Iino Kaiun Kaisha : Integrated Report 2023

Integrated Report 2023

IINO Kaiun Kaisha, Ltd.

IINO Kaiun Kaisha,Ltd.

Corporate Philosophy: IINO PURPOSE

Connecting Wishes.

Building a Brighter Future.

Always Safety First.

Management Policy: IINO COMMITMENT

For our customers:

We promptly and accurately respond to our customers' needs, providing safe and high-quality services consistently.

For our employees and executives:

We offer a supportive work environment and opportunities for personal growth, recognizing that our employees and executives are the cornerstone of our company.

For our society:

As responsible members of society, we work together with society to contribute to solving various issues.

For our shareholders:

By focusing on sustainable growth, we enhance corporate value and implement rewarding shareholder returns.

Mid-term Management Plan

Plan name: The Adventure to Our Sustainable Future

Theme: The Challenge of Portfolio Management and

Becoming Carbon Neutrality

Period: April 2023 - March 2026 (3 years)

▶Corporate Philosophy

▶Management Policy

Value that the IINO Group provides to society

▶Code of Conduct

Preparedness of each individual in the IINO Group

▶IINO VISION for 2030

IINO Group's Aim towards 2030

▶Mid-term

Management Plan

Code of Conduct: IINO STYLE

Integrity:

As a responsible corporate citizen, we actively contribute to a better society. We respect human rights with a commitment to not engaging in or tolerating human rights violations.

Open-mindedness:

We listen attentively to others' opinions without preconceived notions.

Agility:

We are capable of prompt response and act swiftly to seize opportunities as they arise.

Resilience:

We are adaptable and maintain composure even in challenging situations.

IINO VISION for 2030

Aiming to be an independent global company that continues to evolve with creative ideas in response to the demands of the times.

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				Fundamentals of
About IINO Group	Top Message	Value Creation Story	Value Creation Strategy	Our Value Creation	Corporate Information

Contributing to Japanese and Global Logistics Over a History Spanning More Than 120 Years

Since its founding in 1899, IINO LINES has achieved growth while facing and overcoming numerous challenges, including two world wars, the consolidation of the shipping industry in 1964, and the sharp plunge in shipping markets. The driving forces behind our growth are the high-quality service, human resources, and organizational capabilities we have cultivated over a history of more than 120 years. By making full use of these strengths and responding to the needs of society, we will continue to achieve further growth.

1899-1959

From Meiji-era Founding to Post-War Development

●Founded in Maizuru, Kyoto ●Launched tanker business

●Liner Service business launched after the Second World War

1960-1978

From Japan's High Economic Growth Period to the Downturn in the Shipping Industry

●Completion of former IINO Building

●Entered the domestic and oceangoing LPG carrier business

●Transferred the Liner Service business upon the consolidation of the shipping industry

●Rebuilt from the shipping industry consolidation to develop tankers, dry bulk carriers, and LPG carriers as main businesses

1979-2010

Toward Business Expansion and the Recovery of Shipping Markets

●Entered the chemical tanker business

●Entered the ammonia transportation business ●Entered the LNG carrier business ●Completion of Shiodome Shiba-Rikyu Building

2011- present

Shaping a Sustainable Society

●Completion of new IINO Building

●Completion of large gas carrier and methanol carrier equipped with dual-fuel main engine

●Acquired office building in London, UK ●Completion of Hibiya Fort Tower

(vessels)

150

		Total number of vessels*		Number of buildings operated

* Data for 1954 onward includes chartered and contracted vessels.

2006	2020	(buildings)
Completion of the	Bracton House in	7
Shiodome	London, UK was

1899

Torakichi Iino founded IINO Shokai in Maizuru, Kyoto, with commencement of

1960

Completion of IINO Building IINO Hall began operations

1979

Delivery of ESPOIR, IINO's first full-fledged chemical tanker

Shiba-Rikyu Building

acquired

6

100

50

0

transportation of coal by barge and stevedoring

1970

Delivery of ZENKOREN MARU NO.5, the Group's first Panamax dry bulk carrier

1985

Entered into contracts of affreightment with SABIC

1997

Merger with IINO Fudosan IINO Media Pro Co., Ltd. was established to engage in operation of photography studios and design and production of advertising

5

Torakichi Iino, founding President

1964

1941	Consolidation of the
shipping industry

IINO Shoji Kaisha, Ltd., merged with IINO Kisen Kaisha, Ltd., and was renamed IINO Kaiun Sangyo Kaisha, Ltd

2004

Simultaneously obtained ISO9001 and 14001 certifications in the Shipping Business

IINO Marine Service Co., Ltd. obtained the Green Award certification

4

2011	2021
Completion of new	Completion
IINO Building	of Hibiya
Head Office became	Fort Tower

the first office in Japan
to receive LEED	3
Platinum Certification

Accumulated strengths

High-quality service

・Attaining safety and fulfilling customer need cultivated over 120 years

・Expertise in ship management for various vessel types

・Expertise in everything from real estate development to building management

Human resources and

organizational

capabilities

・High qualified employees on shore and at sea

1949

The Company's stock was listed on the Tokyo Stock Exchange (By October 1952, it was listed on all domestic stock exchanges, including the Osaka Securities Exchange)

1955

Acquired Chiyoda Land and Building Co., Ltd., the predecessor of IINO Fudosan Kaisha Ltd.

