Sincere Co., LTD.

Against the backdrop of Japan's declining population, a contraction and structural change in the contact lens market is anticipated. The Company is responding through improving domestic market share and developing overseas sales channels; however, if it is unable to respond appropriately to unforeseen changes in market conditions, this may have a material impact on its financial position and business performance. Although the Company monitors customer and industry trends and implements measures to diversify impact, it recognizes that it is difficult to completely eliminate this risk.

Because contact lenses are products that come into direct contact with the eyes, there is a risk of litigation arising in the event of eye disorders. Although manufacturing is conducted at overseas partner factories in compliance with the safety standards of each country, damages payments or loss of social trust may arise due to product defects. The Company judges that the probability of this risk materializing is not high, but recognizes that the impact would be unavoidable if it were to materialize.

The Company holds multiple manufacturing and marketing business licenses, manufacturing business registrations, and sales business licenses under the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices. If any license were revoked due to a violation of laws and regulations, the Company could be forced to recall products, suspend sales, or halt business activities. In addition, amendments to related laws and regulations, or reputational damage to the contact lens industry as a whole arising from violations detected at other companies in the same industry or media coverage, could also have a material impact on the Company's financial position and business performance. Although no grounds for license revocation have currently arisen or been recognized, the Company recognizes that the content and timing of any such occurrence are beyond its control.

The Company uses multiple overseas partner factories for merchandise procurement, but has a high degree of dependence on Visco Vision Inc. Although the Company maintains a good relationship with this supplier, if an unforeseen event caused by external factors were to occur, procurement of necessary merchandise could become difficult, which may have a material impact on the Company's financial position and business performance. Although measures to diversify impact are implemented, the Company recognizes that it is difficult to completely eliminate this risk.

Approximately half of purchase amounts have already been shifted to yen-denominated settlement, but the remaining approximately half are settled in US dollars, meaning that fluctuations in exchange rates affect import transaction prices. The Company hedges within the scope of actual demand through derivative transactions; however, for derivative transactions to which hedge accounting is not applied, valuation gains or losses based on fair value at the end of the period are recorded in non-operating income or expenses, which may cause significant fluctuations in ordinary income and net income for each quarter in the event of substantial foreign exchange fluctuations. The Company recognizes that it is difficult to avoid all risk through hedging in the case of rapid and substantial exchange rate fluctuations.

The Company maintains a strict management system for confidential information such as personal information and R&D information through the establishment and operation of its Personal Information Protection Regulations and Intellectual Property Management Regulations, as well as internal audits; however, if a leakage incident were to occur for any reason, this may have a material impact on the Company's financial position and business performance due to liability for damages and loss of social trust. The Company recognizes that the probability of this risk materializing is low.

There exists a risk that infringement of the Group's intellectual property rights by third parties could reduce market competitiveness, as well as a risk that litigation such as claims for compensation or damages could arise if the Group infringes on the intellectual property rights of third parties. Although the Company implements appropriate protection and management measures as well as prior investigations, it recognizes that the possibility of a sudden occurrence is not entirely absent. The Company judges the probability of this to be extremely low.

Although measures against large-scale disasters such as earthquakes and typhoons, as well as infectious diseases, are implemented at the head office, logistics centers, and subsidiary business locations, depending on the extent of the damage or outbreak, business locations could be damaged or forced to halt operations, or system failures could occur, potentially causing delays or stoppages in the purchase, sale, and distribution of materials and products. If suppliers or customers are similarly affected, this could also impact business performance. The Company recognizes that it is difficult to make a definitive estimate of the degree of impact of this risk.

As of December 31, 2025, the parent company, Ucarrier Corporation, held 59.0% (4,050,000 shares) of the total number of issued shares, and while it intends to maintain a holding of over 50% for the time being, it plans to gradually reduce its stake. Although there is currently no competitive relationship or transactions with the parent company, and the Company makes its own independent management decisions, if a significant change in the relationship with the parent company group were to occur in the future, this could affect the management of the Group.

The Company is promoting business diversification through M&A with a view to sustained growth, and conducts detailed prior due diligence and risk assessment of target companies; however, if circumstances differ from initial projections and the anticipated revenue cannot be realized, it may become necessary to record impairment losses, which could affect the Company's financial position and business performance.