M
i
t
s
u
i
O
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K
i
L
n
e
s
L
t
d
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
4
Sea Change
to build sustained
momentum
Annual Report 2014
Year ended March 31, 2014
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Sea Change
to build sustained momentum
MOL returned to profi tability in fi scal 2013 and regained solid footing for a growth trajectory
through successful execution of Business Structural Reforms and the single-year management
plan “RISE2013.”
Fiscal 2014 marks MOL’s 130th anniversary. Under the newly initiated midterm management
plan “STEER FOR 2020,” the Company will build momentum toward solid growth by innovat-
ing its business portfolio, business model and business areas while continuing to enhance its
core competence as a marine transport company.
MOL GROUP CORPORATE PRINCIPLES
As a multi-modal transport
group, we will actively seize
opportunities that contrib-
ute to global economic
growth and development
by meeting and responding
to our customers’ needs
and to this new era.
We will strive to maximize
corporate value by always
being creative, continually
pursuing higher operating
effi ciency and promoting
an open and visible man-
agement style that is guid-
ed by the highest ethical
and social standards.
We will promote and pro-
tect our environment by
maintaining strict, safe
operation and navigation
standards.
Forward-Looking Statements
This annual report contains forward-looking statements concerning MOL’s future plans, strategies and performance. These statements represent assumptions and beliefs
based on information currently (*) available and are not historical facts. Furthermore, forward-looking statements are subject to a number of risks and uncertainties that
include, but are not limited to, economic conditions, worldwide competition in the shipping industry, customer demand, foreign currency exchange rates, price of bunker,
tax laws and other regulations. MOL therefore cautions readers that actual results may differ materially from these predictions.
(*) As of June 24, 2014 unless otherwise specifi ed.
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MOL’s Communication Tools
MOL produces the following publications as a means of promoting communication with stakeholders:
The latest versions of all reports can be found on our website.
http://www.mol.co.jp/ir-e/
http://www.mol.co.jp/csr-e/
Annual Report
MOL Investor Guidebook
Market Data
Environmental and Social Report
Contents
2
8
10
12
14
16
Feature: The Seascape
Financial Highlights
Key Indicators
To Our Shareholders
New Midterm
Management Plan
Message from the
President
24 MOL at a Glance
26 Market Position in the Industry
28 Overview of Operations
51
Management Foundation
Underpinning MOL
52 Board of Directors, Corporate
Auditors and Executive Offi cers
54 MOL’s Approach to
Governance, Safety and CSR
56 Corporate Governance
60 Risk Management
62 Safe Operation
65 Corporate Social
Responsibility (CSR)
69
Financial Section
The MOL Group
112
114 Worldwide Offi ces
115
Shareholder Information
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2 Mitsui O.S.K. Lines
Feature: The Seascape
Shipping:
Making the world
smaller and
economy bigger.
Nearly 50 years ago in 1965, the global population was
3.3 billion and global seaborne trade was 1.7 billion
tons, which means there was around half a ton of
cargo per person. Seaborne trade has since outpaced
population growth. In 2002, the population increased
to 6.3 billion, but seaborne trade grew even faster to
6.4 billion tons, surpassing one ton per person. In
2011, seaborne trade exceeded 1.3 tons per person,
and the gap is only continuing to widen. There’s a rea-
son why. More and more countries, and the people liv-
ing in them, have begun participating in the rich
bounty of global trade.
Even in this day and age, when offshoring is said to
have peaked out, the frontier still exists in global trade
and marine shipping. For example, countries with newly
developed resources often seek consumers in faraway
lands and burgeoning populations often seek inexpen-
sive, bulk foodstuffs from fertile agricultural regions,
however distant. In addition, emerging nations build up
their infrastructure, and the people living there often
drive up imports as they seek to improve their own quali-
ty of life. And as the infl uence of IT spreads, global inter-
dependence is deepening, spawning an increasing web
of cargo fl ows within and between regions for wide-
ranging products and components. The majority of that
movement is conveyed through marine shipping.
As long as the world economy grows, or rather, as
long as marine shipping continues to support the
growth-oriented global economy, seaborne trade will
continue to expand. The marine shipping industry is
intrinsically a growth industry.
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Annual Report 2014 3
The marine shipping industry creates value by transporting things across the ocean, all sorts of
things. Nowadays, most of what we use in our daily lives—from food and clothes to appliances,
automobiles and even energy—is produced somewhere else in the world and only reaches us
after a long journey through the global supply chain.
Value is created by delivering what people need where they need it, enriching the lives of
both the senders and the receivers. This was fi rst made possible by marine shipping, which is an
inexpensive means of large-volume shipping. Marine shipping has made the world smaller and
the economy bigger.
World Population & Global Seaborne Traffi c
16
14
12
10
8
6
4
2
0
Seaborne Traffic (bn t)
World Population (bn)
estimate (2014–)
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Source : World population= UN, Seaborne traffi c = Feamley/Clarksons (~2013), MOL estimation based on assumption that the trend of traffi c per capita in the past
continues in the future (2014–)
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4 Mitsui O.S.K. Lines
Feature: The Seascape
130 years
& MOL is still
changing !
The history of MOL, which has grown in response to
expanding seaborne trade, is also a history of innova-
tion. In 1961, we launched the world’s fi rst automated
ship. In 1965, we launched Japan’s fi rst specialized car
carrier. In 1968, we commenced service of full contain-
erships. In the 1980s, we were quick to enter the ship-
ping business for methanol, LNG and petroleum
products. Moreover, we developed specialized vessels
of optimal size to meet customer needs for shipping
iron ore, coal, wood chips, crude oil and other prod-
ucts. In 2007, MOL took delivery of the world’s largest
iron ore carrier, opening a route for shuttle transport of
iron ore from Brazil to Japan. It bears the same name—
the Brasil Maru—as the ship that served as a bridge for
emigrants from Japan to Brazil in the old days. Recently
we have been working on the Senpaku ISHIN project, a
next-generation vessel concept to reduce environmental
load, and in 2012, we launched the world’s fi rst hybrid
car carrier.
In the midst of making this history, OSK Lines and
Mitsui Steamship merged in 1964 to form Mitsui O.S.K.
Lines, Ltd. (MOL), which went on to merge with Navix
Line in 1999 to form the present Mitsui O.S.K. Lines.
Through these mergers, we constructed a business
portfolio fi t to meet global demand for seaborne trade
and strengthened our management foundation.
In 2014, MOL launched “STEER FOR 2020,” its mid-
term management plan based on analysis of the chang-
ing business environment, with the aim of achieving
solid growth through innovation.
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Annual Report 2014 5
In April 2014, MOL celebrated its 130th anniversary.
Marine shipping is a growth industry and yet, over the 150-year history of modern
marine shipping, more than a few shipping companies have collapsed. Why has MOL
continued to grow amid what can admittedly be a hostile environment? MOL has advanced
by adapting its businesses to the changing business environment ever since Osaka Shosen
Kaisha (OSK Lines), its corporate predecessor, was established in 1884. During the
intervening years, MOL has been invigorated with the addition of distinct corporate
cultures through two major mergers, creating the robust spirit of innovation and resilience
unique to hybrids. And now, once again, the fl ow of cargo is on the verge of a major sea
change. With its eye on 2020, MOL is already adjusting its course to prepare for major
changes six years down the line.
MOL’s 130 years: Challenge and Innovation
1964
Mitsui O.S.K. Lines (MOL) was
founded by a merger of OSK
Line and Mitsui Steamship
AMERICA MARU (700TEU)
1968
Full containership
service commenced
OSK Line’s former
headquarters building (Osaka)
1884
Osaka Shosen Kaisha
(OSK Line) is
founded.
1995
The fi rst double hull
very large crude carrier
(VLCC), the ATLANTIC
LIBERTY, is launched.
1989
Navix Line is
established by
the merger of
Japan Line and
Yamashita-Shinnihon
Steamship
1999
New Mitsui O.S.K.
Lines is established by
the merger of MOL
and Navix Line.
2012
The world’s fi rst hybrid car
carrier, the EMERALD ACE, is
launched.
1961
World's fi rst automated
ship, the KINKASAN
MARU, is launched.
1965
Japan's fi rst specialized
car carrier, the OPPAMA
MARU, is launched.
1984
LNG carrier, the SENSHU
MARU is launched.
1983
Japan's fi rst specialized
methanol tanker, the KOHZAN
MARU, is launched.
2007
The World's largest iron ore
carrier, the BRASIL MARU,
is launched.
2009
Next-generation
vessel concept
Senpaku ISHIN
project
announced.
2014
MOL celebrated
its 130th
anniversary.
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6 Mitsui O.S.K. Lines
Feature: The Seascape
Big
opportunities come
with challenges.
There is a revolution underway that is changing global trade. The shale revolution
occurring in the United States is transforming the global geopolitics of energy and bringing
about a major shift in seaborne trade.
In the fl ows of product trade, the trend toward diversifi cation is ongoing. In some cases,
producing regions are moving closer to consuming regions. MOL not only must remain alert
to demand mo vements, but also sensitive to prevailing conditions in global shipyards,
which impact the supply-demand balance of vessels. This shifting business environment
will bring opportunities to those who can anticipate the changes and meet the new
challenges and risks to those who underestimate them.
The shale revolution will affect many aspects of sea-
borne trade. In natural gas, the United States will go
from being a net importer to a net exporter, which is
certain to rapidly boost demand for long-distance trans-
port of LNG. In crude oil, while the decline in U.S.
imports caused the crude oil tanker market to stagnate,
it also shifted West African light crude, once destined
for the U.S., to Asia, increasing ton-miles. LPG, a by-
product of shale gas, is exported to Asia, generating
great demand for marine shipping. With the advanta-
geous price of domestically produced crude oil, the U.S.
has already become a net exporter of petroleum prod-
ucts, and production is expected to return stateside in
the chemical industry, with forecasts of rising exports.
Nevertheless, as these forecasts could change due to
fl uctuations in energy prices and other factors, we must
diligently monitor the situation.
The trend continues toward optimizing manufactur-
ing by moving production to ideal sites worldwide. To
name just one instance, the diversifi cation of completed
vehicle cargo fl ows is necessitating changes to estab-
lished business models. Being able to anticipate these
changes and launch services ahead of demand will lead
to business opportunities.
Today, we face unprecedented opportunities to cap-
ture new fl ows of cargo, as well as the marine shipping
market risks linked with the ongoing glut of shipbuild-
ing capacity. Having seriously assessed both of these
factors, you may wonder how MOL plans to achieve
sustainable growth over the medium- to long-term. The
midterm management plan “STEER FOR 2020” charts a
clear course.
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Annual Report 2014 7
Shale gas provides the largest source of growth in U.S. natural gas supply
U.S. natural gas production by source
(trillion cubic feet)
40
History
2012
Projection
30
20
10
0
1990
Shale gas
Tight gas
Lower 48 onshore conventional
Lower 48 offshore
Coalbed
methane
Alaska
2000
2010
2020
2030
2040
Source: U.S. Energy Information Administration | Annual Energy Outlook 2014
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8 Mitsui O.S.K. Lines
Financial Highlights
For the year:
Shipping and other revenues
Shipping and other expenses
Selling, general and administrative expenses
Operating income (loss)
Ordinary income (loss)
Income (loss) before income taxes and minority interests
Net income (loss)
Free cash fl ows [(a) + (b)]
Cash fl ows from operating activities (a)
Cash fl ows from investing activities (b)
Tangible/intangible fi xed assets increased
At year-end:
Total assets
Net vessels, property and equipment
Interest-bearing debt
Net assets/Shareholders’ equity
Amounts per share of common stock:
Net income (loss)
Cash dividends applicable to the year
Management indicators:
Gearing ratio (%)
Net gearing ratio (%)
Equity ratio (%)
ROA (%) (*)
ROE (%)
Dividend payout ratio (%)
MOL next
MOL STEP
2004/3
2005/3
2006/3
2007/3
2008/3
¥997,260
¥1,173,332
¥1,366,725
¥1,568,435
¥1,945,697
1,101,459
1,300,038
1,544,109
824,902
80,232
92,126
90,556
89,776
55,391
114,945
114,591
354
50,548
917,149
84,388
171,795
174,979
155,057
98,261
80,230
92,273
172,993
176,502
188,290
113,732
8,838
100,324
168,073
182,488
197,854
120,940
20,369
156,418
110,303
291,285
302,219
318,202
190,321
23,291
283,359
167,897
163,914
(87,667)
111,905
(155,076)
(136,049)
(260,068)
177,226
153,876
303,573
1,000,206
1,232,252
1,470,824
1,639,940
1,900,551
477,621
491,693
221,535
665,320
514,131
298,258
769,902
571,429
424,461
847,660
1,047,825
569,417
620,989
601,174
751,652
¥46.14
11.00
¥81.99
16.00
¥94.98
18.00
¥101.20
¥159.14
20.00
31.00
222
202
22.1
5.4
28.7
23.8
173
157
24.2
8.8
37.8
19.5
135
120
28.9
8.4
31.5
19.0
104
94
33.6
7.8
24.8
19.8
88
79
35.8
10.8
30.9
19.5
Number of MOL Group employees:
(the parent company and consolidated subsidiaries)
7,033
7,385
8,351
8,621
9,626
(*)Net income (loss) /Average total assets at the beginning and the end of the fi scal year.
Please refer to the notes on P. 74, for “Presentation of net assets in the balance sheet.”
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Annual Report 2014 9
MOL ADVANCE
GEAR UP! MOL
RISE 2013
2009/3
2010/3
2011/3
2012/3
2013/3
2014/3
Millions of yen
¥1,865,802
¥1,347,965
¥1,543,661
¥1,435,221
¥1,509,194
¥1,729,452
1,564,486
1,228,479
1,328,960
1,368,795
1,432,014
1,587,902
90,886
92,946
100,458
104,105
197,211
204,511
197,732
126,988
(71,038)
118,984
98,547
20,939
24,235
27,776
12,722
(40,055)
91,300
123,401
121,622
95,367
58,277
46,970
(24,460)
(24,320)
(33,516)
(26,009)
(129,298)
(15,766)
(28,568)
(137,939)
(178,847)
(25,285)
93,428
181,755
5,014
78,956
41,092
54,986
71,710
57,394
(25,615)
94,256
(190,022)
(133,484)
(134,785)
(134,313)
(104,241)
(119,871)
223,208
204,190
220,443
175,726
164,890
186,149
1,807,080
1,861,312
1,868,741
1,946,162
2,164,611
2,364,695
1,106,746
1,209,176
1,257,823
1,293,803
1,303,967
1,379,245
702,617
695,022
775,114
735,702
724,259
740,247
869,619
1,046,865
1,094,081
717,909
619,493
783,549
STEER
FOR 2020
¥106.13
31.00
¥10.63
3.00
¥48.75
10.00
¥(21.76)
¥(149.57)
5.00
−
113
99
34.5
6.9
19.5
29.2
118
105
35.4
0.7
2.0
28.2
110
100
35.4
3.2
8.8
20.5
136
123
32.8
(1.4)
(4.0)
−
196
158
24.7
(8.7)
(30.5)
−
Yen
¥47.99
5.00
161
135
28.7
2.5
9.5
10.4
10,012
9,707
9,438
9,431
9,465
10,289
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10 Mitsui O.S.K. Lines
Key Indicators
Shipping and Other Revenues/
Ordinary Income (Loss)
Total Assets/Net Assets
(¥ billions)
400
2,500
300
2,000
200
1,500
100
1,000
0
500
Ordinary Income (Loss) by
Consolidated Segment
(¥ billions)
1,000
800
600
400
200
240
180
120
60
0
(¥ billions)
2,000
1,500
1,000
500
0
–500
09/3
10/3
11/3 12/3 13/3 14/3
–100
0
09/3
10/3
11/3 12/3 13/3 14/3
0
-60
09/3
10/3
11/3 12/3 13/3 14/3
(cid:2) Shipping and other revenues (left scale)
(cid:2) Ordinary income (loss) (right scale)
(cid:2) Total assets (left scale)
(cid:2) Net assets (right scale)
(cid:2) Bulkships (cid:2) Other segments, etc.
(cid:2) Containerships
FY2013
Shipping and Other Revenues ¥1,729.4 billion
FY2013
¥54.9 billion
Ordinary Income
FY2013
Total Assets
FY2013
Net Assets
¥2,364.6 billion
¥783.5 billion
FY2013
Bulkships
FY2013
Containerships
FY2013
Other segments, etc.
¥57.1 billion
¥(14.5) billion
¥12.4 billion
Revenues increased ¥220.2 billion year on year and
ordinary income achieved a ¥83.5 billion turnaround.
This result refl ected a strengthening of fl eet cost com-
petitiveness through the Business Structural Reforms
and cost reductions that rose to an entirely different
stage. Other positive effects included the weaker yen
and the lower bunker prices.
Total assets as of March 31, 2014 were ¥200.0 billion
higher than at March 31, 2013 due to increases in
vessels and construction in progress attributable to
investment for fl eet enhancement and increases in
investment securities. Net assets increased ¥164.0 bil-
lion year on year due mainly to increases in retained
earnings and unrealized gains on hedging derivatives.
Bulkships improved signifi cantly year on year and
returned to profi tability mainly through the Business
Structural Reforms in the dry bulker segment.
Containerships, meanwhile, posted a larger ordinary
loss than fi scal 2012 as freight rates fell due to the
worsened vessel supply-demand balance accompany-
ing deliveries of large ships.
Cash Flows
(¥ billions)
ROA/ROE
(%)
Net Income (Loss) per Share/Cash
Dividends Applicable to the Year
(¥)
150
100
50
0
–50
–100
–150
09/3
11/3 12/3 13/3 14/3
10/3
(cid:2) Net income (Loss) per share
(cid:2) Cash dividends applicable to the year
200
150
100
50
0
–50
–100
–150
–200
09/3
10/3
11/3 12/3 13/3 14/3
(cid:2) Cash fl ows from operating activities
(cid:2) Cash fl ows from investing activities
Free cash fl ows
FY2013
Net Income per Share
FY2013
Cash Dividends Applicable to the
Year
¥47.99
¥5
FY2013
Cash Flows from Operating
Activities
FY2013
Cash Flows from Investing
Activities
¥94.2 billion
¥(119.8) billion
20
10
0
–10
–20
–30
–40
09/3
10/3
11/3 12/3 13/3 14/3
ROA
ROE
FY2013
ROA
FY2013
ROE
2.5%
9.5%
MOL’s ¥236.2 billion turnaround in net income con-
trasted sharply with the prior year loss when costs
were incurred for Business Structural Reforms. MOL
resumed dividends and paid ¥5 per share for the fi s-
cal year, including a ¥2 interim dividend.
Operating activities provided net cash of ¥94.2 billion,
up ¥15.2 billion year on year. Investing activities used
net cash of ¥119.8 billion, ¥15.6 billion more than a
year prior. For the third straight year, this resulted in
negative free cash fl ows.
ROA and ROE both improved signifi cantly because of
the year-on-year ¥236.2 billion turnaround in net
income.
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Annual Report 2014 11
Interest-bearing Debt/
Shareholders’ Equity
(¥ billions)
1,200
1,000
800
600
400
200
0
09/3
10/3
11/3 12/3 13/3 14/3
Gearing Ratio/Equity Ratio
Cost Reductions
(%)
200
150
100
50
0
09/3
10/3
11/3 12/3 13/3 14/3
(¥ billions)
40
30
20
10
0
40
30
20
10
0
Target
Result
(cid:2) Interest-bearing debt
(cid:2) Shareholders’ equity
Gearing ratio (left scale)
Equity ratio (right scale)
(cid:2) Target
(cid:2) Result
FY2013
Interest-bearing Debt
FY2013
Shareholders’ Equity
¥1,094.0 billion
¥679.1 billion
FY2013
Gearing Ratio
FY2013
Equity Ratio
* “Shareholders’ equity” in this section comprises the total of
owners’ equity and accumulated other comprehensive income (loss).
161%
28.7%
FY2013
Target
FY2013
Result
¥31.5 billion
¥34.0 billion
Interest-bearing debt increased ¥47.2 billion to
¥1,094.0 billion, as the Company procured funds by
bank loans to cover negative free cash fl ows.
The gearing ratio improved 35 points and the equity
ratio improved 4 points, refl ecting the ¥143.7 billion
increase in shareholders’ equity, the ¥47.2 billion rise
in interest-bearing debt, and the ¥200.0 billion
increase in total assets.
In fi scal 2013, MOL achieved total cost reductions of
¥34.0 billion, exceeding its ¥31.5 billion target. This
was accomplished by reducing bunker expenses
through slow steaming, improving vessel allocation
effi ciency and taking other actions.
Highly Stable Profi ts
Credit Ratings (As of July 2014)
Capital Expenditure
(¥ billions)
Type of Rating
Rating
(¥ billions)
80
60
40
20
0
Short-term debt
rating (CP)
JCR
Long-term preferred
debt (issuer) rating
Long-term debt
rating
Issuer rating
R&I
Short-term debt
rating (CP)
11/3
12/3
13/3
14/3
Long-term individual
debt rating
J-1
A
A
A–
a-1
A–
250
200
150
100
50
0
09/3
10/3
11/3 12/3 13/3 14/3
FY2013
Highly Stable Profi ts
¥50.0 billion
Moody’s
Issuer rating
Baa3
JCR
R&I
Moody’s
A
A-
Baa3
FY2013
Capital Expenditure
¥169.0 billion
Highly stable profi ts are fi rm profi ts based on medi-
um- to long-term contracts, and profi ts from highly
stable businesses. MOL generated highly stable profi ts
of ¥50.0 billion in fi scal 2013.
MOL exchanged information more closely with the
credit rating agencies and explained that capital
investments were expected to increase, but would be
limited to investments that would generate future sta-
ble profi ts. The credit rating agencies were, to an
extent, able to understand this explanation and main-
tained our current level of credit ratings.
Capital expenditure represented here is the net
amount calculated by deducting proceeds from the
sale of vessels when delivered from “Tangible/intangi-
ble fi xed assets increased” contained in the annual
securities report.
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12 Mitsui O.S.K. Lines
To Our Shareholders
Koichi Muto
President
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Annual Report 2014 13
The future harbors both uncertainty and opportunities for
growth. To ensure a rewarding future for MOL, the key will
be successfully picking up on early indicators of change and
making swift adjustments to fi ne tune our heading.
International marine shipping demand is consistently grow-
ing in step with the global economy. But the speed of that
growth and the type, trade and volume of cargo is highly
sensitive to current economic developments in many coun-
tries, changing trade structures and political events.
Looking back at the past decade or so, I can see we
fi rmly grasped early indicators during the fi rst half and took
decisive action. Amidst rapid emerging market growth, this
allowed us to expand the scale of our business to an
unprecedented level. But we also accumulated signifi cant
market exposure risks during the boom market, and during
the latter half this oversight became a huge burden on
business performance.
I assumed the role of president in June 2010. Business per-
formance was favorable in fi scal 2010, but then, during fi s-
cal 2011 and 2012, a fl ood of negative factors appeared at
once. These included the European fi nancial crisis, natural
disasters, an overvalued yen, and surging bunker prices.
Above all, however, MOL’s market-linked profi ts worsened
due to the oversupply caused by large-scale deliveries of
new vessels. It obliterated MOL’s stable profi ts from medi-
um- to long-term contracts, resulting in two consecutive
losses. We decided to forgo paying dividends in fi scal 2012,
betraying our shareholders’ expectations.
This is why MOL decided it was necessary to implement
fundamental reforms enabling robust performance that
didn’t rely on a turnaround in the external environment. In
the fourth quarter of fi scal 2012, we carried out Business
Structural Reforms, striving to improve market-linked prof-
its, especially in dry bulkers. Then, we poured our energy
into successfully carrying out the single-year management
plan “RISE2013”, with the aim of ensuring a return to prof-
itability and regaining a growth trajectory. To you, our val-
ued shareholders, I would like to announce that we have
secured ordinary income of ¥54.9 billion and net income of
¥57.3 billion, and have resumed dividend payments of ¥5
per share.
Since assuming offi ce and based on past experience, I have
endeavored to strengthen business intelligence. We gather
wide-ranging data from all possible sources, including cus-
tomers and research institutes, and share this data through-
out the organization. We then work to comprehend the
complete picture and form a sound assessment from a
broad perspective to pinpoint promising markets, risks and
early indicators of change in the business environment.
In fi scal 2014, we are moving forward. We have already
begun implementing “STEER FOR 2020,” which was for-
mulated based on the aggregate business intelligence of
each MOL Group director and employee. Of course there is
no such thing as data that’s 100% reliable or opportunity
devoid of risk. It is, however, 100% crucial that, after very
carefully examining the very best data available, we make
decisions, enact necessary measures and take swift action.
Doing this, will enable MOL to overcome intense competi-
tion and raise corporate value while fulfi lling a MOL Group
Principle. “As a multi-modal transport group, we will
actively seize opportunities that contribute to global eco-
nomic growth and development by meeting and respond-
ing to our customers’ needs and to this new era.”
For the midterm management plan “STEER FOR 2020,” we
have issued a rudder command. Our course stands in direct
contrast to a business model that relies on rising markets to
lift marine shipping. Instead it is set toward long-term, sta-
ble profi t growth as we endeavor to capture new opportu-
nities in cargo fl ows, meet customers’ needs and maintain
their trust, and differentiate ourselves through safe opera-
tions and technical capabilities. As we selectively concen-
trate the investment of management resources, we will
build up a sound fi nancial foundation by 2020. Upon this
stable foundation, we will confi dently be able to continue
readjusting our heading, or even issue a new rudder
command, toward growth spurred by evolving strategies
ten years down the line from 2020. Our new heading will
be discussed and decided in tandem with the execution of
the current plan and steadfastly based on robust business
intelligence.
MOL will strive to ensure sustainable growth and improve
long-term corporate value while meeting growing seaborne
shipping demand. We would like to ask for the continued
understanding and support of shareholders as we work to
achieve these goals.
June 24, 2014
Koichi Muto
President
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14 Mitsui O.S.K. Lines
New Midterm Management Plan
Main theme: Solid growth through innovative changes
Overall Strategies
Three Innovations
Innovation of
Business Portfolio
Innovation of
Business Model
Innovation of
Business Domain
Allocate management
resources earlier and
signifi cantly to businesses
where we expect high growth
and stable long-term profi ts
Transform our fl eet for higher
market tolerability and more
competitiveness
Focus on businesses that offer
added values and meet
customer needs
Create value chains by
expanding business domain
to both upstream and
downstream of ocean
shipping transport
The foundation to support achievement of our goals
(cid:129) Reinforce compliance
(cid:129) Reconstruct our safe operation structure
(cid:129) Strengthen total risk control
(cid:129) Concentrate business intelligence
Investments (from FY2014 to FY2019)
(cid:2) For Building up Highly Stable Profi ts
(cid:2) For Enhancing Cost Competitiveness
Additional
target
500
Others
160
Ordered
500
LNG Carrier
300
Offshore
business
120
Total
1,000
(Billions of yen)
LNG Carrier
220
Offshore
business
60
Others
140
Ordered
200
Total
130
(Billions of yen)
Additional
target
500
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Annual Report 2014 15
Profi t Targets/Financial Targets (Billions of yen)
Revenue
Ordinary income
(Highly stable profi ts)
Net income
ROA *1
ROE *2
FY2013
(Result)
1,729.4
54.9
(50)
57.3
2.4%
9.5%
FY2014
(Forecast)*
1,800
70
(50)
60
3%
8%
Y2016
(Plan)
1,900
100
(55)
80
FY2019
(Target)
2,100
140
(75)
110
4-5%
above 10%
*1) ROA =Ordinary income/ Average total assets at the beginning and the end of the fi scal year
*2) ROE =Net income/ Average shareholders’ equity at the beginning and the end of the fi scal year
Equity ratio *3
Net gearing ratio *4
29%
135%
29%
141%
(around FY2019)
(around FY2019)
35-40%
100%
*3) Equity ratio = Shareholders’ equity / Total assets
*4) Net gearing ratio =(Interest bearing debt-cash and cash equivalents)/ Shareholders’ equity
Exchange rate JPY/US$
Bunker price US$/MT
Market level
99.79
610
100
620
100
620
100
620
Assuming not so much improvements in and after FY2014
Revenue, Ordinary Income, Net Income (consolidated) (Billions of yen)
160
140
120
100
80
60
40
20
0
100
12
30
58
13
2
55
54.9
70
12.4
57.1
-14.5
140
20
40
80
(cid:2) Others**
(cid:2) Container ships
(cid:2) Bulkships
Others**=Ferry& domestic transport, Associated businesses, Others and Adjustment
FY2014
(Forecast)*
FY2013
(Result)
-20
FY2016
(Plan)
FY2019
(Target)
Fleet Scale
Bulkships
Dry bulkers
Tankers
LNG carriers
FPSO/FSRU
Car carriers
Containerships
Others
Total
March 31, 2014
(Result)
March 31, 2015
(Forecast)*
March 31, 2017
(Plan)
March 31, 2020
(Target)
776
403
180
67
1
125
119
43
938
743
390
167
67
2
117
108
43
894
730
365
160
75
10
120
105
45
880
780
365
160
120
15
120
105
45
930
*As of April 30, 2014
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16 Mitsui O.S.K. Lines
Message from the President
Question 1:
How would you evaluate
the results of the fi scal 2013
management-plan
“RISE2013 ”?
1
Achieving Profi t Recovery and Returning
to a Growth Trajectory
It was a good year, exceptional in many respects.
RISE2013 was itself an exception, with a timeframe
of just one year. We typically launch midterm man-
agement plans with a horizon of three years, but
this single-year management plan was designed
with a very immediate purpose. In both fi scal 2011
and fi scal 2012, MOL posted losses. RISE2013 was
designed to bring the Group back to profi tability in
fi scal 2013, placing us on solid footing for future
growth. We carried out Business Structural
Reforms in fi scal 2012 and other measures that we
expected would help to regain profi tability on an
accounting basis. On top of that we aimed to build
up cash fl ow and achieve a V-shape recovery in
profi t, thereby strengthening our fi nancial position
and returning the Group to a growth trajectory.
On the whole, I believe we achieved our tar-
gets. Ordinary income of ¥54.9 billion fell short of
our ¥60.0 billion mark, but net income surpassed
our ¥50.0 billion target, reaching ¥57.3 billion. We
also exceeded our targets for the equity ratio,
which improved to 29% (we had targeted 26%),
and net gearing ratio improved to 135% (we had
targeted 154%).
Looking closer, bulkships were on a clear
upswing, but containerships went the other way,
ending the year in a loss. We were helped by a
better than expected correction in the overvalued
yen and lower bunker prices. On the other hand,
through the outlined initiatives to transform our
business model, we achieved more effi cient
deployment of ships in dry bulkers, tankers and car
carriers. Benefi tting from the intensity of focus
brought by the single year time frame, we were
able to reduce costs on an entirely different stage,
achieving ¥34.0 billion in reductions, surpassing
our target of ¥31.5 billion. Without these initia-
tives, we would not have been able to improve
cash fl ows and reverse fi scal 2012’s ordinary loss of
¥28.5 billion with ordinary income of ¥54.9 billion
in fi scal 2013. More than that, by also attaining a
higher level of business intelligence aimed at in
RISE2013, the path for the next midterm manage-
ment plan is now visible. Not only did we fi nd our
footing, we were able to build a springboard for
MOL’s future.
(¥ billions)
Revenue
Ordinary income/loss
Bulkships
Containerships
Others*
Net income/loss
Shareholders’ equity
Equity ratio
Net gearing ratio
Cost reduction
FY2012 (Result)
1,509.1
-28.5
-24.7
-11.2
7.5
-178.8
535.4
25%
158%
29.0
Plan
1,700.0
60.0
40.0
10.0
10.0
50.0
590.0
26%
154%
31.5
FY2013
Result
1,729.4
54.9
57.1
-14.5
12.4
57.3
679.1
29%
135%
34.0
Others*=Ferry & domestic transport, Associated
businesses, Others and Adjustment
Business Structural Reforms
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Annual Report 2014 17
Solid Accomplishments in Bulkships
Containerships and Unfi nished Business
The segment that fell short of forecasts was con-
tainerships. The original target called for ordinary
income of ¥10.0 billion yen, but the fi scal year
ended in a loss of ¥14.5 billion. One after the
other, very large vessels were delivered, pushing
smaller vessels out of some routes and causing
them to cascade to other routes. Despite broad
efforts from shipping companies to facilitate recov-
ery, this in turn destabilized freight rates, causing
average rates to fall signifi cantly year on year. In
effect, this erased all of the gains from cost cut-
ting, the weaker yen and lower bunker prices. And
with the dockworker strike in Hong Kong and the
incident involving the containership in the Indian
Ocean, segment loss worsened ¥3.2 billion from
the previous fi scal year.
The other segments performed well. With the
Japanese economy recovering, the ferry & domes-
tic transport segment increased profi ts beyond
plans and the associated business segment secured
stable profi ts, especially in real estate.