1974

IINO Marine Service Co., Ltd. was established to conduct ship management operations

1987

IINO Building Maintenance Co., Ltd., forerunner of IINO Building Technology Co., Ltd., was established

1994

Delivery of LNG VESTA,	2005
IINO's first LNG carrier
	Simultaneously obtained
	ISO9001 and 14001
	certifications in the
	Office Leasing Business

2

1

2022

Delivery of the CALLUNA GAS, LPG dual-fuel vessel

0

・Customer base and business partner base

・Collaboration with startups

1948 1950196019701980 1990 1990200020102023

* As of June 30. 2023

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Pursuing Sustainable Growth Through

Business on Land and at Sea

Fleet in Operation

95 vessels

Deadweight tonnage

4,264,725 dwt

(inclusive of ownership partners' shares)

(as of June 30. 2023)

Through the Provision of Safe

and Secure Marine Transport

				Fundamentals of
About IINO Group	Top Message	Value Creation Story	Value Creation Strategy	Our Value Creation	Corporate Information

By facing the demands of society that change with the times while leveraging strengths in the Shipping and Real Estate Businesses cultivated over many years, we pursue management from long-term perspectives to create economic and social value.

For the Comfort and Safety of Workers and People who Gather There

Office Property

7buildings	6 in central Tokyo
1 in London, UK
real estate projects in the
	* Participation in two other
Gross floor area	United States

271,228.48㎡

* Aggregated by leased floor space of the office building in London

(as of June 30. 2023)

	High-quality service			Human resources and organizational capabilities
New Entry into Low-CO2 Emission Liquefied	▶P37	Overcoming Environmental Changes through	▶P25
Ethane Transportation		Collaboration with Startups

High-quality service
Acquiring Knowledge from Overseas to	▶P45
further Enhance Corporate Value

Human resources and organizational capabilities

Certified as a Top-level Facility for Our Group	▶P48
Human Resources and Organizational Capabilities

In November 2022, IINO LINES entered into long-term charter agreements for two 99,000 cbm very large ethane carriers (VLECs) with INEOS Europe AG, a global leading company in the chemical business, thus determining the Company's new entry into the liquefied ethane transportation business. A VLEC charter agreement is the first such agreement for IINO LINES, which has a track record spanning more than six decades in the gas carrier business, and the conclusion of the agreement reflected recognition of IINO LINES as a highly experienced partner committed to safety, reliability, and efficiency. These carriers are equipped with dual-fuel main engines capable of using ethane as fuel, which emits less CO2 than conventional fuel oil. In addition to reducing the environmental impact, this represents a major turning point in accumulating operational expertise in dual-fuel technologies and achieving greater sophistication.

IINO LINES regards B-to-B collaboration with various startups possessing advanced technologies as one of the most effective ways to adapt to the changing environment surrounding the shipping industry in a precise and speedy fashion. After starting with collaboration in the development of a CII optimization tool with the Silicon Valley-based AI data analysis startup Bearing, Inc. that began in 2022, in June 2023 we decided to invest in a fund operated by theDOCK, an Israel-based marine venture capital (VC) firm, as well as in a fund operated by New York-based marine VC Trail Mix Ventures (TMV), as part of further efforts to cultivate marine startups by identifying and investing in cutting-edge technology trends. Going forward, IINO LINES will continue to respond to the rapidly changing business environment with flexibility and precision while utilizing the expertise gained from these endeavors to enhance sustainability, streamline operations by driving DX, and fully utilize human resources.

IINO LINES is working to acquire knowledge regarding the series of operations from development to stable operation and deepen its ties with local companies by taking part in overseas real estate projects. Utilizing the expertise we have cultivated through our operations in Japan, we will continue to invest in promising real estate domestically and abroad to improve the stability of earnings from the Real Estate Business while diversifying operations, aiming to further enhance corporate value. In October 2022, we decided to take part in the Press Block Project, the largest real estate development project in Portland, the U.S. on a joint basis with TAKENAKA CORPORATION, Chuo-Nittochi Group Co., Ltd. and Nomura Real Estate Development Co., Ltd. In December 2022, we also decided to take part in a project to construct an ESG-friendlylarge-scale wooden office building in the suburbs of Dallas, in the U.S. on a joint basis with Sumitomo Forestry Co., Ltd. and Kumagai Gumi Co., Ltd.

In the Real Estate Business, IINO LINES has earned outside recognition for the environmental performance of its buildings and facilities (physical aspects) and for reducing the environmental impact (non-physical aspects) of its operational and management systems. Behind these achievements are the Group's organizational capabilities on the operational management front and human resource capabilities undergirding cooperative relationships with tenant companies. In addition to advanced measures on the physical side, the IINO Building has implemented efficient facility operations to reduce CO2 emissions and conserve energy under an accurate management system provided by IINO Building Technology Co., Ltd. The system was subsequently certified as an Outstanding Specified Global Warming Countermeasure Office, Top-level Facility, under the Tokyo Metropolitan ordinance concerning the Environment to Secure the Health and Safety of the Citizens of Tokyo (certified in FY2015 and FY2020).

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Publishing the Integrated Report

In May 2023, the IINO Group formulated its new mid-term management plan, "The Adventure to Our Sustainable Future (from April 2023 to March 2026). The plan designates two main themes, the challenge of portfolio management and becoming carbon neutrality, and aims to achieve the IINO VISION for 2030, which is to be an independent global company that continues to evolve with creative ideas in response to the demands of the times. In formulating the plan, we also established a new corporate philosophy system.

In this report, we have summarized IINO LINES' medium to long-term value creation story in the contexts of our mid-term management plan, financial strategy, business strategy, and materiality as initiatives aimed at achieving this corporate philosophy and the IINO VISION for 2030. The report has been prepared in accordance with our policy of plainly communicating the Group's activities to shareholders, investors, and other stakeholders.

In the preparation of this report, we referenced the Global Reporting Initiative (GRI) standards, the Integrated Reporting Framework proposed by the IFRS Foundation, and valuable feedback received from stakeholders. Group officers and employees worked together in earnest across departmental lines to compile reports on the various initiatives the Group pursued over the year to create economic and social value. I am confident that the production process and content of this report are properly validated.

We will continue to make every effort to improve the content of the Integrated Report to facilitate more constructive dialogue with stakeholders. We will work to incorporate feedback from stakeholders in our management, and aggressively drive the creation of shared value that comes from building economic and social value.

