Mercuria Holdings Co., Ltd.

Since capital gains and fund success fees are the main sources of revenue, performance can fluctuate significantly from year to year depending on stock market conditions, the status of portfolio companies, and the degree of concentration of fund maturities. Under the current situation where fund maturities are not sufficiently diversified, the timing of receipt of success fees may be skewed, creating a risk that revenue becomes concentrated in or disappears from a particular fiscal year. Although the Company is promoting diversified investment, its dependence on the external environment remains high.

Unlisted companies targeted for investment have unstable earnings and financial bases, and since it takes a long time from investment to recovery, there is a risk that corporate value may deviate significantly from initial expectations. Compared with listed company shares, liquidity is markedly lower, and there is no guarantee of being able to sell at the desired price or timing, which may result in capital losses or long-term illiquid holdings. Although due diligence is conducted, the risk of deteriorating profitability due to changes in the external environment cannot be eliminated.

Management and operation revenue from Spring REIT by the subsidiary Spring Asset Management Limited accounts for 20.2% of consolidated operating revenue, meaning that fluctuations in Spring REIT's performance directly affect the Group's performance. Because part of the management fee is received in the form of REIT units, this also entails risks from fluctuations in the Hong Kong dollar exchange rate and the price of Spring REIT units. Changes to the management fee structure or a change of the management company could lead to a reduction or loss of management fees.

As of the end of December 2025, the Company did not meet the Prime Market listing maintenance criterion of tradable share market capitalization of ¥10.0 billion or more, and has entered an improvement period. Although the Company has formulated a plan centered on maximizing success fees, enhancing IR/PR, and flexibly implementing capital policy, if the criterion cannot be met, maintaining the Prime Market listing may become difficult, which could adversely affect the share price, liquidity, business results, and financial position.

The Group's basic concept is cross-border investment, and it holds numerous overseas investments, including a mega-solar development business in Taiwan. If geopolitical risks related to conflicts intensify, delays or failures in recovering invested funds, or the suspension of business execution, could occur, potentially having a material impact on business results and financial position. Although the Group pursues regional diversification, dependence risk on the political and military situation in specific regions remains.

The Group must maintain multiple registrations and licenses, including Financial Instruments Business (Type II, Investment Management Business, and Investment Advisory and Agency Business), real estate investment advisory business (valid until October 2030), real estate brokerage license (valid until August 2030), and Hong Kong Type 9 license. If registrations or licenses are revoked due to violations of laws and regulations or failure to meet requirements, it would become difficult to conduct the fund management business, resulting in a decline in social credibility and a material adverse effect on business activities. There is also a risk of increased regulatory compliance costs across multiple jurisdictions, including Japan, Hong Kong, and the Cayman Islands.

Operating revenue from Spring REIT is recorded in Hong Kong dollars and accounts for 20.2% of consolidated operating revenue, meaning that fluctuations in the Hong Kong dollar exchange rate directly affect business results. In addition, foreign-currency-denominated assets held through overseas regionally diversified investment and financing are generally exposed to foreign exchange fluctuation risk. There is no description of specific measures for foreign exchange hedging, and details of risk management are not disclosed.

Representative Director Toshihiro Toyoshima plays a central role in everything from determining management policy and business strategy to sourcing investment deals, creating a risk that if he becomes unable to perform his duties, it could have a material impact on business results and business development. Although the Company is working to strengthen its management structure through hiring and developing personnel, the state of succession planning is limited. The fact that the Group's total workforce is small, at 119 employees, is also a factor increasing dependence on this key individual.

The investment advisory business has relatively low entry barriers, and competition with new entrants from Japan and overseas has become the norm. Against the backdrop of growing global asset management needs, an increase in market entry by major financial institutions and the strengthening of competitors through industry consolidation are anticipated, which could lead to a decline in management fee and success fee rates and greater difficulty in acquiring and retaining clients. There is also a risk of the Company's fund managers and other personnel being poached by competitors.

The Group is a small organization with 10 directors and 119 employees, and is highly dependent on highly specialized personnel in the finance and real estate fields. If the Group is unable to secure and develop capable personnel as planned, or if existing personnel leave for outside opportunities, this could hinder business operations. On the other hand, there is also a risk that fixed costs such as recruitment and training costs and personnel expenses could increase faster than revenue growth.