Shochiku Co., Ltd.

If the spread of infectious diseases leads to shortened business hours or temporary closures of movie theaters, or the cancellation or postponement of theatrical performances, this could have a material impact on the Group's overall business performance and financial position. Both the film & video and theatrical businesses are business models premised on customer attendance at facilities, making them directly susceptible to the effects of behavioral restrictions caused by infectious diseases. As a countermeasure, the Group incorporates the opinions of medical experts and implements individual safety measures tailored to the characteristics of each theater.

The box office performance of theatrical films varies greatly by title and is always difficult to forecast in advance, resulting in low revenue stability. If titles failing to achieve a certain level of performance continue over a long period, this could affect the Group's business performance and financial position, particularly in the Film & Video Business. While the Group seeks to reduce this risk through title selection and programming based on various data, it is difficult to completely eliminate box office risk.

Infringement of the Group's intellectual property rights through pirated and counterfeit goods is actually occurring, and particularly overseas and on the internet, there is a risk that sufficient rights protection may not be obtained due to legal regulatory issues. If large-scale infringement continues over a long period and becomes unavoidable, this poses a risk of affecting business performance and financial position. While appropriate measures are taken on a case-by-case basis, complete prevention remains difficult.

In Kabuki Performances and General Theater Performances, if an appearing actor becomes unable to perform due to health reasons or an unforeseen accident, this may force the cancellation or alteration of performances, potentially affecting business performance. There is also a risk that attendance numbers may fluctuate significantly due to the topicality of performances and appearing actors or changes in customer preferences. While the Group strives to maintain a system enabling understudies to perform and to provide appealing performances, it is difficult to completely eliminate the risk of demand fluctuation.

At business facilities that accommodate large numbers of customers, such as movie theaters, theatrical venues, restaurants, and tenant buildings, unforeseen events related to customer safety and health, such as natural disasters or sanitation issues, may occur. Depending on the scale of such events, this poses a risk of affecting business performance and financial position across all of the Group's business segments. The Group has established a

Regarding fixed assets held by the Group, losses associated with impairment processing may arise due to trends in land prices or deterioration in the earnings status of the relevant assets. If an impairment loss is recognized, it would directly adversely affect business performance and financial position. The Group's policy is to identify signs of impairment at an early stage and take appropriate action, and the assumptions underlying significant accounting estimates are disclosed in the notes to the consolidated financial statements.

The Group holds marketable securities (including cross-shareholdings), and if stock prices continue to decline significantly in the future, impairment or valuation losses may occur, potentially affecting business performance and financial position. For cross-shareholdings, the Group comprehensively examines the financial condition, business relationships, and dividends of each individual stock, and determines the appropriateness of holding by reporting periodically to the Board of Directors. Risk management is conducted through quarterly fair value assessments and various other verifications.

The Company has entered into long-term loan agreements totaling ¥101 million (¥10,100 million) with 5 financial institutions and ¥5,600 million with 8 financial institutions, both of which include financial covenants requiring that consolidated and non-consolidated net assets be maintained at 75% or more of the same period of the previous year and 75% or more of the base fiscal year-end. If these covenants are breached, the Company may be required to repay the loans ahead of schedule, posing a risk of a material impact on cash flow and financial position. The Group seeks to avoid breaching these covenants by strengthening its financial position through stable management.

The Group holds rental real estate nationwide, but if deteriorating real estate market conditions lead to a rise in vacancy rates or the withdrawal of key tenants, the Group may be unable to obtain the expected level of income. A deterioration in earnings from the Real Estate Business poses a risk of affecting the Group's overall business performance and financial position. The Group addresses this through close communication with tenants for rent negotiations and by attracting successor tenants in the event of a withdrawal.

The Group recognizes deferred tax assets for tax loss carryforwards and deductible temporary differences, but if future estimates of taxable income are revised downward due to changes in the business environment or other factors, it may become necessary to write off all or part of the deferred tax assets. If such a write-off occurs, it poses a risk of adversely affecting financial position and business performance. The Group continuously examines recoverability by appropriately reviewing the scheduling of expected reversal years and reasonable estimates of future taxable income.