September 2023

President and Representative Director Yusuke Otani

Contents

About the IINO Group

Corporate Philosophy System ���������������������������������������1

Inherited DNA and History of Value Creation������������������������3

Current Strengths���������������������������������������������������5

Publishing the Integrated Report / Contents / Editorial Policy�������7

Top Message

Top Message��������������������������������������������������������9

Value Creation Story

Value Creation Process�������������������������������������������� 15 Capital and Business Model��������������������������������������� 17

Creation of Business Value Creation and Materiality�������������� 19 Financial and Non-Financial Highlights���������������������������� 21

Vision and Strategies���������������������������������������������� 23

Special Feature 1

Collaborating with a Startup to Implement DX

Adapted to the Issues of the Shipping Industry����������������� 25

Value Creation Strategy
Message from the Executive Officer in Charge of
Corporate Planning and Finance����������������������������������	29
The Role of the Business Portfolio���������������������������������	33
Departmental Business Strategy (Shipping Business)��������������	35
Departmental Business Strategy (Real Estate Business) �����������	45
Departmental Business Strategy (Group Companies) �������������	47
Initiatives to Overcome Materiality (Environment, Social) ���������	49

Special Feature 2

Utilizing Diverse Human Resources to Build

a New Corporate Culture��������������������������������������� 55

Basis of Value Creation

Messages from Outside Directors ��������������������������������� 58

Initiatives to Overcome Materiality

(Governance, List of Officers, Risk Management, Compliance) ���� 59

Corporate Information

Key Consolidated Financial Data���������������������������������� 67 Non-FinancialData������������������������������������������������ 69

Corporate Data / Stock Information / External Recognition�������� 70

Financial Statements���������������������������������������������� 71

Editorial Policy

The IINO Group started to publish the IINO Report in 2009 combining the Annual Report and Safety and Environmental Report, and since 2022 the name has been changed to Integrated Report. Our basic editorial policy is to plainly communicate to stakeholders how our measures lead to the creation of shared value.

For more detailed information, please refer to the documents below available on our website.

Period covered: Fiscal year 2022 (from April 1, 2022 to March 31, 2023) Note: Some information may concern other periods.

Issued: October 2023

Reporting cycle: Annual, with a report issued every year

Financial
	Annual securities		Shareholder			Integrated Report
	report*		newsletter*			Sustainability
	Consolidated
Information		financial results					Website
		Supplementary report
		for financial results					Corporate
							Governance
							Report
					Non-financial Information
						*Available only in Japanese
Company Website

https://www.iino.co.jp/kaiun/english/

Financial Reports

https://www.iino.co.jp/kaiun/english/ir/index.html

Sustainability Website

https://www.iino.co.jp/kaiun/english/csr/

Scope Covered in this Report

This report covers IINO Kaiun Kaisha, Ltd., its 65 consolidated subsidiaries, 8 equity method affiliates, and 9 non-consolidated affiliates. When the applicable companies differ for each field of activity, the scope of coverage is indicated. In this report,

the terms "IINO Group" or "the Group" refer to the entire corporate group of 83 companies; "IINO LINES" or "the Company" refers to IINO Kaiun Kaisha, Ltd.

Cautionary note on forward-looking statements

This report includes statements concerning future plans, strategies, and earnings forecasts of the Group. Such content constitutes forward-looking statements and is based on information available at the time of the preparation of this report. Actual results may differ from those expressed or implied by forward-looking statements owing to various factors including economic trends, market environments, exchange rates, and tax regimes.

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Top Message

				Fundamentals of
About IINO Group	Top Message	Value Creation Story	Value Creation Strategy	Our Value Creation	Corporate Information

Embarking on a new adventure through the unwavering pursuit of safety and promoting business portfolio management

recurring profit increased 119.2% year on year to 20.677 billion yen, while profit attributable to owners of the parent improved 81.1% to 22.681 billion yen. These results represent record highs for net sales and all levels of profit.

FY2022 was also the final year of our three-yearmid-term management plan, Be Unique and Innovative: The Next Stage-Towards 2030. In terms of numerical targets, we failed to meet operating profit targets for FY2022 in the Real Estate Business but achieved considerable growth in the Shipping Business and exceeded forecasts in net sales and each profit item. In terms of shareholder return, based on a dividend payout ratio of 30%, we issued dividends of 65 yen per share, higher than initial forecasts.

In the previous mid-term management plan, we tackled three priority measures, further solidifying stable earnings, further promotion of global business, and sustainability initiatives, to realize our long-term goal, IINO VISION for 2030, namely to become an independent global corporate group that continues to evolve with creative ideas in response to the demands of the times. We implemented a wide range of measures in the final year of this plan. In the large gas carrier division, we entered into long-term charter agreements for two 99,000 cbm very large ethane carriers (VLECs) with a UK-based chemical company and took delivered

building construction profit in the suburbs of Dallas, Texas (announced December 2022) as global and sustainable efforts. In the previous mid-term management plan, we declared targets to create social and economic value through ESG management and strengthened efforts for individual businesses and groupwide. In addition to the acceleration of DX, we have tackled sustainability by responding to environmental issues, utilizing and enhancing human capital, and bolstering corporate governance. In FY2022, we introduced a CII optimization tool to predict ship fuel consumption using AI technologies, enabling us to develop a system that complies with the CII Rating System*1 starting in January 2023. In June 2022, we established the Sustainability Promotion Department and set up Group-level working teams for the environment, human rights, and other priorities. That same month the Technical Department was established to drive environmental efforts, such as achieving GHG reduction targets*2 for all IINO Group vessels.

*1: Carbon Intensity Indicator (CII) Rating System: These regulations rate the fuel consumption performance of ships on a yearly basis on a 5-point scale from A (best) to E (worst), with ship falling below certain assessment scores required to submit improvement plans and obtain certification from supervisory authorities to continually promote energy-saving ship operation.

