TBS HOLDINGS, INC.

Terrestrial television advertising revenue, which accounts for a large proportion of the Group's net sales, is strongly linked to the business performance of advertisers and consumer sentiment. If the advertising market contracts significantly due to geopolitical risks, instability in the international economy, or sharp increases in resource prices, this could materially affect the Group's operating results and financial position. Amid the continuing shift by advertisers from fixed costs to variable costs, the Group has worked to promote flexible time sales and to pass on costs at appropriate prices, and in the fiscal year under review, spot sales significantly exceeded the previous fiscal year. The materialization of reputational risk could similarly affect operating results.

The rise of global OTT platforms, including Netflix, has intensified competition for consumers' discretionary time, and competition to acquire quality content, such as soaring sports broadcasting rights fees, is also intensifying. The Group is working to expand its revenue base through collaboration with U-NEXT (with over 5 million members), content provision to Netflix, and real-time streaming; however, the competitive environment is intensifying further as global platform operators expand advertising-based services, and if these businesses do not grow as planned, this could affect the Group's operating results and financial position. As the pace of content investment increases, maximizing profit through optimal window control has become a challenge.

In January 2026, the Group entered into a capital and business alliance with Hollywood film production studio Legend Pictures, LLC, including an investment of US$150 million, and agreed to jointly plan and develop works based on Japan-originated IP. While this alliance is an important step in expanding the global strategy, if joint planning and development do not proceed as planned, the Group may not be able to recover an amount commensurate with its investment, which could affect operating results and financial position. There is also a risk of recognizing valuation losses on unlisted shares without market prices, including those related to M&A and startup investments, if the performance of investee companies deteriorates.

There is a risk of system outages caused by increasingly sophisticated and advanced cyberattacks such as ransomware, as well as a risk of leakage of personal information and confidential information via the supply chain of outsourced business partners. In fiscal 2025, an incident actually occurred in which personal information of service users may have been leaked due to unauthorized access to a contracted vendor's system. The Group is promoting the establishment of a group-wide basic cybersecurity policy and ISMS-compliant guidelines, the establishment of TBS CSIRT, and the introduction of ASM, CASB, and multi-factor authentication, and achieved its target level (Tier 2) under the NIST CSF one year ahead of schedule. However, it is difficult to completely eliminate all cyberattacks, and if an unexpected situation occurs, this could affect the Group's operating results and financial position through loss of social trust, damages, or other consequences.

The Group is converting the core facilities of its broadcasting and streaming businesses from dedicated equipment to general-purpose devices and cloud servers (AWS/GCP/Azure, etc.), which is expected to reduce costs, but also carries the risk of loss of important data due to storage media damage and business interruption due to unexpected failures of developed software. Precise specification of requirements is essential for large-scale software development, and if development costs increase unexpectedly or the development of critical systems is delayed or discontinued, this could affect the Group's operating results and financial position. The Group is also introducing advanced technologies, such as the use of IOWN at the

Competition to acquire personnel essential for growth, such as specialists in global business, business investment, technology, and early childhood/education, is intensifying, and there are growing concerns about the loss of talented personnel and accumulated skills and know-how. The Group has established a "Human Resource Development Policy" and an "Internal Environment Development Policy" as part of its human capital management framework, and is working to improve employee retention rates by promoting diverse working styles and building systems that enable "happy challenges." However, if competition to acquire personnel intensifies further amid the rapidly changing environment surrounding the content industry, this could affect the Group's operating results and financial position.

The Group's terrestrial television and radio broadcasting businesses are subject to licensing regulations under the Broadcast Act, Radio Act, and other laws, and licenses must be renewed every five years (the validity period). The amended Broadcast Act, which came into effect in April 2024, made it possible to unify programming across multiple broadcast service areas, which could develop into a restructuring of affiliated stations, and other changes in the legal system could affect the business environment. If there are significant future changes to the Broadcast Act, Radio Act, or other laws, or if the Group receives a decision that violates such laws, this could affect its operating results and financial position. Regulations on the voting rights ratio of foreign shareholders (refusal to record in the register of shareholders is possible at 20% or more, and voting rights are restricted above 33%) also impose constraints on shareholder composition.

Valuation difference on available-for-sale securities within net assets for the fiscal year under review increased by ¥181,438 million from the previous fiscal year due to fluctuations in fair value, and significant fluctuations in fair value could affect indicators showing the Group's operating results and financial position. In addition, while the Group appropriately values unlisted shares without market prices, including those related to M&A and investments in startup companies, at the end of the consolidated fiscal year, there is a risk of recognizing valuation losses if the performance of investee companies deteriorates or fails to meet plans. Although there is no direct impact on cash flow, the impact on financial indicators is disclosed as a matter important to investor decision-making.

The Group owns leased real estate, centered mainly in Akasaka, Minato-ku, and while Akasaka Biz Tower currently maintains a vacancy rate of 0.00% (fully occupied) and a high rent level, there is a possibility that vacancy rates could rise and contracted rents could fall due to large-scale supply in the surrounding area and changes in the supply-demand balance. In the Akasaka 2-chome/6-chome area redevelopment plan, construction costs have risen due to the prolonged increase in material procurement costs and labor costs, and there is a risk of further increases in development costs. Combined with rising fuel costs and other expenses in the operation of existing buildings, if profitability declines, this could affect the Group's operating results and financial position.

In the Lifestyle Business, which handles cosmetics, apparel, food products, and other goods, there is a risk of lost revenue opportunities due to excess inventory caused by economic stagnation, rising raw material prices, the shift to online purchasing behavior, and demand imbalances due to abnormal weather. In the early childhood/education business, there are risks of intensifying competition to secure students due to the declining birthrate, difficulty securing personnel due to the shrinking labor force, and reputational damage from food poisoning, allergy incidents, or employee misconduct. In the franchise business, if brand image deterioration due to misconduct at franchise stores or contract terminations due to deteriorating profitability at franchise stores occur frequently, this could affect the Group's operating results and financial position.