MOL secured ¥50.0 billion in stable earnings in
fi scal 2013, virtually unchanged from the previous
fi scal year. What differed considerably, however,
was that other earnings than stable profi ts did not
deteriorate into a loss and offset stable profi ts. This
clearly shows the success of the Business Structural
Reforms and the initiatives of RISE2013
Despite the overall success of RISE2013, there
remains some unfi nished business. More than any-
thing, we need to return containerships to profi t-
ability. For some reasons including stagnant freight
rates on North-South routes, where we have a pres-
ence, our business performance lags other compa-
nies we benchmark. We need to evaluate the
business environment and bolster measures to
recover profi tability.
We also need to remain sensitive to market
developments. As the market improved for dry
bulkers and tankers, speculative orders were again
made for some vessel types in the latter half of fi s-
cal 2013, which is worrying.
The new midterm management plan “STEER
FOR 2020” was formulated in parallel with the
execution of RISE2013 in light of the accomplish-
ments and unfi nished business of the one-year
plan.
It helps to look at the details by segment and busi-
ness division.
The dry bulker division, which posted a large
loss in fi scal 2012, was really the key to improving
business performance in fi scal 2013. As a pillar of
the Business Structural Reforms implemented in
the fourth quarter of fi scal 2012, we transferred
sales and operations of free vessels to our subsid-
iaries in Singapore. Although this led to large
extraordinary losses, we made our fl eet more cost-
competitive in fi scal 2013. We also gained advan-
tageous cargo contracts in Singapore, a hub for
both customers and information, and achieved
effi cient deployment of vessels. Delivery of new
vessels has come off its peak and the market has
pulled out of its slump. This helped vastly improve
earnings and, coupled with stable profi ts from
long-term contracts, we were able to rebuild a
structure that contributes solid profi t to MOL’s
business performance.
Although the tanker division regrettably did not
turn a profi t, it was able to greatly reduce its loss
and is, I believe, poised to turn a profi t in the next
fi scal year. In crude oil tankers, we reduced losses
by shrinking free tonnage and we wrote off some
of our ships at the end of the fi scal year. After
transferring sales and operations to Singapore,
chemical tankers, which were able to secure profi t-
able cargo and effi ciently deploy vessels, and LPG
tankers, which were supported by favorable mar-
ket conditions, both turned a profi t.
The LNG carrier and offshore businesses division
secured stable profi ts on par with the previous fi s-
cal year thanks to long-term contracts, while accu-
mulating new contracts for future growth thanks
to tenacious activities to win orders. A particularly
notable milestone was MOL’s success in Uruguay,
where we became the fi rst Japanese shipping com-
pany to participate in an FSRU project anywhere in
the world. This defi nitely showcased MOL’s under-
lying strength.
Despite declining exports of automobiles from
Japan, the car carrier division increased profi ts by
effi ciently taking on inbound voyages and cross
trades outside of Japan.
Assembling the results of these four divisions,
Bulkships churned out ¥57.1 billion in ordinary
income. This was a sharp turnaround of ¥81.9 bil-
lion yen, from the ¥24.7 billion loss in the previous
fi scal year. It also surpassed the RISE2013 plan of
¥40.0 billion in ordinary income by ¥17.1 billion.
With the dry bulker market pulling out of the
slump as expected, this was a really solid year.
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18 Mitsui O.S.K. Lines
Question 2:
2What kind of strategy does the
midterm management plan’s title,
“STEER FOR 2020,” represent
for Mitsui O.S.K. Lines ?
Making a Sharp Turn toward 2020—
Solid Growth through Innovative
Changes
The word steer refers to adjusting the rudder of a
boat to change direction toward the desired route.
How do we plan to adjust the rudder and direct
the ship? Hard to starboard. We named this mid-
term management plan “STEER FOR 2020” to
refl ect the major shift in direction we take toward
the fi scal year ended March 31, 2020.
To formulate the new plan, we fi rst thoroughly
analyzed the business environment.
Marine shipping demand is expected to at least
keep pace with the world economy, which accord-
ing to the IMF is poised to grow by about 4%. It is
supply, however, that will be the primary issue.
Shipbuilding facilities far surpass the scale needed
in the world today. And, as mentioned earlier, we
saw speculative orders in the latter half of fi scal
2013. We will likely need to wait a while longer
before we witness a structural turnaround in the
supply and demand environment.
We therefore formulated the midterm manage-
ment plan with the assumption that freight rates
Building up Highly Stable Profi ts
(¥ billions)
75
80
60
40
20
0
50
55
FY2013
(Result)
FY2016
(Plan)
FY2019
(Target)
would not rise. This stands in stark contrast to a
plan where companies bet on a future bull market
in marine shipping and order ships in anticipation.
We then thought about how to expand profi ts
under those conditions. Naturally, the answer was
to focus on building up stable profi ts.
When we looked at it that way and went on to
analyze the business environment, we realized the
shale revolution was delivering a one-in-a-million
business opportunities with the rapid expansion of
long-distance shipping demand for LNG.
Accompanying this, demand for FSRUs will natu-
rally grow as will demand for other offshore busi-
nesses, particularly for offshore energy-related
facilities. These are areas where MOL can leverage
its global presence and know-how gained from
being the world’s largest energy shipping company
while generating stable profi ts from long-term
contracts.
One must concentrate business where there is
opportunity. Staff, funds and other management
resources are, however, not infi nite. We formulat-
ed plans to optimally allocate limited resources to
maximize return on investment. As a result, we
have a plan with clear directives to selectively
concentrate our investment in businesses that
generate long-term stable profi ts, centered
especially on LNG carriers and offshore businesses.
This is one of the reasons “STEER FOR 2020” is
so named. We are adjusting the rudder with new
confi dence as we navigate toward stable profi ts.
The name also embodies the main theme of the
midterm management plan—solid growth through
innovative changes. Through the successful enact-
ment of this strategy, we forecast stable profi ts will
increase from ¥50.0 billion in fi scal 2013 to ¥75.0
billion in fi scal 2019.
Innovation of Business Portfolio
The fi rst overall strategy outlined in “STEER FOR
2020” is business portfolio innovation, which
Highly Stable Profi ts
(cid:129) Profi ts that are fi xed, or expected to be
fi xed during this midterm management
plan, from contracts of two years or more.
(cid:129) Projected profi ts from highly stable
businesses
(The segments and divisions included in
“Highly Stable Profi ts” are Dry bulker,
Tanker, LNG carrier, Offshore business,
Associated business and Others)
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Annual Report 2014 19
of vessels. Innovation of business portfolio is not
simply limited to capital investment, it also
naturally extends to the optimal distribution of
human resources.
LNG carriers and offshore businesses also
require highly specialized knowledge, and the
demands are likely to grow in the future. We are
aiming to earn the trust of customers through our
unifi ed manufacturing and sales operations, with
the sales division and the technical/marine safety/
ship management divisions united as a team.
Innovation of Business Domain
Investing in offshore businesses is also a critical link
in the third overall strategy, Innovation of Business
Domain. Although MOL has horizontally expanded
the presence of its marine shipping business across
the globe, the Company is now also looking to
expand its business domains vertically to capture
both upstream and downstream marine shipping
businesses.
In this direction, we have already started work
outside the offshore businesses by strengthening
the container terminal business. In fi scal 2013, we
built alliances with a prominent partner, establish-
ing a base for future business expansion.
The vessel operation and management technol-
ogies MOL has accumulated will support
Innovation in Business Domains, but we will also
actively assemble newly needed management
resources from outside the Company with the aim
of expanding businesses that will be the future pil-
lars of the MOL Group and contribute to stable
profi t growth.
refers to the swift, strong allocation of manage-
ment resources in fi elds likely to ensure signifi cant
growth and long-term stable profi ts, particularly in
LNG carriers and offshore businesses.
This capital investment will only be carried out if
a long-term contract is signed and subsequent
future cash fl ow is ensured. Under this premise, if
we are able to realize the full increase in fl eet size,
total capital expenditure between fi scal 2014 and
2019 for LNG carriers and offshore businesses
would reach ¥700.0 billion. We expect the profi le
of LNG carriers and offshore businesses to rise
considerably in the MOL Group; nearly tripling to
account for 26% of assets at the end of fi scal
2019, up from 9% at the end of September 2013.
This would be an unprecedented portfolio trans-
formation.
Securing top-notch seafarers is key to success-
fully implementing these strategies. Safely operat-
ing LNG carriers requires a high degree of
knowledge and experience. MOL has training facil-
ities and hiring desks in Croatia, Russia, India, the
Philippines and other major recruitment centers.
We’ve also cultivated Indonesian captains through
our existing LNG carrier projects. As we expand the
scope of our recruitment in many countries, we
fi rst deploy new recruits to MOL LNG carriers for
training in preparation of new ships being deliv-
ered or beginning operations.
Some companies operating LNG carriers are
restricting investment due to bottlenecks in
recruiting seafarers. However, when exceptional
demand is anticipated, MOL believes it preferable
to prepare in advance after carefully analyzing cost
performance. We are also able to transfer
experienced seafarers from tankers and other types
Innovation in Asset Portfolio by Segment
9%
31%
September 30,
2013
43%
17%
25%
26%
March 31,
2020
12%
37%
(cid:2) LNG carriers &
Offshore business
(cid:2) Dry bulkers & Tankers &
Car carriers
(cid:2) Containerships
(cid:2) Group businesses
* Group businesses =Ferry &
domestic transport, Associated
businesses and Others
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20 Mitsui O.S.K. Lines
How does MOL aim for
sustainable profi t growth ?
3Question 3:
Innovation of Business Model
In the last answer, I explained that under “STEER
FOR 2020,” we will concentrate capital investment
on businesses that generate long-term stable prof-
its. However, no matter how much stable profi t is
accumulated, we cannot achieve solid growth
unless we also have a strategy for businesses that
face changing markets every day.
The answer to this is our second overall strate-
gy, Innovation of Business Model. While we initiat-
ed this strategy under RISE2013, we will further
strengthen it under “STEER FOR 2020,” with the
aim of constructing a structure that can mitigate
the impact of market volatility and provide robust
profi ts regardless of market conditions.
First, we will raise our resilience to market vola-
tility by increasing the ratio of medium- to long-
term contracts with customers and increasing the
ratio of short-term charted ships, especially in dry
bulkers and tankers. Although we focused our
efforts on reducing the number of free vessels
linked to short-term contracts with customers
under RISE2013, it is the ships with a gap between
contract terms and procurement periods that are
actually affected by market volatility. We call this
market exposure risk under “STEER FOR 2020”
and by targeting a lower ratio, we aim to create a
fl eet of appropriate scale that also boasts greater
market tolerability.
Second, to fi rmly reap profi ts with this kind of
fl eet composition, it is crucial that we optimally
combine trades to reduce ballast voyages as much
as possible and focus efforts on transport areas
where we can provide added value in response to
customer needs. In dry bulkers and tankers, we will
accomplish this by leveraging the business bases
developed in Singapore and other optimal loca-
tions around the world, as well as our diverse ves-
sel types and shipping know-how. Our aim is
“market plus alpha profi ts.” Although the fl eet
composition is different for car carriers, which face
changing trade patterns as automakers relocate
manufacturing nearer end markets, the same strat-
egy will be effective.
Third is strengthening our cost competitiveness. We
will implement measures that effectively cut costs by
¥70.0 billion over three years from fi scal 2014, with
roughly half the savings generated by containerships.
Turning a Profi t
in the Containership Business
Improving profi tability in the containership busi-
ness will be indispensible to achieving the profi t
targets of “STEER FOR 2020.”
MOL plans to accomplish this by strengthening
cost competitiveness, especially by lowering the unit
cost associated with launching large vessels. Even
while containership companies continued to order
ultra-large vessels, MOL strategically delayed follow-
ing suit. This was because we believed that the fi rst
generation of ultra-large vessels would not be par-
ticularly fuel effi cient. Although some companies
that added new vessels appeared to see improved
earnings to some extent, by waiting to place orders
for new vessels, MOL has been able to add more
fuel-effi cient vessels to its fl eet at lower prices given
prevailing conditions in the shipbuilding market.
Deliveries of fi ve 14,000 TEU ships began in fi scal
2013 and were completed in April 2014. Between
fi scal 2014 and 2016, we will receive deliveries of
Downsize Market Exposure (Dry bulker and Tanker)
0
20
40
60
80
(%)
100
Fiscal 2013 (Results)
Fiscal 2016 (Plan)
Fiscal 2019 (Target)
52%
45%
35%
(cid:2) Owned or mid-and long-term chartered vessels with mid-and long-term contracts
(cid:2) Owned or mid-and long-term chartered vessels with short-term contracts (=Market exposure)
(cid:2) Short-term chartered vessels with short-term contracts
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Annual Report 2014 21
Scenario for Earnings Recovery in Containership Business
(¥ billions)
60
40
20
0
-20
Reduction of
unit costs (*1)
8
Improvement in
profitability (*2)
30
Fiscal 2013
(Results)
-14.5
Increase in profits from
Terminal / Logistics
businesses
Others
9
-2.5
30
Increase in profits from
Terminal / Logistics
businesses
Others
Reduction of
unit costs (*1)
8
2
Improvement
in profitability (*2)
4.5
-4.5
40
Fiscal 2016
(Plan)
Fiscal 2019
(Target)
(*1) Effects from replacement of vessels, expansion of alliance, reduction of fuel cost and so on
(*2) Higher utilization, increase in revenue of non-ocean freight
ten 10,000 TEU ships in series. The new vessels will
reduce operational expenses per unit, as will
expanding collaboration through the G6 Alliance
and reduced fuel consumption, due mainly to fuller
implementation of slow steaming. All in all, we
expect unit cost savings will reach ¥30.0 billion over
three years. We will procure these large vessels
through charters.
Reductions in unit cost are quantifi able measures
with visible effects. Regardless of how strenuously
costs are reduced, however, there will be little
improvement in earnings if most of the savings are
lost to falling freight rates. Since large vessel deliver-
ies will continue over the following two to three
years, we have already incorporated gradually fall-
ing freight rates into our plans. We believe, howev-
er, the risk of freight rates falling much further is
small. In fi scal 2013, most companies posted losses
and a few found themselves in fi nancially dire
straits. These companies cannot bear larger declines
in freight rates and will likely eschew further orders
of large vessels. In addition to the limited number of
players, the alliances on the East-West routes are
increasingly integrating. Previously each individual
player thought it logical to order large vessels, but
this unintentionally worsened the overall supply and
demand balance, bringing about a fallacy of com-
position. The increasingly integrating alliances, how-
ever, make this kind of large volume ordering
unlikely to occur again.
Reducing unit cost is dependent upon securing
cargo in line with the increasingly larger vessels.
Fortunately, everything went as planned for ship-
ping contracts renewed in fi scal 2014, especially
with the major customers we have been doing
business with for many years. I believe this is the
payoff of MOL’s intensely focused efforts to differ-
entiate ourselves in this competitive industry.
In the North-South routes, which stifl ed our
attempts to improve containership earnings rela-
tive to our competitors, I want to lay out key mea-
sures now that we have reorganized the West
Africa route. Naturally, we will also consider pulling
out from routes that are not forecast to improve.
Complementing improved earnings in route
operations, our calculations show increased earn-
ings in the container terminal business, especially
our U.S. west coast terminal, where construction
to boost automation recently concluded. With the
increased earnings in the logistics business, the
containership segment on the whole should turn a
profi t in fi scal 2014 and achieve ordinary income
of ¥30.0 billion in fi scal 2016. I will provide close
supervision while carefully monitoring the progress
of each initiative.
Sustainable, Consistent Profi t Growth
By successfully executing the overall strategies
explained in my answers to Question 2 and 3, MOL
plans to post ¥100.0 billion in ordinary income and
¥80.0 billion yen in net income in fi scal 2016.
Looking three years further down the line, MOL
aims to post ordinary income of ¥140.0 billion and
net income of ¥110.0 billion in fi scal 2019.
Although we will be building up long-term con-
tracts over the next three years in LNG carriers and
offshore businesses, actual contributions to profi ts
will mostly happen after fi scal 2016 following the
delivery of new ships. Therefore, we will focus on
lifting profi t levels through fi scal 2016 by increas-
ing profi ts in divisions that are already rebounding,
including dry bulkers and chemical tankers, as well
as fully implementing plans to strengthen cost
competitiveness, especially in containerships.
Achieving reinforcement of market tolerability at
the same time, we will bridge now to the period
after fi scal 2016, when stable profi ts start to
build up in full swing. In this way we will seek sus-
tainable and consistent growth of profi ts.
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22 Mitsui O.S.K. Lines
improve shareholder value ?
Question 4:
4How does MOL plan to
Improving Shareholder Value through
Active Investment in Long-Term Stable
Profi ts
Under “STEER FOR 2020,” we plan to invest a
total of ¥1,130 billion in our vessels and business-
es: ¥1,000 billion for stable profi t growth and
¥130 billion mainly for strengthening cost compet-
itiveness. Considering such factors as the timing of
payments and the sale of assets, that would mean
net cash used in investing activities between fi scal
2014 and 2019 would approximate ¥600 billion in
the fi rst three years and ¥400 billion in the latter
three years. On the other hand, net cash provided
by operating activities will increase over time due
in part to stable profi t growth. Cash fl ows for the
fi rst three years will be negative, then turn positive
over the latter three years, more than making up
for the previous shortfall.
MOL’s policy on shareholder returns is to maintain
a dividend payout ratio of 20% and raise this to
around 30% as our fi nancial standing improves over
the medium- to long-term. By fi rst carrying out
investment, MOL expects to achieve its fi nancial tar-
gets, equity ratio of 35% to 40% and net gearing
ratio of 100%, no earlier than around fi scal 2019.
However, based on our long-term planning for the
next 10 to 20 years, we have determined that now is
the best time to actively invest in sources of stable
profi ts. Sound fi nancial standing is also important for
securing long-term contracts. Prioritizing capital
investment for stable profi t growth and improvement
in fi nancial standing will, I believe, lead to improved
shareholder value over the medium- to long-term.
This is the time frame, and I would like to ask for the
understanding of our shareholders. We do not envis-
age restoring shareholders’ equity by increasing capi-
tal and, as for equity fi nancing as a whole, the
Company remains extremely cautious in view of its
negative impact on our current shareholders.
When we make an investment, we will pay
careful attention to ensure the return on invest-
ment.
As for LNG carriers and offshore businesses, the
barriers to entry are high and there are relatively
few competitors. Because entering into long-term
contracts spanning 20 to 30 years also presents
risks to customers, it is diffi cult for shipping com-
panies that do not have comprehensive credibility,
including a track record of safe operations and
fi nancial soundness, to enter this business. I believe
it is therefore certainly possible for MOL to achieve
its target number of vessels by securing projects
that exceed its internal hurdle rate of ROI and
other indicators. ROI levels of course are not like
free vessels during surging markets, but I would
like to once again emphasize that in contrast with
free vessels, LNG carriers will provide long-term
stable income for 20 or more years. What is more,
because our policy is generally to cover 80% of the
total investment from loans and fi nancial institu-
tions are willing to fi nance this substantial portion,
return on equity is further enhanced. Over time
profi ts will increase gradually as loans are paid
back and so the interest burden lightens. Our plan
is to increase stable profi ts by ¥25.0 billion from
fi scal 2013 to fi scal 2019, but this is only the
beginning. The contribution to profi ts from the
long-term contracts secured during this period will
continue to grow in fi scal 2020 and beyond.
Through this accumulation of stable profi ts and
strengthening of cost competitiveness, ROA will be
steadily lifted to between 4% and 5% during
“STEER FOR 2020,” and ROE should reach 10%
early on in the plan and we would like to maintain
it at or above that level.
Strengthening the Management
Foundation for Sustainable Growth
In “STEER FOR 2020,” we will also work hard to
reinforce our management foundation. In this way,
we can avoid risks that absolutely must not be
taken and exploit opportunities where proper eval-
uation shows the risk to be reasonable. This will
support MOL’s sustainable growth and the success-
ful execution of the plans outlined in “STEER FOR
2020.”
First, we will reinforce compliance. Compliance is
essential to continuing as a going concern. Despite
our 130 years of history, illegal behavior could
instantly jeopardize our very existence. It must be
stamped out and I deeply regret the conduct con-
nected with automobile transport that the Japan
Fair Trade Commission found violated the
Antimonopoly Act. I offer my sincerest apologies to
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Annual Report 2014 23
customers and society for this. We have already
launched a new committee, which I chair, and we
will do our very best to reinforce systems and mea-
sures to ensure that everyone in the MOL Group, no
matter where in the world they work, obeys every
law, regulation and social norm.
Second, we will reinforce our safe operation sys-
tems. To fulfi ll our responsibility as a shipping com-
pany and to be the company of choice, achieving
the world’s highest level of safe operations is MOL’s
essential mission. Considering that customers are
calling for higher standards of safety in LNG carriers
and offshore businesses, areas where we plan to
expand, we will strive to reinforce our systems.
Third, we will strengthen total risk control. We
will work to make the volume of comprehensive
risk transparent and fully implement sustainable
risk management by assuming worst-case scenari-
os. While no business is free of risks, we will objec-
tively assess whether the risks are worth taking
and carefully choose which ones to take.
Fourth, we will strive to concentrate our business
intelligence. Since I assumed the role of president,
our business intelligence has been strengthened and
this forms the foundation upon which the new mid-
term management plan was formulated. Stand-alone
data is of limited value on its own. We will generate
value and illuminate trends by combining various
sources of data. We will strengthen the systems to
quickly share and assemble data from various sourc-
es, including our personnel on the front lines.
Intangible Assets Accumulated over
130 Years of History
On April 1, 2014, MOL celebrated its 130th anni-
versary. MOL is the shipping company with the
world’s largest fl eet, and I really feel that what
enabled the Company to grow to its current posi-
tion is the support of our customers. Until the
1990s, Japan had been the largest trading country
and home to an abundance of clients for shipping
companies. To transport the cargo entrusted to us
by our clients in Japan comprising iron ore, coal,
crude oil, LNG, automobiles and various export
products, we developed new vessels and further
refi ned our comprehensive services. We then later
used those capabilities to acquire clients around
the world, beginning with China, and we are still
continuing to grow.
One of MOL’s dearest intangible assets is the
trust we have steadily accumulated with our cus-
tomers. Our ability to uncover customer needs
then offer appropriate solutions, which was
acquired through our efforts to repay their trust, is,
without a doubt, another.
I would consider the Company’s own DNA to be
yet another of MOL’s intangible assets. By this, I
mean MOL’s indomitable fi ghting spirit and the fi ne
balance between that indomitable fi ghting spirit
and total risk control. MOL is a hybrid company that
was created through the merger of many compa-
nies: Osaka Shosen Kaisha (OSK Lines) and Mitsui
Steamship, Navix Line, and Navix Line’s previous
incarnations of Yamashita-Shinnihon Steamship and
Japan Line. This is the source of our DNA and it is
because of the very fact that MOL is a hybrid that
we are resilient amidst changes in the operating
environment. With the merger of these companies,
we all worked together to enhance our capabilities,
cultivating this indomitable fi ghting spirit.
While leveraging these intangible assets to the full-
est extent possible, MOL is committed to improv-
ing shareholder value sustainably by successfully
implementing the midterm management plan
“STEER FOR 2020,” which was formulated in light
of the current environment of the marine shipping
industry, and achieving solid growth through inno-
vative changes.
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24 Mitsui O.S.K. Lines
MOL at a Glance
Revenues Breakdown by Segment
(Fiscal 2013 results)
OTHERS
1%
ASSOCIATED BUSINESSES
7%
FERRY & DOMESTIC TRANSPORT
3%
CONTAINERSHIPS
41%
Fleet Table
Performance (¥ billions)
BULKSHIPS
(Dry Bulkers, Tankers, LNG Carriers/
Offshore Businesses and Car Carriers)
900
600
300
0
75
50
25
0
12/3
13/3
14/3
-25
(cid:2) Revenues (left scale)
(cid:2) Ordinary income (loss) (right scale)
BULKSHIPS
48%
Dry Bulkers
21%
Tankers
10%
LNG Carriers/
Offshore Businesses
3%
Car Carriers
15%
As of March 31, 2014
As of March 31, 2013
Number of
vessels
Thousand
dwt
Number of
vessels
Thousand
dwt
BULKSHIPS (Dry Bulkers, Tankers, LNG Carriers/Offshore Businesses and Car Carriers)
Dry Bulkers
403
35,760
404
34,928
Tankers
180
16,874
194
19,037
LNG Carriers
67
5,182
69
5,310
Offshore
Businesses (FPSO)
1
−
1
−
Car Carriers
125
2,033
127
2,063
Containerships
119
7,091
115
6,370
Ferry &
Domestic Transport
Cruise Ships
Others
Total
40
160
44
159
1
2
5
13
2
3
10
19
938
67,117
959
67,895
(Note) Including spot-chartered ships and those owned by joint ventures
CONTAINERSHIPS
[Dry Bulker] Bulk carrier: AWOBASAN MARU
[LNG Carrier] GRAND MEREYA
[Containership] MOL COMMITMENT
TraPac Jacksonville Container Terminal
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Annual Report 2014 25
CONTAINERSHIPS
FERRY & DOMESTIC TRANSPORT
ASSOCIATED BUSINESSES
750
500
250
0
90
60
30
0
60
30
20
0
12/3
13/3
14/3
-30
(cid:2) Revenues (left scale)
(cid:2) Ordinary income (loss) (right scale)
12/3
13/3
14/3
(cid:2) Revenues (left scale)
(cid:2) Ordinary income (loss) (right scale)
3
2
1
0
-1
120
90
60
30
0
12/3
13/3
14/3
(cid:2) Revenues (left scale)
(cid:2) Ordinary income (loss) (right scale)
12
9
6
3
0
[Tanker] Crude oil tanker: HORAISAN
[Tanker] Product tanker: GARNET EXPRESS
[Offshore Business] FPSO Cidade de Angra dos Reis MV22 (photo: MODEC, INC.)
[Car Carrier] ONYX ACE
FERRY & DOMESTIC TRANSPORT
ASSOCIATED BUSINESSES
[Ferry] SUNFLOWER IVORY
[Cruise Ship] NIPPON MARU
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26 Mitsui O.S.K. Lines
Market Position in the Industry
MOL operates a large and balanced oceangoing fl eet.
In terms of its total fl eet size and presence in individual market
categories, MOL ranks among the world’s largest shipping companies.
1,000
938
1,200
World Major Carriers’ Fleets (All Vessel Types)
(Number of vessels)
0
200
400
600
800
67
MOL (Japan)
NYK (Japan)
COSCO (China)
K Line (Japan)
APM-Maersk (Denmark)
Oldendorff (Germany)
China Shipping (China)
MSC (Switzerland)
Swiss Marine (Switzerland)
Fredriksen (Norway)
CMA-CGM (France)
Teekay (Canada)
0
20
40
60
80
100
120
(Million deadweight tons (DWT))
(cid:2)(cid:2) Number of vessels (cid:2)(cid:2) Million deadweight tons (DWT)
Source: MOL internal estimation based on each companies’ published data, Clarkson and Alphaliner (April 2014)
World Major Carriers’ Revenue Portfolio by Segment
(%)
0
20
40
48
60
80
41 11
100
MOL
NYK
K Line
APM-Maersk
NOL
OOIL
MISC
Frontline
Teekay
Pacifi c Basin
Golar LNG
(cid:2) Bulkships (cid:2) Containerships and related business (cid:2) Other businesses
Source: MOL calculations based on each company’s fi nancial statements and/or website.
MOL’s containerships and related business includes revenue from Containerships, Terminals and Logistics.
NYK’s containerships and related business includes revenue from Containerships, Air freighters and Logistics.
APM-Maersk’s containerships and related business includes revenue from Terminal business.
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Annual Report 2014 27
Dry Bulkers
(Thousand deadweight tons)
0
10,000
20,000
30,000
40,000
50,000
NYK
MOL
Oldendorff
K Line
Swiss Marine
COSCO
35,760
0
5,000
10,000
15,000
20,000
16,874
20
40
60
80
67
40
80
120
119
160
MOL
Fredriksen
SCF
NYK
Teekay
MISC
MOL
NYK
Nakilat(*)
K Line
Shell
MISC
0
0
MOL
NYK
K Line
EUKOR
HOEGH
WWL
0
500
1,000
1,500
2,000
2,500
Source: Companies’ published data
and Clarkson (March 2014)
Tankers
(Thousand deadweight tons)
Source: Companies’ published data
and Clarkson (March 2014)
LNG Carriers
(Number of vessels)
*Qatar Gas Transport Company Ltd.
Source: MOL (March 2014)
Car Carriers
(Number of vessels)
Source: MOL (March 2014)
Containerships
(Thousand TEU)
Maersk
MSC
CMA-CGM
Evergreen
COSCO
Hapag+CSAV(*)
Hanjin
APL
MOL
CSCL
NYK
OOCL
Hamburg Sud
Yang Ming
Zim
K Line
UASC
Hyundai
(*) simple summation of each
company
Source: MDS (February 2014)
513
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28 Mitsui O.S.K. Lines
Overview of Operations
Bulkships
Dry Bulkers
Kenichi Nagata
Senior Managing Executive Offi cer
We will solidly and sustainably
contribute to the overall performance
of the Company by providing services
that meet customer needs, securing
stable profi ts and strengthening
market tolerability.
Consolidated Revenues Breakdown (FY2013)
General Cargo Carrier/
Heavy Lifter
8%
Steaming Coal Carrier
13%
Wood Chip Carrier
11%
General Bulk Carrier
21%
Iron Ore and
Coking Coal
Carrier
48%
Dry Bulker Fleet Table
Vessel Type
Standard
DWT
At the
end of
Mar.2013
At the
end of
Mar.2014
Use
Capesize
170,000
103
107
Panamax
72,000
Handymax
Small handy
Steaming coal
carrier
55,000
28,000
93,000
Wood chip carrier
50,000
Other (Heavy lifter,
General cargo carrier)
12,000
38
68
52
41
44
58
38
67
56
40
42
53
Total
404
403
Steel raw materials
(iron ore, coking coal)
Iron ore, coking coal,
steaming coal, grains,
etc.
Steaming coal, grains,
salt, cement,
steel products, etc.
Steel products, cement,
grains, ores, etc.
Steaming coal
Wood chips,
soybean meal, etc.
Steel products, plants,
etc.
Fiscal 2013 in Review—
Looking back on “RISE2013”
MOL transferred sales and operations of
dry bulker free vessels*1 from Tokyo to
Singapore in the fourth quarter of fi scal
2012 as the centerpiece of its Business
Structural Reforms. The charter contracts
of about 130 free vessels were trans-
ferred at prevailing market rates to our
Singaporean subsidiaries,*2 with the dif-
ference between the original charter
rates and then current market rates
recorded as extraordinary loss. As the
result, the MOL Group now features one
of the world’s leading cost-competitive
free vessel fl eets and it is based in
Singapore, which has become the cur-
rent hub of seaborne transport in Asia.
By fi rmly establishing this business
base in Singapore and endeavoring to
secure profi table cargo throughout fi scal
2013, the fl eet turned a profi t amid mar-
ket conditions, which were on average,
below the general breakeven point over
the fi scal year. Also backed by fi rm, con-
sistent profi ts from long-term contracts,
including those for iron ore and coking
coal carriers, steaming coal carriers and
wood chip carriers, the entire dry bulk
division was able to achieve its target of
returning to profi tability.
Although the market for dry bulkers
remained stagnate in the fi rst half of
2013, the second half brought signifi -
cant improvement, especially for the
largest vessel class (Capesize bulkers).
Oversupply prevailed during the three
years from 2010 to 2012, with more
than 200 new Capesize bulkers complet-
ed each year. In 2013, however, the
number of newly delivered vessels
dropped by half and, supported by
robust Chinese imports of iron ore and
coal, growth of demand outstripped that
of supply. This brought about a much
anticipated, genuine market recovery.
While we have not seen improvement of
the supply-demand situation for small
and medium-sized vessels (Panamax size
or under), the pace of newly completed
vessels has begun to decelerate and the
market did perform better on the whole
than the previous year.
Steaming coal carriers also performed
quite well thanks to an increase in the
volume of coal imports amid growing use
of coal-fi red electric power plants to meet
base load power requirements in Japan.
A recovery in demand for paper in tan-
dem with the rebounding Japanese econ-
omy boosted profi ts in wood chip
carriers, which also benefi ted from new
contracts of transport to China and India.
With such an improved operating
environment, the dry bulker division did
not only turn a profi t, it was able to
exceed the forecast (announced on
April 30, 2013) by 70%.
I’d now like to touch upon two accom-
plishments in fi scal 2013, which contribut-
ed to the improvement in profi ts.
