GMO internet group, Inc.

The Group holds and manages a large volume of customer personal information, financial assets, and crypto assets, and is exposed to the risk of information leakage or asset outflow due to unauthorized external access or cyber attacks. In particular, in the Internet Finance Business and Crypto Asset Business, where large amounts of customer assets are entrusted to the Group, GMO Coin (Crypto Asset Exchange) has implemented high-level security measures such as cold wallet management. However, if an incident occurs despite these measures, it could lead to a loss of trust, administrative sanctions, and large-scale claims for damages, which may have a material impact on business activities, operating results, and financial condition.

GMO Click Securities, GMO Coin (Crypto Asset Exchange), and GMO Foreign Exchange are registered operators subject to regulation by supervisory authorities under the Financial Instruments and Exchange Act, and business activities may be constrained by amendments to related laws and regulations, changes in interpretation, or the enforcement of new laws. In addition, if the capital adequacy ratio falls below 120%, the Company will need to raise capital funds, which could have a material impact on financial condition and operating results. Furthermore, GMO Click Securities eliminated stock trading commissions and mutual fund sales commissions in September 2025, and if increased trading volume and revenue supplementation through cross-selling cannot be achieved, this may affect business performance.

The crypto asset mining business may be subject to restrictions on holding, trading, and mining activities due to changes in laws and policies. GMO-Z.com Trust Company Inc., which engages in the issuance and redemption of Stablecoin (GYEN / ZUSD), is under the supervision of the New York State Department of Financial Services (NYDFS), and changes to U.S. laws or regulations may make it difficult to continue business operations. In the crypto asset exchange business, if customer investment appetite declines due to deteriorating market conditions in equities, foreign exchange, or crypto assets, trading volume may decrease, which could have a material impact on financial condition and operating results. Although the Group strives to establish a compliance framework, the diversity and volatility of regulations across countries make compliance challenging.

In the OTC FX Trading Service, CFD Trading Service, and crypto asset trading, each company acts as a counterparty to transactions, resulting in proprietary positions. If cover transactions cannot be conducted appropriately due to system failures or sudden market fluctuations, losses may occur. In addition, in margin trading such as securities margin trading, FX, and crypto asset margin trading, there is a risk that shortfalls cannot be recovered if losses from forced customer liquidations exceed the margin held, and there is also a receivables collection risk associated with the termination of margin trading at the Thai subsidiary. Including the risk of bad debt losses due to deteriorating financial condition or legal liquidation of counterparties, if these risks materialize, they may have a material impact on financial condition and operating results.

Rapid advances in internet-related technology are changing industry standards and user needs, and if the Group fails to respond in a timely manner, its services may become obsolete and lose competitiveness. In businesses such as the Cloud/Rental Server (Hosting) Business, E-Commerce Support Business, and Internet Advertising Business, barriers to entry are low and there are many competitors, and intensifying price competition may force fee reductions or increases in advertising and capital expenditures. In particular, in the advertising business, if advertisers increasingly bring advertising operations in-house due to advances in AI technology, this may reduce advertising placements with the Group and affect operating results.

The Group is actively promoting the utilization of AI with the aim of becoming the "No. 1 Corporate Group Creating the Future with AI," but if it falls behind competitors, this may result in a relative decline in the added value of its services. Increased dependence on external AI platforms and LLM providers creates risks of service quality degradation or interruption, and the incorporation of AI into infrastructure services may lead to security vulnerabilities or malfunctions that damage the Group's brand. If the securing and development of AI talent and the establishment of governance frameworks fail to keep pace with business expansion, this may hinder the proper introduction and operation of AI technology. The Group is addressing these issues through initiatives such as the establishment of the "GMO AI Boost Support Fund" and the internal reskilling program "Tora no Ana."

The Group is actively pursuing M&A and joint ventures both domestically and internationally, but if due diligence is insufficient due to time constraints or other factors, contingent liabilities or off-balance-sheet liabilities may be discovered after an acquisition. In overseas expansion, business plans may become difficult to execute due to local government regulations, changes in laws, or arbitrary enforcement by regulatory officials, potentially making it difficult to recover invested capital. In addition, the loss of key personnel or customers after an acquisition, or divergence in management policy from joint venture partners, may prevent the realization of expected synergies, which could affect the Group's business performance.

The Group raises funds through borrowings from financial institutions and the issuance of corporate bonds, and rising interest rates may increase funding costs, affecting operating results and financial condition. Loan agreements include financial covenants, and deterioration in operating results, financial condition, or creditworthiness may result in the loss of the benefit of the term or a requirement to provide additional collateral. In addition, the Group is exposed to foreign exchange risk through the yen conversion of revenue, assets, and liabilities of overseas consolidated subsidiaries and expenditures denominated in foreign currencies. Although the Group utilizes hedging transactions such as forward foreign exchange contracts, fluctuations in foreign exchange rates may have a material impact on business performance.

Much of the Group's business is specialized in internet-related services, and if all or part of a system fails to operate normally due to congestion, hardware defects, software bugs, unauthorized access, or other causes, important data may be lost or altered, or transactions may be suspended. In particular, in the Internet Finance Business and crypto asset exchange business, system failures may result in customers losing the opportunity to use services, a decline in social credibility, and claims for damages, which may have a material impact on financial condition and operating results. The Group conducts ongoing maintenance such as application improvements and hardware upgrades, but the risk of failures due to unforeseen factors cannot be eliminated.

The Group develops its services entirely in-house from scratch, and the recruitment and development of outstanding talent forms the core of its competitiveness. If it becomes difficult to secure outstanding talent due to intensifying competition for human resources, or if existing employees leave the Group, this may affect operating results and financial condition. In addition, if any unforeseen event occurs affecting Masatoshi Kumagai, Representative Director, Group Representative, Chairman, President, Executive Officer, and CEO, this may hinder the smooth conduct of business. Competition for specialized security talent (such as white hat hackers) and AI talent is also intensifying, and a shortage of talent in specific areas poses a risk that directly affects the Group's competitiveness.