*2: GHG Reduction Targets: Our FY2030 reduction targets are set at 20% (compared with FY2020 levels) in the Shipping Business and 75% (compared with FY2013 levels) in the Real Estate Business. In addition, we have set the target of achieving carbon neutrality by 2050.

Message from the President

Against the backdrop of positive market conditions for marine transportation, the IINO Group showed favorable business performance achieving record-high profits for two consecutive fiscal years in FY2021 and FY2022. Under the leadership of the previous president, Hiromi

President and Representative Director

Yusuke Otani

Looking Back on FY2022

While the global economy showed signs of destabilizing from the COVID-19 pandemic, high inflation and monetary tightening developed due to the situation between Russia and Ukraine. In March 2023, the uncertainty was worsened following the bankruptcy of multiple

a second LPG dual-fuel VLGC in March 2023. In the chemical tanker division, we increased personnel in Dubai and Houston, significantly bolstering our sales capabilities and delivering new shipping routes. In the Real Estate Business, we began the operation of solar power generating equipment on the IINO Building in May 2022 and also took part in a redevelopment project for an environmentally friendly complex in Portland, Oregon (announced October 2022) and a wooden office

●Philosophy System

Formulating the New Mid-term Management Plan

Over the past year, we have been monitoring the progress and results of our efforts to date while proceeding with the formulation of our new mid-term management plan. Amid positive operating results, we have embraced the lesson of "the higher the mountain the deeper the valley," considering the risks posed by market uncertainty in the future and our

Tosha, I believe the concerted efforts made by employees to tackle the previous mid-term management plan led to these significant results.

From FY2023, we have started our new mid-term management plan, and took the opportunity to revamp our management structure, including a change in top management. While I had previously been involved

in the formulation of the new mid-term management plan, I took the lead as the new president in April. We will inherit the management foundations of the IINO Group developed by our predecessors while incorporating advanced management techniques suited to the times, striving to enhance our management foundations and further develop the business. We will also actively embrace the roles we are expected to fulfill in the future society and contribute to the realization of a sustainable society.

US banks and management instability in major European financial institutions. In the Shipping Business of the IINO Group, the markets for chemical tankers remained strong due to changes in marine logistics caused by the situation in Ukraine, despite softening aspects such as dry bulk carriers being affected by the slowing global economy.

In this business environment, the IINO Group has worked to renew existing contracts on favorable terms and allocate its vessels efficiently to improve profitability. However, in the Real Estate Business, the COVID-19 pandemic impacted commercial tenants of the owned office buildings as well as IINO Hall & Conference Center and increased costs due to sharply rising utility expenses. Despite these challenges, we continued the steady operation of office floors and secured stable revenue overall. In addition, the Japanese yen was weaker year on year against the US dollar. As a result, net sales rose 35.8% year on year to 141.324 billion yen, operating profit jumped 163.6% year on year to 19.835 billion yen,

		Corporate	Corporate Philosophy: IINO PURPOSE
		Philosophy
		Management	Management Policy: IINO COMMITMENT
		Value that the IINO Group provides to society
		Policy
		Code of Conduct	Code of Conduct: IINO STYLE
		Preparedness of each individual in the IINO Group
			IINO Group's Aim towards 2030
		IINO VISION for 2030	Aiming to be an independent global company that continues to evolve with
			creative ideas in response to the demands of the times.
			Plan name : The Adventure to Our Sustainable Future
	New Mid-term Management Plan	Theme	: The Challenge of Portfolio Management and Becoming Carbon Neutrality
			Period	: April 2023 - March 2026 (3 years)
		Task Execution Plan		Group Annual Plan

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				Fundamentals of
About IINO Group	Top Message	Value Creation Story	Value Creation Strategy	Our Value Creation	Corporate Information

• Review of the Previous Mid-term Management Plan and Future Challenges

Previous Mid-term Management Plan Priority Strengthening Measures and Achievements

Further promotion of global business		Further solidifying stable earnings		Sustainability initiatives
- Conclusion of VLGC and VLEC charter contracts with		- Completion of Hibiya Fort Tower		- Materiality (key sustainability issues) identification and
European customers		- Delivery of 2 new VLCCs		launch of initiatives
- Participation in U.S. real estate development projects		- Delivery of 2 new LPG dual-fuel VLGCs		- Re-entry into ammonia transportation
- Increased personnel at overseas subsidiaries				- Installation of solar panels on the IINO Building

		Ongoing Items and Future Challenges
	Sales promotion to areas with		Optimal allocation of management		Strengthening of initiatives for
		resources to growth businesses and
	growth potential			new energy transport and materiality
		stable businesses

New Mid-termManagement Plan: The Adventure to Our Sustainable Future

choose us and put their trust in our services. This applies equally to the Real Estate Business as well as the Shipping Business. Our commitment to providing high-quality services generates significant added value, and I am certain it sets us apart from the competition.

The second strength is the IINO MODEL, a business model that is unique to IINO LINES. The IINO MODEL is our two-pillared management style that combines the Shipping Business, which is subject to high market volatility, and the Real Estate business, which experiences relatively less volatility. And we have taken it further, forming a business portfolio that possesses flexibility and high potential. The Real Estate Business is an operating model that generates lease revenue over

the long term and provides us with a stable operating foundation. Market conditions in the Shipping Business fluctuate cyclically and carry a certain degree of risk, but we have worked on developing transportation services through various vessel types, including crude oil tankers, chemical tankers, gas carriers, and dry bulk carriers. As the timing of market fluctuations can vary for each type of vessel, our risks are diversified. Additionally, if you focus on our customers in the

focus based on a healthy balance. In short, even within the Shipping Business, our success in developing this carefully structured business portfolio reflects the essential strength of the IINO MODEL.

A third and significant strength of IINO LINES lies in our agile operational structure combined with enhanced human resource capabilities. We shape our human resources into highly experienced assets by having them work on important jobs from an early stage. As our lean organizational size means that people can put a name to the face of each officer and employee, our highly specialized technical departments work close to staff from sales divisions, making it easy for inter-departmental exchanges to form and increasing the chances of synergistic effects. Decision-making in the field occurs at high speed, enabling us to develop businesses adapted to current trends and changes in the operating environment.