The fi rst is the increased level of slow
steaming. Slow steaming is done to keep
fuel costs down, but the reduced speed
can cause a multitude of issues, includ-
ing incomplete combustion. With a fi rm
understanding of these, we discovered
solutions in terms of both hardware and
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Annual Report 2014 29
Main Routes
Vessels Supply (Capesize)
(Number of vessels)
300
200
100
0
-100
2008 2009 2010 2011 2012 2013
24%
16%
8%
0%
-8%
— Iron ore — Coal, grain and others
(cid:2) Deliveries (cid:2) Demolitions YOY %
Source: MOL internal calculation based on IHS-Fairplay
Global Seaborne Trade of Major Dry Bulk Cargo
China: Dependence on Imported Iron Ore
(Million tons)
2008
2009
2010
2011
2012
2013
(Million tons)
1,200
900
600
300
0
0
500
1,000
1,500
2,000
2,500
3,000
(cid:2) Iron ore (cid:2) Coking coal (cid:2) Steaming coal (cid:2) Grain
Source: MOL internal calculations based on various sources
80%
60%
40%
20%
0%
2004 2005 2006 2007
2008 2009 2010 2011
2012 2013
(cid:2) Crude steel production (cid:2) Imported iron ore(*1) (cid:2) Domestic production(*2) Import dependency (%)
Source: MOL estimation (*1) on the premise of 62.5% Fe content (*2) 62.5% Fe content
equivalent based on MOL estimate of run-of-mine Fe content
software and, in the case of chartered
vessels, promoted ship owners’ under-
standing about these issues.
The second is tangentially related to the
fi rst accomplishment. We became very
aware of precisely where maritime trans-
port fi ts into our customers’ entire supply
chain. Reducing speed under some cir-
cumstances can cause trouble for our cus-
tomers, but if we are aware of our clients’
manufacturing processes and stock levels,
reducing speed can actually help control
inventory and ease port congestion. MOL
has gained the trust of its customers by
developing and operating vessels of the
optimum size to meet the requirements of
their loading and discharging ports, as well
as providing proposals and services, such
as cargo supervision during unloading at
destination ports. By keeping in mind
exactly where we fi t into their supply
chain, the entire dry bulker division has
come to realize that there are numerous
win-win initiatives that will improve service
for our customers and improve earnings
for the Company.
I call this kind of capacity our “ship-
ping profi ciency.” It may seem obvious,
but as someone who has been involved
in this division for quite some time, I can
tell you that I really notice the positive
impact and I have watched this profi -
ciency grow. By going back and refl ect-
ing on the basics of transporting our
valued customers’ cargo, as was dis-
cussed in last year’s annual report, we
have achieved it. Moving ahead, our
shipping profi ciency will also support the
business model we are striving for under
“STEER FOR 2020.”
“STEER FOR 2020” and the
Outlook for the First Fiscal Year
The market for dry bulkers over the dura-
tion of “STEER FOR 2020” is expected to
escape stagnation and to remain steadily
above general vessel costs. Chinese iron
ore imports, a source of frequent concern
due to China’s economic adjustments,
look set to increase as prices of iron ore
exported by major natural resource com-
panies are declining. Chinese domestic
iron ore will gradually be overtaken by
overseas iron ore, which also serves to pre-
vent air pollution in the country. Orders for
building dry bulkers, on the other hand,
appear to be on a gradual decline heading
into 2016, and this should help correct the
supply-demand imbalance and improve
market conditions.
In light of these factors, especially the
improved market conditions, fi scal 2014
profi ts for the dry bulker division are
forecast to surpass the level achieved in
fi scal 2013.
However, taking into account the cur-
rent surplus of shipbuilding facilities
around the world, we need to be aware
of the risk of an upswing in the number
of completed vessels after 2016.
With this awareness, we will begin to
shift focus under “STEER FOR 2020.” In
accordance with its overall strategy, we will
work to secure stable profi ts, provide ser-
vices to better meet customer needs and
increase our market tolerability. Our divi-
sion has already adopted this route, which
essentially means returning to the basics of
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30 Mitsui O.S.K. Lines
fi rst securing customers’ cargo, then oper-
ating vessels to transport it. Or, to put it
another way, we are making a clean break
from the business model where we would
fi rst secure vessels, then operate them or
contract them out, which was possible
during times of tight supply and high
demand for shipbuilding. Operating ves-
sels is considerably more demanding of
human power than the business of simply
contracting them. Functioning as a guide-
line for total risk control, however, it will
be able to help us suppress the rapid,
excessive growth of fl eets.
As previously mentioned, we have built
a business and operations base in
Singapore for free dry bulkers. Singapore is
a hub of information regarding global sea-
borne transport. Many of our key custom-
ers, including the three largest natural
resource companies, are based in
Singapore and charged with making ship-
ping decisions for their businesses. We are
putting a lot of effort into being their busi-
ness partner and shipping company of
choice, by earning their trust through
technical support, our track-record in ship-
ping and our local presence for face-to-
face communication. With our sights on a
wide range of markets, including Australia,
Southeast Asia, India and China, we will
secure and combine diverse cargo, achieve
more effi cient operations with fewer bal-
last voyages and generate profi ts that
exceed the market average.
For both our Japanese and Singaporean
fl eets, we continue aiming to secure and
renew long-term contracts for dedicated
and large vessels mainly with iron and steel
mills, electric power companies and major
natural resource companies. In addition to
the current shipping points, which include
Australia and Brazil, they are looking into
new shipping routes from Mozambique
and other African countries as well as the
Middle East, which exports semi-processed
ores. For small and medium-sized vessels,
we are planning to secure as many
medium-term COAs*3 as possible when
the timing is right.
We will maintain the current scale of
the dry bulker fl eet as a basic policy.
Having said so, we still plan to scrap ves-
sels that have been rendered obsolete by
recent improvements in fuel effi ciency and
those that do not meet environmental reg-
ulations, as we continue to gradually
switch over to energy effi cient vessels with
low environmental loads. Replacement in
advance of the regulations is also an
option. Improving the quality of our vessels
has recently been a key to securing long-
term contracts. While medium- to long-
term charted vessels at the expiry of their
contracts are being redelivered, we are
responding to transport demands by
increasing our fl exibility in terms of scale
and cost by leveraging short-term char-
tered ships. So while the scale of the entire
fl eet will not change, looking into the
details, we see that medium- to long-term
contracts are increasing and our resilience
to market conditions is strengthening as
we continue the switch over to a higher
quality fl eet.
insurance that we pay to manage mar-
ket risk. If we utilize our “shipping profi -
ciency,” we can secure a certain profi t
through slow steaming, effi cient opera-
tions and optimum cargo combination
even if we use these vessels.
I believe the greatest strength of the
dry bulker division is the know-how culti-
vated over the 130 years of MOL’s vessel
operations. We will meet and respond to
the various needs of our customers and
make a tidy and steady contribution to the
results of the entire MOL Group.
Likewise, our primary goal for profi t-
Glossary
ability during “STEER FOR 2020” is to
maintain the division’s profi ts at this high
level after a rebound in fi scal 2013.
However, with ongoing changes to the
composition of our fl eet we will trans-
form our profi t structure to make it even
more stable and less susceptible to
supply-demand fl uctuations. To ensure
stable profi ts, we will secure as many
contracts as possible to owned vessels
and long-term chartered vessels. On the
other hand, there may be times it is cost-
ly to utilize short-term chartered vessels,
which however can be thought of as
*1 Free vessels: Vessels that don’t operate on
contracts of more than 2 years and are
thus exposed to changing market condi-
tions.
*2 Singaporean subsidiaries: MOL Cape
(Singapore) Pte. Ltd. and MOL Bulk Carriers
Pte. Ltd. Both are wholly owned subsidiar-
ies of MOL based in Singapore.
*3 COA (Contracts of Affreightment): A type
of contract to transport cargo based on
weight or volume. They are usually con-
cluded on a long-term basis to transport
large bulk cargoes of iron ore, coal or
crude oil. The contracts are based on the
volume of cargo transported and the deliv-
ery period, so vessels are not specifi ed and
the method of transporting the cargo is
left to the discretion of the shipping
company.
Iron Ore: Global Seaborne Trade by Country/Area (Million tons)
1,200
1,000
800
600
400
200
0
(cid:2) Others
(cid:2) EU27
(cid:2) Taiwan
(cid:2) Korea
(cid:2) Japan
(cid:2) China
13
Export
Source: MOL internal calculation based on Tex Report, Clarkson, Trade Statistics
11
Import
12
08
09
10
13
(cid:2) Others
(cid:2) India
(cid:2) Sweden
(cid:2) Canada
(cid:2) South Africa
(cid:2) Brazil
(cid:2) Australia
Steaming Coal: Global Seaborne Trade by Country/Area (Million tons)
1,000
800
600
400
200
0
(cid:2) Others
(cid:2) North America
(cid:2) EU27
(cid:2) Taiwan
(cid:2) Korea
(cid:2) Japan
(cid:2) India
(cid:2) China/Hong
Kong
Source: SSY
(cid:2) Others
(cid:2) Russia
(cid:2) U.S.
(cid:2) Columbia
(cid:2) South Africa
(cid:2) Australia
(cid:2) Indonesia
08
09
10
11
Import
12
13
13
Export
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Annual Report 2014 31
Bulkships: Dry Bulkers
The Capesize Bulker LAMBERT MARU
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32 Mitsui O.S.K. Lines
Bulkships
Tankers
Consolidated Revenues Breakdown (FY2013)
Chemical Tanker
33%
LPG Tanker
5%
Methanol Tanker
7%
Crude Oil
Tanker
26%
Product
Tanker
28%
Tsuneo Watanabe
Senior Managing Executive Offi cer
We will capture new cargo fl ows and
build up a competitive fl eet with
market tolerability, by leveraging
intelligence gained as a
comprehensive player in tankers for
strong competitive advantage.
Tanker Fleet Table (Number of vessels)
at the end
of March
2013
at the end
of March
2014
Vessel type under pool
management
(at the end of March 2014)
Crude oil tankers
Product tankers*1
Chemical tankers*2
Including methanol
tankers
LPG tankers
Total
47
61
75
11
194
38
59
72
11
180
VLCC (very large crude
carrier, 300,000 DWT)
LR1 (75,000 DWT)
Chemical tanker
VLGC (very large gas
carrier, 80,000m3)
*1 Petrochemicals: gasoline, naphtha, kerosene, jet fuel and gas oil, etc.
*2 Chemical products: xylene, benzene, methanol and plant oil, etc.
Fiscal 2013 in Review—
Looking back on “RISE2013”
The tanker division operates fi ve types of
vessels: crude oil tankers, product tank-
ers, LPG tankers, methanol tankers and
chemical tankers. Under RISE2013, the
single-year management plan that aimed
for a turnaround in profi t for the MOL
Group as a whole, this division endeav-
ored to improve its operating effi ciency
by setting up pools with other operators
and worked to reduce its fuel costs by
slow steaming. In addition, we contin-
ued to reduce the number of costly ves-
sels operated for spot trading. Also
backed by the favorable market condi-
tions, we could greatly narrow our loss.
Nevertheless, I hereby regret to report
that the tanker business did not turn a
profi t and instead posted a loss for the
fi fth consecutive fi scal year.
This is not, however, the whole story.
After a long struggle, chemical tankers
and LPG tankers did manage to turn a
profi t. Methanol tankers expanded their
profi t. And crude oil tankers turned a
profi t for the second half of the fi scal
year. From this perspective, we can safely
say that we have prepared a foundation
from which the division can become
profi table in fi scal 2014.
In 2013, supply pressures were limited
for very large crude carriers (VLCCs)—the
largest ships used to transport crude oil—
with 30 new vessels delivered and 20
withdrawn worldwide, resulting in a net
increase of only 10 new carriers.
Moreover, global oil demand grew by
1.2% and, although the volume trans-
ported by sea was virtually unchanged
from 2012, ton-miles increased in tandem
with rising demand for long distance
shipping, resulting in a modest improve-
ment in supply and demand. Despite
stagnant market conditions during the
summer, when demand is typically low,
trade surged after November as China
and other Asian countries began stockpil-
ing crude oil. Trade slid again following
Chinese New Year, which began on
January 31, but I perceived genuine mar-
ket shift as it moved beyond the break-
even-point for some time even during this
sluggish period.
Despite a strong start in the begin-
ning of the fi scal year, the product
tanker market remained basically
range-bound after June. The weak
market restrained our ability to narrow
the full year loss.
The market that changed most in fi s-
cal 2013 was LPG tankers. The shale rev-
olution helped spur U.S. LPG exports.
Until then, the Middle East had been the
center, but U.S. exports effectively split
the LPG tanker market for very large gas
carriers (VLGCs). U.S. exports were
bound not only for Central and South
America and Europe, but also Asia via
the Cape of Good Hope. This brought
about an increase in ton-miles, which
easily absorbed 12 new VLGCs: a rela-
tively large supply pressure given the
global total of about 150 VLGCs. As a
result, even during periods of lower
demand, market conditions hardly dete-
riorated and LPG tankers turned a profi t.
Methanol tankers are a specialized ves-
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Main Routes
— Crude Oil — Petroleum Products
Vessels Supply (VLCC) (Number of vessels)
80
60
40
20
0
-20
-40
-60
8%
6%
4%
2%
0%
2008
2009
2010
2011
2012
2013
(cid:2) Deliveries
(cid:2) Withdrawal
YOY %
Source: MOL internal calculations based on Clarkson (Note: Double hull only)
sel type fi rst developed by MOL, and we
operate all of our methanol tankers on
long-term contracts of 10- to 15-years. In
addition to achieving increased profi t in
fi scal 2013 by cutting costs, methanol
tankers secured four long-term time-char-
ter agreements for a total of 10 vessels,
ensuring stable profi ts into the future.
In chemical tankers, Contracts of
Affreightment (COA)(*) account for 80%
of business with spot contracts account-
ing for the remaining 20%. New vessel
deliveries, which remained sizable until
2012, are expected to slow down and
help tighten the supply-demand balance
of vessels. In COA negotiations, we
received more requests for multiple year
contracts and freight rates also
improved. Moreover, after successfully
transferring the center of sales and ship
operations to Singapore in October
2012, we improved operational effi cien-
cy by transporting Southeast Asian vege-
table oil exports to India as spot cargo
on the return trip from transporting
Middle Eastern exports of chemical prod-
ucts to Asia. This helped chemical tank-
ers move into the black.
“STEER FOR 2020” and the
Outlook for the First Year
In 2014, approximately 25 new VLCC
deliveries are expected in a market that
includes about 50 ships older than 15
years. Maintenance costs for older ships
rise due to tighter safe operation stan-
dards, and a rising number of oil majors
are avoiding these vessels. This should
shorten the time before the vessels with-
draw. If these aging ships are withdrawn
steadily, we can expect a net increase of
just about 10 VLCCs. In addition,
demand for oil is expected to increase by
1.3%. Although seaborne shipping vol-
ume of crude oil is expected to remain
stable, ton-miles are expected to
increase by 2% to 3%. This will likely
improve supply and demand balance.
Because most U.S. shale oil is light
crude, the revolution greatly reduced
light crude oil trade from West Africa to
the United States. On the other hand,
Annual Report 2014 33
trade in heavy crude oil from the Middle
East did not decrease as much.
Moreover, China and India expanded
imports of crude oil from West Africa
and South America in addition to the
Middle East, increasing ton-miles.
In product tankers, exports from the
Middle East and India are expected to
increase as refi neries in developed
nations are shuttered. Using inexpensive
shale oil as feedstock, the U.S. is produc-
ing cost competitive petroleum products
and is likely to enter Africa and other
new markets in addition to Europe and
South America. U.S. exports of LPG, a
by-product of shale gas, are also expect-
ed to steadily expand.
There are still concerns, however,
about the supply trend. In fi scal 2013,
we saw speculative orders for types of
tankers likely to experience demand
growth. LPG tankers maintained good
market conditions into 2014, but fairly
large numbers of new vessel deliveries,
relative to the size of the market, are
expected between 2015 and 2016. The
actual number of new vessel deliveries
for product tankers in 2013 was around
70% of orders, so if the ratio of vessel
deliveries to orders increases after 2014,
attention will need to be paid to chang-
es in the supply and demand balance.
Based on this understanding of the
operating environment, the tanker busi-
ness, following the overall strategies laid
out in “STEER FOR 2020,” will continue to
take various measures to adapt its fl eet to
a composition that has high market tolera-
bility. As a result, our plan is to reduce the
size of the fl eet from 180 vessels at the
end of fi scal 2013 to 160 vessels at the
end of fi scal 2016. I believe this will help
control downswings in earnings and bring
the entire tanker division to profi tability in
fi scal 2014, the fi rst year of “STEER FOR
2020.” That way, the division will be able
to solidly contribute to increasing profi t for
the entire MOL Group throughout the
duration of the plan.
In VLCCs, we will continue focusing
on mainly long-term contracts and we
will reduce vessels operated for spot
trading while maintaining our ability to
adequately respond to our customers’
short-term contract needs. In product
tankers, we will reduce market exposure
by relying more on market-linked chart-
ed vessels. Even in LPG tankers, which
are thriving in current market conditions,
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34 Mitsui O.S.K. Lines
we are aiming to secure profi ts by con-
cluding well-timed medium- to long-
term contracts for a portion of vessels.
Methanol tankers continue to gener-
ate stable profi ts through their long-term
contracts. Moreover, with the increase in
petrochemicals being produced with
shale oil as a feedstock, there may be
another product suited for transport in
specialized ships, just as methanol is. By
conceiving of and developing such spe-
cialized ships, we seek to expand busi-
nesses that result in secure, stable
profi ts. Chemical tankers, which trans-
port a wide variety of chemical products
simultaneously, also provide a fertile fi eld
of differentiation thanks to the require-
ment for extensive shipping know-how
and we expect continued steady increas-
es in profi ts. Going forward, we believe
deep sea routes will be a growth area
and are already reducing the number of
coastal vessels. We aim to raise our prof-
it levels by increasing cargo volume and
strengthening our competitiveness
through investments in large vessels.
Although the shale revolution has
greatly changed fl ows of cargoes, fore-
casts and predictions remain diffi cult
given the possibility the outlook could
change dramatically due to such key fac-
tors as future crude oil prices or U.S.
environmental regulations. For MOL to
grow while meeting our customers’
needs, it is necessary to maintain a pres-
ence as a key global player in each trans-
portation fi eld of crude oil, petroleum
products and chemicals in order to suc-
ceed in the face of this variability. If our
presence is diminished, we could miss
out on information and lose opportuni-
ties for the new fl ow of cargoes. As I
mentioned previously, our plan is to
reduce the number of vessels to
decrease our market exposure risk for
the duration of “STEER FOR 2020.” To
maintain our presence, simultaneously,
we will use a pool management system
for various types of vessels. So as not to
lose touch with our customers, we are
committed to a policy of handling sales
and operations of the pool by playing a
role as pool manager.
In this way, for the duration of “STEER
FOR 2020” and with the trust of our cus-
tomers, which we cultivated with our
long track record of safe operations, the
division will maintain a competitive fl eet
and secure new growth opportunities
through active intelligence gathering.
Glossary
(*) COA (Contract of Affreightment) :Please
refer to p30 (*3)
Crude Oil: Global Seaborne Trade by Import Area
(Million tons)
Global Seaborne Trade from Africa/Latin America to Asia(*)
(*) Japan, China, Korea, India
(Million tons)
2009
2010
2011
2012
2013
forecast
2014
forecast
2008
2009
2010
2011
2012
2013
0
400
800
1,200
1,600
2,000
0
50
100
150
200
(cid:2) China (cid:2) Japan (cid:2) North America (cid:2) Europe (cid:2) Other Asia/Pacifi c (cid:2) Others
Source: Clarkson
(cid:2) ex. Africa (cid:2) ex. Latin America
Source: MOL internal calculation based on Japan METI /
China Custom / Korea Customs / India MCI
Petroleum Products: Global Seaborne Trade
by Import Area
(Million tons)
LPG: Global Seaborne Trade by Export Area
(Million tons)
2008
2009
2010
2011
2012
2013
forecast
2007
2008
2009
2010
2011
2012
0
200
400
600
800
1,000
0
20
40
60
80
(cid:2) Japan/China/Korea (cid:2) Other Asia/Pacifi c (cid:2) Europe (cid:2) Latin America
(cid:2) North America (cid:2) Africa (cid:2) Others
Source: Clarkson
(cid:2) Middle/Near East (cid:2) Europe (cid:2) Africa (cid:2) U.S. (cid:2) Others
Source : Poten & Partners LPG in World Markets Year Book
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Annual Report 2014 35
Bulkships: Tankers
The VLCC CHOKAISAN
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36 Mitsui O.S.K. Lines
Bulkships
LNG Carriers/Offshore Businesses
Main Routes
Takeshi Hashimoto
Managing Executive Offi cer
As we accumulate long-term and
stable profi ts by capturing the rapidly
increasing seaborne trade of LNG,
we will also actively expand offshore
businesses, which have signifi cant
growth potential, to build a new
pillar of profi t.
Anticipated future routes
LNG: Supply Forecast by Area
5%
7%
9%
2013
34%
278
million tons
22%
23%
10%
2020
(Forecast)
413
million tons
7%
5%
20%
25%
20%
14%
(cid:2) Middle East (cid:2) Africa (cid:2) S/E Asia (cid:2) Australia/PNG
(cid:2) South America (cid:2) Others (cid:2) North America
Source: MOL internal calculation based on Poten & Partners
Fiscal 2013 in Review—
Looking back on “RISE2013”
Thanks to stable profi ts from long-term
contracts, the LNG Carrier Division post-
ed fi scal 2013 profi t in line with the pre-
vious year. The single-year management
plan “RISE2013” united all of the MOL
Group in the common goal of regaining
profi tability. Under it, we were able to
fulfi ll the Group’s expectations as a bear-
er of stable profi ts unaffected by market
conditions.
Global seaborne trade of LNG stood at
roughly 240 million tons during 2013,
unchanged from the previous year.
However, in detail, global volumes grew
in terms of ton-miles as increased
demand in Asia offset decreased demand
in Europe caused by lingering economic
malaise, and LNG transport from the
Atlantic region to Asia expanded.
The LNG carrier business is character-
ized by long lead times, often several
years, between the time an order for a
project is received and the time the new
ship is delivered and contributing to
profi ts. In fact, all of the projects that
contributed to profi ts in fi scal 2013 were
secured in and before 2010. In fi scal
2013, we secured four contracts for nine
vessels (see the below table) that will lead
to stable profi ts in the future, beginning
with an LNG ship for the Ichthys LNG
Project in Australia, an order placed in
May by Osaka Gas and Kyushu Electric
Power. At earliest, these projects will
begin contributing to earnings in 2016,
but we achieved a great accomplishment
in winning multiple contracts that will
generate long-term stable profi ts, sailing
past our competitors in terms of out-
standing orders.
I believe the reason MOL was select-
ed for these contracts lies in our plan-
ning capabilities. We’re able to
FY2013: Signed Long-Term Contracts
LNG Carriers
Tokyo Gas
Osaka Gas /Kyushu
Electric Power
SINOPEC
SINOPEC
Peteronet
Offshore Businesses
Petrobras
Tullow Ghana
GDF Suez
ex.USA
To Japan
1 vessel
To start in FY 2017
ex.Australia
To Japan
1 vessel
To start in FY 2019
ex.Australia
ex.Australia
ex.Australia
To China
To China
To India
4 vessels
2 vessels
1 vessel
To start in FY 2016
To start in FY 2017
To start in FY 2016
Brazil
Ghana
Uruguay
FPSO
FPSO
FSRU
To start in FY 2016
To start in FY 2016
To start in FY 2016
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LNG: Supply/Seaborne Trade (Million tons)
450
400
350
300
250
200
150
100
50
0
2007
2008
2009 2010 2011 2012 2013 2014* 2015* 2016* 2017* 2018* 2019* 2020*
*forecast
(cid:2) Japan (cid:2) Korea (cid:2) China (cid:2) Taiwan (cid:2) India (cid:2) Europe (cid:2) Middle East (cid:2) Americas (cid:2) Others
Liquefaction capacity
Source: MOL internal calculation based on Poten & Partners
accurately assess our customers’ needs
and leverage our resources to provide a
comprehensive proposal that our cus-
tomers can appreciate. The keys to pro-
viding optimum solutions are data
collection capabilities that capture the
details of seaborne transport demand,
acumen for discerning individual cus-
tomer needs, and then, above all else,
our richest in-house resources: the
world’s largest fl eet and talents gained
supporting that fl eet such as vessel man-
agement know-how, shipbuilding tech-
nology and fi nancing, and our extensive
global network. Take, for example, a
project that requires a new vessel to be
built. We would assess whether custom-
ers can use one of our current vessels in
the time before the new one is delivered.
We would also grope for an optimal
solution by coordinating one project
with others. By being creative in our
approach to raising added value for our
customers, we have differentiated our-
selves from the competition. I believe that
fi scal 2013 was the year in which these
expansive capabilities came to fruition.
In the offshore businesses, MOL was
also able to secure three long-term con-
tracts in fi scal 2013. Most remarkable of
all was securing the FSRU*1 project in
Uruguay. Previously European companies
dominated the FSRU fi eld. We are the
fi rst Japanese shipping company to inde-
pendently enter this fi eld. At 263,000
cubic meters of LNG storage capacity,
the FSRU will be the world’s largest,
proving MOL’s true capabilities in the off-
shore business fi eld. Since 2006, MOL
has gained experience with FSRUs
through a joint venture with a European
shipping company. In addition, we have
succeeded in ship-to-ship*2 operations,
which require technical skills common to
FSRU operations, in Tomakomai,
Hokkaido Prefecture. As we build up this
kind of experience, we’re very proud
that our track record and technical capa-
bilities, which we’ve cultivated over
many years in the LNG carrier business,
Annual Report 2014 37
are being recognized by the customers
of the FSRU project above. Fiscal 2013
marked a major turning point for the
offshore business, as we were able to
successfully enter the FSRU business at
long last.
“STEER FOR 2020” and the
Outlook for the First Fiscal Year
By 2020, global demand for ocean trans-
porting of LNG is expected to grow to
over 400 million tons per year, up from
240 million tons. The shale revolution
has become a reality in North America,
but large reserves of shale gas have been
confi rmed not only in North America but
also throughout the world. In addition,
conventional large-scale natural gas
fi elds have been discovered in eastern
Africa and other regions. As the need for
gas to supply base load electric power
grows due to nuclear power issues in
Japan and air pollution issues in China
and India, future demand for natural gas
seems likely to outpace the growth rate
in overall energy demand.
Accompanying this trend, demand
for LNG carriers is expected to increase
from the current 370 vessels to around
550 vessels. Considering the geographi-
cal relationships between new natural
gas sources and Asia, where demand will
rise, ton-miles will rise beyond present
levels. There are currently about 100
outstanding orders in the world, but if
you include demand for replacing older
ships, which is around 50 to 100 ships, it
would likely mean that an additional 120
ships would be built going forward.
Considering the expected growth,
MOL is confi dent the LNG carrier and
offshore businesses can secure long-term
stable profi ts. So, we set these two busi-
nesses at the core of “STEER FOR 2020”,
which holds the innovation of MOL’s
business portfolio as one of its pillars.
Targets call for the two businesses to
expand and comprise 26% of our assets
at the end of fi scal 2019, three times as
much as at the end of fi scal 2013. This is
why MOL plans to invest ¥700 billion of
¥1,130 billion total investment in the
LNG carrier and offshore businesses dur-
ing the term of “STEER FOR 2020.” By
expanding the LNG carrier fl eet to 120
vessels by the end of fi scal 2019, we will
reinforce MOL’s dominant position.
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38 Mitsui O.S.K. Lines
For that reason, MOL is not only
going after conventional LNG contracts,
for which there is a comparatively high
level of competition, but also more chal-
lenging contracts. Prime examples would
be projects to build LNG carriers at
Chinese shipyards or the Russian Yamal
LNG project which will develop the
Northern Sea Route. For contracts that
present a high level of technical diffi cul-
ty, the technical, ship management and
business divisions will unite to work with
the aim of ensuring a higher level of
profi tability. We are optimizing the port-
folio of the LNG carrier business by com-
bining conventional LNG contracts with
these more challenging ones.
In parallel, it is absolutely critical that
we recruit and train capable seafarers for
our LNG carriers to keep pace with our
expanding fl eet. LNG is transported at
minus 162 degrees Celsius with a por-
tion of it continuously vaporizing. MOL
needs seafarers who possess a high
degree of knowledge and skill in terms
of maintaining the correct temperature
and pressure inside the tanks of LNG
carrier. There are about 20 seafarers
aboard each LNG carrier, but including
reserves, we would need to recruit about
40 seafarers per carrier. This means we
would need over 2,000 seafarers to
increase the size of our fl eet to over 50
carriers. To say that the recruitment and
training of seafarers will be the key to
success for “STEER FOR 2020” is no
overstatement.
Fortunately, the MOL Group boasts
the world’s largest fl eet and many expe-
rienced seafarers. We can draw capable
seafarers from across the Group, those
who have worked on tankers and other
types of vessels, and train them to be
professional LNG carrier seafarers by giv-
ing them experience, judgment and skills
to safely manage ship operations
through training at our practice facilities
around the world or hands-on training
aboard existing LNG carriers. Obviously
this kind of training cannot be done
overnight, so we have already begun
training in preparation for the 2016 –17
period when a large number of new
ships will be delivered. Manning our
existing ships with trainees will tempo-
rarily infl ate seafarer training expenses
and will suppress profi ts from fi scal
2014. But we regard them as upfront
investments to seize a “one-in-a-million”
opportunity. They will contribute to long-
term stable profi ts beginning in fi scal
2016, when those trainees will start to
stand confi dently on their own two feet
and new LNG carriers will be delivered.
Like the LNG carrier business, the off-
shore businesses collectively constitute
another major source of long-term sta-
ble profi ts. At the start of “STEER FOR
2020,” the Offshore Business Offi ce,
which had been one of the groups in the
LNG Carrier Division, was upgraded to
the Offshore and LNG Project Division,
launching a new system to strengthen
company-wide initiatives. At present,
MOL has fi ve contracts for FPSOs*3, one
of which is in operation, and one con-
tract for an FSRU. While aiming to accu-
mulate additional investments in FPSOs
and FSRUs, we will also explore entering
the FLNG*4 business in the medium- to
long-term to establish a third major busi-
ness fi eld following FPSOs and FSRUs.
There are a wide range of fi elds within
offshore businesses, but MOL will focus
its investments in fi elds where MOL can
leverage its know-how cultivated as a
shipping company and can secure long-
term contracts that promise stable
profi ts.
Because FSRUs can be set up at lower
cost and in shorter time than onshore
LNG receiving terminals, demand is rap-
idly expanding, especially in emerging
markets. Due to the diffi culty of trans-
porting natural gas compared to coal or
petroleum, it typically used to be con-
sumed relatively close to the production
site or exported to Japan and other
developed nations capable of shoulder-
ing the large costs associated with build-
ing LNG terminals. With the introduction
of FSRUs, however, new trade patterns
for LNG are emerging and demand for
seaborne transport is expected to take
off. Consequently, FSRUs are expected to
have synergy with the LNG carrier busi-
ness, and leveraging MOL’s core compe-
tency of safety management expertise in
LNG carriers will provide MOL with clear
competitive advantage. So, going
forward, we will actively expand this
business.
For the growth of MOL in the medi-
um- to long-term, offshore businesses
may prove capable of serving as the
back bone of the entire Group. The
already signed contracts will begin to
contribute to profi ts in a big way in
2016 when these projects will be in
operation. I would like to develop this
business as a strong second to the LNG
carrier business, so both can deliver
long-term stable profi ts.
Glossary
*1 FSRU (fl oating storage and regasifi ca-
tion unit): A facility for storing LNG off-
shore, where LNG returns to its gaseous
form for distribution by pipeline to land.
*2 Ship-to-ship: Operation to transfer cargo
between seagoing ships, such as LNG carri-
ers or tankers, positioned alongside each
other. When a port’s facilities are too small
for large vessels, the loads are transferred
offshore to or from small- and medium-
sized vessels compatible with the port’s
facilities.
*3 FPSO (fl oating production, storage and
offl oading system): A facility for produc-
ing oil offshore. The oil is stored in tanks in
the facility and directly offl oaded to tankers
for direct transport to the destination.
*4 FLNG (fl oating LNG): Also called LNG FPSO.
A facility for producing natural gas off-
shore. The natural gas is liquefi ed at minus
162 degrees Celsius, stored in tanks in the
facility and directly offl oaded to LNG carri-
ers for direct transport to the destination.
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Annual Report 2014 39
Bulkships: LNG Carriers and Offshore Businesses
The LNG Carrier LNG PIONEER
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40 Mitsui O.S.K. Lines
Bulkships
Car Carriers
Main Routes
Junichiro Ikeda
Senior Managing Executive Offi cer
As we have a nimble fl eet deployed
globally, the trend toward local
production and local consumption
poses not only as a challenge, but also
as an opportunity to capture
increasingly diverse trade fl ows.
Global Car Seaborne Trade (Thousand units)
(excluding CKD)
2008
2009
2010
2011
2012
2013
0
6,000
12,000
18,000
(cid:2) Exports from Japan (cid:2) Exports from Korea (cid:2) Others
Source: MOL internal calculation based on Trade Statistics of Japan (MOF), etc.
