New Risk • May 30
New major risk - Revenue and earnings growth Earnings have declined by 3.1% per year over the past 5 years. This is considered a major risk. Ultimately, shareholders want to see a good return on their investment and that generally comes from sharing in the company's profits. If profits are declining over an extended period, then in most cases the share price will decline over time unless the company can turn around its fortunes. A trend of falling earnings can be very difficult to turn around. If the company is well already established it may also be a sign the company has matured and is in decline. In addition, if the company pays dividends it will also likely need to reduce or cut them, striking a dual blow to total shareholder returns. Currently, the following risks have been identified for the company: Major Risks Interest payments are not well covered by earnings (2.1x net interest cover). Earnings have declined by 3.1% per year over the past 5 years. Minor Risk Profit margins are more than 30% lower than last year (8.6% net profit margin). Announcement • May 15
Lake Materials Co., Ltd. announced that it expects to receive KRW 50 billion in funding Lake Materials Co., Ltd. announced a private placement of series 2 unregistered interest unsecured private convertible bonds for a gross proceeds of KRW 50,000,000,000 on May 13, 2026. The transaction will include participation from The bonds have yield to maturity of 1%. The bonds will mature on April 30, 2024. The bonds will be 100% converted into 3,177,629 common shares at a fixed conversion price of KRW 3,147 per share for an equity stake of 9.71%. The conversion period is from April 30, 2022 to March 30, 2024. The payment date of the transaction is April 30, 2021. The securities issued in the transaction are subject to a lock up period of one year. The transaction has been approved by the board of directors of the company. New Risk • Mar 27
New minor risk - Earnings quality The company has large one-off items impacting its financial results. One-off items were 26% of the size of the rest of the company's trailing 12-month earnings before tax. This is considered a minor risk. One-off items are incomes or expenses that the company does not expect to repeat in future periods. Examples include profits from the sale of a business or expenses from a restructuring or legal settlements. If the company's reported statutory earnings include a large proportion of one-off items it means they may be an unreliable indicator of its true business performance as the earnings were skewed by these incomes or expenses. Currently, the following risks have been identified for the company: Major Risks Interest payments are not well covered by earnings (1.9x net interest cover). Share price has been highly volatile over the past 3 months (16% average weekly change). Minor Risks Large one-off items impacting financial results. Profit margins are more than 30% lower than last year (5.4% net profit margin). 