In our new mid-term management plan, we recognize the need to achieve growth by leveraging these many strengths. At the same time, taking action on environmental issues and responding to social issues such as diversity and inclusion (D&I) also reflect key pillars in driving the

strengths and the challenges we face. We have carefully considered how we should pursue improved corporate value based on our strengthened financial base and how we might establish an optimum business portfolio. In drafting the new mid-term management plan, we also took the

opportunity to revise our corporate philosophy for the first time in a decade. To revisit what IINO LINES' should be and aspires to be, a working team set up internally played a central role in summarizing the views of officers and employees through a questionnaire and formulating the plan while remaining mindful of how it is linked with

the company's materiality. Under the new corporate philosophy, the IINO PURPOSE is described as Connecting Wishes. Building a Brighter Future. Always Safety First. The questionnaire also offered a powerful boost by reaffirming that the idea of "ensuring safety," which has been a foundation of our business to date, has firmly taken root among employees as a fundamental and unwavering principle. Based on the corporate philosophy, we have established management policies and a code of conduct, expressing the values we emphasize in addition to safety, including high-quality services, a healthy workplace environment, solving social issues, and active efforts for sustainable growth.

We formulated the new mid-term management plan based on the newly established corporate philosophy system and decided to continue pursuing the goal of IINO VISION for 2030, which was inherited from the previous plan, to be an independent global company that continues

Shipping Business, many customers deal with multiple types of cargo and contract us to transport goods using multiple types of vessels. By offering high-quality transportation services and having customers select us for multiple types of cargo, we produce synergies that span multiple divisions and vessel types. We also offer a wide range of contract types, from long-term charter agreements to short-term spot contracts, allowing us to further diversify risks by incorporating both the stability of long-term contracts with the improved business results from short-term

• Overview of the New Mid-term Management Plan

implementation of the plan. This reflects our commitment to creating shared value on both the social and economic fronts and providing that value to society.

With this approach to leveraging the strengths of IINO LINE in safety awareness, the IINO MODEL, organizational strength, and human resource capabilities, combined with a commitment to balancing social value with economic value to a high level, we completed the new mid- term management plan.

to evolve with creative ideas in response to the demands of the times.

The Strengths of IINO LINES Forming the Basis for the New Mid-term Management Plan

It is more than thirty years since I joined IINO LINES, and my sense that the IINO Group's independence is both a characteristic and an asset has grown deeper year after year. I believe our ability to continue operating as an independent company despite facing hardships on the level of the 2008 Global Financial Crisis multiple times reflects one of our unique strengths.

The first of those strengths lies in high-quality services with a solid foundation in safety. Our ability to enter into stable and long-term agreements with customers is due to the provision of safety and high- quality transportation services and is the reason customers continue to

IINO VISION for 2030

Aiming to be an independent global company that continues to evolve with creative ideas in response to the demands of the times

Priority

Creating Economic Value

Creating Shared Value

Creating Social Value

Promoting Business Portfolio

Management

Overcoming Materiality

Strategies

Allocate Management Resources

Formulation and Implementation of

to Growth Businesses

Plan to Realize a Decarbonized Society

Expansion of Global Business

Strengthening of Human Capital

Promotion of Environmental

Addressing Respect for

Initiatives and Investments

Human Rights

Ship and building management quality

Improving cost competitiveness

Acceleration of DX

Strengthening governance

improvement (Provision of safety and security)

Business Foundation Strategy

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				Fundamentals of
About IINO Group	Top Message	Value Creation Story	Value Creation Strategy	Our Value Creation	Corporate Information

Measures in the New Mid-term Management Plan

The new three-yearmid-term management plan that runs from April 2023 to March 2026 was named The Adventure to Our Sustainable Future. "Adventure" can mean acting without regard for the risks, but we use it to clarify that we will weather the stormy seas of change present in the Shipping Business and confidently take a step into an unknown world, providing for the future. IINO LINES maintains a stable Real Estate Business through which it can mitigate the fluctuating risks of shipping markets. Even with the difficulty of predicting the future outlook, we hope that stakeholders will understand that this wording embodies our desire to boldly take on challenges and seek adventure.

Through the plan, we will create shared value through two priority strategies: creating economic value by promoting business portfolio management based on the IINO MODEL and creating social value by overcoming material challenges, including carbon neutrality and human rights issues. We will progress towards the IINO Group's vision for 2030, to be an independent global company that continues to evolve with creative ideas in response to the demands of the times. We have also set shipping and building management quality improvement (provision of safety and security), improving cost competitiveness, acceleration of DX, and strengthening governance as business strategies.

For promoting business portfolio management, we will allocate management resources to growth businesses, expand global business, and promote environmental initiatives and investments. We have

• Allocation of Management Resources

classified each business as either a "growth and new business," "core business" or "stable and mature business," and plan to invest 100 billion yen, more than double the investments we made in the previous mid-term management plan. Growth businesses will receive half of these investments to generate a driving force for the company's growth. For our global business operations, we will expand various overseas sites, pursue collaboration, and improve the service provided to existing customers while developing new customers. Particularly in the European market, we hope to expand our customer base with environmentally friendly services. We also plan to make environment-related investments, spanning each category of 60 billion yen. In the Shipping Business, we will invest in vessels equipped with dual-fuel main engines, focusing on oceangoing gas carriers. At present, hydrogen and ammonia are considered next-generationzero-emission fuels, but we will wait until industry implementation, and in the meantime, will continue to improve fuel efficiency. For real estate, we will invest in high environmental- performance buildings and renovate older buildings. We will work in both shipping and real estate from where we can now.

