HOPE, INC.

The majority of advertising space sold through the SR Service is procured via municipal government bidding, creating a risk that misjudgment of media value or high bids by competitors could increase cost of sales. There is also a possibility that changes in the external environment could make it impossible to procure sufficient inventory. While the Company strives to procure inventory at appropriate bid prices through accurate assessment of media value and its know-how and sales capabilities, there remains a possibility of impact on business performance.

For the SR Service, advertising space is procured on a 12-month basis for the calendar fiscal year (April to the following March) as a lump-sum period, bearing inventory risk, and if actual sales deviate significantly from plan, this could impact business performance. Because advertising space has a nature whereby its value disappears over time, unsold inventory directly leads to losses.

While there is currently no competitor of comparable or larger scale in the SR Service, competition to acquire market share could intensify due to new entry by major companies or expansion of business scale by regional peers. For the SC (SMART CREATION) Service / Machiret, multiple competitors already exist, and the Company strives to maintain its competitive advantage by enhancing media value through content expansion.

Japan's total fertility rate has been on a declining trend since the late 1960s, and if municipal tax revenues and administrative demand decrease along with the declining population, demand for the services handled by the Group could decline. For the Group, whose core business is oriented toward municipal governments, this represents a structural and long-term risk factor.

The environment surrounding municipal governments is expected to change significantly due to the promotion of the Digital Garden City Nation Vision and other initiatives, and if the speed of digital technology innovation exceeds the Group's capacity to respond, this could affect medium- to long-term business results. The Group strives to collect and grasp information beneficial to municipal government-related business, but there is a risk of delayed response to change.

Representative Director and President Takayasu Tokitsu plays a central role in formulating and deciding management policy and business strategy, and a high degree of dependence on him is expected to continue for the time being. If his involvement in the business becomes difficult, this could affect the Group's financial condition and business results; while the Company is working to reduce this dependence by strengthening its management organization, the risk remains.

If the Group is unable to secure and develop personnel to play core roles, it may face a shortage of management talent in the future. As a small organization with 217 employees (excluding temporary staff), unexpected resignations of officers and employees pose a risk of directly affecting the internal control system and business execution structure. While the Company is actively working to establish education systems and frameworks, uncertainty regarding personnel acquisition continues.

As a business handling customers' personal information, if an information leak were to occur, this could result in damage to social trust and corporate image, as well as unforeseen damages such as claims for compensation. The Company strives to maintain an appropriate management system, including undergoing ISMS (ISO/IEC 27001) recertification and the transition audit to the 2022 version, receiving an audit report with no nonconformities.

Because the publication of childcare information booklets and similar materials in the Machiret business within the Advertising Business is concentrated in specific periods, net sales and operating profit tend to be weighted toward certain periods. If order intake and production do not proceed as planned, this could directly affect business results for that period; the Company addresses this by formulating order intake and production plans that take seasonal factors into account.

The number of potential shares from stock acquisition rights granted to officers and employees is 513,900 shares, equivalent to 3.7% of the total number of issued shares (excluding treasury shares) of 13,742,956 shares as of March 31, 2026. If these rights are exercised, this could dilute the value per share, leading to a decrease in the ownership ratio of existing shareholders.