Avex Inc.

As the Group operates as a content holder utilizing rights it owns as well as rights held jointly with artists and other companies across its businesses, the presence or absence of hit artists and content, the popularity of key artists and talent, and the growth of new talent directly affect business performance. Given the characteristics of the entertainment industry, predicting hits is highly difficult, making continuous cultivation of new talent and maintenance of a diverse content portfolio ongoing challenges.

As the Group conducts live events and content production activities across the country, natural disasters such as earthquakes, tsunamis, typhoons, and floods, or the spread of infectious diseases such as COVID-19, may force the suspension of large-scale live events and content production activities. Such business suspensions would directly reduce revenue and could have a material impact on business performance.

The Group holds personal information such as customer data, and works to protect it by establishing personal information protection regulations and conducting information security training. However, should a leakage occur, it could result in damages liability and a decline in social credibility, potentially affecting the business and performance.

If the market value of held assets declines significantly, or if the profitability of a business deteriorates, an impairment loss on fixed assets may arise through the application of impairment accounting. The recognition of an impairment loss would directly and adversely affect the Group's business performance and financial position.

The Group conducts overseas business in Asia and other regions around the world and expects market growth going forward. However, unforeseen events such as political and economic factors, changes in laws and regulations, unfavorable tax factors, or social disruption caused by terrorism or war could affect overseas expansion and business performance.

The Group sets and periodically reviews credit limits for each business partner based on its credit management regulations; however, as it actively pursues business expansion into new territories, receivables may become uncollectible due to the bankruptcy of important business partners or their affiliated subsidiaries. Should such uncollectibility occur, it could affect business performance and financial position.

The Group is subject to a wide range of laws and regulations, including the Copyright Act, the Act on the Protection of Personal Information, the Financial Instruments and Exchange Act, and the Labor Standards Act, and is working to develop internal regulations and strengthen its compliance framework. Any material future violation of laws or ethical lapse could damage social credibility, and amendments or changes to related laws and regulations could affect the business and performance through increased compliance costs.

While the Group pursues new businesses leveraging technology, rapid advances in technological innovation, including AI, may lead to the obsolescence of existing technologies and the emergence of competitors. In particular, the spread of AI also poses a risk of infringement on content rights held by the Company, and rapid changes in the business environment could affect performance.

The Group makes extensive use of systems in providing services and conducting internal operations, and has established security measures and backup environments against loss, leakage, alteration, or system downtime of important data caused by cyberattacks, unauthorized access, natural disasters, or excessive access. However, given the increasing sophistication of cyberattacks in recent years, complete protection cannot be guaranteed, and service outages or increased security cost could affect business activities and performance.

Katsuto Matsuura, a founding member and Representative Director and Chairman, is a major shareholder and plays a central role in formulating and deciding management strategy and in contracts with key business partners and affiliated artists. Should he depart for any reason, it could disrupt the continuity of management strategy and the maintenance of important business relationships, potentially having a material impact on the business and performance.