NS UNITED KAIUN KAISHA, LTD.

Freight rates and charter hire rates in the ocean shipping business are constantly subject to fluctuation depending on global economic trends and the vessel supply-demand balance, and since a certain proportion of vessels are under medium- to short-term contracts, a significant market downturn could lead to substantial losses. While the Group is working to stabilize its business foundation by centering on long-term contracts, a prolonged deterioration in market conditions could impair that business foundation. As countermeasures, the Group is promoting the construction of an appropriate fleet portfolio, expansion of business targeting overseas customers, and the strengthening of overall capabilities in combination with the Domestic Shipping Business.

There is a risk that costs for responding to international environmental regulations will increase, including the IMO's GHG reduction strategy (net-zero target by 2050), SOx and NOx emission regulations, and the Ballast Water Management Convention. Tightening regulations also raise concerns about the obsolescence of existing vessels, a decline in demand for fossil fuel transport, and the loss of business opportunities due to delayed responses. Under the medium-term management plan "FORWARD 2030 II," the Group has set a target of reducing GHG emissions by 25% (1.5 million tons) by 2030 compared to 2019 levels, and is proceeding with investments such as ordering methanol dual-fuel vessels and installing rotor sails.

Since the majority of commercial transactions in the ocean shipping business are conducted in US dollars or other foreign currencies, fluctuations in exchange rates directly affect business performance and financial condition. While the Group's policy is to mitigate this risk to a certain extent through hedging transactions such as forward foreign exchange contracts, it is not possible to completely avoid significant fluctuations in the foreign exchange market. Due to the imperfect nature of hedging transactions, losses may occur in the event of a sharp appreciation of the yen.

The price of fuel oil for operating vessels fluctuates in line with crude oil market trends, directly affecting the Group's profit and loss. While the impact of such fluctuations is mitigated through the conclusion of transport contracts with fuel oil price adjustment clauses, the promotion of volume contracts, and price fixing through fuel oil swaps and other means, there is a risk of losses on the portion not subject to fixing during sharp price increases, and settlement losses on the fixed portion during price declines.

Deterioration of the situations in Russia-Ukraine and the Middle East, including transit risks in the Red Sea and Suez Canal and the continued de facto blockade of the Strait of Hormuz, may cause supply chain disruptions and a slowdown in seaborne cargo movement and softening of market conditions. Social disruptions such as war, terrorism, piracy, and strikes, as well as changes in trade restrictions and public regulations in various countries, may also affect business activities. The Group strives for prevention and avoidance through the gathering of information from both domestic and overseas sources, while also focusing on appropriately maintaining the supply-demand balance of its controlled fleet.

In the event of a marine accident, risks of loss of life, loss or damage to cargo and vessels, and marine pollution from spilled fuel oil or cargo may arise, which could have a material impact on business activities and financial condition. The Group has established safety management manuals, quality control manuals, and environmental management manuals, and conducts crew education and training as well as emergency response drills, while also advancing the use of operational data through DX promotion and the renewal of vessel management software. While loss countermeasures are taken through insurance, some losses may still be borne by the Company.

If information system failures, data tampering, or leakage of customer information or personal information occur due to cyberattacks, natural disasters, operational errors, or other causes, this may affect the Group's credibility, business activities, performance, and financial condition. The Group continuously strengthens both hardware and software measures against cyberattacks, builds backup systems, develops internal regulations such as its Basic Policy on Information Security, and conducts employee training. It has also formulated a business continuity plan (BCP) that anticipates cyber incidents.

Stable business continuity requires securing excellent personnel both onshore and at sea, with the securing and training of seafarers being a particularly important issue. If changes in the seafarer supply-demand environment due to new qualification requirements associated with environmental measures, substantial increases in hiring and training costs, increased costs after crew assignment due to geopolitical risks or the spread of infectious diseases, or challenges in preventing turnover and promoting retention become apparent, this could have a significant impact on the business. As countermeasures, the Group is promoting diversification of seafarer nationalities, collaboration with universities and a wide range of seafarer training institutions, and cooperative arrangements with overseas manning companies.

Impairment losses may be recorded on fixed assets such as owned vessels due to changes in the business environment or market conditions, which could affect business performance and financial condition. Deterioration in shipping market conditions, obsolescence of vessels due to technological innovation, and changes in public regulations could all trigger impairment. Losses on the sale of vessels and costs associated with the early termination of charter contracts are also financial risk factors.

If investment plans for fleet development do not proceed as planned due to changes in shipping market conditions or financial circumstances, this may affect business performance and financial condition. There is also a risk of loss of business opportunities due to delayed responses to technological innovation, as well as the risk of existing fleet obsolescence due to the emergence of new technologies. The Group strives to utilize data and digital technology through the introduction of advanced technologies, optimize transport, strengthen competitiveness, and improve environmental performance.