IINO KAIUN KAISHA, LTD.

In the shipping business, freight income and charter income may fluctuate significantly at the time of mid- to long-term contract renewals or spot voyages due to changes in maritime transport volume and vessel supply-demand conditions. In the real estate business, there is a risk that rental income will fluctuate due to changes in the vacancy rate of the Tokyo central business district office market. Although measures to secure stable earnings centered on mid- to long-term contracts have been implemented, there remains a risk of lost profit opportunity should market conditions move in the opposite direction.

Middle East geopolitical risks such as the de facto closure of the Strait of Hormuz and the situation in the Red Sea, the prolonged Russia-Ukraine conflict, and changes in U.S. tariff policy may lead to stagnation or decline in maritime transport demand or deterioration of the real estate market through concerns over a global economic slowdown and changes in supply chains. Social disruption caused by accidents, wars, terrorism, infectious diseases, and other factors could also affect business activities as a whole. The Group closely monitors international conditions and strives to respond promptly, but it is difficult to completely avoid these risks.

In the shipping business, a decline in fossil fuel demand may lead to lower sales, carbon pricing may increase operating costs, and compliance with fuel efficiency regulations is expected to increase vessel construction costs and next-generation fuel introduction costs. In the real estate business, there is a risk of increased construction and renovation costs associated with improving the energy efficiency of owned buildings, as well as a risk of declining rents, occupancy rates, and asset value due to inferior environmental performance. The Company supports the TCFD recommendations and, under its medium-term management plan "Transformation for a Sustainable Future," is promoting decarbonization initiatives under the theme of "strengthening competitiveness through environmental response."

Assets held by the Group, such as vessels, land, buildings, and investment securities, may fluctuate in value due to economic conditions and market fluctuations. In particular, in the Ocean-going Shipping Business, large fluctuations in freight rates create significant uncertainty in determining the need to recognize impairment losses and in calculating recoverable amounts. The Group assesses indications of impairment once every quarter, but the realization of unexpected gains or losses on asset sales or the recognition of impairment losses may affect its business performance and financial condition.

In the shipping business, foreign currency-denominated income structurally exceeds foreign currency-denominated expenses, so fluctuations in exchange rates directly affect profit and loss. Capital expenditures are also largely denominated in foreign currencies, resulting in significant exposure to foreign exchange risk. The Group works to mitigate the impact through measures such as promoting the dollarization of expenses and hedging transactions including forward exchange contracts and currency swaps, but there remains a risk of lost profit opportunity should exchange rates fluctuate significantly or move in the opposite direction.

Marine fuel oil prices fluctuate depending on the supply-demand balance of crude oil and conditions in oil-producing countries and regions, directly affecting the earnings of the shipping business. The Group takes measures such as diversifying refueling regions and timing, reducing fuel consumption through slow steaming, and agreeing on fuel price fluctuation adjustment clauses with shippers, but significant price fluctuations may affect business performance and financial condition.

If an unforeseen accident involving a vessel or building results in a serious accident or incident affecting human life or property, or if environmental pollution such as oil spills or soil contamination of owned real estate is discovered, significant costs and loss of trust may result. The Group strives to thoroughly prevent accidents and ensure safety through measures such as the monthly "Safety and Environment Committee," a quality management system based on international standards, and the regular convening of the "Safety Management Committee," but unforeseen events cannot be completely eliminated.

The construction, registration, and operation of vessels are subject to legal regulations under international treaties and rules established by classification societies, and there is a continuing trend toward stricter regulation amid growing emphasis on environmental protection and safety. The implementation, amendment, or abolition of new regulations may result in increased compliance costs, withdrawal from business, or restrictions on business activities in the event of non-compliance. The Group closely monitors regulatory trends in both the shipping and real estate businesses and strives to respond appropriately.

If information and accounting systems are suspended due to natural disasters such as earthquakes, unauthorized external access, computer virus intrusion, or failures during the introduction of new systems, delays or interruptions in business operations and delays in providing information to customers may occur. The Group implements appropriate information security measures against increasingly sophisticated cyber threats, but complete protection is difficult, and system failures may affect business performance and financial condition.

If a serious compliance violation occurs, such as a violation of competition law, bribery, or involvement with antisocial forces, loss of social trust and liability for damages may seriously affect business performance and financial condition. The Group has established a system including "Compliance Regulations," a "Compliance Committee" that convenes at least four times a year, and an external whistleblowing contact point, but these measures may not completely eliminate the risk.