Fiscal 2013 in Review —
Looking back on “RISE2013”
Global auto sales reached 84 million
units in 2013, a new record high for the
third straight year. The number of vehi-
cles transported by sea worldwide also
reached a new record high of over 15
million units. Despite a weakening yen,
however, the number of vehicles export-
ed from Japan declined as Japanese
automakers continued shifting manufac-
turing toward end markets, stepping up
local production for local consumption.
Under these circumstances, we increased
business in such areas as cross trade
from countries other than Japan as well
as inbound cargo, such as that exported
from Europe to China, and worked to
secure new business opportunities. As a
result, we experienced a signifi cant year-
on-year improvement in our business
performance.
In the ongoing diversifi cation of trade
patterns, our efforts to minimize ballast
voyages have come to fruition by com-
bining cargo from various loading and
unloading ports together.
In the past, the main routes for sea-
borne transport of automobiles were
from Japan to Europe and the U.S.
Today, however, more countries are pro-
ducing and consuming automobiles,
forming a rich web of trade. Export
countries now span Thailand, Mexico,
China, India, Indonesia, Turkey, Morocco,
South Africa and beyond. In addition,
ships unloading import vehicles in
Europe depart after loading large vol-
umes of vehicles bound for Asia and
other markets. In this changing business
environment, it is vital to respond fl exibly
to information concerning loading and
discharging locations, which changes by
the day. The increasing number of vehi-
cles we transport on cross trades and
inbound trades demonstrates our ability
for it.
In March 2014, MOL commenced
ocean transport services for vehicles
being exported from Mexico. In recent
years, many automakers have been rush-
ing to build and enlarge plants in
Mexico, and automobile production is
estimated to increase by more than 10%
per year for the next several years.
Around three million vehicles were pro-
duced in Mexico in 2013, with about
80% of them exported. As this trend
appears robust, MOL launched services
to the United States, the largest destina-
tion for Mexican made vehicles, creating
a system to meet these increased cus-
tomers’ needs.
“STEER FOR 2020” and the
Outlook for the First Fiscal Year
Looking ahead, global auto sales are
likely to grow to 86.5 million units in
2014. Growth in China and the United
States is projected to remain fi rm, while
a sales recovery for the European market
is expected in tandem with an upturn in
the economy.
Looking even further, global auto
sales, especially in emerging nations, are
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Annual Report 2014 41
Car Export from Japan by Destination (Thousand units)
(excluding CKD)
8,000
6,000
4,000
2,000
0
(cid:2) Oceania
(cid:2) Latin America
(cid:2) Africa
(cid:2) Middle East
(cid:2) Asia
(cid:2) Europe
(cid:2) North America
Source: Trade Statistics of Japan (MOF)
2008 2009 2010 2011 2012 2013
Car Export from Emerging Countries (Thousand units)
6,000
4,000
2,000
0
(cid:2) ex. Mexico
(cid:2) ex. South Africa
(cid:2) ex. India
(cid:2) ex. China
(cid:2) ex. Thailand
2008 2009 2010 2011 2012 2013
Source: MOL internal calculations based on FOURIN data, etc.
expected to remain on a solid upward
trajectory with sales of 90 million units in
2015. Sales could conceivably hit the
100 million mark in 2019, the last fi scal
year of “STEER FOR 2020.” Naturally,
the seaborne transport of automobiles
would rise in tandem, but production
geared to local markets is likely to con-
tinue expanding while Japanese exports
are expected to fall, leading to shorter
transport distances. Amid these circum-
stances, in fi scal 2014, costs will rise due
to the launch of new services from
Mexico to North America and in South
America. As a result, we forecast an
appreciable decrease in profi ts compared
to the previous year.
We cannot rule out the possibility
that Japanese automakers will bring pro-
duction back to Japan and again
increase exports if they are sure that the
yen will remain weak for several years.
However, the trend toward local produc-
tion is quite strong and unlikely to let up
in the next two to three years. This trend
not only affects Japan; it is also becom-
ing stronger among European automak-
ers as well. The shift in fl ow of cargo is a
risk and, at the same time, an opportuni-
ty in this sense.
In light of this operating environ-
ment, MOL’s car carriers business will
push ahead with existing strategies
under the “STEER FOR 2020” plan. Our
customers not only seek to increase local
production, but increasingly to produce
the same model in several countries. By
doing so, they can respond fl exibly to
exchange rate fl uctuations, seeking the
most profi table combination of produc-
tion sites to sales destinations. To do
this, they are establishing the necessary
manufacturing network. Thus, we must
try to change our shipping routes pliably
in responding to customers’ needs. At
the same time, we must offer services
that help customers reduce their logistics
costs in case they have other routing
alternatives such as railroads and other
forms of cargo transportation. While
providing services that completely meet
these changing transport needs, MOL
continues its tireless efforts to thorough-
ly reduce ballast voyages by fi nding the
best combination of freight among these
diverse trade patterns.
Success in this endeavor will fully
leverage the strengths of our car carrier
fl eet. The company has continued to
align its fl eet by making car carriers
capable of transporting 6,400 small pas-
senger cars MOL’s standard. These car
carriers have high usability in various sea
lanes and ports across the globe, and
now account for over 60% of the vessels
in our car carrier fl eet. This makes it easi-
er for us to dispatch a replacement ves-
sel of the same size in response to
problems that hinder shipping schedules
such as bad weather or port congestion.
Customers can safely entrust us with
their shipping needs.
Another one of our strengths lies in
our global network of sales and market-
ing bases spanning Asia, Australia, South
Africa, Europe, South America and North
America. Being able to share the latest
information across this network allows
us to offer our services to customers
anywhere in the world. Through its more
effi cient operations, MOL is also maxi-
mizing synergy with its consolidated sub-
sidiary Nissan Motor Car Carrier Co., Ltd.
MOL’s swift decision-making is also
one of its strengths. Beginning cross-
trade transport in the 1990s signifi ed
our strength as a pioneer as well, and
this was underpinned by swift decision-
making.
When it comes to increasing cargo
volume through cross trade, we don’t
get caught up in short-term profi tability.
Instead, we assess the potential of mid-
to long-term developments. Upfront
investment is often essential. Sometimes
you need to initiate service to discover
the full potential. As a result, MOL has
managed to uncover opportunities for
shipments that would have gone unno-
ticed if we had not rapidly decided to
launch service. For example, after
increasing the frequency of service in
inter-South East Asia routes, we realized
that besides the cargo we had been con-
tracted to transport, there was a lot of
additional cargo moving around, such as
used construction machinery and trailers.
And with our new previously mentioned
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42 Mitsui O.S.K. Lines
service out of Mexico, we quickly uncov-
ered various unmet transport needs that
we had not been able to grasp before
beginning the service. In addition, even
when a single cross-trade shipment does
not break even, it can still be a catalyst to
create sustainable services when linked
with other cargo trends. We are able to
achieve fi rst-mover advantage and create
services that other competitors cannot
match by identifying new emerging
needs as well as the future growth poten-
tial of shipping routes, swiftly making
decisions, and rapidly building our ship-
ping track record.
The development of inland infrastruc-
ture in emerging markets helps increase
our loading volumes there. MOL will
adhere to its existing policies for develop-
ment and implement them as necessary.
In India, we relatively recently got into the
inland transport business as well as the
automobile terminal business at Ennore
Port. Also, we are engaged in operating
terminals in Australia and Turkey.
However, we believe it is imperative that
each endeavor maximizes synergies with
our main business of maritime transport
or strengthens relationships with custom-
ers expanding into those areas.
“STEER FOR 2020” will continue
MOL’s aim for improving both profi tability
and customer satisfaction. We will contin-
ue to meet the challenge of increasingly
complex and diverse seaborne trade. We
will dare not to plant the conventional
pivot foot, but rather create a resilient
system that adapts adroitly to our cus-
tomers’ needs by changing our shipping
routes fl exibly as we pursue ever more
effi cient vessel allocation and operation.
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Annual Report 2014 43
Bulkships: Car Carriers
The Car Carrier CRYSTAL ACE
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44 Mitsui O.S.K. Lines
Containerships
Revenue Breakdown by Trade (Results of FY2013)
North America
Trade
37%
Asia Trade
20%
North-South Trade
13%
Europe Trade
29%
Main Routes
(cid:3) Container Terminal Business
Toshiya Konishi
Managing Executive Offi cer
Working to secure cost
competitiveness and a source of stable
profi ts, we will transform our
containership business into the one
that can sustainably generate profi ts.
Fiscal 2013 in Review—
Looking back on “RISE2013”
In fi scal 2013, the containership business
reduced costs by about ¥20.0 billion
thanks mainly to fuller implementation
of slow steaming and other measures to
reduce fuel expenses, the G6 Alliance’s
expansion to the Asia-North America
East Coast route in May 2013 to improve
operating effi ciency, and reductions in
container handling and on-carriage
expenses. A weaker yen and lower bun-
ker prices also played a role, but all of
these factors were negated by falling
freight rates. And with the loss caused
from the incident of the containership
MOL Comfort in June 2013, we record-
ed an ordinary loss of ¥14.5 billion. This
division must still work toward the goal
of recovering profi tability as set forth in
“RISE2013.”
I would like to take this opportunity to
once again express my most sincere apolo-
gies to all of our customers and everyone
affected by the MOL Comfort incident.
Global seaborne trade remained fi rm
overall. In 2013, Asian exports to North
America grew 3.4%, supported by a sta-
ble U.S. economy. After the European
economy bottomed out, exports to
Europe recovered in the second half of
the year, climbing 4.8% for the full year.
Despite economic uncertainty and politi-
cal unease in some countries, Inter-Asia
trade and North-South trade both
expanded, helping raise global contain-
ership trade 3.9% during 2013.
On the other hand, global vessel sup-
ply rose 5.5% as signifi cant numbers of
ultra-large containerships with capacity
exceeding 10,000 TEU were delivered
for the third year in a row. This further
delayed an improvement in the supply-
demand balance and also had a destabi-
lizing effect on freight rate levels. Freight
rates greatly declined, especially in the
fi rst half of the year, in both Asia-Europe
routes, which had persistent deliveries of
large containerships, and Asia-South
America East Coast routes, to which the
replaced vessels cascaded over. Although
we did our best to maintain stable reve-
nue by securing more long term freight
contracts and by adjusting our capacity
to reduced demand during slack sea-
sons, average freight rates across all
routes in fi scal 2013 tumbled 8% year
on year. As I said before, this essentially
erased our gains from cost-cutting and
other factors, and was a major reason
our loss expanded by ¥3.2 billion.
Many other containership companies
around the world also fell into the red
amid this harsh environment. Of the 15
major shipping companies that disclose
their earnings, only three were able to
post a profi t in fi scal 2013. The less com-
petitive companies have reached the
point where they cannot bear any fur-
ther decreases in freight rates. Even
though the containership division posted
a loss, our ranking by profi t margin is
improving thanks to the cost-cutting
measures set out in the division’s own
medium-term plan “Operation CORE,”
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Annual Report 2014 45
Containership Seaborne Trade
(1995 = 100)
Asia-North America Container Trade Cargo
Movements
(Excluding Canada cargo)
(Million TEU)
400
300
200
100
0
Source: MOL
internal calculations
based on the
Clarkson Shipping
Review & Outlook
Spring 2014
15
10
5
0
2008
2009
2010
2011 2012 2013
1995
2000
2005
2010 2013(estimated)
Source: Piers/JoC etc.
(cid:2) Eastbound
(cid:2) Westbound
Global Containership Capacity by TEU Size Range
(Thousand TEU)
Asia-Europe Container Trade Cargo Movements
(Including Mediterranean cargo)
(Million TEU)
20,000
15,000
10,000
5,000
0
(cid:2) 12,000TEU~
(cid:2) 10,000-
11,999TEU
(cid:2) 8,000-
9,999TEU
(cid:2) 5,100-
7,999TEU
(cid:2) 3,000-
5,099TEU
(cid:2) ~2,999TEU
yoy %
2008
2009
2010
2011 2012 2013
Source: MOL internal calculations based on Alphaliner / IHS-Fairplay
20%
15%
10%
5%
0%
15
10
5
0
(cid:2) Westbound
(cid:2) Eastbound
Source: Drewry
2008
2009
2010
2011 2012 2013
launched in 2012. I believe the key to
improving profi tability for the division is
in pursuing the goals set out in
“Operation CORE,” including reinforce-
ment of our brand value by disclosing
and improving key performance indica-
tors, such as on-time performance per-
centages.
“STEER FOR 2020” and the
Outlook for the First Year
Through “STEER FOR 2020” the contain-
ership business will more fully implement
the strategies already laid out in
“Operation CORE.” In short, we aim to
improve profi tability by reducing unit
cost, the cost to transport one container,
as we formulate plans based on the
assumption that freight rates will contin-
ue to decline gradually in the medium-
to long-term.
The centerpiece of the unit cost
reduction measures is launching larger
vessels to reduce the vessel cost and fuel
expenses per unit. Together with higher
fuel and operating effi ciency through
slow-steaming, comprehensive operation
management and the G6 Alliance’s
expansion to Asia-North America West
Coast routes and Transatlantic routes in
May 2014, this will reinforce our cost-
competitiveness by a total of ¥30.0 bil-
lion over the three-year period from
fi scal 2014 to 2016.
We already added four of the latest
model 14,000-TEU capacity container-
ships to our fl eet in fi scal 2013 and one
in April 2014, all of which already began
operating on Asia-Europe routes. From
July 2014 to fi scal 2016, we will succes-
sively roll out ten 10,000-TEU capacity
containerships to operate Asia-Europe
and Asia-North America West Coast
routes. And by reducing the number of
less fuel-effi cient small and medium-
sized vessels, we will further improve the
whole fl eet’s cost competitiveness.
In addition, we plan to improve prof-
itability ¥8.0 billion by increasing reve-
nue from non-ocean-freight charges and
raising our slot utilization rates over
three years under “STEER FOR 2020.”
During that same time, we also plan to
increase stable income by ¥9.0 billion
from the container terminal and logistics
businesses. Putting all these together, we
plan to achieve ¥30.0 billion in ordinary
income in the containership business in
fi scal 2016.
In fi scal 2014, the fi rst year of the
plan, we forecast a return to profi t with
¥2.0 billion in ordinary income. To
ensure we succeed, we are streamlining
operations in North-South routes, where
ineffi ciencies prevented us from improv-
ing profi ts as much as competitors in fi s-
cal 2013. These efforts include the
switch over in June 2014 to the direct
Asia-West Africa route around the Cape
of Good Hope instead of transhipment
via the Mediterranean.
The major contributor to increasing
stable earnings in the container terminal
business is our U.S. subsidiary TraPac,
Inc., which carried out construction at
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46 Mitsui O.S.K. Lines
Share by Major Carrier Alliance of the North
America Routes
Share by Major Carrier Alliance of the
Europe Routes
Others
12%
CMA-CGM
6%
MSC
7%
Maersk
9%
Evergreen
9%
Others
11%
G6
20%
CKYHE
23%
CKYH
24%
G6
33%
Maersk
20%
MSC
15%
CMA-CGM
11%
Source: Alphaliner Monthly Monitor June 2014
Source: Alphaliner Monthly Monitor June 2014
the Port of Los Angeles in fi scal 2013 to
increase automation using IT technology.
This increasing cost-competitiveness will
boost profi ts in fi scal 2014. In addition,
the container terminal at Rotterdam
Port, 20% of which is owned by MOL,
will begin operations in October 2014.
Furthermore, with the aim of expanding
our overseas terminal business in the
long-term, we transferred a portion of
shares of TraPac, Inc.’s holding company
to the major Canadian fund Brookfi eld
Asset Management Inc. in January 2014
to form a strategic alliance. By leverag-
ing both the MOL Group’s high-quality,
high-effi ciency terminal operation know-
how and Brookfi eld’s practical knowl-
edge gained from solid accomplishments
in the infrastructure business in emerg-
ing markets, we plan on expanding our
business into ports across Central and
South America and beyond.
To understand the profi tability of the
containership business in the medium-
to long-term, it is important to consider
how the trend of further introduction of
larger vessels will proceed. Looking back
on the trend toward larger vessels, it
took around 20 years to go from 800
TEU to 4,000 TEU capacity ships, about
10 years to go from 4,000 TEU to 8,000
TEU capacity ships but just four years to
go from 8,000 TEU to 14,000 TEU
capacity ships. Higher fuel effi ciency is
the major driver of the switch to larger
vessels and this trend has greatly acceler-
ated since the sharp rise in crude oil pric-
es. With each shipping company chasing
larger vessels, this trend has led to a so-
called fallacy of composition. This has
resulted in an overabundance of vessels
and falling freight rates, forcing many
shipping companies to languish in
unprofi tability.
We, however, expect this trend
toward larger vessels to hit the brakes
soon. First, we have reached the limit of
cost reductions enabled by larger vessels.
Cost reductions are biggest when the
routes are long and the ports are few, so
while large vessels are used on European
routes, they are still restricted by the
physical limitations of the Suez Canal.
The largest containerships at present
have a capacity of 18,000 TEU, but it is
our view that it would not be economi-
cal to build vessels larger than this given
the amount of steel necessary to ensure
a vessel’s integrity, in addition to the
technical and structural diffi culties. And
second, it is unlikely that the number of
large vessels will continue to rise. Since
benefi ting from the economies of scale
by using large vessels depends on maxi-
mizing an effi cient slot utilization rate, it
clearly would not be economical to have
ultra-large vessels deployed on every
loop in East-West routes.
We can expect improvement in busi-
ness environment and profi tability for
containerships after 2016 and 2017,
when the large vessels ordered to date
will be delivered. The containership busi-
ness will transform into a business that
can sustainably generate profi ts as we
earn more trust from customers by con-
tinuously improving the quality of our
transportation and as we strive to secure
stable sources of income and cost-com-
petitiveness through “STEER FOR 2020.”
Glossary
(*) The G6 alliance: An alliance of six compa-
nies and represents the integration of
TNWA [MOL (Japan), APL (Singapore) and
Hyundai (Korea)] and the Grand Alliance
[NYK (Japan), Hapag-Lloyd (Germany) and
OOCL (Hong Kong)]. The alliance began
operating jointly in Asia–Europe (Northern
Europe and Mediterranean) routes in March
2012 and expanded its framework to
include North American East Coast routes
in May 2013 and North America West
Coast routes and Atlantic routes in May
2014.
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Annual Report 2014 47
Containerships
TraPac Los Angeles
Container Terminal
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48 Mitsui O.S.K. Lines
Ferry & Domestic Transport
Hirokazu Hatta
Managing Executive Offi cer
Pouring our efforts into enhancing our
services to better meet customer needs
while reinforcing our operational safety
and transportation quality, we will
strive to capture burgeoning domestic
transport demand.
Fiscal 2013 in Review—
Looking back on “RISE2013”
The ferry & domestic transport segment
comprises the ferry business, which
transports passengers, automobiles and
trucks along Japan’s largest network,
and the domestic transport business,
which transports cement, heavy oil,
steel, coal, salt and other cargoes. In fi s-
cal 2013, we recorded ¥2.2 billion in
ordinary income. This ¥0.9 billion
increase from the previous year resulted
in part because Abenomics thankfully
helped the Japanese economy recover
and the ferry business completed a series
of route rationalizations in April 2013.
The results exceeded start-of-fi scal-year
expectations by ¥0.8 billion and we were
able to contribute to the MOL Group’s
target of achieving profi t recovery as
outlined in “RISE2013.”
The ferry division saw a year-on-year
increase of 4% in passengers, 3% in
automobiles and 4% in trucks transport-
ed. In addition to a strong performance
for cargo transport, we were able to suc-
cessfully shore up signifi cant passenger
demand by boosting TV commercials,
improving internal ship services such as
adding local specialties to our menus,
and strengthening product tie-ups with
bus companies and airlines.
Turning to domestic transport via
general cargo ships, the transport of
steel boomed due to the rebounding
economy in addition to demand arising
from recovery efforts for the Great East
Japan Earthquake. An obvious shortage
of vessels emerged, but the MOL Group
was able to actively capture this demand
by more effi ciently deploying ships.
“STEER FOR 2020” and the
Outlook for the First Fiscal Year
I believe the ferry & domestic transport
segment will continue to strongly
expand in 2014 and beyond, helped by
fi rm trade arising from Japan’s recover-
ing economy and full-scale reconstruc-
tion work.
Amid a shortage of truck drivers and
an increase of labor practices aimed at
reducing overtime, there is growing
awareness by truck operators that using
night-time ferry operations is superior in
terms of cost, safety and environmental
impact. This will accelerate the shift from
inland transport to ferries, providing us
with another major opportunity. As for
passengers, we will continue our efforts
to raise brand awareness through adver-
tisements and promote attractive travel
packages, aiming to create new
demand. Going forward, we will align
our fl eet with the goal of switching over
to more energy effi cient vessels while
working to promote our environmental
performance and lower costs.
As for domestic transport, we aim to
expand the scope of our business opera-
tions supported by the solid partnerships
we have formed with ship owners in
Japan, even though the shortage of ves-
sels and crew members appears likely to
continue due to expanding demand.
This segment will continue to contrib-
ute to profi t growth for the MOL Group
throughout the entire period of “STEER
FOR 2020.” We will pour our efforts into
enhancing our services to better meet
customer needs while also reinforcing
our safe operations and transportation
quality. We foresee ordinary income of
¥3.0 billion for fi scal 2014.
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Annual Report 2014 49
Ferry & Domestic Transport
The Ferry SUNFLOWER FURANO
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50 Mitsui O.S.K. Lines
Associated Businesses
Hirokazu Hatta
Managing Executive Offi cer
While meeting market
needs and growing
demand in Japan and
other Asian countries,
we will serve as a
bearer of stable profi t
to underpin the
Group’s profi t growth.
Fiscal 2013 in Review—
Looking back on “RISE2013”
This segment comprises MOL’s real
estate, tugboat, cruise ship, trading and
other businesses. Real estate, especially
Daibiru Corporation, accounts for a large
portion of profi ts and is a main pillar
supporting the segment’s stable profi ts.
In Daibiru Corporation’s main operating
areas of Tokyo and Osaka, signs of a mar-
ket rebound accompanying the broader
economic rebound did appear, but failed
to lead rent levels higher during fi scal
2013. Nevertheless, Daibiru sustained solid
business performance with well above
average occupancy at its offi ce buildings.
Cruise ship passengers increased from
summer 2013 onward, thanks in part to
the rebounding economy. This narrowed
losses, but did not result in a turnaround.
Business performance for tugboats and
trading companies remained fi rm.
Overall, the associated businesses
recorded ordinary income of ¥11.1 bil-
lion, achieving increased revenues and
earnings.
“STEER FOR 2020” and the
Outlook for the First Fiscal Year
The associated business shall underpin
the entire MOL Group’s profi t growth
with real estate and tugboats remaining
major sources of stable profi ts. We are
committed to further improving earnings
across all fi elds.
Daibiru embarked on a new medium-
term management plan entitled “Design
100” Project Phase-I in April 2013. This
fi ve-year plan, which continues through
the end of fi scal 2017, aims to expand
revenues and profi ts by approximately
20%, thus allowing the company to
continue making steady contributions to
MOL Group’s stable earnings. The
Daibiru-Honkan Building, which was
completed in Osaka in February 2013,
has exceeded original targets and is per-
forming strongly. Daibiru will concen-
trate efforts on securing even more
tenants and improving occupancy levels.
The company is currently engrossed in
negotiations with prospective tenants for
the Shin Daibiru Building, which is slated
for completion in March 2015. Turning
overseas, Daibiru expanded into Ho Chi
Minh City, Vietnam in January 2012 with
the purchase of a high-grade building
and maintained high occupancy. The
company is now moving forward to
acquire another property in the country.
The tugboat business, serving at the
very frontline of shipping, will continue to
take the lead in reinforcing the Group’s
safe operating structure as outlined in
“STEER FOR 2020.” It will expand its
business in domestic ports and also strive
to capture new demand in ports through-
out economically booming Southeast Asia
by leveraging the MOL Group’s track
record and wealth of experience. In addi-
tion, we will continue to seek growth
opportunities in related fi elds of offshore
businesses and realize innovation
throughout our business domain in accor-
dance with “STEER FOR 2020.”
The cruise ship business has been
struggling fi nancially, but its loss has
been narrowing. We acknowledge for-
eign competitors have been making
inroads, but they have also been raising
awareness of cruises and done a lot to
expand the cruise ship market in Japan.
Mitsui O.S.K. Passenger Line, Ltd. will
continue to differentiate itself through
personalized, top-notch service. The
cruise ship business is one of the few
B-to-C businesses within the MOL
Group. The cruise business can signifi -
cantly raise the visibility of the Group
and increase the Group’s ability to com-
municate with its stakeholders. I am
eager to increase earnings and stabilize
this unique business by signifi cantly
increasing the number of passengers
experiencing our cruises.
Our trading business will expand
profi ts mainly by selling equipment to
raise vessels’ environmental and safety
performance. They have developed an
improved Propeller Boss Cap Fin (PBCF)(*),
which is a device to improve energy-effi -
ciency that has been equipped on over
2,500 ships worldwide as of fi scal 2013.
The division forecasts ordinary income
for fi scal 2014 to be ¥10.5 billion.
Glossary
(*) PBCF: A device to improve propeller effi -
ciency developed by the corporate group
centered in MOL. It reduces fuel consump-
tion by 4-5% operating at the same speed.
Associated Businesses
Daibiru-Honkon Building
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Annual Report 2014 51
Management Foundation
Underpinning MOL:
Corporate Governance and Corporate Social Responsibility
Contents
52 Board Of Directors, Corporate Auditors And Executive Offi cers
54 MOL’s Approach to Governance, Safety and CSR
56 Corporate Governance
60 Risk Management
62 Safe Operation
65 Corporate Social Responsibility (CSR)
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52 Mitsui O.S.K. Lines
Board Of Directors, Corporate Auditors And Executive Offi cers
Koichi Muto
Representative Director Born 1953
Apr. 1976 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2002 General Manager of Bulk
Carrier Division
Jan. 2003 General Manager of Corporate
Planning Division
Jun. 2004 Executive Offi cer, General
Manager of Corporate
Planning Division
Jun. 2006 Managing Executive Offi cer
Jun. 2007 Director, Managing Executive Offi cer
Jun. 2008 Director, Senior Managing
Executive Offi cer
Jun. 2010 Representative Director, President
Executive Offi cer (current)
Apr. 1978 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2004 General Manager of Tanker
Division
Jun. 2006 Executive Offi cer
Jun. 2008 Managing Executive Offi cer
Jun. 2010 Director, Managing Executive
Offi cer
Jun. 2011 Director, Senior Managing
Executive Offi cer (current)
Tsuneo Watanabe
Director
Born 1955
Junichiro Ikeda
Director
Born 1956
Apr. 1979 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2003 General Manager of Logistics
Business Division
Jun. 2008 Executive Offi cer, Managing
Director of MOL Europe B.V.
Jun. 2011 Managing Executive Offi cer
Jun. 2013 Director, Managing Executive
Offi cer (current)
Apr. 1975 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2001 General Manager of LNG
Carrier Division (A)
Jun. 2004 General Manager of LNG
Carrier Division
Jun. 2005 Executive Offi cer,
General Manager of LNG
Carrier Division
Jun. 2008 Managing Executive Offi cer
Jun. 2010 Senior Managing Executive
Offi cer
Kazuhiro Sato
Representative Director Born 1953
Jun. 2013 Representative Director,
Executive Vice President
Executive Offi cer (current)
Apr. 1979 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2004 General Manager of Human
Resources Division
Jun. 2007 General Manager of Liner
Division
Jun. 2008 Executive Offi cer
Jun. 2010 Managing Executive Offi cer
Jun. 2013 Director, Senior Managing
Executive Offi cer (current)
Apr. 1981 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2006 General Manager of
Corporate Planning Division
Jun. 2008 Executive Offi cer
Jun. 2011 Managing Executive Offi cer
Jun. 2014 Director, Managing
Executive Offi cer (current)
Masahiro Tanabe
Director
Born 1957
Shizuo Takahashi
Director
Born 1959
Jun. 2008 Director of Mitsui O.S.K. Lines,
Ltd. (current)
Jan. 2014 President of Capital Market
Promotion Foundation (current)
Jun. 2011 Director of Mitsui O.S.K. Lines,
Ltd. (current)
Nov. 2012 Chairman of NWIC Co., Ltd.
(current)
Takeshi Komura
Director
Born 1939
Masayuki Matsushima
Born 1945
Director
Jun. 2014 Director of Mitsui O.S.K. Lines,
Ltd. (current)
Jun. 2014 Advisor to the Board of
Toshiba Corporation (current)
Atsutoshi Nishida
Director
Born 1943
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Annual Report 2014 53
Takaaki Inoue
Managing Executive Offi cer
(Tanker Safety Management Offi ce, MOL LNG
Transport Co., Ltd., Marine Safety Division)
Takashi Maruyama
Executive Offi cer
(General Manager of Finance Division)
Akihiko Ono
Executive Offi cer
(General Manager of Corporate Planning
Division)
Toshiyuki Sonobe
Executive Offi cer
(Managing Director of Mitsui O.S.K. Bulk
Shipping (Asia Oceania) Pte. Ltd., Southeast
Asia)
Yoshikazu Kawagoe
Executive Offi cer
(General Manager of Technical Division)
Hideo Horiguchi
Executive Offi cer
(General Manager of Accounting Division)
Akio Mitsuta
Executive Offi cer
(Tanker Division)
Koichi Yashima
Executive Offi cer
(Human Resources Division)
Mitsujiro Akasaka
Executive Offi cer
Managing Director of MOL (Asia) Ltd.
Toshikazu Inaoka
Executive Offi cer
(Dry Bulk Carrier Supervising Offi ce,MOL Ship
Management Co., Ltd.,
Marine Safety Division, General Manager of Dry
Bulk Carrier Supervising Offi ce)
Naotoshi Omoto
Executive Offi cer
(General Manager of Car Carrier Division)
Toshiaki Tanaka
Executive Offi cer
(General Manager of Coal and Iron Ore Carrier
Division)
Corporate Auditors
Executive Offi cers
Masaaki Tsuda
Corporate Auditor
Born 1959
Koichi Muto
President
Apr. 1981 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2006 General Manager of General
Affairs Division
Jun. 2011 Corporate Auditor of Mitsui
O.S.K. Lines, Ltd. (current)
Takehiko Ota
Corporate Auditor
Born 1960
Apr. 1984 Joined Mitsui O.S.K. Lines, Ltd.
Jun. 2008 General Manager of Investor
Relations Offi ce
Jun. 2013 Corporate Auditor of Mitsui
O.S.K. Lines, Ltd. (current)
Hiroyuki Itami
Corporate Auditor
Born 1945
Oct. 2008 Professor and Dean of Tokyo
University of Science, Graduate
School of Innovation Studies
(current)
Jun. 2011 Corporate Auditor of Mitsui
O.S.K. Lines, Ltd. (current)
Hideki Yamashita
Corporate Auditor
Born 1941
Apr. 1982 Attorney-At –Law (current)
Apr. 1985 Established YAMASHITA &
TOYAMA LAW AND PATENT
OFFICE
Mar. 1993 Patent Attorney (current)
Jun. 2011 Corporate Auditor of Mitsui
O.S.K. Lines, Ltd. (current)
Kazuhiro Sato
Executive Vice President Executive Offi cer
(Assistant to President)
Tsuneo Watanabe
Senior Managing Executive Offi cer
(Tanker Division, Tanker Safety Management
Offi ce)
Kenichi Nagata
Senior Managing Executive Offi cer
(Research Offi ce,Coal and Iron Ore Carrier
Division, Bulk Carrier Offi ce, Dry Bulk Carrier
Supervising Offi ce)
Junichiro Ikeda
Senior Managing Executive Offi cer
(Human Resources Division, Liner Division, Car
Carrier Division)
Masaaki Nemoto
Senior Managing Executive Offi cer
(Dry Bulk Carrier Supervising Offi ce, Tanker
Safety Management Offi ce, MOL Ship
Management Co., Ltd., MOL LNG Transport Co.,
Ltd.,Human Resources Division, Marine Safety
Division, Tanker Safety Management Offi ce)
Masahiro Tanabe
Managing Executive Offi cer
(Finance Division, Accounting Division, Investor
Relations Offi ce)
Shizuo Takahashi
Managing Executive Offi cer
(Internal Audit Offi ce, Secretaries Offi ce,
Corporate Planning Division, Public Relations
Offi ce, MOL Information Systems, Ltd.,
Compliance)
Kiyotaka Yoshida
Managing Executive Offi cer
(Technical Division)
Hirokazu Hatta
Managing Executive Offi cer
(General Affairs Division, Group Business
Division, Kansai Area)
Takeshi Hashimoto
Managing Executive Offi cer
(LNG Carrier Division, Offshore and LNG Project
Division,MOL LNG Transport Co., Ltd.)