In terms of overcoming material challenges, we aim to formulate and implement a plan to realize a decarbonized society, strengthen human capital, and address respect for human rights. We have developed a new roadmap for carbon neutrality by 2050 and raised our targets for 2030. We will institute key measures, including a switch to next-generation fuels in the Shipping Business and improvements to environmental performance in the Real Estate Business per the roadmap. To strengthen

human capital, we will present numerical targets as KPIs and will work to create a diverse workplace environment. Regarding respect for human rights, we have been pursuing initiatives with the human rights working team playing a central role, and to show our support for the United Nations Global Compact in FY2022, we are implementing human rights due diligence across the IINO Group. Going forward, we will look to establish a structure addressing human rights that includes the entire supply chain.

As our Business Foundation Strategy, we are working on a range of measures to improve ship and building management quality (provision of safety and security), improve cost competitiveness, accelerate DX, and strengthen governance, aiming to support our two priority strategies.

To improve ship and building management quality (provision of safety and security), we will bolster our in-house management while working with external companies as needed to improve management quality. We will also deepen our knowledge of vessels and equipment that contribute to carbon neutrality, by acquiring expertise in promising new cargo transportation methods and exploring ships equipped with dual- fuel main engines and wind propulsion systems. Regarding building management, we will work toward next-generation office building management and acquire knowledge related to wooden office buildings.

To improve cost competitiveness, we will implement comprehensive cost-cutting measures amid sharply rising material and equipment costs both for Shipping and Real Estate Businesses, while also looking to streamline business operations by utilizing DX and collaborating with startups.

Regarding DX acceleration, the AI-enabled CII optimization tool

achieved record levels of profit, we are in a position to secure net sales

and profit on	par with pre-pandemic levels, and on a consolidated basis
project profit	attributable to owners of the parent of 12.3 billion yen (as
of July 31, 2023, published).

The major changes to the global logistics framework triggered by the situation in Ukraine will continue to bring unpredictable changes to the shipping industry. The new mid-term management plan incorporates IINO LINES' strong willingness to boldly take on challenges in an era in which the future is difficult to predict. We will make every effort to demonstrate the merits of our business portfolio, respond flexibly to change, and generate revenue in the process. The key to accomplishing that will be

Allocation of Management Resources to Each Business

		Eligible Businesses				Key Strategies		Amount Invested
							- Expand stable earnings through aggressive investment			40
GrowthandNew Businesses		Large Gas
					- Further sophistication of liquefied gas cargo management know-how
	Carriers
					- New business initiatives with synergies			10
	Investment
							- Strengthen marketing to small and medium-sized vessels			billion yen
		Strategic					- Investment to improve competitiveness of core business
											billion yen
Core Businesses		Chemical					- Differentiated sales by leveraging the strengths of the stainlesssteel fleet			20
		Tankers					- Establishment of personnel and organizational structure capableof agile response to logistics changes
											billion yen
		Dry Bulk					- Strengthen ability to make proposals to major shippers to reduce CO2 emissions
		Carriers					- Continued fleet flexibility to manage market risks
							- Replacing assets with environmentally friendly vessels in cooperation with Japanese oil companies
StableandMature Businesses	Oil Tankers
				- Continued high quality service and added value to existing vessels
Real estate				- Accumulate stable income through investment in office buildings (including overseas)			30
							- Maintain business scale by securing crews
		Short-sea/ Domestic
		Gas Carriers					- Capturing commercial opportunities associated with the decarbonization of domestic shipping			billion yen

- New initiatives for value-up projects, wooden offices, etc.

Total 100 billion yen (more than double that of the previous mid-termmanagement plan)

introduced in FY2022 will significantly advance carbon neutrality initiatives in our Shipping Business, and looking ahead, we plan to incorporate similar technologies. In June 2023, we established the DX Promotion Department to enhance our response capabilities at the organizational level. The department is pursuing initiatives to streamline operations and improve cost competitiveness.

We will continue to pursue highly effective corporate governance while thoroughly ensuring compliance and developing increasingly sophisticated risk management. We will also make every effort to strengthen engagement with institutional investors.

FY2023 Outlook and Initiatives

The business environment in FY2023 will continue to be uncertain due to the collapse of some US banks and the ongoing situation in Ukraine. Operating under these conditions, the shipping market will remain solid, although not at the previous year's level. The environment surrounding the Real Estate Business will remain stable despite some negative factors due to sharply rising energy costs. Looking at the business overall, although we expect a decline from FY2022 levels during which we

the further strengthening of our human resource and organizational capabilities. What ultimately leads to the development of a business is the power of its people. Human resources and organizational capabilities are already two of our strengths, but we need to improve further. Today, with the roles companies play in society becoming increasingly diverse, strengthening human capital is a priority management issue. IINO LINES has a characteristically compact organizational structure, but going forward we recognize that it will be necessary to increase personnel and expand the organization in tandem with business growth. To preserve the benefits unique to the compact organization we have cultivated to date, we will develop an environment in which officers and employees can maintain lines of communication.

Additionally, for IINO LINES to continue to exist as an independent corporate group, growth-oriented investment and the continuation of appropriate shareholder dividends will be essential. We intend to issue dividends tied to our business performance with a dividend payout ratio of 30% as a base.

We thank our valued shareholders and other stakeholders for understanding our future efforts and for supporting the new adventures on which IINO LINES will embark.

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14

Value Creation Process

The IINO Group capitalizes on the diverse capital resources that it has cultivated to implement its business model featuring the dual business pillars of the Shipping Business and the Real Estate Business. In doing so, we fulfill our commitments to our stakeholders and create economic and social value from a long-term perspective.

IINO PURPOSE

Connecting Wishes, Building a Brighter Future, Always Safety First.

