(3) Product liability In spite of our efforts to ensure a high level of product quality, there is a possibility that a customer or other party may experience financial losses or other forms of damage as a result of an unexpected defect in products manufactured and sold by the Group. As not all losses incurred will be covered by product liability insurance, this factor may adversely affect the business performance and financial position of the Group. (4) Impact of natural disasters The production plants of the Group are located mostly in the Tokai Region of Japan, which is said to be particularly at risk of the occurrence of a major earthquake. If such an earthquake were to occur, substantial losses . including the suspension of operations . could result, and this would adversely affect the business performance and financial position of the Group. (5) Major litigation In the event of a lawsuit being brought against the Group in the future, there is a possibility that this will adversely affect its business performance and financial position. (6) Deferred tax assets The deferred tax assets of the Group are based on an amount that is recorded after judging the potential for collection based on forecasts of future taxable income. If such forecasts deviate significantly from actual results, there is a possibility that this will adversely affect the business performance and financial position of the Group. (7) Changes in foreign currency exchange rates For the reporting period, overseas sales of the Group accounted for 12.4% of total sales. The Group includes seven overseas consolidated subsidiaries and one overseas affiliated company subject to the equity method. There is therefore a possibility of a change in exchange rates adversely affecting the business performance and financial position of the Group. (8) Changes in interest rates The Group committed to reducing the interest-bearing debt, and to improving the overall financial balance. However, there is a possibility that a change in interest rates will influence the business performance and financial position of the Group. (9) Application of accounting for the impairment of long-lived assets In line with changes to the law relating to accounting methods in Japan, the Group employs accounting for the impairment of longlived assets. As a result, in the event of a significant future decline in market prices of land, and/or a deterioration in the Group’s operating environment, there is a possibility of the posting of a substantial impairment loss, which would adversely affect the Group’s business performance and financial position. Estimates or projections included in this report are based on facts known to the Company’s management as of the time of writing, and actual results may therefore differ substantially from such statements. 0 50,000 100,000 150,000 200,000 0.0 2.0 4.0 6.0 8.0 (Millions of yen) (%) 04 05 06 07 08 Total assets & ROA ■ Total assets ROA Toagosei Co., Ltd. 25