Tetsuro Nishio
Managing Executive Offi cer
(Dedicated Bulk Carrier Division)
Toshiya Konishi
Managing Executive Offi cer
(Liner Division)
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54 Mitsui O.S.K. Lines
MOL’s Approach to Governance, Safety and CSR
We will continue to
build a highly
transparent management
foundation that brings
both order and growth
dynamics.
Shizuo Takahashi
Managing Executive Offi cer
Corporate Governance that Supports
Growth Dynamics
MOL believes there are two sides to effective corporate gov-
ernance. The fi rst is defensive, focused on eliminating risks
and ensuring business is conducted in line with social norms
and corporate ethics. The other side is offensive, striving to
maximize corporate value by accurately evaluating latent
risks in the process of pursing business opportunities, then
actively taking those risks deemed reasonable. In short, a
company needs both wheels of governance. One brings
order, the other provides growth dynamics. Only after both
wheels are fi rmly in place, can a company gain the trust of its
customers, stockholders, business partners, employees, local
communities and wide-ranging stakeholders to sustainably
conduct business operations.
MOL greatly shored up its management structure in the
fi ve years leading up to 2002. Taking a lead position among
Japanese companies, MOL established an advanced, highly
transparent corporate governance structure by, for example,
inviting external directors and introducing an executive offi -
cer system. While you could say we are now reaping the
benefi ts of those efforts, MOL has only arrived at its current
position through a process of continuous improvement and
evolution. We have worked hard to enhance corporate value.
The fruit of these efforts can be found in the growth we
achieved through the successful implementation of a series
of mid-term management plans. We were also able to over-
come the oppressive business environment from around
2011 to 2012 and return to a growth trajectory through the
Business Structural Reforms of 2012. This can be attributed
to the proper functioning of corporate governance.
However, we must deeply refl ect on the fact that during
the boom period, before the onset of the fi nancial crisis, we
compounded signifi cant market exposure risks, as well as the
fact that car carriers became involved in cartel-related viola-
tions. Under the new midterm management plan,
“STEER FOR 2020,” the strengthening of total risk control
and compliance is regarded as a priority issue around which
the entire MOL Group is coming together to carry out.
Safe Operation as the
Wellspring of Competitiveness
A major premise for our business activities lies in the follow-
ing MOL Group Corporate Principle: “We will promote and
protect our environment by maintaining strict, safe operation
and navigation standards.” Everyone at the Group knows
that there is no completion date on maintaining strict, safe
operation and navigation standards. We need to endlessly
focus our efforts on making continuous improvements. This
is why we established the Operational Safety Committee
chaired by the president of MOL. This is also the reason top
management is proactively taking the lead in evaluating and
determining important matters related to safe operation.
Maintaining strict, safe operation is also directly connect-
ed to the quality of service we provide our customers. For
this reason, MOL has set achieving the Four Zeroes (an
unblemished record in terms of serious marine incidents, oil
pollution, fatal accidents and cargo damage) as a permanent
target. We are striving for transparency by monitoring stan-
dard quantitative key performance indicators (KPIs), such as
the number of work-related accidents, operational stoppage
time and operational stoppage accident rate. And by proac-
tively disclosing MOL’s shipping quality to stakeholders, MOL
is doing its utmost to be the carrier of choice.
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Annual Report 2014 55
As we place more focus on LNG carrier shipping and off-
shore businesses going forward under “STEER FOR 2020,”
customers and society at large will demand an even higher
level of safe operation. MOL’s ability to deliver this will,
through marketing, likely become a powerful point of differ-
entiation, setting us apart from other companies. MOL will
not become complacent with the track record it has cultivat-
ed thus far. We will always place safe operation as our ulti-
mate core competence. And in securing human resources as
we expand the LNG carrier business, we will continue to
actively promote the employing and training of superior
marine and inland personnel. We aim to be the company
of choice.
Tightening Global Environmental Regulations
as a Business Chance
In the world of international seaborne trade, the 21st centu-
ry is said to be the era of environmental regulation. New reg-
ulations are steadily being introduced to prevent global
warming, conserve biodiversity, and protect the sea and the
air. In responding concretely, MOL views these evolving regu-
lations as a business opportunity. MOL will leverage its practi-
cal environmental technologies and know-how to attain a
competitive advantage and advance toward further growth.
To this effect, we have launched the Senpaku ISHIN project,
have set targets for introducing environmental technologies
and we are making fi rm strides toward achieving our goals.
For example, the hybrid car carrier Emerald Ace, delivered in
2012, earned plaudits from automakers striving to lower
environmental load over the entire product lifecycle.
Social Contribution Activities Centered on
MOL’s Main Businesses and Sharing
Global Values
In terms of social contribution, MOL especially promotes
activities that synergize with our areas of business. For exam-
ple, over half of the seafarers aboard our vessels are Filipinos.
Their homeland lies in the freq uent path of typhoons so,
unfortunately, the Philippines is often visited by calamity.
When this happens, we swiftly conduct on-site disaster relief
operations and support reconstruction by providing relief
supplies and funds to help people return to their normal
lives. On a different continent altogether, MOL participates in
a support project by the U.N. Development Programme to
combat the pirate problem in the waters around Somalia. We
are working hard to enable the young people of Somalia to
fi nd employment in proper lines of work by solving underly-
ing problems through the establishment of inland social
infrastructure. The nations of Africa are expected to grow
and we will continue to leverage the unique strengths of
maritime shipping to promote stability, for example, by trans-
porting desks and chairs to be used in schools for free and
cooperating in shipments of mobile libraries. Taking the long
view, these initiatives will serve as the cornerstone of our sus-
tainable growth and through them, our Group employees
from all around the world can really feel that our business
activities are contributing to the betterment of people’s lives
through marine shipping.
Furthermore, as a company expanding globally, we share
universal values. It is important to show that MOL acts in
accordance with those values. MOL was quick to participate
in the United Nations Global Compact in 2005 and has
endeavored to support and carry out the Global Compact’s
10 principles, which span the four fi elds of human rights,
labour, environment and anti-corruption.
MOL’s Fighting Spirit is in Its DNA
MOL’s views as explained above regarding governance, safe
operation, CSR and the environment are based on a corpo-
rate culture fostered throughout a 130-year history. Above
all, I believe that MOL’s unique DNA is essentially its indomi-
table fi ghting spirit. Unyieldingly taking on new challenges is
what I believe enables MOL’s sustainable corporate activities.
To remain sustainable, it is necessary to set high targets and
tirelessly pursue them. Reasonable risks must also be taken
to be sustainable.
Under “STEER FOR 2020,” we will greatly reduce our
market exposure risks as we set course to pursue long-term
stable profi ts, especially in LNG carriers and offshore busi-
nesses. The decision to shift its investment focus to LNG car-
riers and offshore businesses with a signifi cant ¥700 billion
investment is a remarkably bold decision.
This kind of decision, however, is made based on the
results of business intelligence, which the Company consid-
ers vital to governance. I want to stress that “STEER FOR
2020” is the result of a thorough decision-making process.
Management, including outside directors, comprehensively
examined the arguments analyzing relevant data from many
angles, starting with front-line data collected by MOL’s
employees. They only arrived at their decision after thor-
oughgoing debate and completing a careful governance pro-
cess that included quantitative and qualitative risk
assessment.
This year, MOL celebrates its 130th anniversary. From its
forebears, open communication has been steadfastly handed
down over all these years. Open communication remains a
value the Company prides itself on, and a virtue essential to
new endeavors. Valuing such endeavors, I would like to cre-
ate a highly transparent management foundation that brings
both order and growth dynamics. Rather than governance
that merely constrains everyone to a predetermined mold,
this two-sided form of corporate governance will enable us
to anticipate long-term trends and customer needs to
achieve the continued creation of corporate value.
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56 Mitsui O.S.K. Lines
Corporate Governance
MOL’s Philosophy and
Past Management Reforms
The MOL Group established the MOL Group Corporate Principles
in March 2001. One of the pledges in our Corporate Principles
states, “We will strive to maximize corporate value by always
being creative, continually pursuing higher operating effi ciency
and promoting an open and visible management style that is
guided by the highest ethical and social standards.”
In order to realize the ideals set forth in the principles, MOL
reformed its corporate governance structure, instituting manage-
ment reforms that brought outside directors onto the board, sep-
arated management and executive functions, and set standards
for accountability, risk management and compliance. These
reforms were implemented as shown in the timeline below.
Corporate Governance Organization
MOL has established a corporate governance system that maxi-
mizes shareholder profi ts through the most appropriate alloca-
tion of management resources, with higher transparency of
corporate management as shown in the chart on the next page.
The Board of Directors (with the participation of independent
outside directors, who are indispensible to corporate governance)
supervises and encourages business operations, which are carried
out by the President as chief executive offi cer. In addition, as a
company with a board of corporate auditors, four corporate
auditors, including two outside auditors, conduct business and
accounting audits.
At MOL, we believe that the essence of corporate governance
lies not in its structure or organization, but in whether or not it func-
tions effectively. The framework described in the preceding para-
graph is operated in the manner outlined in the following sections.
The Board of Directors
The Board of Directors, as the Company’s highest-ranking deci-
sion-making body, discusses and decides on basic policy and the
most important matters connected with MOL Group manage-
ment. It consists of nine directors, including three outside direc-
tors. In principle, the Board of Directors convenes around 10
times a year, and as necessary.
Major investment projects, such as the construction of new
vessels, are submitted to the Board of Directors at the basic poli-
cy formulation stage. The directors thoroughly evaluate and dis-
cuss the pros and cons of the projects and make decisions on
their feasibility from many perspectives. Transferring the authori-
ty to implement projects within the scope of the basic policy to
executive offi cers supervised by the President speeds decision-
making on individual projects.
Deliberation on Corporate Strategy and Vision
A major feature of the Board of Directors is deliberation on corpo-
rate strategy and vision. At each meeting, the board focuses on a
particular topic concerning management strategies, MOL’s long-
term vision or other subjects involving management. These discus-
sions provide an opportunity for lively debates that include the
outside directors and corporate auditors, thus helping to ensure that
the perspective of shareholders is refl ected in how MOL is managed.
With regard to the midterm management plan, the Board
began deliberations centered on the theme of “shale revolution
and energy transportation” in February 2013 and continued with
the deliberations as outlined below. The prudent deliberations
extended to an analysis of the business environment and open
discussions on the direction of the plan based on opinions and
information about new business opportunities. The fruit of this
comprehensive deliberation is refl ected in “STEER FOR 2020.”
Themes discussed in corporate strategy and vision
deliberations held in fi scal 2013 (4 times)
May 2013
Prospects for offshore businesses and MOL’s initiatives
October 2013
November
2013
Business environment analysis for formulating the next
midterm management plan
Technical innovation in marine shipping
February 2014 Outline of next midterm management plan
Executive Committee and Committees
MOL established the Executive Committee in 2000 as part of
reforms to its management organization. As the second step of
those reforms, in 2002 the Company expanded the jurisdiction
of the Executive Committee regarding execution of business
activities, and also transferred the authority to implement proj-
ects within the scope of the basic policy approved by the Board
of Directors to executive offi cers supervised by the President to
speed up decision-making on individual projects.
MOL has also established the following committees to study
and discuss important matters that will be submitted to the
Executive Committee for discussion and projects straddling divi-
sions, as sub-committees of the Executive Committee.
y
r
o
t
s
i
H
1997
Outside auditors increased
from one to two out of a total
of four auditors
1998
George Hayashi (former APL
chairman) invited to join the
Board of Directors (became
Director and Vice President in
1999, following revision of the
Shipping Act)
2000
Management organization reform
1. Introduced a system of executive offi cers
2. Abolished the Managing Directors Committee and established an
Executive Committee (reduced the membership from 21 to 10)
3. Reformed the Board of Directors (redefi ned its duties as the
highest-ranking decision-making body and the supervision of
business activities) and reduced membership from 28 to 12
4. Elected two outside directors
5. Established the Corporate Visionary Meeting
Established the IR Offi ce
Started holding the Annual General Shareholders’ Meeting on a
day relatively free of other shareholders’ meetings
2001
Established the MOL Group
Corporate Principles
Added one more outside
director, increasing the num-
ber of outside directors to
three
Established Compliance Policy
and a Compliance Committee
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Annual Report 2014 57
■ STEER Committee
Executes and follows up on midterm management plans for
MOL and the MOL Group, and examines and discusses matters
related to the MOL Group’s management strategy.
■ Budget Committee
Formulates basic policy on budget preparation for MOL and the
MOL Group and sets targets; ascertains the status of implemen-
tation at MOL and in the MOL Group of the overall budget; and
studies and discusses results evaluation and other matters.
■ Investment and Finance Committee
Studies and discusses items that will be submitted to the Executive
Committee such as matters related to investment and fi nance and
guarantees of obligations, the fl eet control plan for individual vessels,
and important matters relating to Group company management.
■ Operational Safety Committee
Chaired by the President, this committee studies and discusses
basic policies and measures for ensuring safe operation of MOL
Group-operated vessels through rigorous attention to every
detail.
As subordinate organizations of this committee, there are the
Safety Assurance Committee, which monitors efforts to strengthen
Corporate Governance Organization (as of June 24, 2014)
the safe operation system, confi rms progress and achievements
thereof, and discusses advice for making necessary revisions to
measures; and the Ship Standard Specifi cation Committee, which
discusses standard specifi cations for MOL vessels and MOL Ship
Management Standards.
■ CSR and Environment Committee
Studies and discusses corporate social responsibility (CSR), and
matters related to company systems for reducing global environ-
mental impact.
■ Compliance Committee
Studies and discusses the enhancement of the compliance sys-
tem and actions for dealing with compliance violations, and mat-
ters related to establishing a structure for protecting and
managing personal information, among other topics.
■ Review Committee of Recurrence Prevention Measures
for Anti-competitive Practices
Studies and formulates policies to prevent a recurrence of cartel
activity as well as to ensure the strict execution of the policies.
■ Business Reconstruction Committee
Studies and discusses matters relating to rehabilitation plans for
depressed businesses.
General Shareholders’ Meeting
Elect and appoint/dismiss
Board of Directors [11]
Outside directors: 3
Internal directors: 6
Total: 9
Elect and appoint/supervise
Submit basic management policies
and other issues for discussion
Executive Committee [45]
Internal directors and Executive officers: 9
Business audit
Accounting audit
Accounting audit
Elect and appoint/dismiss
Elect and
appoint/dismiss
Corporate Auditors Outside auditors: 2
Internal auditors: 2
Total: 4
Corporate Auditor Office
Accounting Auditors
Provide direction on
important business issues
Submit to Executive Committee after preliminary deliberations
Committees Under the Executive Committee
STEER Committee [16], Budget Committee [2], Investment and Finance Committee [39],
Operational Safety Committee [3], CSR and Environment Committee [2],
Compliance Committee [2], Review Committee of Recurrence Prevention
Measures for Anti-competitive Practices [New], Business Reconstruction Committee [9]
Submit report on important business and other issues
Executive Officers
Director/Executive officers: 6
Executive officers: 19
Total: 25
Divisions / Offices / Branches / Vessels / Group companies
Provide
direction
Audit plan,
Audit report
Communicate and coordinate
with corporate auditors and
independent public accountant
Internal Audit Office
Business audit
Accounting audit
Numbers in brackets show the number of meetings of the Board of Directors, Executive Committee and their sub-committees during fiscal 2013.
The STEER Committee, an organization under the Executive Committee, was called the RISE Committee in fiscal 2013 and met 16 times.
2002
2006
Second stage of management reforms
Reforms reinforced roles of the Board of
Directors concerning determination of basic
strategies and monitoring risk management
while providing for faster decision-making
at the business execution level
1. Board of Directors was reorganized to
carry out three important functions: (1)
deliberation on issues requiring approval
by the directors; (2) receipt of reports on
business operations; and (3) deliberation
on corporate strategy and vision
2. Reviewed and consolidated issues
submitted to the Board of Directors
3. Expanded jurisdiction of the Executive
Committee regarding execution of busi-
ness activities
Decided basic policy on the establishment of inter-
nal control systems in response to enforcement of
the new Japanese Companies Act
In response to the enforcement of the Financial
Instruments and Exchange Act, the Internal Control
Planning Offi ce was established in the Corporate
Planning Division
2007
The Internal Control Planning Offi ce enhanced inter-
nal control systems for the purpose of ensuring the
accuracy of fi nancial reporting, in accordance with
the Financial Instruments and Exchange Act.
2008
We have been using management evalua-
tions of internal controls relating to fi nan-
cial reporting required by the Financial
Instruments and Exchange Law since fi scal
2008, audits by the Internal Audit Offi ce
and advice based on the results of those
audits, to improve internal controls
throughout the Group.
2009
We submitted an internal control report to
the Kanto Local Finance Bureau in Japan
containing an assessment by management
that internal controls over fi nancial report-
ing at MOL were effective.
2011
Revised the MOL’s Compliance
Policy and Rules of Conduct
2014
Revised the Compliance Policy,
Revised the Compliance Policy,
establishing a chief compli-
establishing a chief compli-
ance offi cer (COO)
ance offi cer (COO)
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58 Mitsui O.S.K. Lines
Functions of Outside Directors and
Reasons for Appointment
As part of efforts to strengthen corporate governance, MOL
appoints outside directors, with the aim of bolstering oversight
of the execution of business operations by bringing an outside
perspective to management.
MOL has appointed three outside directors whose experience
encompasses macroeconomic management, fi nance, and businesses
in Japan. MOL has adjudged that all three individuals are indepen-
dent and have neutral positions with no confl icts of interest with the
Company. The outside directors draw on their individual experience
and insight to check the appropriateness of management and the
status of execution of business operations from the shareholders’
standpoint. At the same time, they express valuable opinions about
management as a whole. In these ways, the outside directors play a
major role in enhancing the operation of the Board of Directors.
Outside Director Newly Elected in 2014
Name
Position
Reason for Appointment
Atsutoshi
Nishida
Advisor to the Board of
TOSHIBA CORPORATION
MOL adjudged that he can offer
advice from the shareholders’ per-
spective, with an objective view
independent from that of internal
executive management, based on
his abundant experience and
extensive knowledge as a corpo-
rate executive.
(As of June 25, 2014)
Functions of Outside Corporate Auditors and
Reasons for Appointment
The Board of Directors has nine members, including three outside
directors who are completely independent and have no confl icts of
interest with MOL. Likewise, there are four corporate auditors, who
are responsible for performing statutory auditing functions, including
two outside corporate auditors who are completely independent and
have no confl icts of interest with MOL. At a time when the auditing
systems of corporations are taking on added importance, it goes
without saying that the independence of auditors from management
and policy execution is assured. Our corporate auditors work closely
with the Internal Audit Offi ce and independent public accountants to
assure effective corporate governance. They also work on strengthen-
ing corporate governance and compliance throughout the group.
Outside Corporate Auditor Newly Elected in 2014
Name
Position
Reason for Appointment
Hideki
Yamashita
Attorney-at-Law & Patent
Attorney, YAMASHITA &
TOYAMA LAW AND
PATENT OFFICE
MOL adjudged that he has a
neutral position with no confl icts
of interest with the Company, and
that he has wide-ranging
experience and knowledge for
checking the appropriateness of
management decisions and
supervising the execution of
business operations from the
shareholders’ perspective based
on his specialist knowledge as an
attorney at law.
(As of June 24, 2014)
Director and Corporate Auditor Compensation
The Board of Directors, including the outside directors, deter-
mines compensation for the directors and corporate auditors.
Compensation paid to directors and corporate auditors in fi scal
2013 is shown in the following table.
The Company has granted stock options to all directors, exec-
utive offi cers, general managers of divisions and branch offi ces
and managers in similar positions, as well as to presidents of
consolidated subsidiaries, to motivate them to carry out opera-
tions for the benefi t of shareholders.
Compensation for Directors and Corporate Auditors
No. of people
remunerated
Total
remuneration
(¥ millions)
(Thousands
of U.S.$)
Directors
(Excluding outside directors)
Corporate auditors
(Excluding outside corporate
auditors)
Outside directors and
outside corporate auditors
9
3
5
¥331
$3,224
62
57
610
563
Compensation for Independent Public Accountants
Compensation for auditing services
Compensation for auditing-related services
Total
Compliance
(¥ millions)
(Thousands
of U.S.$)
¥105
3
¥108
$1,020
35
$1,056
The Company is aware of the crucial role that compliance plays
in living up to its broad corporate social responsibilities, and that
compliance with the letter of the law is at the core of this role.
We have established a Compliance Committee, which is headed by
a corporate offi cer appointed by the Executive Committee, and formu-
lated the Compliance Policy to assure strict adherence to rules and reg-
ulations. General managers of divisions and offi ces are appointed as
Compliance Offi cers. They are responsible for enforcing compliance
regulations and are also required to report to the Compliance
Committee Secretariat Offi ce in the event of a compliance breach. The
Internal Audit Offi ce, a body that operates independently of the
Company’s divisions and offi ces, provides a counseling service. The
Internal Audit Offi ce undertakes investigations of breaches and reports
the results to the Compliance Committee. In addition to the existing
counseling service, in fi scal 2011 we established an external compli-
ance advisory service desk, which we entrusted an attorney to run.
The Company works to assure a proper relationship with its
independent public accountants. Compensation paid to indepen-
dent public accountants in fi scal 2013 is shown in the table above.
Regarding the Japan Fair Trade Commission's Announcement
According to the announcement made by the Japan Fair Trade
Commission (JFTC) on March 18, 2014, MOL was found to have violated
Article 3 of the Antimonopoly Act (Unreasonable Restraint of Trade). The
Company, however, was exempted from Cease and Desist Orders and
Surcharge Payment Orders because it had already ceased the questioned
conduct before the on-site investigation and the JFTC granted MOL's
application under the JFTC's leniency program. Nevertheless, we still
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Annual Report 2014 59
consider this legal violation to be a very serious matter and have cut
executive compensation of the Chairman, the President, and the Senior
Managing Executive Offi cer responsible. In addition, we are working to
reinforce compliance through new measures, including those described
below, as each and every executive and employee should conduct their
activities each day with the deeply ingrained understanding that
compliance is a major requisite for corporate activities.
(cid:129) Established the Review Committee of Recurrence Prevention Measures
for Anti-competitive Practices, which is headed by the President, to
examine and execute concrete policies to prevent a recurrence
(cid:129) Established a chief compliance offi cer
(cid:129) Revised company rules and reinforced education and training
Internal Control System
Since the fi scal year ended March 2009, the Financial Instruments
and Exchange Act has obligated publicly listed companies to pre-
pare a report evaluating their internal controls over fi nancial
reporting by management (Internal Control Reporting System) and
to have this evaluation audited by auditors outside the Company.
This internal control reporting system involves management them-
selves confi rming the effectiveness of the framework for disclosing
information such as appropriate and proper fi nancial reporting
through methods that visualize and evaluate operations, and an
audit by auditors from outside the Company.
Using the occasion of this system reform, MOL went beyond
the scope required of it by law, and is promoting activities to fur-
ther enhance MOL Group management effectiveness, effi ciency
and transparency, namely ensuring the appropriateness of busi-
ness operations and the trustworthiness of fi nancial reporting.
In fi scal 2013, MOL again assessed the status of the internal con-
trols over fi nancial reporting and the operation thereof, confi rming
that there were no major fl aws in the MOL Group’s internal controls
over fi nancial reporting. Going forward, the MOL Group will contin-
ue working to enhance its internal control system.
Independent Directors/ Corporate Auditors
Due to partial amendments to the Securities Listing Regulations that
came into force in December 2009, publicly listed companies are
required to secure independent director(s)/corporate auditor(s) from
the standpoint of protecting general investors (Rule 436-2 of the
Securities Listing Regulations). An independent director/corporate
auditor means an outside director or outside corporate auditor who
is unlikely to have a confl ict of interest with general investors.
Independent directors/corporate auditors are expected to act to pro-
tect the interests of general investors. For instance, they are expected
to state necessary opinions to ensure the interests of general share-
holders are taken into consideration in a situation where a decision is
made concerning business operations in the Board of Directors or
other decision-making body of a publicly listed company.
MOL has designated its three outside directors and two out-
side corporate auditors as independent directors/corporate audi-
tors, respectively, because there is no concern about a confl ict of
interest with general investors in conformity with the criteria for
independent directors/corporate auditors of listed securities
exchanges. Each of these individuals plays a major role in corpo-
rate governance by checking the appropriateness of manage-
ment decisions and supervising the execution of business
operations from the shareholders’ perspective based on their
experience and insight.
Annual General Shareholders’ Meeting
MOL aims to hold open General Shareholders’ Meetings. In addi-
tion to sending the notice of the general meeting of sharehold-
ers out about three weeks before the meeting, MOL avoids dates
when many Japanese companies hold their annual meetings so
that as many shareholders as possible can attend.
MOL has also enabled shareholders to exercise their voting
rights by mobile phone and the Internet since the June 2006
annual meeting, in addition to postal voting, so that shareholders
who cannot attend the annual meeting can vote on proposals.
Furthermore, since the June 2006 annual meeting, MOL has used
the electronic voting platform for institutional investors so that
proxy voting rights holders can exercise voting rights. Moreover, a
summary of questions received about matters reported and pro-
posed at the annual meeting is posted on MOL’s website after the
conclusion of the meeting in the interest of fair disclosure.
Accountability
MOL believes that timely, full and fair disclosure of corporate and
fi nancial information is an important aspect of corporate gover-
nance. In addition to being accountable to shareholders and
investors by providing information, the Company makes every
effort possible to refl ect their opinions in management.
The distinguishing feature of our investor relations activities is that
the President takes the lead in their implementation. In fi scal 2013, the
President participated in the Company’s presentations of quarterly
results and attended meetings with domestic and foreign investors.
This refl ects his conviction that it is the chief executive offi cer’s respon-
sibility to explain future corporate strategies to investors. The Company
is also aware of the need for full and fair disclosure to all investors,
whether in Japan or overseas. At the same time its quarterly fi nancial
results in Japanese are released over the Tokyo Stock Exchange’s
TDnet, the Company posts them to its website with an accompanying
English translation. The Japanese and English drafts of presentation
materials are also posted on the website. This information is e-mailed
on the same day to foreign investors registered with the Company.
MOL actively disseminates information about management strategy,
investment plans, market conditions and other information through
its website.
Japan’s Stewardship Code was enacted in February 2014. MOL
has already been proactively holding constructive dialogues with insti-
tutional investors and there will be no change to that policy. Feedback
is regularly provided to management with regard to the content of
discussions held with investors and analysts. Going forward, MOL will
further bolster the quality and quantity of communication while being
mindfully aware of fair disclosure.
The responsibility to provide information is not limited to man-
agement and fi nancial issues. MOL’s basic stance is to quickly disclose
information, even if it is negative such as information on accidents,
to all stakeholders. Furthermore, we hold regular drills for respond-
ing to the media in emergencies and are working to strengthen our
ability to be able to quickly and properly disclose information.
MOL will continue working to raise confi dence in its business
policies and management through close communication with
various stakeholders.
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60 Mitsui O.S.K. Lines
Risk Management
The Company identifi es the risks surrounding the MOL Group,
such as fl uctuations of freight rates, with the aim of managing
and reducing these risks. In the midterm management plan
"STEER FOR 2020," MOL has designated the reinforcement of
total risk control as one measure to strengthen its management
foundation and support the successful execution of the plan. To
fully exercise sustainable risk management, the Company trans-
parently quantifi es its comprehensive risk.
Fluctuations of Cargo Volume, Fleet Supply and
Freight Rates
The global shipping business, like many other industries, is great-
ly affected by trends in the global economic cycle, and is thus
subject to both macroeconomic risk, as well as business risk asso-
ciated with trends in specifi c industries. There are a multitude of
factors that are subject to change, such as fl uctuations in the
economies of individual countries, changes in trade structures,
vessel supply-demand balance, market conditions and cargo vol-
umes. Achieving the best performance hinges on objectively ana-
lyzing information so as to continually increase the probability of
generating higher earnings. With this in mind, MOL has adopted
a strategy of “diversifying operations to reduce risk” and “raising
highly stable profi ts” by aligning its fl eet to match international
marine transport demand in the transport of both raw materials
and fi nished goods. In this way, we strive to maximize returns
Fleet Composition (As of March 31, 2014)
Others
43
5%
Containerships
119
13%
Car Carriers
125
13%
LNG Carriers
67
7%
Others
178
0%
Containerships
7,091
11%
Car Carriers
2,033
3%
LNG Carriers
5,182
8%
Number of
Vessels
Deadweight
(1,000 DWT)
Dry Bulkers
403
43%
Tankers
180
19%
Dry Bulkers
35,760
53%
Tankers
16,874
25%
and sustain profi t growth. In accordance with our internal mar-
ket risk management regulations, we appropriately reduce risks
related to fl uctuation, especially those arising from freight rates,
bunker prices, exchange rates, and interest rates. The Investment
and Finance Committee also identifi es, analyzes and evaluates
risks related to such material issues as investment in ships.
Diversifying Operations to Reduce Risk
MOL operates a “full-line marine transport group.” As of the
end of March 2014, we operated around 940 vessels, ranging
from dry bulkers, tankers, and LNG carriers to car carriers and
containerships, capable of transporting a diverse range of raw
materials and fi nished goods. Each type of ship and each type of
cargo have particular supply and demand trends, and create par-
ticular markets. While some of these markets are highly correlat-
ed with each other, others are negatively correlated depending
mainly on the economic environment, so the impact in one sec-
tor offsets the impact in another. By assessing the suitability of a
particular vessel type for medium- to long-term contracts and
market exposure the Company expects, MOL constructs an opti-
mum business portfolio, which allows the Company to pursue
higher profi ts while mitigating risks.
Building up Highly Stable Profi ts Through the Use of
Medium- and Long-Term Contracts and Other Means
The Company pursues medium- and long-term contracts won
based on long-standing relationships of trust with customers.
These contracts ensure a stable future cash fl ow that will help
reduce the risk that market fl uctuations could have on its results.
International marine transportation is expanding, but consid-
ering the ongoing glut of shipbuilding capacity, more time will
likely need to elapse before a structural turnaround is realized in
the market environment. The Company aims to conclude con-
tracts that are not largely affected by changes in the external
business environment and constitute a stable source of profi t. By
expanding these contracts from a long-term perspective, MOL
will create an even steadier earnings structure. To achieve this
objective, one of the options we will look closely at as a matter
of priority is M&A deals in growing sectors which enjoy a rela-
tively stable cash fl ow.
Exchange Rate Fluctuations
Although MOL has concluded transport contracts on a yen-
denominated basis with some Japanese clients, most transactions
in the international marine transport business are concluded on a
U.S. dollar-denominated basis. Despite our best efforts to incur
expenses in U.S. dollars, U.S. dollar-denominated revenue cur-
rently exceeds U.S. dollar-denominated expenses, so when the
yen strengthens against the U.S. dollar this can have a negative
impact on Group earnings. In fi scal 2014, we project that each
¥1-per-dollar change in the yen-U.S. dollar exchange rate will
have an impact of approximately ¥2.1 billion on consolidated
ordinary income.
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Annual Report 2014 61
Interest Rate Fluctuations
MOL depends mainly on the issuance of corporate bonds and
funds borrowed from banks and other fi nancial institutions to
meet working capital and capital expenditure requirements.
Loans are denominated in either yen or U.S. dollars, with funds
procured at variable interest rates affected by interest rate fl uctu-
ations. As of March 31, 2014, interest-bearing debt totaled
¥1,094.0 billion, and around 50% of that loan principal is locked
in at a fi xed interest rate. As a result, an increase of 1 percentage
point in market interest rates on both yen-denominated and U.S.
dollar-denominated interest-bearing liabilities would impact
annual consolidated ordinary income by no larger than approxi-
mately ¥5.0 billion. Although MOL has benefi ted from ultra-low
interest rates in the aftermath of the fi nancial crisis, the
Company is taking steps to mitigate the risk of a future interest
rate rise. It plans to fl exibly adjust the ratio of variable-rate and
fi xed-rate loans through interest rate swaps and other means
according to changes in fi nancial conditions, taking into consid-
eration the balance between variable- and fi xed-rate interest.
Bunker Price Fluctuations
The market price of bunker is generally linked to the price of
crude oil, and any increase in bunker prices has a negative
impact on earnings for the MOL Group. The Group operates a
fl eet of approximately 940 vessels, whose annual fuel consump-
tion amounts to around 6 million tons of bunker. The Company
is able to pass on about 60% of the risk to customers. Therefore,
an increase of US$1 per metric ton in the average annual price of
bunker would lower earnings by approximately ¥0.24 billion (net
of hedging) at the maximum.
