Menicon Co., Ltd.

In addition to intensifying competition with domestic and overseas manufacturers, there is a risk that securing market share may become difficult due to the expansion of the internet sales market, intensifying price competition, and diversification of sales channels. If the Company is slow to respond to diversifying customer needs (such as myopia progression control, environmental consideration, and compatibility with digital devices), this may have a material impact on the financial position and operating results. As countermeasures, the Company is working to curb customer attrition through the rollout of the "Miru 3C PLAN" and the use of the web sales system "ClickMiru".

As the Company expands its business in Europe, North America, Asia, and other regions, changes in the political, economic, and social conditions of the countries in which it operates may affect the supply chain, and depending on the movements of competitors and the timing of new product development, this may have a material impact on the financial position and operating results. Given the unstable global situation and competition in overseas markets, the Company recognizes that there is always a possibility that this risk will materialize. In addition to risk research by the Overseas Management Headquarters and strengthening the sales capabilities of local subsidiaries, the Company is promoting risk diversification through M&A and business alliances to diversify the regions in which it operates.

As overseas business expansion increases, sales and purchase transactions denominated in currencies other than the Japanese yen have increased, and sharp fluctuations in exchange rates may cause the yen-equivalent amounts of foreign currency-denominated sales and purchases to fluctuate, affecting the financial position and operating results. Given the Company's policy of increasing overseas sales, it recognizes that there is always a possibility that this risk will materialize. The Company seeks to mitigate the impact of fluctuations by establishing and optimally allocating production bases both domestically and overseas, and by executing forward foreign exchange contracts for foreign currency-denominated transactions.

As Melsplan, a fixed-rate membership system, is the Company's main service, if it becomes difficult to promptly pass on increases in procurement costs, logistics costs, personnel expenses, and other costs due to sharp price increases to monthly membership fees, this may affect the financial position and operating results. While the Company has revised its monthly membership fees multiple times in response to increased procurement costs for raw materials and other items, there are limits to how flexibly it can respond to sharp price increases, and it recognizes that there is always a possibility that this risk will materialize. The Company seeks to mitigate this risk through continuous analysis of economic trends, market research to grasp price fluctuations, and efficiency improvements through product consolidation.

Contact lenses are classified as "highly controlled medical devices" under the Act on Pharmaceuticals and Medical Devices, and manufacturing/sales businesses are subject to licensing requirements. Legal amendments or the establishment of new regulations may result in longer new product development periods, increased development costs, and greater capital expenditure burdens. While the Company currently recognizes no grounds for revocation of its licenses, it recognizes that, should it ever fall afoul of legal regulations, this could develop into an extremely significant issue. A dedicated department has been established within the General Management Headquarters to regularly monitor and share information on changes in legal regulations in each country.

If medical malpractice occurs on the part of doctors at affiliated ophthalmology clinics, or if there are changes in the legal interpretation of provisions prohibiting the practice of medicine without a license or ensuring the non-profit nature of medical institutions under the Medical Care Act, this may affect business operations and the financial position and operating results. While the Company currently responds appropriately based on laws, regulations, and public health center guidance, there is always a risk that additional measures will be required due to amendments to laws and regulations or changes in their interpretation. A committee comprising executive officers and personnel from quality assurance, legal, sales, and development departments meets regularly to discuss countermeasures across departments, aiming to reduce this risk.

If the production status of the 1-Day Disposable Contact Lenses deviates significantly from expectations, or if sales targets are not met due to deteriorating market conditions or worsening competitive environment for orthokeratology-related products in China, this may affect the financial position and operating results. While the Company anticipates a reduction in cost ratio through expanded production at the Malaysia plant, it recognizes that there is a considerable risk that production and sales plans may not be achieved. The Company plans to address this through improved production efficiency at its Kakamigahara, Singapore, and Malaysia plants, and by expanding its target customer base and global operations through multiple orthokeratology-related products.

If the recoverable amount of fixed assets such as manufacturing plants, production lines, and retail stores, or goodwill recorded through corporate acquisitions, falls below book value due to a significant decline in business profitability or other factors, an impairment loss may need to be recognized, which could have a significant impact on the financial position and operating results. During the fiscal year under review, the Company actually recorded an impairment loss due to changes in the business environment, and it recognizes that there is a considerable possibility that this risk will materialize. At the time of making investment decisions, the Company formulates investment recovery plans based on multiple scenarios and evaluates the recoverable amount every fiscal year to identify and address any divergence from the business plan.

If information leakage occurs due to unauthorized external access or computer virus infection, this could result in claims for damages from customers and business partners, response costs, and significant damage to the Company's social credibility, potentially having a material impact on its business, operating results, and financial position. While the Company has taken thorough measures for its information management system and recognizes the likelihood of this risk materializing as low, it positions this as a risk that could develop into an extremely significant issue should it ever occur. In addition to establishing a CSIRT, conducting CSIRT training, and taking out cyber insurance, the Company thoroughly disseminates its information security policy across the group and conducts annual reviews of the status of security measures.

In the manufacture of contact lenses, which primarily use petroleum-derived raw materials, if supply constraints due to international conditions, logistics disruptions, supplier bankruptcy or disasters, or transaction suspensions due to human rights issues occur, this could disrupt stable procurement and make product production impossible, potentially having a significant impact on the financial position and operating results. As raw materials required for the manufacture of "highly controlled medical devices" must meet extremely high quality standards and are not easily replaced with alternatives, the Company recognizes this risk as a critical matter in its business operations. The Company is systematically implementing risk mitigation measures such as early detection through close information sharing with suppliers, securing multiple procurement sources, and optimizing inventory levels.