accident may cause some delay or stop in production or delivery.

6. (6) Price competition

   Recently the price reduction requests from automobile manufacturers have been increasing due to the intensifying cost competition in the automobile industry. We believe that our products are competitive in cost, quality and engineering. However we may not be able to maintain and expand the sales level and not able to keep the profitability due to competitor's low sales price by the increased competition. In this case, our financial results may be affected by these factors.

7. (7) Insufficient supply of materials and increase of the supply prices

   It is essential to procure enough raw materials, parts and services for our business. However our business may be adversely affected by interruptions or instability of supply caused by unexpected accident or disaster at suppliers. Supply prices are agreed between the KASAI Group and suppliers by contract but material and parts costs may rise due to the price increase in oil. In this case, our business may be affected by this factor.

8. (8) Development and technical capabilities of new product

   We actively work on the strengthening of product development and technical capabilities such as development of socially demanded eco-friendly weight reduction technology to maintain and enhance both quality and cost competitiveness. However, if it is difficult to develop or provide attractive and low-priced new products or technologies on a timely basis due to unexpected environmental changes or market changes, future growth and profitability may be reduced or our business results may be affected by the bearing of invested capital.

9. (9) Product defect and quality problem

   We work on design and production in compliance with related regulations and internationally recognized quality control standards to secure the quality. However in case of unexpected defects or quality problems in products, it may generate large amount of cost or decrease in evaluation of our group depending on the conditions of defects.

10. (10) Intellectual property right

    We acquire intellectual property rights such as product and manufacturing technology related patents to conduct business activities and carry on patent research as necessary to prevent any claim or lawsuit of third parties. However, if it is determined that our products or production engineering could infringe on other company's intellectual property rights in the future, it may affect our financial results.

11. (11) Interest-bearing debt dependence and increase in interest expense

    We are dependent on loans from banks for financing of equipment, system and research & development. The dependence on interest-bearing debt makes up 23.9 % of the consolidated assets.
    It may affect our financial results, should interest expense increase due to rising of borrowing rate in the future.

    	84th End of the FY 2015	85th End of the FY 2016	86th End of the FY 2017	87th End of the FY 2018	88th End of the FY 2019
    Total asset (Million yen)	128,271	133,501	136,655	140,703	143,287
    Interest-bearing debt (Million yen)	33,879	30,460	26,802	28,847	34,181
    Interest-bearing debt dependence (％)	26.4	22.8	19.6	20.5	23.9
    Sales (Million yen)	214,884	237,992	222,537	224,036	227,257
    Interest expense (Million yen)	540	466	380	299	407
    Interest expense / Sales (％)	0.3	0.2	0.2	0.1	0.2

12. (12) Securing of human resources

    To secure excellent human resources and good labor forces in Japan and around the world is indispensable for globally expanding our business. We are undergoing activities to secure human resources and working forces based on the recruiting of new graduates and mid-career employees and personnel system with emphasis on each person's performances and capabilities. However if these activities do not work well due to the tight labor market and this results in the situation that human resources which the KASAI Group wants are not secured and developed as planned, our business expansion might be subject to the restrictions and our financial results could be affected by that condition.