Sensitivity of Earnings to Exchange Rate/Interest Rate/
Bunker Price Fluctuations
Exchange Rate
(¥/US$)
A ¥1 appreciation reduces ordinary income by
approximately ¥2.1 billion
Interest Rate
(%)
A 1 point rise in both yen- and U.S. dollar-denominated
interest-bearing debt reduces ordinary income by
approximately ¥5.0 billion
Bunker Price
(US$/MT)
A US$1/MT increase reduces ordinary income by
approximately ¥0.24 billion
Average Bunker Price
(US$/MT)
800
600
400
200
0 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3
Stricter restrictions to reduce sulfur oxide emissions generated
by ships could be introduced as soon as 2020. These restrictions
would require the use of low-sulfur fuel oil containing less than
0.5% sulfur across all ocean regions, which could have an impact
on fuel costs. In the event fuel costs rise, the Company intends
to pass on these higher costs by raising freight rates and other
fees.
Vessel Operations
MOL operates a fl eet of approximately 940 vessels and it is there-
fore impossible to ignore the risks related to various incidents
that may occur on the high seas. In order to prevent accidents,
the Company has introduced a variety of measures such as safety
standards, a safety management system, comprehensive crew
education and training, and establishment of organizations to
support safe operations.
Furthermore, MOL has arranged suffi cient insurance coverage
so that its fi nancial results will not be materially impacted, should
the Company or a third party suffer damages in the unlikely
event of an MOL-operated vessel being involved in a collision,
sinking, fi re or other marine incident.
Group Company Operational Management
The MOL Group Corporate Principles serve as the basis for set-
ting regulations at MOL Group companies. Each Group company
submits required reports to MOL in a timely manner in accor-
dance with Group Company Management Regulations. After
properly ascertaining the fi nancial conditions and business risks,
the Company, as a shareholder, requests Group companies
obtain permission prior to executing important management
matters.
Natural Disaster or Similar Event
An earthquake, other natural disaster or an outbreak of an infec-
tious disease (hereinafter “disaster or similar event”) could affect
MOL-operated vessels, offi ces and facilities, as well as employ-
ees, hampering business operations.
MOL puts the highest priority on ensuring the safety of its
vessels and personnel in the event of a disaster or similar event.
The Company has formulated a business continuity plan docu-
menting procedures to enable it to continue providing core
ocean transport services and quickly restore operations in the
unlikely event that they are suspended. This business continuity
plan establishes organizations and delegates authority for duties
relating to maintaining the safe operation of vessels, execution
of transportation contracts and charter agreements, fi nancial
preparation, securing required personnel, and other matters.
Furthermore, for some years MOL has been conducting regular
disaster-preparedness drills on and off premise at Head Offi ce,
aboard ships and throughout the Group’s other facilities, as well
as taking other measures to ensure preparedness. By addressing
issues arising from these drills, MOL believes that it maintains a
high state of readiness. Nevertheless, in the event of a disaster or
similar event in which MOL cannot completely avoid damage,
the Company’s business performance may be affected.
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62 Mitsui O.S.K. Lines
Safe Operation
Safe operation is of the utmost importance and lies at the heart of MOL’s management. In the new midterm management plan "STEER
FOR 2020," we set the reconstruction of our safe operating system as an integral initiative to strengthen our management foundation,
which supports the successful execution of the plan. We will continue to restrengthen our safe operating system to ensure the thorough
implementation of measures to prevent serious marine incidents as we strive to become the world leader in safe operation.
Safe Operation Management
Safe Operation Management Structure
MOL has an Operational Safety Committee,
which is chaired by the President of MOL.
Under this committee are the Safety
Assurance Committee and the Ship
Standard Specifi cation Committee. The
Operational Safety Committee discusses
and determines basic policies and
measures for ensuring safe operation
of vessels through rigorous attention
to every detail. The Safety Operations
Headquarters, which consists of marine
technical and ship management divisions,
is responsible for implementing specifi c
measures, with progress overseen by the
Safety Assurance Committee. The Ship
Standard Specifi cation Committee discuss-
es and determines MOL Safety Standards
and owned ship maintenance standards
from a fail-safe *1 perspective.
Organizational Structure
Supporting Safe Operation
Executive Committee
Operational Safety Committee
Safety
Assurance
Committee
Ship Standard
Specifi cation
Committee
Safety Operations Headquarters
• Marine Safety Division
• MOL Ship Management Co., Ltd.
• Tanker Safety Management
Offi ce
• MOL LNG Transport Co., Ltd.
• Dry Bulk Carrier Supervising
Offi ce
• Car Carrier Division, Marine
Technical Group
• MOL Liner Ltd., Liner Fleet
Supervising and Marine
Operation
Emergency Response System
MOL continues to strengthen its systems so
that it can provide an accurate response in
the unlikely event of an emergency.
■ Safety Operation Supporting
Center (SOSC)
The SOSC is staffed at all times by two
marine technical specialists, including an
experienced MOL captain, and supports
the safe navigation of MOL-operated ves-
sels around the clock 365 days a year. The
center monitors the position and move-
ment of more than 900 MOL Group-
affi liated vessels in real time, providing
assistance from the captain’s perspective
by supplying information on abnormal
weather and tsunamis and on piracy and
terrorism incidents to relevant personnel
on the ship and land. At the same time as
serving as an information portal support-
ing the safe operation of MOL ships, the
center also functions as a help desk for
urgent inquiries from ships regarding safe
operation. Since its establishment, the
center has helped to steadily reduce the
number of incidents involving adverse
weather or emergency entry*2.
Safety Operation Supporting Center (SOSC)
■ Accident Response Drills
MOL regularly conducts accident response
drills on vessels while at sea. These drills sim-
ulate various situations such as an on-board
fi re or water immersion, or act of piracy or
terrorism, so that seafarers can respond
swiftly and appropriately in an emergency.
Head Offi ce conducts serious marine inci-
dent emergency response drills twice a year
with the cooperation of the Regional Coast
Guard Headquarters. The drills involve MOL’s
President, other corporate offi cers, represen-
tatives of relevant departments and ship
management companies, and vessels. In
November 2013, we conducted an emer-
gency response drill with the premise of a
Evacuation drill on board
pirate attack on a car carrier in the seas off
Somalia. In May 2014, we conducted an
emergency response drill with the premise
of a bulk carrier running aground in the
Seto Inland Sea with a fi re in the engine
room. Furthermore, MOL Group companies
that operate ferries and cruise ships conduct
emergency response drills, including evacua-
tion guidance, on a regular basis, as they
put the highest priority on ensuring custom-
er safety in an emergency.
Safe Operation Measures
Efforts to ensure safe
operation will never
end. Coupled with
the revision and con-
tinuation of policies
already in place to
strengthen safe
operation, MOL will
thoroughly imple-
ment policies to prevent a recurrence of
recent serious marine incidents.
Making Processes for Realizing Safe
Operation Visible
MOL has introduced objective numerical
indicators for measuring safety levels, and
also set the following numerical targets,
including the Four Zeroes.
1. Four Zeroes (an unblemished record in
terms of serious marine incidents, oil
pollution, fatal accidents and cargo
damage)
2. LTIF *3 (Lost Time Injury Frequency):
0.25 or below
3. Operational stoppage time *4: 24
hours/ship or below
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Annual Report 2014 63
4. Operational stoppage accident rate *5:
1.0/ship or below
Lost Time Injury Frequency (LTIF)
1.8
1.5
1.2
0.9
2013 average for all
industries: 1.58
MOL target:
0.25 or below
0.6
0.42
0.38
0.44
0.31
0.24
0.3
0
2009 2010 2011 2012 2013
Operational Stoppage
Accidents Average Time and
Frequency
(Hour/ship)
(Number of accidents/ship)
40
30
20
10
0
Average operational
stoppage time: 24 hours or below
22.59 22.96
19.82
19.04
25.04
0.64
0.83
0.66
0.52
0.40
Operational stoppage
accident rate target: 1.00 or below
2009 2010 2011 2012 2013
Average operational stoppage time
(hour/ship) (left scale)
Operational stoppage accident rate
(accidents/ship) (right scale)
2.0
1.5
1.0
0.5
0
In fi scal 2014, MOL will work on three
important targets: (1) eradicate work-relat-
ed accidents causing death, and reduce
work-related accidents causing injury,
(2) eradicate collisions and groundings, and
(3) eradicate machinery trouble resulting
in a dead ship condition (a ship being
unable to move under its own power).
Preventing New or a Recurrence of
Serious Incidents
MOL is constantly, repeatedly implement-
ing and raising awareness of fundamental
matters while striving to thoroughly keep
fresh the memory of serious incidents we
have experienced and prevent a recurrence
of serious incidents while giving due con-
sideration to improving teamwork, safety
awareness, awareness of relevant parties
and vessel management quality. We will
continue to adapt our accident prevention
system by making improvements related to
both seafarer training and ship facilities to
break the chain of errors in which minor
factors combine and ultimately lead to
major maritime accidents.
In terms of seafarer training, we are
thoroughly implementing drills prior to
boarding and supervising the instruction
of less experienced seafarers. We are also
enhancing land-based education and
training curriculum and programs such as
“Hazard experience” training sessions and
BRM drills*6. These measures are geared
towards enhancing the ability of seafarers
to perceive danger and promoting team-
work. In addition, we are working to raise
safety awareness among seafarers by col-
lecting information from each vessel in
operation on examples of incidents and
problems as well as close calls*7 and by
using videos, photos and illustrations to
appeal to the visual sense of seafarers. In
terms of ship facilities, we are working to
equip ships with error-resistant equipment
and promoting the adoption of informa-
tion technology. This involves promoting
the fail-safe design concept by providing
shipyards and equipment manufacturers
with feedback from vessels in operation
on areas of non-conformance and areas in
need of improvement.
It is the MOL Group’s ultimate goal to
eradicate work-related accidents causing
death. MOL analyzes the factors and
causes behind accidents from various
angles and uses the results to make
improvements in ship facilities. It also asks
employees on land and at sea to discuss
and propose preventive measures for
examples of serious incidents and prob-
lems as if they were each wholly responsi-
ble as part of efforts to prevent accidents.
Glossary
*1 Fail-safe: Equipment and systems designed to
operate safely at all times, even when trouble
occurs due to operator error or malfunction.
*2 Emergency entry: Entering foreign territory due
to severe weather on the sea, serious hull or
engine distress, or the injury of a crew member.
*3 LTIF (Lost time injury frequency): Number
of work-related accidents per one million hours
worked that resulted in time lost from work of
one day or more. Average for all industries
(2013) was 1.58; for shipping industry, 1.54;
for transportation equipment manufacturing
industry, 0.47. (Source: 2013 Survey on
Industrial Accidents issued by the Ministry of
Health, Labour and Welfare)
*4 Operational stoppage time: Expresses the
amount of ship operational stoppage time due
to an accident per ship per year.
*5 Operational stoppage accident rate:
Expresses the number of accidents that result
in ship operational stoppage per ship per year.
*6 Bridge resource management drill: Simulating
an incident on a vessel operation simulator to
enable seafarers to acquire response techniques.
It includes MOL’s original programs.
*7 Close calls: Risky incidents that came very
close to causing a more serious accident.
MOL COMFORT Marine Incident
On June 17, 2013, MOL COMFORT (an 8000-TEU type container-
ship built in 2008) suffered a crack amidships while under way
from Singapore to Jeddah, Saudi Arabia, in the Indian Ocean. This
made it impossible for the vessel to continue on under its own
power. Subsequently, the vessel fractured into two parts and the
aft part of the containership sank on June 27 and the fore part
later sank on July 11.
Since directly after the incident, MOL has been continuing a
thorough investigation to fi nd the cause with the cooperation of
the shipbuilder, the classifi cation society and other parties in addi-
tion to implementing various safety measures. The Company
strengthened the hull structures of seven sister vessels operated by
MOL. MOL decided to take extra preventive measures to achieve
roughly twice the strength of Class NK hull strength standard in
compliance with the Rules of the International Association of
Classifi cation Societies Ltd. (IACS). The Company is also continuing
operational precautions to reduce the stress on the hull. MOL has
examined the outer bottom shell plates of all the large container-
ships it operates and confi rmed there were no safety issues. We,
with industry professionals and experts, are also fully cooperating
with the study by the Committee on Large Container Ship Safety
initiated by the Japanese Ministry of Land, Infrastructure, Transport,
and Tourism acting as secretariat. Although the committee has not
reached a conclusion about the defi nite cause, MOL has already
implemented the recommended safety measures outlined in the
interim report released in December 2013. We will continue to
cooperate with the parties concerned to ensure safe operation.
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64 Mitsui O.S.K. Lines
Cooperation for Safe Operation
The MOL Group works together with ves-
sels, shipowners, and ship management
companies to work toward achieving the
world’s highest level of safe operation of
all owned and chartered vessels by shar-
ing safety-related information. The
Company regularly broadcasts “Safety
Alerts”— information pertaining to safe
operation, including work-related inci-
dents involving casualties—to every vessel.
MOL conducts “Safety Operation
Meetings” and “Safety Campaigns”
involving vessels, shipowners, ship man-
agement companies and even the sales
division to deepen understanding of its
safety standards and to discuss safety
improvements. MOL also inspects vessels
to check whether its safety standards are
understood well and put into effect. If
there is a need to make improvements,
MOL will take corrective actions, commu-
nicating with the vessel, shipowner and
ship management company in the
process.
Recruiting and Training Excellent
Personnel to Support Safe
Operation
To ensure safe operation, it is crucial we
regularly employ and train excellent sea-
farers who meet the Company's technical
standards. We secure excellent human
resources from around the world and
mold these recruits into seafarers possess-
ing the high morale and vastly superior
technical skills and knowledge MOL
demands by tailoring their compensation
and working environment on and off the
ship, in addition to conducting top-notch
training and education. We have intro-
duced a scholarship and other programs
to support students aspiring to be seafar-
ers. In addition, the Company operates
MOL Training Centers in eight locations
spanning six countries. We conduct a
wide variety of training from lectures for
learning theories to practical training
using various simulators.
The Company has introduced unique
programs and is carrying out initiatives to
foster MOL seamanship. These programs
include the Cadet Actual Deployment for
Education with Tutorial (CADET) Training,
which is a cadet training program where-
by practical training is conducted on oper-
ated vessels. There is also the OJT
Instructor Program where highly experi-
enced captains and chief engineers board
the ship while at sea and give advice and
technical guidance right there on the
spot.
The MOL Training Centers, where excellent seafarers around
the world are trained
MOLTC
(Montenegro)
MOLTC
(MSU-Russia)
MOLTC
(Japan)
MOLMC*(Japan)
*MOL Marine
Consulting
MOLTC
(MOL Mi-India)
MOLTC
(MANET-India)
MOLTC
(STIP-Indonesia)
MOLTC
(Philippines)
Third-Party Evaluations
Safe Operation, Including Evaluations of Seafarer Educational Programs
■ LNG Carrier Standard Training Course acquired
certifi cation from DNV*
The LNG Carrier Standard Training
Course implemented globally by MOL
was certifi ed by Norway's Det Norske
Veritas AS (DNV)* in 2007 for compli-
ance with the LNG carrier crew ability
standards advocated by SIGTTO.**
* Now DNV GL
** Society of International Gas Tanker & Terminal
Operators Ltd .
■ Management program for seafarer education and
training acquired certifi cation
from DNV*
MOL’s management program for seafar-
er education and training was recog-
nized to be effective and certifi ed in its
tanker and LNG carrier operations by
DNV* in 2012 for compliance with the
Competence Management System
(CMS).
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Corporate Social Responsibility (CSR)
Annual Report 2014 65
Participating in the UN Global
Compact
The MOL Group Basic
Procurement Policy
MOL’s Approach to CSR
In our view, CSR means conducting business
management that adequately takes into
account laws and regulations, social norms,
safety and environmental issues, human
rights and other considerations, and devel-
oping together with society sustainably and
harmoniously while earning the support and
trust of stakeholders, including sharehold-
ers, customers, business partners, employ-
ees and local communities.
CSR Overview
Raise corporate value, contribute to stake-
holders, help solve social issues and con-
tribute to society’s sustainable growth
Trust of Stakeholders
Support of
Stakeholders
Business Activities
CSR Activities
Safe operation; environmental measures; compli-
ance; corporate governance; risk management;
accountability; fair trading; respect for human
rights; employment, labor, occupational health
and safety, health management and employee
satisfaction; social contribution activities
Long-term Vision
Midterm Management Plan
CSR activities are broad
and, from time to time,
the strength and priori-
ty of those activities
change depending on
the operating environ-
ment, global circumstances and region where
business is being developed. With business
activities spread across the globe, MOL
believes that building good relationships with
various stakeholders worldwide and contrib-
uting to the realization of sustainable growth
of society are vital as it seeks to realize the
ideas set forth in the MOL Group Corporate
Principles. In order to contribute to an inter-
national framework for realizing these goals,
MOL became the fi rst Japanese shipping
company to participate in the United Nations
(UN) Global Compact in 2005. Since then,
MOL has worked to support and practice the
10 principles in 4 areas of the UN Global
Compact, which shares the same values as
MOL’s Rules of Conduct, which were estab-
lished as a set of guidelines for executives
and employees.
MOL Group Corporate Principles
10 Principles of the Global Compact
In order to fulfi ll these responsibilities,
MOL deliberates on CSR-related policies and
measures, primarily through the three com-
mittees under the Executive Committee.
The MOL Group’s initiatives and poli-
cies regarding overall CSR are deliberated
on by the CSR and Environment
Committee, which then sets single-year,
medium- and long-term targets and con-
ducts regular reviews.
The Operational Safety Committee dis-
cusses basic policies and measures for
ensuring safe operation of MOL Group-
operated vessels through rigorous atten-
tion to every detail. The Compliance
Committee discusses basic policies and
measures for enhancing the compliance
system, dealing with compliance violations,
and establishing a structure for protecting
and managing personal information.
Human Rights
Principle 1.
Business should support and respect the
protection of internationally proclaimed
human rights; and
Principle 2. Make sure that they are not complicit in
human rights abuses.
Labour
Principle 3.
Principle 4.
Principle 5.
Principle 6.
Businesses should uphold the freedom of
association and the effective recognition of
the right to collective bargaining;
The elimination of all forms of forced and
compulsory labour;
The effective abolition of child labour; and
The elimination of discrimination in respect
of employment and occupation.
Environment
Principle 7.
Principle 8.
Principle 9.
Businesses should support a precautionary
approach to environmental challenges;
Undertake initiatives to promote greater
environmental responsibility; and
Encourage the development and diffusion of
environmentally friendly technologies.
Anti-Corruption
Principle 10. Businesses should work against corruption in
all its forms, including extortion and bribery.
Organizational Framework for CSR Initiatives
Chief Executive Offi cer
(President)
Executive Committee
CSR and Environment
Committee
Operational Safety
Committee
Compliance Committee
We formulated the MOL Group Basic
Procurement Policy in 2012. This clearly
documents our CSR activity policy regard-
ing the Group’s procurement activities. To
embed this policy in the MOL Group, we
work throughout our supply chain to
observe laws and regulations and social
norms, incorporate consideration for envi-
ronmental protection in our activities, pur-
sue safety, engage in fair trading and build
trust, with the understanding and coopera-
tion of business partners. In this way, we
aim to contribute towards the realization
of sustainable societies together.
The MOL Group Basic Procurement
Policy
The MOL Group procures goods and/or
services in accordance with the following
basic policy:
1. We comply with applicable laws,
regulations and social norms, and pay
due consideration to the protection of
the environment.
2. We procure goods and/or services,
including the delivery or execution of
such goods and/or services, that meet
high safety standards.
3. We conduct fair trade, and endeavor to
establish trusting relationships with
contractors.
We work to make sure that our contrac-
tors understand our Basic Procurement
Policy, with the aim of contributing
towards the realization of sustainable
societies together.
CSR Objective of Midterm
Management Plan
1. Thoroughly implement safe operation
and provide safe, secure, stable, high-
quality services.
2. Deepen initiatives to ensure thorough
compliance.
3. Promote personnel training and diver-
sity to strengthen comprehensive
Group capabilities.
4. Make further progress on solving social
issues and promoting environment
initiatives as an environmentally
advanced company.
5. Actively disclose sustainability data.
6. Promote social contribution activities
related to MOL’s businesses.
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66 Mitsui O.S.K. Lines
Environmental Protection
Environmental Management
Systems and Certifi cations
MOL has two unique environmental man-
agement systems—MOL EMS21 and the
MOL Group Environmental Target System.
Through these systems we have taken
steps to reduce our environmental burden.
MOL EMS21: We introduced our environ-
mental management system—MOL
EMS21—in April 2001. In January 2003, we
expanded its scope
to all our operated
vessels (except
charter vessels on
contracts of one
year or less), and
acquired interna-
tionally recognized
ISO 14001 certifi -
cation.
MOL Group Environmental Target
System: This system applies to MOL’s 53
main Group companies in Japan and 29
overseas affi liates and subsidiaries. It
serves as a framework for Group-wide
environmental protection activities. MOL
Group companies in Japan are working
hard on complying with the “green man-
agement” environmental certifi cation sys-
tem promoted by the Japanese Ministry of
Land, Infrastructure, Transport and
Tourism. A total of 14 MOL Group compa-
nies have earned this certifi cation.
Prevention of Global Warming and
Air Pollution
Although shipping is a more energy effi -
cient mode than other modes of trans-
port, vessels burn fossil fuels and
inevitably emit carbon dioxide (CO2),
which is a cause of global warming, as
well as nitrogen oxide (NOx), sulfur oxide
(SOx), soot and other emissions, which
are linked to acid rain and atmospheric
pollution. The MOL Group is fully aware
of the effects on air quality associated
with its business activities and thus
proactively works to reduce the impact
on an ongoing basis.
Environmental Technologies: MOL is
engaged in various research, development
and innovation of technologies for ships.
(Please refer to page 67 and our website
at the following URL: http://www.mol.
co.jp/csr-e/environment/ishin/ )
Increasing Transportation Effi ciency
with Larger Ships and Improved
Propulsion: MOL believes that the intro-
duction of larger vessels and improvement
of propulsion are effective measures to fulfi ll
the social responsibility of the shipping
industry to meet burgeoning international
demand for ocean shipping and, at the
same time, to prevent global warming. With
this in mind, MOL is conducting research
and applying those results to vessels.
ECO SAILING Thoroughly Adopted:
MOL practices an approach we call ECO
SAILING to save fuel and reduce environ-
mental impact. We rigorously apply the
principles of ECO SAILING whenever we
operate vessels. Specifi cally, we 1) deceler-
ate to the most economical navigation
speeds, 2) take advantage of weather and
sea condition forecasts, 3) take the opti-
mum trim, 4) select optimum routes, 5)
reduce vessels’ wetted surfaces, 6) opti-
mize operation and maintenance of main
engines, auxiliary equipment and other
machinery, 7) develop energy effi cient
ship designs, and 8) equip vessels with
Propeller Boss Cap Fins (PBCF*).
PBCF effi ciently recovers
energy loss from the
hub vortex generated
behind a ship’s propel-
ler. This is an MOL pro-
prietary technology that
uses the same number
of fi ns attached to the
rear end of the propeller
shaft.
Modal Shift:
Approximately 20% of Japan’s CO2 emis-
sions are accounted for by the transporta-
tion sector. In order to reduce these
emissions, the Japanese Ministry of Land,
Infrastructure, Transport and Tourism and
other concerned agencies have set up pro-
grams to establish a transportation system
with a low environmental burden and have
promoted the so-called “Modal Shift” of
using rail transport, shipping and other low-
impact modes of transport. The MOL Group
stands ready to do its utmost to facilitate
this modal shift by providing Japan’s largest
lineup of ferry and coastal shipping services.
Reducing NOx/SOx/Soot/Smoke and
Dust: MOL controls NOx emissions
through the installation of electronically
controlled engines. Regarding SOx, MOL
has set a standard of using bunker oil
with a maximum sulfur content below the
current 3.5% mandate for general sea
areas in the International Convention for
the Prevention of Pollution from Ships
(MARPOL Convention). In respect of soot
contained in ship exhaust gases, MOL
teamed up with Akasaka Diesels Limited
to develop a diesel particulate fi lter (DPF).
This DPF has been trialed aboard an MOL
Group-operated coastal ferry, where it
was shown to remove more than 80% of
particulate matter from diesel emissions.
Approaches to Marine
Environmental and Biodiversity
Protection
Responding to Ballast Water
Management Convention: Ballast water
is discharged when cargo is loaded. It may
have an impact on local ecosystems by
introducing foreign marine organisms
from another location as well as the
preservation and sustainable use of
biodiversity. This potential cross-border
transportation of foreign marine organisms
in ballast water has been highlighted as an
international issue since the late 1980s. As a
result, the Ballast Water Management
Convention was adopted by the
International Maritime Organization (IMO)
in 2004, and work is proceeding on
ratifi cation ahead of enforcement. We have
developed a ballast water purifi cation
system and conducted on-board
demonstrations in cooperation with
manufacturers and other concerned parties.
In addition, care is exercised to reduce
the impact of normal operation of our ves-
sels on the oceans. MOL strictly adheres to
all marine pollution treaties, including the
MARPOL Convention, as well as applicable
laws and regulations around the world.
The Company has stringent internal rules
to prevent oil discharges and to ensure the
proper disposal of lubricating oil and bilge
water (which includes oil and other pollut-
ants) to protect the marine environment.
Regarding anti-fouling ship bottom paints,
MOL has switched to tin-free paints. These
are just part of our efforts to help protect
biodiversity.
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Annual Report 2014 67
The Senpaku ISHIN project,
our concept for next-generation vessels
(cid:129) The Senpaku ISHIN project, our concept for next-generation
vessels, is a ground-breaking initiative that helps protect the
environment in a substantive way by reducing carbon diox-
ide emissions using feasible technologies.
(cid:129) MOL announced concepts for ISHIN-I, ISHIN-II and ISHIN-III
as a series of next-generation vessels.
(cid:129) MOL took delivery of the vessels marking major steps
toward realizing the Company’s concepts of ISHIN-I and
ISHIN-III.
ISHIN- II
An LNG-powered ferry
Features
(cid:129) Using LNG as fuel means the
vessel has cleaner exhaust
gases and greatly reduces CO2
emissions.
(cid:129) While in port and at berth,
the ship uses electricity sup-
plied from shore and
rechargeable batteries to
achieve zero emissions.
(cid:129) Emphasis on comfort
(cid:129) CO2 reduction: 50%
ISHIN- I
A hybrid car carrier which uses renewable energy
In June 2012, MOL took deliv-
ery of the EMERALD ACE, a
new car carrier equipped with a
hybrid electric power supply
system, taking a step toward
realizing the Company’s ISHIN-I
image of future car carriers.
ISHIN- III
A very large ore carrier with high-effi ciency waste
heat recovery system
In June 2014, MOL took deliv-
ery of the AZUL BRISA, a new
bulk carrier with high-effi ciency
waste heat recovery system,
taking a step toward realizing
the Company’s ISHIN-III image
of future very large ore carriers.
Journey to ISHIN—Development Roadmap
Diverse technologies are employed for ISHIN-I/II/III. We created the roadmap for the research, development and fi eld trials of all
of the component technology and routinely monitor progress with the aim of rapidly launching the completed vessels.
Component
Technology
Optimum Trim
Operation
Waste Heat Recovery
(WHR) from the main
engine
Power Assist Sail
Diesel Particulate
Filter (DPF) system
development to
reduce PMs in the
exhaust gases
H2 FY2013
H1 FY2014
H2 FY2014
(cid:129) Complete tank tests of ship model of each
type of vessels
(cid:129) Running trial of the actual vessels operated
by MOL
(cid:129) Complete tests on the actual vessels
(cid:129) Integrate test results, and tune up the
individual trim chart of each type of vessel
(cid:129) Prepare to introduce Optimum Trim
Operation into actual vessels (developing
interface with loading computer, etc.)
(cid:129) Examine performance of each WHR device
(cid:129) Examine actual performance of WHR
system on sea trial, and delivery
(cid:129) Evaluate working condition of WHR and
effect of bunker saving under operation
(cid:129) Evaluation of energy effi ciency improvement
and confi rmation of proper operation
through the onshore demonstration test
(cid:129) Consideration of appropriate ship types
where sails can be installed and have
signifi cant effect in bunker saving
(cid:129) Study of details on energy effi ciency
improvement
(cid:129) Develop fi ne-tuned DPF
(cid:129) Verify the performance of DPF installed in
the test engine at MOL Technology
Research Center (TRC)
(cid:129) Replace DPF installed on actual vessel with
fi ne-tuned one
(cid:129) Continue the performance test at TRC and
verify PM measuring methods
(cid:129) Continue test for examination of durability
of fi ne-tuned DPF installed on actual vessels
(one year)
(cid:129) Continue the performance test at TRC and
verify PM measuring methods
(cid:2) Implemented (cid:2) Implementation scheduled
Third-Party Evaluations
Environment
■ DBJ Environmental Rating
In 2011, MOL became the fi rst company in
the ocean shipping industry to acquire the
"DBJ Environmental Ratings" from the
Development Bank of Japan Inc. (DBJ). MOL
received the highest rating from DBJ, which
cited MOL's "particularly forward-looking
approaches to environmental consciousness."
■ Carbon Disclosure Leadership Index (CDLI) Commendation
In 2012, MOL was praised for the content of the information it
revealed in the survey conducted by the NPO Carbon Disclosure
Project (CDP) regarding the disclosure of greenhouse gas emis-
sions and climate change strategies. MOL was selected for inclu-
sion in CDLI.
■ SMBC Environmental Assessment Loan
In 2012, MOL acquired the top rating for
Sumitomo Mitsui Banking Corporation
(SMBC) Environmental Assessment Loan
because of the remarkable environmental
friendliness in its corporate management.
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68 Mitsui O.S.K. Lines
Social Contribution Activities
MOL aims to be a company that grows
sustainably and harmoniously with society.
We therefore carefully consider social
issues to tackle, and work to help solve
them based on the following three princi-
ples. Guided by these principles, we pro-
actively undertake social contribution
activities that only a shipping company
with a global network can.
Global Social Contribution Activities
Three Principles of MOL’s Social Contribution Activities
I. Contribute to the UN
Millennium Development
Goals* as a company
growing in step with
the global economy and
social development.
II. Contribute to protecting
biodiversity and preserv-
ing nature as a company
that impacts the envi-
ronment to an extent
and as a company that
does business on the
ocean, a rich repository
of living organisms.
III. Contribute to local
communities as a good
corporate citizen.
* One of the common frameworks that integrates the Millennium Declaration adopted at the United Nations
Millennium Summit held in September 2000, and the International Development Goals that were adopted at
major international conference and summits in the 1990’s. The Millennium Development Goals consist of specifi c
numerical targets to be achieved by 2015 in eight fi elds, including “achieve universal primary education” and
“reduce child mortality.”
Japan
(cid:129) Contributions to Reconstruction Efforts from
the Great East Japan Earthquake
1. Transport of SDF vehicles and personnel by ferry
2. Free emergency support of rescue supplies
3. Transport of international rescue supplies
4. Support voyages by the cruise ship Fuji Maru
5. Donation of refrigerated container
(cid:129) Helping clean up beaches
(cid:129) Helping plant trees and thin forests
Contributions to Biodiversity and
Nature Conservation
Thailand and Malaysia: Planted
mangrove forests
Hong Kong: Cleaned up the seashore
India: Participated in the “Say NO to
Plastic Bags” campaign and afforestation
activities
The United States: Implemented affor-
estation and conservation activities
Burkina Faso
Transport of desks and chairs by sea
Cambodia
Transport of medical
vehicles by sea
Opening of new
market facility
Somalia
MOL and six other compa-
nies* provided US$1 million
in funding to the Somalia
Support Project, run by the
United Nations Development
Programme (UNDP).
* Shell, BP, Maersk, Stena, NYK,
K Line and MOL
Tanzania
Transport of
children’s
clothes by sea
The Philippines
Helping construct a day care
center
Kenya
Zambia
Transport of
children’s shoes
by sea
South Africa
Transport of mobile libraries
by sea
Vietnam
Transport of wheelchairs by sea
Paraguay
(cid:129) Transport of fi re engines by sea
(cid:129) Transport of children’s wheelchairs by sea
Third-Party Evaluations
Overall CSR, including evaluation of socially responsible
investment (SRI)
■ CSR Rating by the Dow Jones Sustainability Indices (DJSI)
Since 2003, MOL has been included in the DJSI Asia Pacifi c, a des-
ignation reserved for companies capable of sustaining growth
over the long term while maintaining
excellence in environmental, social, and
investor relations programs.
■ The Morningstar Socially Responsible Investment Index (MS-SRI)
Since 2003, MOL has been selected by
Morningstar Japan K.K. for superior social
responsibility and included in the MS-SRI.
■ The Global 100 Top Sustainable Companies
In 2011, MOL was selected for inclusion in the Global 100 Index pub-
lished every year by the Canadian company Corporate Knights Inc.
■ CSR Rating by the FTSE4Good Global Index
FTSE is a global index company owned by
the London Stock Exchange. Since 2003,
FTSE has included MOL in one of its major
indices, the FTSE4Good Global Index,
which is a socially responsible investment
index.
