CHUOKEIZAI-SHA HOLDINGS,INC.

The resale price maintenance system (saihan system) recognized for copyrighted works such as books and magazines is maintained as an exception to the general prohibition under the Antimonopoly Act, but the Japan Fair Trade Commission has suggested its abolition from a competition policy perspective. While it is currently maintained on the grounds that national consensus has not yet been formed, if it were abolished, it could have a material impact on the Group's business results, including effects on the industry as a whole. No specific countermeasures by the Group are explicitly disclosed in the Annual Securities Report.

Under the publishing industry's consignment sales system, products sold to distributors and bookstores are sold on terms accepting returns within a certain period, and an increase in the return rate directly affects business results. In accounting terms, the amount required by multiplying recent sales by the return rate, etc. is recorded as return assets and refund liabilities, meaning fluctuations in the return rate are reflected in financial figures. While the Group has achieved results by making "reducing returns" a key policy and thoroughly implementing appropriate-volume shipments, the risk of the return rate rising due to changes in market conditions continues to exist.

Since 2023, generative AI such as ChatGPT has rapidly spread domestically, and mechanisms that generate text and other content by referencing past creative works and data may pose a threat to the copyrights of published works. If appropriate rules are not established domestically and internationally, the interests of authors and publishers could be unduly harmed, potentially leading to impairment of the value of the Group's content assets. No specific countermeasures by the Group are explicitly disclosed in the Annual Securities Report.

Due to the nature of the publishing business, the Group holds personal information of numerous authors and general customers, and if an information leak occurs due to an unforeseen event, this could result in liability for damages, significant impairment of brand value, and substantial cost burdens. While the Group states that it is taking thorough measures to protect personal information, the specific details of these measures are not elaborated on in the Annual Securities Report.

The Group positions human resources as its most important asset, and securing and developing personnel with a wide range of specialized skills, including planning and editorial capabilities as well as management and communication skills, forms the foundation of its business operations. While the Group conducts regular new graduate and mid-career recruitment and enhances various training programs and employee benefits, if difficulties arise in securing and developing human resources, this could affect business results.

While the Group strives to protect its own intellectual property rights and avoid infringing on the rights of third parties, if litigation is brought against the Group due to unforeseen circumstances, or if litigation becomes necessary to protect the Group's own rights, this could result in the consumption of significant time and effort as well as substantial liability for damages. Since rights related to content are fundamental to the publishing business, litigation risk could also affect business continuity.

During the current consolidated fiscal year, no disputes or litigation with a material impact on business results have been brought against the Group, but if litigation with significant business or social impact arises in the future and a judgment unfavorable to the Group is rendered, this could affect business results. No specific ongoing dispute matters are disclosed in the Annual Securities Report at this time.

If disasters such as major earthquakes or typhoons, or unforeseen accidents, occur at the Group's business locations, outsourced warehouse facilities, or other facilities, this could affect business results through disruption to production, sales, distribution, and procurement activities, as well as human casualties. In recent years, record-breaking heat waves, heavy rains, typhoons, and earthquakes have damaged bookstores, retailers, and infrastructure, which could also affect business results through lost sales opportunities.

As in the case of the spread of COVID-19 in 2020, if a specific infectious disease or epidemic spreads nationwide and significantly restricts socioeconomic activities, this could affect the Group's business results. A scenario in which infections occur among the Group and related business partners, constraining business activities, is also envisaged, but no specific countermeasures by the Group are explicitly disclosed in the Annual Securities Report.

In recent years, cases of computer virus infections, including ransomware and other malware, causing enormous damage to corporate management have been increasing domestically. While the Group is strengthening virus countermeasures for its servers, if a virus infection occurs due to unforeseen circumstances, this could force the Group to respond to business suspension, personal information leaks, and other issues, potentially affecting business results.