TOHO CO.,LTD.

In each of the Movie, Animation, and Theatrical businesses, there is a constant risk that box office revenue and attendance for a given title may fall significantly short of expectations, as well as the risk of release or performance cancellation due to trouble involving cast or staff or production delays. If such risks materialize, in addition to a decline in operating revenue and operating income, effects on financial condition such as write-downs of inventory assets may occur. As a countermeasure, the Company seeks to mitigate volatility by acquiring a wide range of high-quality content and arranging a balanced lineup throughout the year.

Because a diverse range of external parties—including creators, actors, and technical staff—are involved at Movie, Animation, and Theatrical production sites, there is a constant risk of compliance violations, harassment incidents, and transaction-related disputes. If such risks materialize, in addition to damage to the Group's credibility, operating revenue and operating income may decline due to suspension of the screening, broadcasting, or performance of content. As a countermeasure, the Company promotes compliance with the review standards of the film production standardization organization, thorough awareness of respect for human rights, and the establishment of appropriate working and business environments.

There is a risk of illegal video distribution, piracy, and unauthorized manufacture and sale of merchandise related to owned IP such as "Godzilla" and invested content, as well as unauthorized resale of theater tickets. Infringement occurring overseas or on the internet, in particular, can be difficult to stop and the resulting damage may expand. If such risks materialize, lost profits related to content utilization may occur. As a countermeasure, the Company implements stronger protection of copyrights and trademarks, cooperation with industry organizations such as CODA, promotion of electronic ticketing, and thorough legal action.

While the Company owns approximately 130 real estate properties nationwide, construction and facility work costs are rising due to increases in energy prices, higher material costs, and labor shortages. For existing owned properties, there is a risk of deteriorating profitability due to increased running costs including repair expenses, while for newly acquired or redevelopment properties, there is a risk of a longer investment recovery period, and revision or suspension of development plans, due to rising property prices and construction costs. As a countermeasure, the Company works to reduce risk through continued cost-reduction efforts and sales activities to revise rents, and through the formulation of prudent investment recovery plans.

The risk of leakage of personal information, digital video material data, and confidential business information—obtained through ticket sales and e-commerce sites—due to unauthorized access or malware intrusion by hacker groups, as well as the risk of a shutdown of core internal infrastructure systems, has been increasing in recent years. If such risks materialize, the encryption of electronic data including financial data could significantly impede the continuity of business activities and lead to a substantial decline in operating revenue and operating income. As a countermeasure, the Company has established an Information Security Committee and operational rules, implements hardware-based measures based on the latest technology, has built a CSIRT structure, and has taken out cyber risk insurance.

Amid a series of human rights issues, including sexual violence and harassment, coming to light in the entertainment industry, there is a risk that human rights issues involving the Company Group's officers, employees, or related parties could occur. If such an issue materializes and is handled improperly, it could lead to significant damage to social credibility and the suspension of business transactions, raising concerns about a decline in operating revenue and operating income and a material impact on financial condition. As a countermeasure, the Company established a Human Rights Policy in March 2023, and has been conducting human rights due diligence and human rights education within the Group, with plans to expand the scope to the supply chain going forward.

There is a risk that a large-scale earthquake, wind or flood damage, or other natural disaster, accident, or fire occurring at movie theaters, directly operated theaters, or owned real estate properties across the country could impede the continuity of business activities. In particular, the probability of a Nankai Trough earthquake occurring within the next 30 years has been raised to approximately 80% by a government research committee, and the risk of a large-scale natural disaster is increasing. As a countermeasure, the Company has established the "Basic Regulations in the Event of a Disaster," and each Group company has prepared "Disaster Response Plans" and "Earthquake Response Manuals," and continuous fire prevention and disaster prevention measures are being implemented.

With active overseas expansion, including overseas distribution, streaming licensing, and merchandising licensing of movies and animation, overseas long-run theatrical performances, the acquisition of GKIDS, INC. in the United States as a wholly owned subsidiary, and the establishment of a base in Singapore, geopolitical risk, differences in cultural customs, intellectual property risk, foreign exchange risk, risk of changes in legal regulations, compliance risk at overseas subsidiaries, and risk of valuation losses on shares of strategic investees are increasing. If such risks materialize, a decline in operating revenue and profit at each stage, as well as extraordinary litigation costs, are expected. As a countermeasure, in February 2025 the Company decided to establish TOHO Global Co., Ltd. as the management holding company overseeing overseas operations, and is proceeding with the development of internal control systems within the Group.

At movie theaters, directly operated theaters, and real estate properties, there is a risk that rising energy costs, raw material costs, and labor costs will worsen the profit structure through increased running costs at movie theaters, increased production costs for performances, and rising energy costs and repair expenses at real estate properties. Because this is caused by changes in the global economy, including geopolitical risk, domestic economic policy, and the social environment, it is difficult to control, and if it materializes, it also carries the risk of impairment of fixed assets due to reduced recoverability of capital investment. As a countermeasure, the Company seeks to reduce risk through revenue increases from appropriate price pass-through and through operational efficiency improvements and cost reductions.

Although social activity has largely returned to normal five years after the COVID-19 pandemic, in today's increasingly globalized world, the risk of a new global pandemic caused by a novel infectious disease cannot be ruled out going forward. If such a risk materializes, significant economic losses similar to those experienced during the COVID-19 pandemic are expected, including responses to requests to close movie theaters and theatrical venues and measures against infection risk for performers, resulting in a decline in operating revenue and operating income and a material impact on financial condition. As a countermeasure, the development of work-from-home and remote work environments is nearly complete, and the Company continues to consider an emergency response framework based on the experience gained during the COVID-19 pandemic.