■ SMBC Sustainability Assessment Loan
In 2013, MOL became the fi rst company to receive an SMBC
Sustainability Assessment Loan from Sumitomo
Mitsui Banking Corporation (SMBC), winning
specifi c praise for timely and accurate disclosure
of environmental, social, and governance (ESG)
issues and for its initiatives on sustainability.
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Annual Report 2014 69
Financial Section
Contents
70 Management’s Discussion and Analysis
74 11-year Summary
76 Consolidated Balance Sheets
78 Consolidated Statements of Operations and Consolidated
Statements of Comprehensive Income
79 Consolidated Statements of Changes in Net Assets
80 Consolidated Statements of Cash Flows
81 Notes to Consolidated Financial Statements
111 Independent Auditor’s Report
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70 Mitsui O.S.K. Lines
Management’s Discussion and Analysis
We will actively implement
strategic investments, while
remaining vigilant of the
fi nancial stability and
investment effi ciency
targeted in “STEER FOR
2020”.
Masahiro Tanabe
Managing Executive Offi cer
Fiscal 2013 Business Performance
The global economy in fi scal 2013 remained fi rm overall as econ-
omies in developed nations continue to bounce back despite
some uncertainty surrounding a few emerging markets. Helped
by the economy, seaborne trade also expanded steadily on the
whole, though cargo fl ows diversifi ed in line with changes of
global trade structures. The market for dry bulkers, especially
large ships, improved compared with the previous fi scal year due
mainly to a drop in completion of new vessels and robust trans-
port demand for iron ore. The tanker market also saw year-on-
year improvement thanks in part to a winter surge in the VLCC
market. However, the supply-demand situation stopped short of
a full-fl edged improvement except for certain vessel types. In
containerships, while trade volume recovered, pressure remained
strong from the delivery of large new vessels and freight rate lev-
els fell from the last fi scal year.
The overvalued yen continued its correction and MOL’s aver-
age exchange rate rose ¥17.48 to ¥99.70 to the U.S. dollar.
Bunker prices fell US$52 to US$610 per metric ton. Amid these
circumstances and in line with “RISE2013,” we implemented
measures to reduce costs up to ¥34.0 billion, reduce free ton-
nage and dispose of costly ships. When coupled with the effects
of the Business Structural Reforms executed at the end of fi scal
2012, this resulted in improved business performance in fi scal
2013. Ordinary income rose to ¥54.9 billion, a reversal of the
¥28.5 billion loss in the previous fi scal year. Net income achieved
an even sharper turnaround, rising to ¥57.3 billion from the year
earlier loss of ¥178.8 billion. With this marked improvement, we
achieved the V-shaped recovery aimed for in the management
plan.
Even in the diffi cult business environment, MOL has contin-
ued investing in future growth. In fi scal 2013, contracts were
concluded for nine new LNG carriers for Japanese utilities and
overseas customers. Long-term contracts were also signed for
four dry bulkers and ten methanol tankers. Moreover, in the off-
shore businesses, we decided to participate in two contracts for
the FPSO business (one planned off the coast of Ghana and the
other off the coast of Brazil), and also inked a contract for an
FSRU business in Uruguay.
Cash Flows and Financial Indicators
In fi scal 2013, cash fl ows provided by operating activities totaled
¥94.2 billion and cash fl ows used in investing activities amount-
ed to ¥119.8 billion, mainly for LNG carriers and offshore busi-
nesses. As a result, free cash fl ows in fi scal 2013 were negative
¥25.6 billion. Since fi scal 2012, we intentionally built up cash on
hand to be prepared for any unexpected diffi culties in the market
for raising funds. In addition, due to the weakening of the yen,
there was an increase in the yen value of liabilities denominated
in foreign currencies. As a result, interest-bearing debt at the end
of fi scal 2013 stood at ¥1,094.0, or ¥47.2 billion higher than the
end of the previous fi scal year. Cash fl ows used in investing activ-
ities in fi scal 2013 were originally forecast to be ¥165.0 billion,
but thanks to taking such active measures as utilizing off-balance
sheet fi nancing, that amount was reduced to ¥119.8 billion.
Thanks to the return to profi t in fi scal 2013, the equity ratio,
which had fallen to 25% at the end of the previous fi scal year
due to an extraordinary loss for the Business Structural Reforms,
improved to 29%. The gearing ratio, which had risen to 196% in
fi scal 2012, improved to 161% (135% for the net gearing ratio)
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Annual Report 2014 71
at March 31, 2014.
In fi scal 2014, cash fl ows used in investing activities are
expected to total ¥220.0 billion, exceeding the ¥110.0 billion
projected for cash fl ows provided by operating activities. Of that
¥220.0 billion, ¥115.0 billion is fi rm, linked to construction in
progress, such as expenses for already ordered LNG carriers. The
remaining ¥105.0 billion of forecast investment consists of
expenses related to additional long-term contracts MOL is aiming
to secure in LNG carriers and offshore businesses. This additional
investment will only be paid out when contracts are concluded.
This plan stands in contrast to the former front-loaded invest-
ment pattern of fi rst ordering ships when prices were low, then
waiting for the market to improve.
Credit Ratings and Strategic Investments
In fi scal 2012, MOL’s fi nancial fi gures worsened and it was
downgraded by the credit rating agencies. In fi scal 2013, we
sought to prevent a further downgrade and exchanged informa-
tion more closely with the credit rating agencies. We explained
that cash fl ows used in investing were expected to remain at
high levels, but would be limited to investments that would gen-
erate future stable profi ts. The credit rating agencies were, to an
extent, able to understand this explanation and maintained our
current level of credit ratings.
CREDIT RATINGS (As of June 2014)
JCR
R&I
Moody’s
Credit Ratings
A
A-
Baa3
Returning to and maintaining fi nancial soundness is a high
priority for MOL. In fi scal 2013, we strove to improve our fi nan-
cial soundness by reducing net cash used in investing by actively
utilizing off-balance sheet techniques. We will continue this in
fi scal 2014. However, business portfolio transformation is also
essential for MOL’s future growth, as outlined in the new mid-
term management plan “STEER FOR 2020.” To achieve this
transformation, we will concentrate investment and manage-
ment resources into businesses that expect growth, such as LNG
carriers and offshore businesses, where we can secure long-term
stable profi ts. The development of offshore resources, LNG as a
source of alternative energy and the shale revolution in the
United States are all now gaining a lot of attention. We recog-
nize that the next two to three years will bring once-in-a-million
business opportunities.
Because it takes over three years to go from initial investment
to the start of operation, interest-bearing debt temporarily swells
before earnings are generated. If MOL were unable to secure a
targeted contract, that portion of investment would not be
undertaken so the forecast additional investment of ¥105.0 bil-
lion for fi scal 2014 might not be incurred. Looking narrowly at
our fi nancial position, reduced investment means MOL would be
able to more rapidly achieve an equity ratio of 35% to 40% and
a gearing ratio of one or below, both set as fi scal 2019 targets of
“STEER FOR 2020.” However, without future growth or progress
in building up stable profi ts, we cannot expect an increase in
shareholder value. MOL plans to actively execute these additional
strategic investments to take advantage of opportune timing,
while remaining vigilant of the capital effi ciency targeted in
“STEER FOR 2020.”
Fund Raising, Financial Soundness and
Shareholder Returns
MOL is committed to strengthening its fi nancial soundness by
achieving an equity ratio of 35%. One way to attain this impor-
tant target is by striving to thoroughly move things off the bal-
ance sheet, including by switching from owned vessels to
chartered vessels. In regards to LNG carriers and offshore busi-
nesses we continue to work on, the Company will also introduce
project fi nancing according to each contract’s characteristics.
Through these and other measurers, MOL is also focusing on
maintaining its corporate credibility.
In dry bulkers and tankers, we are working under a policy of
reducing current market exposure risks. Going forward, we will
balance cargo contracts with vessels and use short- and medium-
term chartered vessels when it is necessary to procure vessels.
In terms of shareholder returns, our dividend policy remains
unchanged. We will link our dividend payments to our business
performance, while considering such factors as cash fl ows for
the fi scal year, using 20% as a guideline for the consolidated div-
idend payout ratio. After recovering fi nancial soundness as fast
as possible, however, we will strive to increase the payout ratio
as one of our medium- to long-term management goals.
U.S. Dollar-Denominated Convertible Bonds
MOL resolved at the meeting of the Board of Directors held on
April 8, 2014 to issue US$300 million Zero Coupon Convertible
Bonds due 2018 and US$200 million Zero Coupon Convertible
Bonds due 2020, for a total of US$500 million. These bonds
were issued on April 24, 2014. This was the fi rst time for a
Japanese company to issue two sets of convertible bonds
denominated in U.S. dollars, and the US$500 million was also
the largest amount of convertible bonds ever to be issued by a
Japanese company.
Upon the issuance of the convertible bonds, MOL introduced
two mechanisms (explained below) to mitigate the dilution of
the earnings per share, in consideration of our shareholders.
1. Contingent Conversion: Bonds can only be converted into
shares before the three-month period prior to the redemption
date, if the share price exceeds 130% of the conversion price.
2. Net Share Settlement: During the three-month period prior to
the redemption date, the issuer can decide to redeem the face
value of the bond in cash and issue new shares equivalent
only to the excess value (market price less the face value) even
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72 Mitsui O.S.K. Lines
when a bondholder requests conversion of the full value into
shares.
A scenario illustrates the benefi ts of the net share settlement
If all of the investors of the four-year US$300 million bonds request conversion when
the share price is US$8.01 (assumes the share price rose to 150% of the US$5.34
conversion price), the Company would issue:
Without net share settlement feature:
56.2 million shares (equivalent to US$300 million), resulting in dilution of 4.49%
With net share settlement feature:
18.7 million shares (equivalent to US$150 million) with the remaining US$300
million paid in cash, resulting in dilution of 1.54%.
Assuming the net share settlement feature will be applied,
these bonds were issued in four and six year maturities to avoid
overlap with other ordinary bonds during the redemption period.
We plan to allocate the proceeds from the convertible bonds
to support an early portion of capital investment for offshore
businesses and vessels, including LNG carriers for which contracts
have already been concluded. Because projects for LNG carriers
and offshore businesses are primarily long-term contracts, we are
routinely able to receive loans from banks and other fi nancial
institutions at later stages of the projects using the cash that will
be generated from the long-term contracts. These convertible
bonds were issued for the limited purposes of funding expenses
before the projects begin and fulfi lling the need for U.S. dollar
funds to fi nance a portion of equity in the projects, and because
these bonds were advantageous since they could be procured
without a coupon while suppressing the risk of dilution. There
has been no change in MOL’s long-standing, extremely cautious
stance toward equity fi nance.
Response to Revised Accounting for Retirement
Benefi t and Pension Management Policy
From the end of fi scal 2013, MOL began recognizing unrecog-
nized actuarial differences that had previously been off the bal-
ance sheet, due to revisions to accounting standards for
retirement benefi ts. Under net assets on the consolidated bal-
ance sheet, ¥1.2 billion was recorded as remeasurements of
defi ned benefi t plans. At the end of fi scal 2013, there was a
¥8.3 billion surplus of net defi ned benefi t assets to net defi ned
benefi t liabilities on a consolidated basis.
MOL BOND ISSUANCE (As of July 1, 2014)
Date of
Redemption
Date of Issue
Years
Interest Rate
Straight bonds No. 16
2015.7.10
Straight bonds No. 14
2016.6.21
2012.7.12
2011.6.21
Straight bonds No. 13
2016.12.16
2009.12.17
Straight bonds No. 17
2017.7.12
2012.7.12
Euro US$ Zero Coupon
Convertible bonds
2018.4.24
2014.4.24
Straight bonds No. 12
2019.5.27
2009.5.27
Euro US$ Zero Coupon
Convertible bonds
2020.4.24
2014.4.24
Straight bonds No. 15
2021.6.21
Straight bonds No. 18
2022.7.12
Straight bonds No. 19
2024.6.19
2011.6.21
2012.7.12
2014.6.19
3
5
7
5
4
10
6
10
10
10
Total Amount of
Issue
Outstanding
¥15.0 billion
¥15.0 billion
¥10.0 billion
¥10.0 billion
¥20.0 billion
¥20.0 billion
¥20.0 billion
¥20.0 billion
0.296%
0.573%
1.106%
0.461%
Zero coupon
US$300 million
US$300 million
1.999%
¥20.0 billion
¥18.5 billion
Zero coupon
US$200 million
US$200 million
1.361%
1.139%
0.970%
¥20.0 billion
¥17.8 billion
¥10.0 billion
¥9.2 billion
¥29.6 billion
¥29.6 billion
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Annual Report 2014 73
Ordinary Income (Loss)/Net Income (Loss) (¥ billions)
Cash Flows (¥ billions)
200
100
0
-100
-200
09/3
10/3
11/3
12/3
13/3
14/3
200
150
100
50
0
-50
-100
-150
-200
09/3
10/3
11/3
12/3
13/3
14/3
(cid:2) Ordinary Income (Loss)
(cid:2) Net Income (Loss)
(cid:2) Cash fl ows from operating activities Free cash fl ows
(cid:2) Cash fl ows from investing activities
Interest-bearing Debt/Shareholders’ Equity (¥ billions)
Gearing Ratio/Equity Ratio (%)
1,200
1,000
800
600
400
200
0
09/3
10/3
11/3
12/3
13/3
14/3
200
150
100
50
0
09/3
10/3
11/3
12/3
13/3
14/3
40
30
20
10
0
(cid:2) Interest-bearing debt
(cid:2) Shareholders’ equity*
* “Shareholders’ equity” in this section com-
prises the total of owners’ equity and accu-
mulated other comprehensive income (loss).
Gearing ratio (left scale) Net gearing ratio (left scale)
Equity ratio (right scale)
Capital Expenditure* (¥ billions)
250
200
150
100
50
0
09/3
10/3
11/3
12/3
13/3
14/3
* Capital expenditure is the actual amount calculated by deducting pro-
ceeds from the sale of vessels when delivered from “Tangible/intangible
fi xed assets increased” contained in the annual securities report.
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74 Mitsui O.S.K. Lines
11-year Summary
Mitsui O.S.K. Lines, Ltd. Years ended March 31
2014
2013
2012
2011
For the year:
Shipping and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,729,452
¥1,509,194
¥1,435,221
¥1,543,661
Shipping and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,587,902
1,432,014
1,368,795
1,328,960
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . .
100,458
92,946
90,886
91,300
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,092
(15,766)
(24,460)
123,401
Equity in earnings (losses) of unconsolidated subsidiaries
and affi liated companies, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,234)
(4,936)
3,300
8,174
Ordinary income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54,986
(28,568)
(24,320)
121,622
Income (Loss) before income taxes and minority interests . . . . . . . . . . .
71,710
(137,939)
(33,516)
95,367
Income taxes, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13,796)
(11,325)
(9,546)
(36,431)
Income taxes, deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,526
(24,799)
20,814
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,046)
(4,784)
(3,761)
2,797
(3,456)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57,394
(178,847)
(26,009)
58,277
At year-end:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
533,640
514,246
386,936
344,444
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
430,045
425,725
322,851
374,269
Net vessels, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,379,245
1,303,967
1,293,803
1,257,823
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,364,695
2,164,611
1,946,162
1,868,741
Long-term debt due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
920,538
861,728
739,188
559,541
Net assets/Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
783,549
619,493
717,909
740,247
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
502,833
447,830
629,667
664,645
Amounts per share of common stock:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 47.99
¥(149.57)
¥(21.76)
Net assets/Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
567.90
447.76
533.27
Cash dividends applicable to the year . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00
–
5.00
¥48.75
552.83
10.00
(Translation of foreign currencies)
The Japanese yen amounts for 2014 have been translated into U.S. dollars using the prevailing exchange rate at March 31, 2014, which was ¥102.92 to U.S.$1.00, solely for the
convenience of readers. (The convenience translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the
future be, converted into U.S. dollars at this or any other rate of exchange.)
(Presentation of net assets in the balance sheet)
Effective from the year ended March 31, 2007, the Company adopted the new accounting standard for presentation of net assets in the balance sheet and related guidance (ASBJ
Statement No.5, “Accounting Standard for Presentation of Net Assets in the Balance Sheet” issued by the Accounting Standards Board of Japan on December 9, 2005) and
Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet (ASBJ Guidance No.8 issued by the Accounting Standards Board of Japan on December 9,
2005). Net assets are comprised of shareholders’ equity as defi ned up to the year ended March 31, 2006, minority interests, share subscription rights and unrealized gains (losses)
on hedging derivatives, net of tax.
(Ordinary income (loss))
Ordinary income (loss) is calculated by adjusting operating income for gains on management of surplus funds (interest income, etc.) and the cost of raising funds
(interest expense, etc.)
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2014/08/21 14:01
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Annual Report 2014 75
Millions of yen
Thousands of
U.S. dollars
2010
2009
2008
2007
2006
2005
2004
2014
¥1,347,965
¥1,865,802
¥1,945,697
¥1,568,435
¥1,366,725
¥1,173,332
¥ 997,260
$16,803,848
1,228,479
1,564,486
1,544,109
1,300,038
1,101,459
917,149
824,902
15,428,508
98,547
20,939
104,105
110,303
100,324
92,273
84,388
197,211
291,285
168,073
172,993
171,795
80,232
92,126
976,078
399,262
5,363
16,000
18,199
16,171
16,817
11,764
6,613
(11,990)
24,235
204,511
302,219
182,488
176,503
174,979
27,776
197,732
318,202
197,854
188,290
155,057
90,556
89,776
534,260
696,755
(8,078)
(3,764)
(3,212)
(65,074)
(115,183)
(63,042)
(61,200)
(52,587)
(35,346)
(134,046)
(638)
(5,032)
(5,694)
(7,004)
(7,468)
(6,404)
(7,570)
(5,788)
(1,205)
(3,004)
2,152
(1,191)
43,976
(49,029)
12,722
126,988
190,321
120,940
113,732
98,261
55,391
557,656
352,030
428,598
506,078
405,474
340,355
299,835
299,544
5,184,998
355,185
440,910
528,390
482,810
433,023
429,695
398,091
4,178,439
1,209,176
1,106,746
1,047,825
847,660
769,902
665,320
477,621
13,401,137
1,861,312
1,807,080
1,900,551
1,639,940
1,470,824
1,232,252
1,000,206
22,976,049
594,711
499,193
459,280
398,534
399,617
340,598
311,021
8,944,209
735,702
695,022
751,652
620,989
424,461
298,258
221,535
7,613,185
616,736
623,626
536,096
375,443
275,689
182,143
101,991
4,885,668
Yen
¥10.63
¥106.13
¥159.14
¥101.20
551.70
3.00
521.23
31.00
567.74
31.00
459.55
20.00
¥94.98
354.01
18.00
¥81.99
248.40
16.00
¥46.14
185.06
11.00
U.S.dollars
$0.466
5.518
0.049
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76 Mitsui O.S.K. Lines
Consolidated Balance Sheets
ASSETS
Current assets:
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
Cash and cash equivalents (Note 3） . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities (Notes 3 and 4） . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade receivables (Note 3） . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories (Note 5） . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 180,126
¥ 200,636
$ 1,750,155
–
146,787
(697)
59,349
73,285
1,629
73,161
2,938
145,408
(590)
59,437
56,274
1,908
48,235
–
1,426,224
(6,772)
576,652
712,058
15,828
710,853
533,640
514,246
5,184,998
Vessels, property and equipment (Notes 7 and 13):
Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment, mainly containers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vessels and other property under construction . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net vessels, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,434,505
1,386,355
13,938,059
281,720
76,228
215,610
148,972
2,157,035
(777,790)
1,379,245
273,946
65,544
214,615
109,917
2,050,377
(746,410)
1,303,967
2,737,272
740,653
2,094,928
1,447,454
20,958,366
(7,557,229)
13,401,137
Investments and other assets:
Investment securities (Notes 3, 4 and 7） . . . . . . . . . . . . . . . . . . . . . . . . . . .
111,061
103,756
1,079,100
Investments in and advances to unconsolidated subsidiaries
and affi liated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable (Note 3） . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible fi xed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 15） . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defi ned benefi t assets (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
See accompanying notes.
124,303
37,519
29,385
3,769
21,200
124,573
451,810
91,093
23,117
22,929
4,034
–
101,469
346,398
1,207,763
364,545
285,513
36,621
205,985
1,210,387
4,389,914
¥2,364,695
¥2,164,611
$22,976,049
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2014/08/21 14:02
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Annual Report 2014 77
LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total short-term debt (Notes 3 and 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term bank loans due within one year . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt due within one year (Notes 3 and 7) . . . . . . . . . . . . .
Trade payables (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities:
Long-term bank loans due after one year . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt due after one year (Notes 3 and 7) . . . . . . . . . . . . . .
Employees’ severance and retirement benefi ts (Note 16) . . . . . . . . . . . . . .
Directors’ and corporate auditors’ retirement benefi ts . . . . . . . . . . . . . . . .
Reserve for periodic drydocking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defi ned benefi t liabilities (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities (Note 8)
Net assets (Note 9):
Owners’ equity
Common stock;
Authorized — 3,154,000,000 shares
Issued
— 1,206,286,115 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total owners’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss)
Unrealized holding gains on available-for-sale securities, net of tax . . . . .
Unrealized gains (losses) on hedging derivatives, net of tax . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remeasurements of defi ned benefi t plans, net of tax . . . . . . . . . . . . . . . .
Total accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . .
Share subscription rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
¥ 14,697
¥ 49,250
$ 142,800
–
14,697
90,492
45,000
135,492
143,196
37,696
6,909
1,716
90,339
430,045
740,038
180,500
920,538
–
1,852
14,191
81,130
12,936
120,454
1,151,101
1,581,146
65,400
44,517
502,833
(6,982)
605,768
32,810
39,711
(315)
1,186
73,392
2,391
101,998
783,549
2,000
51,250
88,296
25,000
113,296
142,585
26,661
7,048
1,118
83,767
425,725
648,228
213,500
861,728
13,472
2,028
14,758
71,132
–
156,275
1,119,393
1,545,118
65,400
44,483
447,830
(6,998)
550,715
24,753
(196)
(39,849)
–
(15,292)
2,115
81,955
–
142,800
879,246
437,233
1,316,479
1,391,333
366,265
67,130
16,673
877,759
4,178,439
7,190,420
1,753,789
8,944,209
–
17,995
137,884
788,282
125,690
1,170,365
11,184,425
15,362,864
635,445
432,540
4,885,668
(67,839)
5,885,814
318,792
385,843
(3,061)
11,524
713,098
23,232
991,041
619,493
7,613,185
¥2,364,695
¥2,164,611
$22,976,049
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78 Mitsui O.S.K. Lines
Consolidated Statements of Operations and
Consolidated Statements of Comprehensive Income
Mitsui O.S.K. Lines, Ltd. Years ended March 31, 2014 and 2013
(Consolidated Statements of Operations)
Shipping and other revenues (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shipping and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in losses of affi liated companies, net . . . . . . . . . . . . . . . . . . . . . . . . .
Others, net (Notes 10 and 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (Loss) before income taxes and minority interests . . . . . . . . . .
Income taxes (Note 15):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (Loss) before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Consolidated Statements of Comprehensive Income)
Income (Loss) before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (Note 19):
Unrealized holding gains on
available-for-sale securities, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains on hedging derivatives, net of tax . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of other comprehensive income (loss) of associates
accounted for using equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
¥1,729,452
¥1,509,194
$16,803,848
1,587,902
1,432,014
15,428,508
141,550
100,458
41,092
9,341
(12,583)
(1,234)
35,094
30,618
71,710
(13,796)
4,526
62,440
(5,046)
77,180
92,946
(15,766)
5,166
(13,021)
(4,936)
(109,382)
(122,173)
(137,939)
(11,325)
(24,799)
(174,063)
(4,784)
1,375,340
976,078
399,262
90,760
(122,260)
(11,990)
340,983
297,493
696,755
(134,046)
43,976
606,685
(49,029)
¥ 57,394
¥ (178,847)
$ 557,656
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
¥ 62,440
¥(174,063)
$ 606,685
8,847
32,725
31,158
19,285
92,015
9,093
56,413
14,909
1,104
81,519
85,960
317,965
302,740
187,379
894,044
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥154,455
¥ (92,544)
$1,500,729
Comprehensive income (loss)
Comprehensive income (loss) attributable to owners of the parent . . . . . . . .
Comprehensive income attributable to minority interests . . . . . . . . . . . . . . . .
¥144,892
¥ (99,159)
$1,407,811
9,563
6,615
92,918
(Amounts per share of common stock)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends applicable to the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen
U.S. dollars (Note 1)
¥47.99
47.97
5.00
¥(149.57)
–
–
$0.466
0.466
0.049
See accompanying notes.
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Consolidated Statements of Changes in Net Assets
Mitsui O.S.K. Lines, Ltd. Years ended March 31, 2014 and 2013
Annual Report 2014 79
Millions of yen
Unrealized
holding gains
on available-
for-sale
securities,
net of tax
Unrealized
(gains) losses
on hedging
derivatives,
net of tax
Remeasure-
ments
of defi ned
benefi t
plans,
net of tax
Foreign
currency
translation
adjustments
Treasury
stock,
at cost
Share
subscription
rights
Minority
interests
Total
net assets
Common
stock
Capital
surplus
Retained
earnings
Balance at April 1, 2012
¥65,400 ¥44,487 ¥629,667
¥(7,152) ¥16,888 ¥(54,936) ¥(56,932)
¥ –
¥2,006 ¥ 78,481
¥717,909
Due to change in
consolidated subsidiaries . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . .
Disposal of treasury stock . . . . . .
Dividends paid . . . . . . . . . . . . . . .
Net changes of items other than
owner’s equity during the year . .
Balance at
March 31 and April 1, 2013 . . . .
Due to change in
consolidated subsidiaries . . . . .
Net income . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . .
Disposal of treasury stock . . . . . .
Dividends paid . . . . . . . . . . . . . . .
Net changes of items other than
owner’s equity during the year . .
–
–
–
–
–
–
–
(0)
– (178,847)
–
(4)
–
–
–
–
(2,990)
–
–
–
(21)
175
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,865
54,740
17,083
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0)
(178,847)
(21)
171
(2,990)
109
3,474
83,271
¥65,400 ¥44,483 ¥447,830
¥(6,998) ¥24,753
¥ (196) ¥(39,849)
¥ –
¥2,115 ¥ 81,955
¥619,493
–
–
–
–
–
–
–
–
–
34
–
–
1
57,394
–
–
(2,392)
–
–
–
(62)
78
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
57,394
(62)
112
(2,392)
8,057
39,907
39,534
1,186
276
20,043
109,003
Balance at March 31, 2014 . . . . .
¥65,400 ¥44,517 ¥502,833 ¥(6,982) ¥32,810 ¥39,711 ¥ (315)
¥1,186
¥2,391 ¥101,998
¥783,549
Thousands of U.S. dollars (Note 1)
Unrealized
holding gains
on available-
for-sale
securities,
net of tax
Unrealized
(gains) losses
on hedging
derivatives,
net of tax
Remeasure-
ments
of defi ned
benefi t
plans,
net of tax
Foreign
currency
translation
adjustments
Treasury
stock,
at cost
Share
subscription
rights
Minority
interests
Total
net assets
Common
stock
Capital
surplus
Retained
earnings
Balance at April 1, 2013 . . . . . .
$635,445 $432,209 $4,351,244 $(67,995) $240,507 $ (1,904) $(387,184) $ –
$20,550 $796,298 $6,019,170
Due to change in
consolidated subsidiaries . . . .
Net income . . . . . . . . . . . . . .
Purchases of treasury stock . . .
Disposal of treasury stock. . . . .
Dividends paid . . . . . . . . . . . .
Net changes of items other than
owner’s equity during the year . .
–
–
–
–
–
–
–
–
–
331
–
–
9
557,656
–
–
(23,241)
–
–
–
(602)
758
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
557,656
(602)
1,089
(23,241)
78,285 387,747
384,123
11,524
2,682 194,743
1,059,104
Balance at March 31, 2014 . . . .
$635,445 $432,540 $4,885,668 $(67,839) $318,792 $385,843 $ (3,061) $11,524 $23,232 $991,041 $7,613,185
See accompanying notes.
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80 Mitsui O.S.K. Lines
Consolidated Statements of Cash Flows
Mitsui O.S.K. Lines, Ltd. Years ended March 31, 2014 and 2013
Cash fl ows from operating activities:
Income (Loss) before income taxes and minority interests . . . . . . . . . . . . . . .
Adjustments to reconcile income (loss) before income taxes and minority
interests to net cash provided by operating activities
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of business structural reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in losses of affi liated companies, net . . . . . . . . . . . . . . . . . . . . . . . . .
Various provisions (reversals) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (Increase) in net defi ned benefi t assets . . . . . . . . . . . . . . . . . . . . .
Increase (Decrease) in net defi ned benefi t liabilities . . . . . . . . . . . . . . . . . .
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (Gain) on sale of investment securities . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of securities issued by subsidiaries and affi liated companies . . . .
Gain on sale and disposal of vessels, property and equipment . . . . . . . . .
Exchange loss (gain), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received for interest and dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash refunded (paid) for corporate income tax, resident tax and enterprise tax
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash fl ows from investing activities:
Purchase of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of investment securities . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for purchase of vessels and other tangible and intangible fi xed assets . . . .
Proceeds from sale of vessels and other tangible and intangible fi xed assets . . . .
Proceeds from sales of investments in subsidiaries . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in short-term loans receivables . . . . . . . . . . . . . . .
Disbursements for long-term loans receivables . . . . . . . . . . . . . . . . . . . . . .
Collections of long-term loans receivables . . . . . . . . . . . . . . . . . . . . . . . . . .
Others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash fl ows from fi nancing activities:
Net increase (decrease) in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in commercial paper . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid to minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) fi nancing activities . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and equivalents . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . .
Net cash increase from new consolidation/de-consolidation of subsidiaries. . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . .
See accompanying notes.
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
¥ 71,710
¥(137,939)
$ 696,755
83,984
6,448
–
1,234
(13,899)
(19,536)
13,035
(9,341)
12,583
(986)
(21,732)
(391)
(15,671)
5,042
1,046
(3,875)
(4,866)
104,785
13,346
(13,167)
(10,708)
94,256
(22,888)
7,318
(183,888)
78,267
9,676
359
(13,939)
4,585
639
(119,871)
(31,725)
(2,000)
159,602
(117,237)
15,000
(25,000)
(62)
13
(2,408)
(1,321)
(1,956)
(7,094)
10,582
(22,127)
200,636
1,617
94,685
10,978
101,463
4,936
529
–
–
(5,166)
13,021
99
(62)
(8,375)
2,842
(11,661)
(5,001)
6,878
14,434
81,661
9,233
(12,695)
757
78,956
(16,853)
1,126
(165,544)
80,198
–
(197)
(5,152)
2,863
(682)
(104,241)
9,661
(3,000)
216,407
(117,417)
55,000
(7,337)
(21)
25
(3,047)
(2,999)
(8,504)
138,768
4,316
117,799
82,837
–
816,012
62,651
–
11,990
(135,047)
(189,817)
126,652
(90,760)
122,260
(9,580)
(211,154)
(3,799)
(152,264)
48,990
10,163
(37,651)
(47,280)
1,018,121
129,673
(127,934)
(104,042)
915,818
(222,386)
71,104
(1,786,708)
760,464
94,015
3,488
(135,435)
44,549
6,208
(1,164,701)
(308,249)
(19,433)
1,550,738
(1,139,108)
145,744
(242,907)
(602)
126
(23,397)
(12,835)
(19,004)
(68,927)
102,818
(214,992)
1,949,436
15,711
¥ 180,126
¥ 200,636
$ 1,750,155
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Notes to Consolidated Financial Statements
Mitsui O.S.K. Lines, Ltd. March 31, 2014 and 2013
Annual Report 2014 81
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated fi nancial statements have been prepared in accordance with the provisions set forth in the
Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting princi-
ples generally accepted in Japan (together “Japanese GAAP”), which are different in certain respects as to application and disclo-
sure requirements of International Financial Reporting Standards.
The accounts of overseas subsidiaries are made revisions according to ASBJ PITF No.18. The accompanying consolidated fi nan-
cial statements have been restructured and translated into English (with some expanded descriptions) from the consolidated fi nan-
cial statements of Mitsui O.S.K. Lines, Ltd. (the “Company”) prepared in accordance with Japanese GAAP and fi led with the
appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. Some sup-
plementary information included in the statutory Japanese language consolidated fi nancial statements, but not required for fair pre-
sentation, is not presented in the accompanying consolidated fi nancial statements.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2014, which was ¥102.92 to U.S. $1.00. The convenience translations should not
be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted
into U.S. dollars at this or any other rate of exchange.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) PRINCIPLES OF CONSOLIDATION
All companies are required to consolidate all signifi cant investees which are controlled through substantial ownership of majority
voting rights or existence of certain conditions.
