AI FUSION CAPITAL GROUP CORP.

If officers, employees, or related parties engage in conduct that violates laws or social norms, a loss of trust from business partners and the financial industry could result in a wide range of adverse effects, including a sharp decline in the share price, suspension of transactions, loss of new investment opportunities, and difficulty securing talented personnel. As financial markets become more complex and regulations tighten, this risk is more likely to materialize if internal controls do not function adequately. As countermeasures, the Company has formulated and disseminated a code of ethics, strengthened its internal whistleblowing system, and conducts periodic compliance audits.

The weakening of check-and-balance functions due to the small organizational size poses a risk of loss of trust in the event of a scandal. With the recent spread of information via SNS and other channels, reputational risk in the event compliance violations are discovered has increased, and there is also a possibility of significant losses arising from litigation or administrative sanctions. The Company addresses this through strengthening its internal audit system, establishing a compliance hotline, and conducting employee training.

A decline in the value of crypto assets in which the Group invests could result in valuation losses on held crypto assets, adversely affecting business performance and financial condition. The crypto asset market is difficult to predict, and there is a risk of a sharp decline in a short period during global financial instability or economic downturns, resulting in substantial losses. The Company addresses this through diversified investment across stocks, bonds, and other assets, and by taking a long-term investment perspective.

In M&A transactions involving regional companies and others, sudden changes in the business environment, the emergence of off-balance-sheet or contingent liabilities, failure to achieve expected synergies, or goodwill impairment could affect business performance and business development. In particular, if PMI does not proceed smoothly or if the target company's business plan is not achieved, there is a risk that losses could materialize several months to several years after the M&A is executed. The Company addresses this by strengthening due diligence, formulating and executing PMI plans, and forming a team of M&A specialists.

As many investee companies are unlisted, if growth does not proceed as expected, impairment losses may need to be recognized due to deteriorating performance or business failure, adversely affecting business performance and financial condition. This risk is more likely to materialize in fields subject to rapid technological innovation or sensitive to regulatory changes. The Company addresses this through periodic review of the financial condition of investee companies and appropriate recognition of impairment losses when signs of impairment are observed.

Business failure of investee companies, delays in their listing, or weak post-listing share sale prices could result in losses on sale or extended recovery periods, adversely affecting business performance and financial condition. Since IPOs as an exit strategy for investments in unlisted companies are uncertain, delays in recovery could lead to deteriorating cash flow and the loss of new investment opportunities. The Company addresses this through enhanced monitoring of investee companies, diversification of exit strategies including M&A and third-party sales, and diversification of the investment portfolio.

Gains from the sale of shares in listed investee companies are heavily influenced by stock market trends, and a market decline or sluggish listing market could result in valuation losses on held shares, adversely affecting business performance and financial condition. There is also a risk of share price fluctuation during the lock-up period restricting sales, which could result in missed selling opportunities and realized losses in the event of a sharp decline. The Company addresses this through diversified investment across unlisted shares, bonds, crypto assets, and other assets, and by taking a long-term investment perspective.

The high dependence on the capabilities of investment personnel and the small size of the administrative department mean that excessive turnover or failure to secure personnel could disrupt business operations. Poaching by competitors and changes in employees' career aspirations could lead to delays or a decline in the quality of investment decisions, and stagnation or increased errors in administrative operations, resulting in a risk of deteriorating business performance. The Company addresses this by reviewing its recruitment strategy, enhancing personnel development programs, improving compensation levels and benefits, and clarifying career paths.

In fund management and private equity investment operations, the Company is subject to regulations such as the Companies Act, the Financial Instruments and Exchange Act, the Antimonopoly Act, and the Act on Prevention of Transfer of Criminal Proceeds, and the introduction of new regulations or strengthening of existing regulations could restrict activities and increase related costs. Changes in the interpretation of regulations by authorities or unexpected legal violations could lead to restrictions on business activities, fines, and litigation risk. The Company addresses this by strengthening its legal department, building a compliance framework, and collaborating with external experts.

System downtime, data tampering, or information leaks caused by virus infection, unauthorized access, or natural disasters could disrupt business operations, lead to claims for damages, and diminish social credibility, thereby adversely affecting business performance and financial condition. With the recent sophistication and increasing complexity of cyberattacks and the rise in natural disasters, the likelihood of this risk materializing is increasing. The Company addresses this through multi-layered security measures, regular data backups, formulation of response plans for system failures, and thorough dissemination of its information security policy.