Integral Corporation

The fair value of the PE investment portfolio is heavily influenced by market conditions, and the timing of recognition of capital gains and Carried Interest depends on the timing of Exit realization, causing significant fiscal-year-to-fiscal-year fluctuations in business performance. Since much of the revenue and profit is recognized on a non-cash basis, operating cash flow may become negative even in periods when profits are recognized. Cases where clawback provisions give rise to obligations to repay Carried Interest may also affect the financial position.

If sufficient funds cannot be raised from LP investors for the next fund series due to deteriorating economic conditions or sluggish fund performance, investment activities may be impaired, leading to a decline in management fees and Carried Interest. Rising market interest rates could also adversely affect the funding costs of the Company's group, its funds, portfolio companies, and LP investors. Interest-bearing debt may also increase as Principal Investment expands and target funds are formed.

If a portfolio company's business does not progress as planned, recovery of invested capital may become difficult due to bankruptcy or other factors, and even if an Exit is achieved, there is no guarantee that the sale price will sufficiently exceed the investment cost. The Fund Series No. 2 has entered its liquidation period, and there is a risk that the success or failure of Exits and the sale amounts will fluctuate depending on economic and political conditions and stock market trends. Because unlisted companies often have underdeveloped management and governance structures and significantly lower share liquidity, sale prices at the unlisted stage may fall below investment cost.

The Company's group conducts Principal Investment using its own funds jointly with funds, and bears the risk of additional investment when a portfolio company's performance deteriorates. Bridge financing through the i-Bridge function increases risk exposure to portfolio companies, and if refinancing cannot be arranged in a timely manner or on desired terms, a funding shortfall may occur. If the Exit of a Principal Investment and the Exit of the corresponding fund investment do not occur simultaneously, conflicts of interest or disputes with LP investors may arise, which could damage reputation and adversely affect the ability to raise additional funds.

The fair value of unlisted shares is calculated in accordance with the IPEV Guidelines and IFRS 13 and IFRS 9, but future changes in uncertain economic conditions may cause material differences from the actual sale price. Portfolio companies' business plans are based on management's assumptions, and if actual results fall short of the plans, fair value may decline, materially affecting the Company's group's business performance and net assets. Changes in valuation methods necessitated by revisions to the IPEV Guidelines or similar standards could also result in material changes to fair value.

There is a risk that portfolio companies or LP investors may bring lawsuits against the Company on grounds such as violations of laws and contracts related to investment activities, breaches of the duty of care as a GP, or fraudulent conduct. Lawsuits over compensation claims arising from complex fee and incentive arrangements may also occur. If substantial legal liability is established, in addition to monetary damages, serious reputational harm could result, causing severe damage to relationships with LP investors and professionals and to business activities.

Under the Fund Series No. 5, seven individuals including Reijiro Yamamoto are designated as key persons, and if three or more of them (or two or more if Yamamoto is among them) become unable to engage in investment operations, the investment period will be suspended, and if not remedied within 180 days, the investment period will be definitively terminated. The market for capable investment professionals is highly competitive, and the departure of personnel or their move to competitors poses a risk of losing important investment opportunities and relationships with LP investors. Increased costs for securing and developing personnel may also put pressure on profitability.

Fund management activities are subject to a wide range of legal regulations, including the Companies Act, the Financial Instruments and Exchange Act, the Foreign Exchange and Foreign Trade Act, the Antimonopoly Act, the Act on Prevention of Transfer of Criminal Proceeds, and Cayman Islands laws and regulations, and tightening of regulations could result in restrictions on activities or increased costs. If officers or employees commit legal violations, breaches of the duty of care, or misconduct, the Company could bear liability for damages, and revocation of licenses could make it difficult to continue operations. Although a system including quarterly regular meetings, internal audits, and training by the Compliance Promotion Committee has been established, violation risk cannot be completely eliminated.

The Company's computer systems and networks may be vulnerable to unauthorized access, computer viruses, and similar threats, and a leak of confidential information could lead to claims for damages and loss of social credibility. In particular, leaks of confidential information related to potential transactions could result in the loss of valuable investment and Exit opportunities. Portfolio companies also face similar risks, and if such risks materialize, they could adversely affect the performance of the portfolio companies as well.

Representative Director and Partner Reijiro Yamamoto (28.6%) and Partner Nobuo Sayama (23.9%) hold more than a majority of the outstanding shares, giving them significant influence over important matters including the election and dismissal of directors, which may create interests that diverge from those of general shareholders. As of the end of December 2025, the ratio of tradable shares was 28.3%, close to the listing maintenance standard (25%), and since the partnership agreement stipulates that officers and employees must continue to hold a majority of voting rights during the investment period of the Fund Series No. 5, there is a risk of reduced liquidity. Officers and employees are subject to restrictions on the sale of their shares until September 19, 2028, and sales following the phased lifting of these restrictions could affect the share price.