INPUT

				Fundamentals of
About IINO Group	Top Message	Value Creation Story	Value Creation Strategy	Our Value Creation	Corporate Information

IINO VISION for 2030

Aiming to be an independent global company that continues to evolve with creative ideas in response to the demands of the times

Financial Capital	Intellectual Capital	Social Capital
●Shareholders' Equity Ratio: 41.7%	●Expertise in ship management related to various	●Collaboration with startups
●Total Assets: 110.7 billion yen	vessel types	●Customer base / business partner base
	●Expertise in everything from real estate development
	to building management

Manufacturing Capital	Human Capital	Natural Capital
●Number of vessels in service	●Number of employees (consolidated): 669	●Energy input (Shipping Business): 11,709,000 GJ
(owned and chartered): 93	●Number of employees with short-term overseas	●Energy input (Real Estate Business): 231,000 GJ
●Number of buildings owned: 6 buildings in
training / experience stationed overseas: 54
Tokyo, one building in the UK
●Planned investment amount: 100 billion yen		＊As of March 31, 2023

OUTPUT

Creation through businesses

Shipping Business

●Provision of safe and stable marine transport

• Various liquid cargo
  (crude oil, petrochemical products, LPG and LNG)
• Various dry cargo
  (grain, fertilizer, coal and wood chips)

●Construction of medium- and long-term partnerships with shippers

OUTCOME

Creating Shared Value

Creating Economic Value

▶Promoting Business Portfolio Management

Streamlining Manufacturing Capital

[Activity Goals]

Allocate management resources to oceangoing gas carriers with growth potential on a priority basis, making them a core business along with chemical tankers and dry bulk carriers ●Invest in stable and mature businesses (crude oil carriers, short-sea and domestic gas

carriers, real estate) to improve risk tolerance and maintain those businesses at around 50% as a percentage of total assets

●Utilize expertise in ship and operational management for multiple vessel types, creating synergy between businesses

IINO MODEL

Business model with the dual business pillars of the Shipping Business and the Real Estate Business

Materiality

●Introduce new equipment, technologies, and fuels, and utilize DX to preserve the global environment

▶Optimize financial capital through management emphasizing capital efficiency

[Numerical Financial Targets (FY2025)]

●Recurring profit 13.0～14.0 billion yen

Shipping

Business

Earnings fluctuate significantly

due to the numerous variable	Complementary
factors involved, including market
to each other
conditions and foreign exchange.

Very large

impact on the environment

Real Estate

Business

Earnings are stable, with relatively limited market fluctuations.

Large impact

on the environment

●Provide safety and security to various stakeholders

●Retain a diverse range of human resources and utilize them as human capital ●Respect human rights

●Collaborate with the supply chain

●Enhance governance to ensure the transparency of management

Mid-term Management Plan

Six Priority Strategies

Real Estate Business

●Provision of safe, comfortable office spaces

●Provision of a venue for dissemination of culture (IINO Hall)

●ROIC*	4～5％
●ROE	9～10%
●D/E ratio	Up to 1.5 times

*ROIC = Earning before interest after taxes ÷ Invested capital

Creating Social Value

●Identify social issues emphasized by stakeholders as material challenges (key sustainability issues) and overcome them through our business activities

▶Accumulate intellectual capital through the active introduction of environmental technologies and reduce the consumption of natural capital

Management based on sustainability initiatives including climate change

Strengths we have developed

Creating Economic Value	Creating Social Value
Promoting Business Portfolio Management	Overcoming material challenges
●Allocate Management Resources to	●Formulation and Implementation of
Growth Businesses	Plan to Realize a Decarbonized Society
●Expansion of Global Business	●Strengthening of Human Capital
●Promotion of Environmental Initiatives	●Addressing Respect for Human Rights
and Investments

[Related Numerical Target]

●Greenhouse gas (GHG) reduction rate: Net zero groupwide by 2050

▶Develop a safe workplace environment, strengthen human capital, and respect human rights

[Related Numerical Targets] ●Number of serious accidents: 0

High-quality services

●Attaining safety and fulfilling customer need cultivated over 120 years

●Expertise in ship management for various vessel types

●Expertise in everything from real estate development to building management

Human resources and organizational capability

●High qualified employees on shore and at sea

●Customer base and business partner base

●Collaboration with startups

Four Business Foundation Strategies

●Ship and building management quality improvement ●Improving cost competitiveness

●Acceleration of DX

●Strengthening governance

●Number of employees with short-term overseas training / expatriate experience: 75 or more

●Human rights training participation rate: 100%

▶Enhancement of social capital through collaboration with startups and dialogue with stakeholders

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				Fundamentals of
About IINO Group	Top Message	Value Creation Story	Value Creation Strategy	Our Value Creation	Corporate Information

Capital and Business Model

The IINO Group has built up capital to support its business activities over a history spanning more than 120 years.

By putting that accumulated capital to full use and pursuing the IINO MODEL in greater depth, we will strive to achieve the IINO VISION for 2030.

Social and Relationship Capital ：We have built relationships

of trust with stakeholders through business operations spanning more than 120 years since our founding

• Through business operations spanning more than 120 years since our

founding in 1899, we have built relationships of trust with shareholders,

creditors, officers and employees, business partners, society, and other

stakeholders

Natural Capital ：We will focus on reducing the vast amount

of energy consumed for business activities in the Shipping and Real Estate businesses

• We generate 860,000 tons in Shipping and 9,000 tons in Real Estate of

CO2 emissions per year. Reducing CO2 emissions is a social mission assigned

to the IINO Group and one of the social challenges stakeholders expect us

to overcome

Financial Capital ：The foundation for implementing and

promoting business portfolio management

• To reliably implement measures aimed at sustainable growth, we will maintain a sound financial structure while steadily carrying out necessary investments from a long-term perspective
• We will return profit to shareholders through growth

Specific Initiatives

Shipping Business:

• Strengthen investment in oceangoing gas carriers transporting various types of gas (natural gas, LPG, ammonia, ethane, and others) for which marine transportation volume is expected to increase
• Invest in various new technologies that help reduce the impact on the environment

Real Estate Business:

Intellectual Capital ：We will promote DX and combine the

expertise gained through many years of ship and building management with digital technologies to streamline business operations

