KYOEI TANKER CO.,LTD.

Freight rates, charter rates, and vessel sale and purchase market conditions fluctuate significantly depending on global political, economic, and social trends as well as vessel supply and demand. While the Group's basic policy is to secure stable earnings mainly through long-term chartering contracts, market downturns may adversely affect business performance and financial condition depending on the timing of each vessel's charter contract or sale. The earnings structure centered on long-term chartering serves as the primary means of risk mitigation.

The difference between foreign currency-denominated income and expenses is affected by foreign exchange fluctuations. The Company strives to reduce risk by minimizing the foreign currency-denominated balance and through short-term and long-term forward exchange contracts; however, complete avoidance is not possible, and depending on exchange rate conditions, business performance and financial condition may be affected.

For external borrowings used to finance vessel construction, the Company seeks to avoid risk by fixing interest rates through interest rate swap transactions; however, for the portion not fixed, business performance and financial condition may be affected by interest rate trends. Future fundraising costs may also be affected by interest rate trends.

The Company raises funds through borrowings from financial institutions; however, changes in market conditions such as fund supply and demand and interest rates, or a deterioration in the Group's operating results, may impede fundraising. Given the business characteristics involving large-scale investments such as vessel construction, securing stable fundraising is an important management issue.

If the market value of vessels and other fixed assets held declines significantly, or if their profitability deteriorates, an impairment loss may occur based on the "Accounting Standard for Impairment of Fixed Assets," which could adversely affect business performance and financial condition. Given the fleet composition centered on Very Large Crude Carriers (VLCC), fluctuations in the market value of individual vessels have a significant impact on financial condition.

The Company operates mainly Very Large Crude Carriers (VLCC), and in the event of an unforeseen accident, there is a risk of loss of life, cargo, and vessel loss or damage, as well as a risk of marine pollution from fuel oil or crude oil spills. The Company has established a "Ship Safety Management System," formulated a "Quality and Environmental Management Manual," conducts regular education, training, and emergency response drills, and takes measures to compensate for losses through insurance; however, depending on the accident, business performance and financial condition may be adversely affected.

In the ocean-going shipping business, the Company is subject to various public regulations, including laws and regulations of international organizations and national governments, as well as rules of classification societies, and increased costs associated with regulatory compliance or restrictions on business activities may adversely affect business performance and financial condition. Strengthening or changes in regulations may lead to additional capital investment or increased operating costs.

Business activities spanning regions around the world may be affected by social and political turmoil such as regional conflicts, wars, riots, terrorism, piracy, and epidemics, as well as natural disasters such as earthquakes, tsunamis, and typhoons. While there is currently no direct impact from the risk of closure of the Strait of Hormuz amid heightened tensions in the Middle East or the prolongation of Russia's invasion of Ukraine, indirect effects have become apparent, including rising costs for ship supplies, lubricating oil, and vessel repairs, as well as sharp increases in hull insurance premiums for vessels navigating high-risk waters.