• We will collaborate with startups and combine digital technologies with insight based on a lengthy management track record to focus on ensuring safety and the efficiency of operations becoming increasingly complex year after year in the ship and building management industries that have become more complicated with each passing year due to strengthened regulation
• We will accumulate expertise in ship management for vessels equipped with dual-fuel main engines for which demand is certain to increase in the future

Specific Initiatives

• Engagement with stakeholders is an essential element in the formulation

of management strategy, and we are committed to providing the value that

stakeholders prioritize while improving the corporate value of the IINO Group

Specific Initiatives

• Periodically review materiality
• Organize the value provided to each stakeholder as our management policy "IINO COMMITMENT" to coincide with the formulation of the mid-term management plan
• • Solid ties with customers and business partners
  • Development of relationships with startups through Plug and Play and promotion of DX

Specific Initiatives

• Formulation of a roadmap to achieving carbon neutrality by 2050
• Raise previous reduction rate targets for 2030 and strengthen decarbonization initiatives
• Implement efforts groupwide to obtain SBT certification
• • Energy consumption
  • Vessels equipped with dual-fuel main engines: 3 delivered, 2 scheduled for delivery

• Continue to invest in real estate, including office buildings in Japan and overseas, where market conditions are relatively stable compared with the Shipping Business
• Secure stable revenue and expand risk tolerances

Strategic Investments:

• Invest in new businesses leading to improved competitiveness or synergy in the Shipping Business and Real Estate Business
• • Shareholders' Equity Ratio: 41.7%
  • D/E Ratio: 1.04 times
  • Investment amount during the mid-term management plan: 100 billion yen
  • Shareholder Return Policy: Payout Ratio of 30%

• Improve operational efficiency utilizing AI and implement AI-based smart routing services (Bearing AI)
• Invest in various vessels equipped with dual-fuel main engines (methanol, LPG, ethane) and implement ship management
• • Vessels equipped with Bearing AI: 66
  • Projects underway in collaboration with startups: 4

About IINO MODEL

Definition of the IINO MODEL: A business model featuring the dual business pillars of the Shipping Business, which is subject to market volatility while growing constantly in line with the expansion of the global economy, and the Real Estate Business, which secures stable earnings with relatively small changes in market conditions. IINO LINES has established a history as an independent company for more than

120 years by combining these two businesses, but if the businesses are maintained as before, they will not continue to be solid in the long-term. We recognize the importance of responding to the needs of the times and continually refining the IINO MODEL in greater depth, and in our mid-term management plan, we have positioned promoting business portfolio management as a priority strategy.

Investment Policy

Defining the sum of stable earnings from some vessels in the Shipping Business and those from the Real Estate Business as the maximum risk tolerance, we invest in types of ships that are affected by the market (types of ships used for spot operations) and growth businesses, within our risk tolerance. At the same time, we also invest in businesses that generate stable earnings, thereby increasing stable earnings and raising our risk tolerance level.

Balance Sheet Management

Maintain the ratio of the amount of non-current assets in the Shipping Business to that in the Real Estate Business at 1 to 1.

Manufacturing Capital ：We will provide high-qualitycustomer-centric services through the in-house management of ships and office buildings combined with the active utilization of overseas sights

• We will provide safe and high-quality services, by owning our own ships and office buildings outright, and by managing them according to standards we have put in place ourselves
• By setting up sites in various locations overseas, we will build a structure to accommodate requests determined through engagement with local customers, enabling the provision of high-quality services

Specific Initiatives

Human Capital ：The foundation of everything we do,

from daily operations to long-term management strategy development and execution

• We emphasize safety and engagement with various stakeholders on the front lines
• To achieve our corporate philosophy, we will focus on developing environments in which each employee can improve their skills and demonstrate their abilities to the fullest in the field

Specific Initiatives

- Establish a virtuous cycle in which the company and employees grow

together by investing in human capital and promoting strategies to increase

Characteristics of the Shipping Business

Supply and demand change reflecting global GDP and increasing population. The business is very susceptible to market risk and foreign exchange risk.

Characteristics of the Real Estate Business

The business secures stable earnings from long-term contracts with tenants. While demand is decreasing in Japan due to the population decline, it is growing modestly worldwide due to the increasing global population. While it is subject to market risk, this business is relatively stable compared to the Shipping Business.

(Billions of yen)

(Billions of yen)

Vessels	65.6		83.3
Buildings and lands		154.8
	155.8
Other assets
89.5	86.9
Net assets
Liabilities	92.0	91.3	95.2	110.6
		FY2021		FY2022 (Billions of yen)

Total assets	247.1	265.4
Depreciation	11.7	12.4

• Make our site in the Middle East (Dubai Representative Office), a hub of chemical tanker customers, into a local subsidiary, and increase personnel at our local subsidiary in London
• In 2004, IINO Marine Service Co., Ltd. received Green Award Certification, followed by the large LPG carrier "MAPLE GAS" in 2022.
• In FY2015 and FY2020, the IINO Building was certified as a "Top-level Facility"
• • Number of vessels in service: 95
  • Number of buildings owned: six in Japan, one in London
  • Number of overseas sites: 5

their value

- Set KPIs for strengthening human capital in line with priority strategies of

current mid-term management plan

- Childcare leave utilization rate:

Aim for 83% → 100% (FY2025)

- Ratio of females in career-track positions (management candidates):

Aim for 16% → 20% (the end of FY2025)

- Number of employees with short-term overseas training or

expatriate experience:

Aim for 54 → 75 (cumulative by the end of FY2025)

• Market Trends of the Shipping Business and the Real Estate Business*

6.00
5.00
4.00
3.00
2.00
1.00
0.00 2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023

17 IINO LINES Integrated Report 2023

		Oceangoing Shipping Business		Real Estate Business (Average amount of rent in the five wards of Tokyo)	(Created by the company based on various data)
*For January 2002 to July 2023, assuming that the value for December 2001 is 1.00
					IINO LINES Integrated Report 2023	18