The consolidated fi nancial statements include the accounts of the Company and 357 subsidiaries for the year ended March 31,
2014 (349 subsidiaries for the year ended March 31, 2013). All signifi cant inter-company balances, transactions and all material
unrealized profi t within the consolidated group have been eliminated in consolidation.
Investments in unconsolidated subsidiaries and affi liated companies (20% to 50% owned and certain others 15% to 20%
owned) are accounted for by the equity method. Companies accounted for using the equity method include 73 affi liated compa-
nies for the year ended March 31, 2014, and 65 affi liated companies for the year ended March 31, 2013. Investments in other sub-
sidiaries (114 for the year ended March 31, 2014 and 107 for the year ended March 31, 2013) and affi liated companies (69 and 68
for the respective years) were stated at cost since total revenues, total assets, the Company’s equity in net income and retained
earnings and others in such companies were not material.
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable
to minority shareholders, are recorded based on the fair value at the time the Company acquired control of the respective
subsidiaries.
The difference between acquisition cost and net assets acquired is treated as goodwill and negative goodwill and is amortized
principally over 5 years on a straight-line basis.
Net amortized amount is included in “Selling, general and administrative expenses” or “Other income” of the consolidated
statements of operations.
Meanwhile, the negative goodwill incurred after April 1, 2010 is recognized as “Other income” at the time of occurrence in
accordance with the revised Japanese GAAP.
(2) TRANSLATION OF FOREIGN CURRENCY
Revenues earned and expenses incurred in currencies other than Japanese yen of the Company and its subsidiaries keeping their
books in Japanese yen are translated into Japanese yen either at a monthly exchange rate or at the rate prevailing on the date of
the transaction. Monetary assets and liabilities denominated in currencies other than Japanese yen are translated into yen at the
exchange rate prevailing at the balance sheet date.
Subsidiaries keeping their books in a currency other than Japanese yen translate the revenues and expenses and assets and lia-
bilities in foreign currencies into the currency used for fi nancial reporting in accordance with accounting principles generally
accepted in their respective countries.
All the items in fi nancial statements of subsidiaries, which are stated in currencies other than Japanese yen, were translated into
Japanese yen at the year-end exchange rate, except for owners’ equity which is translated at historical rates. Translation differences
arising from the application of more than one exchange rate are presented as foreign currency translation adjustments in the net
assets section of the consolidated balance sheets.
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82 Mitsui O.S.K. Lines
(3) CASH AND CASH EQUIVALENTS
In preparing the consolidated statements of cash fl ows, cash on hand, readily-available deposits and short-term highly liquid invest-
ments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.
(4) FREIGHT REVENUES AND RELATED EXPENSES
1. Containerships
Freight revenues and the related voyage expenses are recognized by the multiple transportation progress method.
2. Vessels other than containerships
Freight revenues and the related voyage expenses are recognized mainly by the completed-voyage method.
(5) SECURITIES
Securities are classifi ed into (a) securities held for trading purposes (hereafter, “trading securities”), (b) debt securities intended to
be held to maturity (hereafter, “held-to-maturity debt securities”), (c) equity securities issued by subsidiaries and affi liated compa-
nies, or (d) for all other securities that are not classifi ed in any of the above categories (hereafter, “available-for-sale securities”).
Trading securities are stated at fair market value. Unrealized gains and losses from market value fl uctuations are recognized as
gains or losses in the period of the change. Held-to-maturity debt securities are stated at amortized cost, net of the amount consid-
ered not collectible. Equity securities issued by subsidiaries and affi liated companies which are not consolidated or accounted for
using the equity method are stated at moving-average cost. Available-for-sale securities with fair market values are stated at fair
market values, and the corresponding unrealized holding gains or losses, net of applicable income taxes, are reported as separate
component of net assets. Other securities with no available fair market value are stated at moving-average cost.
If the market value of held-to-maturity debt securities, equity securities issued by unconsolidated subsidiaries and affi liated
companies not on the equity method, and available-for-sale securities, declines signifi cantly, such securities are stated at fair market
value and the difference between fair market value and the carrying amount is recognized as loss in the period of the decline. If the
fair market value of held-to-maturity debt securities, equity securities issued by unconsolidated subsidiaries and affi liated companies
not on the equity method, and available-for-sale securities is not readily available, such securities should be written down to net
assets value with a corresponding charge in the statements of operations in the event net assets value declines signifi cantly. In these
cases, such fair market value or the net assets value will be the carrying amount of the securities at the beginning of the next year.
(6) INVENTORIES
Inventories are stated principally at cost determined by the moving-average method (with regard to the book value of inventories
on the balance sheet, by writing the inventories down based on their decrease in profi tability of assets).
(7) DEPRECIATION OF VESSELS, PROPERTY AND EQUIPMENT
Depreciation of vessels and buildings is computed mainly by the straight-line method. Depreciation of other property and equip-
ment is computed mainly by the declining-balance method.
Depreciation of fi nance lease that transfer ownership to lessees is computed mainly by the identical to depreciation method
applied to self-owned non-current assets. Depreciation of fi nance lease that do not transfer ownership to lessees is computed
mainly by straight-line method on the assumption that the lease term is the useful life and an estimated residual is zero. With
regard to fi nance lease that do not transfer ownership for which the starting date for the lease transaction is prior to March 31,
2008, they are continuously accounted for by a method corresponding to that used for ordinary operating lease contracts.
(8) AMORTIZATION OF BOND ISSUE EXPENSE AND STOCK ISSUE EXPENSE
Bond issue expense and stock issue expense are charged to income as incurred.
(9) INTEREST CAPITALIZATION
In cases where a vessel’s construction period is long and the amount of interest accruing during this period is signifi cant, such inter-
est expenses are capitalized as a part of the acquisition cost which amounted to ¥2,802 million ($27,225 thousand) for the year
ended March 31, 2014 and ¥1,228 million for the year ended March 31, 2013.
(10) ALLOWANCE FOR DOUBTFUL ACCOUNTS
Allowance for doubtful accounts is provided in an amount suffi cient to cover probable losses on collection. It consists of the esti-
mated uncollectible amount with respect to certain identifi ed doubtful receivables and an amount calculated using the actual per-
centage of the Company’s collection losses.
(11) DIRECTORS’ AND CORPORATE AUDITORS’ RETIREMENT BENEFITS
The Company and its domestic subsidiaries recognize liabilities for retirement benefi ts for directors and corporate auditors at an
amount required in accordance with the internal regulations.
Effective from the shareholders’ meeting of the Company, held on June 23, 2005, the Company abolished the retirement bene-
fi ts plan for directors and corporate auditors. Accordingly, the Company recognizes liabilities for retirement benefi t for directors and
corporate auditors till the completion of the shareholders’ meeting on June 23, 2005, which will be paid upon their retirement.
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Annual Report 2014 83
(12) EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS
The Company has the defi ned benefi t pension plans for employees engaged in shore and sea services. Employees engaged in sea
service who retire prior to a certain age are also entitled to a lump-sum payment. Some subsidiaries have the defi ned benefi t pen-
sion plans which cover all or a part of the retirement benefi ts and some other subsidiaries have established reserves for a lump-sum
payment for retirement benefi ts. The Company has a retirement benefi t trust scheme.
Under the accounting standards for employees’ severance and retirement benefi ts, liabilities and expenses for employees’ sever-
ance and retirement benefi ts are determined based on the amounts actuarially calculated using certain assumptions.
The Company and its consolidated subsidiaries (the “Group”) recognized net defi ned benefi t assets and net defi ned benefi t lia-
bilities for employees’ severance and retirement benefi ts at March 31, 2014 and 2013 based on the estimated amounts of pro-
jected benefi t obligation and the fair value of the plan assets at those dates.
Actuarial gains and losses are recognized in the statements of operations using the straight-line method over the average of the
estimated remaining service lives of mainly 10 years commencing with the following period. Past service costs are chiefl y accounted
for as expenses in lump-sum at the time of occurrence.
(13) INCOME TAXES
The Group recognizes tax effects of temporary differences between the fi nancial statement basis and the tax basis of assets and
liabilities. The provision for income taxes is computed based on the pretax income included in the consolidated statements of oper-
ations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax conse-
quences of temporary differences.
(14) AMOUNTS PER SHARE OF COMMON STOCK
Net income (loss) per share of common stock is computed based upon the weighted-average number of shares outstanding during
the year.
Fully diluted net income per share of common stock assumes exercise of the outstanding stock options at the beginning of the
year or at the date of issuance. For the year ended March 31, 2013, fully diluted net income per share is not disclosed because of
the Company’s net loss position.
Cash dividends per share have been presented on an accrual basis and include dividends to be approved after the balance sheet
date, but applicable to the year then ended.
(15) DERIVATIVES AND HEDGE ACCOUNTING
Companies are required to state derivative fi nancial instruments at fair value and to recognize changes in the fair value as gains or
losses unless derivative fi nancial instruments are used for hedging purposes.
If derivative fi nancial instruments are used as hedging instruments and meet certain hedging criteria, the Group defers recogni-
tion of gains or losses resulting from changes in fair value of derivative fi nancial instruments until the related losses or gains on the
hedged items are recognized.
If interest rate swap contracts are used as hedging instruments and meet certain hedging criteria, the net amount to be paid or
received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the
swap contract was executed (“special treatment”).
If foreign exchange forward contracts are used as hedging instruments and meet certain hedging criteria, hedged foreign cur-
rency assets and liabilities are translated at the rate of these contracts (“allocation method”).
The following summarizes hedging derivative fi nancial instruments used by the Group and items hedged:
Hedging instruments:
Hedged items:
Loans payable in foreign currencies
Foreign currency future transactions
Forward foreign exchange contracts
Foreign currency future transactions
Currency option contracts
Currency swap contracts
Foreign currency future transactions
Foreign currency loans payable
Interest rate swap contracts
Interest on loans and bonds payable
Crude oil swap contracts
Commodities futures
Freight futures
Fuel oil
Fuel oil
Freight
The derivative transactions are executed and managed by the Company in accordance with the established policies in order to
hedge the Group’s exposure to interest rate increases, fuel oil increases, freight decreases, and foreign currency exchange rate risk.
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84 Mitsui O.S.K. Lines
The Company evaluates hedge effectiveness by comparing the cumulative changes in cash fl ows from or the changes in fair
value of hedged items and the cumulative changes in cash fl ows from or the changes in fair value of hedging instruments.
(16) RECLASSIFICATIONS
Certain prior year amounts have been reclassifi ed to conform to the 2014 presentation.
(17) CHANGES IN ACCOUNTING POLICIES
(Application of accounting standards for retirement benefi ts)
The Group has applied the Accounting Standard for Retirement Benefi ts (ASBJ Statement No. 26, May 17, 2012) and the Guidance
on Accounting Standard for Retirement Benefi ts (ASBJ Guidance No. 25, May 17, 2012), except for the provisions of the main
clauses of Paragraph 35 of the Accounting Standard for Retirement Benefi ts and Paragraph 67 of the Guidance on Accounting
Standard for Retirement Benefi ts, effective from the year ended March 31, 2014. Accordingly, the Group has changed its account-
ing policy to one that recognizes the difference between retirement benefi t obligations and plan assets as net defi ned benefi t liabili-
ties or net defi ned benefi t assets and recorded unrecognized actuarial gains and losses and unrecognized prior service costs under
net defi ned benefi t liabilities or net defi ned benefi t assets.
Application of the Accounting Standard for Retirement Benefi ts and Guidance on Accounting Standard for Retirement Benefi ts
is in line with the transitional measures provided in Paragraph 37 of the Accounting Standard for Retirement Benefi ts. In accordance
with such measures, the effect of the change has been added to or deducted from remeasurements of defi ned benefi t plans under
accumulated other comprehensive income (loss) as of March 31, 2014.
As a result of the change, as of March 31, 2014, net defi ned benefi t liabilities of 12,936 million yen ($125,690 thousand) and
net defi ned benefi t assets of 21,200 million yen ($205,985 thousand) were recognized. Also, accumulated other comprehensive
income (loss) was increased by 1,186 million yen ($11,524 thousand).
(18) CHANGE IN ACCOUNTING POLICIES WITH AMENDMENT OF RESPECTIVE LAW OR REGULATION THAT ARE NOT
DISTINGUISHABLE FROM CHANGE IN ACCOUNTING ESTIMATES
(Change in depreciation method)
From the year ended March 31, 2013, in accordance with the amendment in corporate tax law, the Company and its domestic sub-
sidiaries have changed its depreciation method for property and equipment. Assets acquired on or after April 1, 2012 are depreci-
ated using the method prescribed in amended corporate tax law. The effect on the consolidated fi nancial statements of the change
is not material.
(19) ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED
Accounting Standard for Retirement Benefi ts (ASBJ Statement No.26, May 17, 2012) and Guidance on Accounting
Standard for Retirement Benefi ts (ASBJ Guidance No.25, May 17, 2012)
1. Summary
Methods for recognizing unrealized actuarial gains and losses and past service costs, methods for calculating retirement benefi t
obligations and current service costs and expansion of disclosures have been amended.
2. Effective dates
Amendments relating to assessment of retirement benefi t obligations and current service costs are effective from the year ending
on or after March 31, 2015. As transitional treatments are provided in these new standards, they were not applied retrospectively
to consolidated fi nancial statements in prior years.
3. Effect of application of the standard
The Group is currently under assessment of the effects of these new standards on the consolidated fi nancial statements.
(20) CHANGES IN ACCOUNTING ESTIMATES
(Change of estimated useful life)
As a part of the Business Structural Reforms executed in the previous year, the Group reviewed the policy on use of vessels based
on actual operating experience. Then, the Group found that vessels can be used longer than their conventional estimated useful
lives. Therefore, starting from the year ended March 31, 2014, the period of useful lives of dry bulkers and car carriers were
changed from 15 years to 20 years, and tankers from 13-18 years to 20-25 years, respectively.
As a result, operating income and income before income taxes and minority interests for the year was increased by ¥10,684
million ($103,809 thousand), respectively.
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3. FINANCIAL INSTRUMENTS
(1) Qualitative information on fi nancial instruments
I. Policies for using fi nancial instruments
We raise capital investment funds to acquire vessels and other fi xed assets primarily through bank loans and corporate bonds. In
addition, we secure short-term operating funds through commercial papers and bank loans. Furthermore, we have established
commitment line with Japanese banks in preparation for supplementing liquidity in emergency situations. Derivatives are utilized to
hedge risks as discussed below and are executed within the scope of real requirements. Our policy is not to use derivatives for
speculative purposes.
II. Details of fi nancial instruments / Risk and its management
Trade receivables are exposed to the credit risks of customers. We strive to mitigate such risks in accordance with internal regula-
tions. Besides, trade receivables denominated in foreign currencies are exposed to the foreign currency exchange rate risk. We avoid
the risk mainly by, in principle, utilizing forward exchange contracts which cover the net position (The difference between trade
receivables and trade payables dominated in foreign currencies). Investment securities are mainly stocks of companies with which
we have business relationships. These investment securities are exposed to the price fl uctuation risk. We identify the market value
of listed stocks on a quarterly basis.
Trade payables are due within a year.
Short-term loans and commercial papers are primarily used for raising short-term operating funds, while long-term loans and
bonds are mainly for capital investments. Although several items with variable interest rates are exposed to the interest rate risk, a
certain portion of such variable interest rates is fi xed with the use of interest rate swaps.
Long-term loans and bonds denominated in foreign currencies are exposed to the foreign currency exchange rate risk, a part of
which is avoided by using currency swaps.
Our major derivative transactions and hedged risks are as follows.
* Forward foreign exchange contracts / Currency swap contracts
: To cover exchange volatility of foreign-currency-denominated trade receivables, trade payables, long-term loans, and corpo-
rate bonds.
* Interest rate swap contracts
: To avoid interest rate risk arising out of interest payment of long-term loans and corporate bonds.
* Crude oil swap contracts / Commodities futures
: To hedge fl uctuation of fuel oil price.
With regard to the detail of hedge accounting (hedging instruments, hedged items, the way of evaluating hedge effective-
ness), see Note 2 (15) to the consolidated fi nancial statements.
Derivative transactions are executed and managed in accordance with our internal regulations and dealt only with highly rated
fi nancial institutions to mitigate credit risks.
On the other hand, as trade payables, loan payables, bonds, and commercial papers are exposed to the risk of fi nancing for
repayment, we manage the risk by planning cash management program monthly, having established commitment line with several
fi nancial institutions, and adjusting funding period (balancing short-term/long-term combination), in consideration of market
circumstances.
III. Supplemental information on fair value
Fair value of fi nancial instruments that are actively traded in organized fi nancial markets is determined by market value.
For those where there are no active markets, it is determined by reasonable estimation. Reasonably estimated value might vary
depending on condition of calculation as several variation factors are included in the calculation. On the other hand, derivative
transactions mentioned in following (2) do not indicate the market risk of such derivatives.
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(2) Fair Values of fi nancial instruments
Book values and fair values of the fi nancial instruments on the consolidated balance sheet at March 31, 2014 are the following;
Millions of yen
Book Value
Fair Value
Difference
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 180,126
¥ 180,126
¥ –
Time deposits with a maturity of more than three months . . . . . . . . . . . . . . . .
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable(*1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,023
146,787
1,445
103,417
41,015
1,023
146,787
1,445
103,417
46,748
¥ 473,813
¥ 479,546
–
–
–
–
5,733
¥5,733
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 143,196
¥ 143,196
¥ –
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds(*2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term bank loans(*3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,697
225,500
830,530
14,697
230,953
833,094
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,213,923
¥1,221,940
Derivative fi nancial instruments(*4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 83,295
¥ 82,895
–
5,453
2,564
¥8,017
¥ (400)
Thousands of U.S. dollars (Note 1)
Book Value
Fair Value
Difference
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,750,155
$ 1,750,155
$ –
Time deposits with a maturity of more than three months . . . . . . . . . . . . . . . .
9,940
9,940
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,426,224
1,426,224
Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,040
14,040
Investment securities
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,004,829
1,004,829
Long-term loans receivable(*1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
398,513
454,217
Total
Liabilities
$ 4,603,701
$ 4,659,405
–
–
–
–
55,704
$55,704
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,391,333
$ 1,391,333
$ –
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142,800
142,800
Bonds(*2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,191,022
2,244,005
Long-term bank loans(*3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,069,666
8,094,578
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,794,821
$11,872,716
Derivative fi nancial instruments(*4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 809,318
$ 805,431
–
52,983
24,912
$77,895
$ (3,887)
*1 The book value of long-term loans receivable includes current portion amounting to ¥3,496 million ($33,968 thousand).
*2 The book value of bonds includes current portion amounting to ¥45,000 million ($437,233 thousand).
*3 The book value of long-term bank loans includes current portion amounting to¥90,492 million ($879,246 thousand).
*4 Amounts of derivative fi nancial instruments are net of asset and liability. Negative amount stated with ( ) means that the net amount is liability.
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Book values and fair values of the fi nancial instruments on the consolidated balance sheet at March 31, 2013 are the following;
Millions of yen
Book Value
Fair Value
Difference
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 200,636
¥ 200,636
¥ –
Time deposits with a maturity of more than three months . . . . . . . . . . . . . . . .
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,139
145,408
1,139
145,408
Marketable securities
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable(*1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Liabilities
2,938
1,188
92,785
24,759
2,938
1,188
92,785
30,955
¥ 468,853
¥ 475,049
–
–
–
–
–
6,196
¥6,196
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 142,585
¥ 142,585
¥ –
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds(*2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term bank loans(*3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,250
2,000
238,500
736,524
49,250
2,000
242,650
739,244
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,168,859
¥1,175,729
Derivative fi nancial instruments(*4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 36,966
¥ 36,518
–
–
4,150
2,720
¥6,870
¥ (448)
*1 The book value of long-term loans receivable includes current portion amounting to ¥1,642 million.
*2 The book value of bonds includes current portion amounting to ¥25,000 million.
*3 The book value of long-term bank loans includes current portion amounting to ¥88,296 million.
*4 Amounts of derivative fi nancial instruments are net of asset and liability. Negative amount stated with ( ) means that the net amount is liability.
The following is a description of the valuation methodologies used for the assets and liabilities measured at the fair value.
Cash and cash equivalents, Time deposits with a maturity of more than three months, Trade receivables and Short-term loans
receivable
Since these assets are settled in a short term and their fair value is almost equal to the book value, the fair value is evaluated at the
book value.
Marketable securities and Investment securities
The fair value of stocks is evaluated at market prices at stock exchange as of the end of the year and the fair value of bonds is eval-
uated at market prices at stock exchange or provided by fi nancial institutions as of the end of the years.
Long-term loans receivable
The fair value of long-term loans receivable with variable interests rate is evaluated at the book value because the interest rate
refl ects the market rate in a short term and their fair value is almost equal to the book value, unless the creditworthiness of the bor-
rower has changed signifi cantly since the loan origination. The fair value of long-term loans receivable with fi xed interest rates, for
each category of loans based on types of loans, and maturity length, is evaluated by discounting the total amount of principal and
interest using the rate which would apply if similar loans were newly made.
Trade payables, Short-term loans and Commercial paper
Since these liabilities are settled in a short term and their fair value is almost equal to the book value, the fair value is evaluated at
the book value.
Bonds
The fair value of corporate bonds with market price is evaluated based on their market price. The fair value of variable interest rates
corporate bonds without market price is evaluated at the book value because the interest rate refl ects the market rate in a short
term and there has been no signifi cant change in the creditworthiness of us before and after the issue.
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Long-term bank loans
The fair value of long-term bank loans with variable interest rates is evaluated at the book value because the interest rate refl ects
the market rate in a short term and there has been no signifi cant change in the creditworthiness of us before and after such bank
loans were made. The fair value of long-term bank loans with fi xed interest rates, for each category of bank loans based on types
of bank loans, and maturity length, is evaluated by discounting the total amount of principal and interest using the rate which
would apply if similar bank loans were newly made. The fair value of long-term bank loans qualifying for allocation method of
interest and currency swap is evaluated at the book value because such bank loans were deemed as the variable interest rates bank
loans and the interest rate refl ects the market rate in a short term.
Derivative fi nancial instruments
Please refer to Note 6 to the consolidated fi nancial statements.
The following table summarizes fi nancial instruments whose fair value is extremely diffi cult to estimate.
Millions of yen
Thousands of
U.S. dollars (Note 1)
Book Value
Book Value
Book Value
2014
2013
2014
Unlisted stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥7,627
¥ 7,764
$74,106
Unlisted foreign bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
17
3,200
7
–
165
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥7,644
¥10,971
$74,271
The above items are not included in the amount presented under the line “Investments securities” in the table summarizing fair
value of fi nancial instruments, because the fair value is extremely diffi cult to estimate as they have no quoted market price and the
future cash fl ow cannot be estimated.
At March 31, 2014, the aggregate annual maturity of monetary claims and securities was as follows;
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits with a maturity of more than three months . . .
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities and investments securities
Available-for-sale securities
Within a year
¥180,126
1,023
146,787
1,445
(Governmental/municipal bonds) . . . . . . . . . . . . . . . . . . .
10
Available-for-sale securities
(Corporate bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
–
3,496
–
23,134
200
6,745
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥332,887
¥23,134
¥6,945
Millions of yen
After one year
through fi ve
years
¥ –
–
After fi ve years
through ten
years
¥ –
–
After ten years
¥ –
–
–
–
–
–
–
–
–
–
–
–
7,640
¥7,640
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits with a maturity of more than three months . . .
Thousands of U.S. dollars (Note 1)
After one year
through fi ve
years
$ –
–
After fi ve years
through ten
years
$ –
–
Within a year
$1,750,155
9,940
After ten years
$ –
–
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,426,224
Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
14,040
Marketable securities and investments securities
Available-for-sale securities
(Governmental/municipal bonds) . . . . . . . . . . . . . . . . . . .
97
Available-for-sale securities
–
–
–
–
–
–
–
–
–
(Corporate bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
–
33,968
–
224,777
1,943
65,536
–
74,232
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,234,424
$224,777
$67,479
$74,232
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At March 31, 2013, the aggregate annual maturity of monetary claims and securities was as follows;
Millions of yen
After one year
through fi ve
years
After fi ve years
through ten
years
Within a year
After ten years
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥200,636
¥ –
¥ –
¥ –
Time deposits with a maturity of more than three months . . .
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities and investments securities
Held-to-maturity debt securities (Other) . . . . . . . . . . . . . . .
Available-for-sale securities
(Governmental/municipal bonds) . . . . . . . . . . . . . . . . . . .
Available-for-sale securities
(Corporate bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
1,139
145,408
1,188
–
–
3,000
1,642
–
–
–
–
10
–
16,099
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥353,013
¥16,109
–
–
–
–
–
200
2,321
¥2,521
–
–
–
3,200
–
–
4,697
¥7,897
4. SECURITIES
A. The following tables summarize acquisition costs, book values and fair values of securities with available fair values at March 31,
2014 and 2013.
Available-for-sale securities:
Securities with book values exceeding acquisition costs at March 31, 2014
Type
Millions of yen
Acquisition cost
Book Value
Difference
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥41,698
¥93,782
¥52,084
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
210
–
226
–
16
–
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥41,908
¥94,008
¥52,100
Type
Thousands of U.S. dollars (Note 1)
Acquisition cost
Book Value
Difference
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$405,150
$911,212
$506,062
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
2,040
–
2,196
–
156
–
$407,190
$913,408
$506,218
Securities with book values exceeding acquisition costs at March 31, 2013
Type
Millions of yen
Acquisition cost
Book Value
Difference
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥33,088
3,060
–
¥73,550
3,166
–
¥40,462
106
–
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥36,148
¥76,716
¥40,568
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Securities with book values not exceeding acquisition costs at March 31, 2014
Type
Millions of yen
Acquisition cost
Book Value
Difference
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥11,545
¥9,409
¥(2,136)
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
–
–
–
–
–
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥11,545
¥9,409
¥(2,136)
Type
Thousands of U.S. dollars (Note 1)
Acquisition cost
Book Value
Difference
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$112,175
$91,421
$(20,754)
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
–
–
–
–
–
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$112,175
$91,421
$(20,754)
Securities with book values not exceeding acquisition costs at March 31, 2013
Type
Millions of yen
Acquisition cost
Book Value
Difference
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥22,581
¥19,007
¥(3,574)
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
–
–
–
–
–
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥22,581
¥19,007
¥(3,574)
B. Total sales of available-for-sale securities sold in the years ended March 31, 2014 and 2013 and the related gains and losses were
as follows:
Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,880
1,200
214
¥932
309
369
Millions of yen
2014
2013
Thousands of
U.S. dollars (Note 1)
2014
$37,699
11,660
2,079
C. Impairment losses of securities
For the years ended March 31, 2014 and 2013, the Company reduced the book value on the securities and booked the reductions
as impairment losses of ¥106 million ($1,030 thousand) and ¥2,892 million, respectively.
With regard to the impairment losses, the Company principally reduces the book value on the securities to the amount which is
considered the recoverability etc. in the event the fair market value declines more than 50% in comparison with the acquisition cost.
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5. INVENTORIES
Inventories as of March 31, 2014 and 2013 consisted of the following:
Fuel and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
¥58,211
1,138
¥59,349
2013
2014
¥58,326
$565,595
1,111
11,057
¥59,437
$576,652
6. DERIVATIVE TRANSACTIONS
The Group enters into derivative transactions to hedge the Group’s exposure to interest rate increases, fuel oil increases, freight
decreases, and currency exchange fl uctuations, in accordance with the guidance determined by the management of the Company.
I. Hedge accounting not applied
The following tables summarize the outstanding contract amounts and fair values of fi nancial derivatives of the Group at March 31,
2014 and 2013, for which hedge accounting has not been applied.
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
(1) Currency related:
Forward currency exchange contracts
Sell (U.S. dollar):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥15,438
¥11,286
$150,000
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
(2,046)
(10)
Buy (U.S. dollar):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 25
¥ 13
$ 243
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0
0
0
Buy (Others):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 22
¥ 2
$ 214
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
0
10
Currency swaps contracts
Buy (U.S. dollar):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ –
¥ 5,102
$ –
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
(651)
–
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
(2) Interest related
Interest rate swaps
Receive fl oating, pay fi xed
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥39,046
(1,966)
¥46,899
$379,382
(2,769)
(19,102)
Receive fi xed, pay fl oating
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ –
¥ 291
$ –
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
2
–
Note: Fair values are measured based on forward exchange rates prevailing at the end of the year and information provided by fi nancial institutions, etc.
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II. Hedge accounting applied
The following tables summarize the outstanding contract amounts and fair values of fi nancial derivatives of the Group at March 31,
2014 and 2013, for which hedge accounting has been applied.
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
(1) Deferral hedge accounting
a. Forward currency exchange contracts to hedge the risk for the
foreign currency transactions
Sell (U.S. dollar):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 16,386
¥ 26,969
$ 159,211
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(415)
(1,947)
(4,032)
Buy (U.S. dollar):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 18,661
¥ 62,906
$ 181,316
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,460
9,189
43,335
b. Currency swaps contracts to hedge the risk for charterages
Sell (U.S. dollar):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,022
¥ 1,686
$ 77,944
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(435)
(162)
(4,227)
Buy (U.S. dollar):
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥507,607
¥491,628
$4,932,054
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88,264
50,309
857,598
c. Interest rate swaps to hedge the risk for the long-term bank loans
and charterages
Receive fl oating, pay fi xed
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥228,282
¥197,060
$2,218,053
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,133)
(16,246)
(69,306)
Receive fi xed, pay fl oating
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,810
¥ 10,698
$ 56,452
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136
289
1,321
d. Commodities futures to hedge the risk for the fuel oil
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 23,486
¥ 40,680
$ 228,197
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
461
997
4,479
e. Freight futures to hedge the risk for the freight
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 649
¥ –
$ 6,306
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(77)
–
(748)
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
(2) Special treatment
Interest rate swaps to hedge the risk for the long-term bank loans
Receive fl oating, pay fi xed
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥18,687
¥3,719
$181,568
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(400)
(447)
(3,887)
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
(3) Allocation method
Currency swaps to hedge the risk for the foreign bonds and long-term bank loans
Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥31,788
¥27,827
$308,861
Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
–
–
Notes: 1. Fair values are measured based on forward exchange rates prevailing at the end of the year and information provided by fi nancial institutions, etc.
2. Currency swaps which allocation method are applied to are recorded as the combined amount of such currency swaps and their hedge
items. Therefore, their fair values are included in fair values of such hedge items.
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7. SHORT-TERM DEBT AND LONG-TERM DEBT
(1) SHORT-TERM DEBT
Short-term debt amounting to ¥14,697 million ($142,800 thousand) and ¥51,250 million at March 31, 2014 and 2013, respec-
tively, were principally unsecured. The interest rates on short-term debt were mainly set on a fl oating rate basis.
(2) LONG-TERM DEBT
Long-term debt at March 31, 2014 and 2013 consisted of the following:
Bonds:
1.428% yen bonds due 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ –
¥ 15,000
$ –
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
1.760% yen bonds due 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.278% yen bonds due 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.590% yen bonds due 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.296% yen bonds due 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.573% yen bonds due 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.070% yen bonds due 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.106% yen bonds due 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.461% yen bonds due 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.999% yen bonds due 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.670% yen bonds due 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.400% yen bonds due 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.361% yen bonds due 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.650% yen bonds due 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.139% yen bonds due 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.070% yen bonds due 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.850% yen bonds due 2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured loans from:
Japan Development Bank due through 2027 at interest rates of
0.19% to 4.20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other fi nancial institutions due through 2031 at interest rates of
0.35% to 6.70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured loans from:
Other fi nancial institutions due through 2031 at interest rates of
0.08% to 5.20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
30,000
15,000
15,000
10,000
15,000
20,000
20,000
18,500
10,000
15,000
17,800
5,000
9,200
10,000
15,000
10,000
30,000
15,000
15,000
10,000
15,000
20,000
20,000
18,500
10,000
15,000
20,000
5,000
10,000
10,000
–
291,489
145,744
145,744
97,163
145,744
194,326
194,326
179,751
97,163
145,744
172,950
48,581
89,390
97,163
–
145,744
62,177
59,453
604,129
82,319
55,649
799,835
686,034
1,056,030
135,492
621,422
975,024
113,296
6,665,702
10,260,688
1,316,479
¥ 920,538
¥861,728
$ 8,944,209
At March 31, 2014, the aggregate annual maturity of long-term debt was as follows:
Year ending March 31
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
¥ 135,492
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 and thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149,855
138,823
101,985
110,493
419,382
Thousands of
U.S. dollars (Note 1)
$ 1,316,479
1,456,034
1,348,844
990,915
1,073,581
4,074,835
¥1,056,030
$10,260,688
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(3) ASSETS PLEDGED AND SECURED DEBT
At March 31, 2014, the following assets were pledged as collateral for short-term debt and long-term debt.
Assets pledged
Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
¥177,092
Thousands of
U.S. dollars (Note 1)
$1,720,676
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vessels and other property under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136
72,953
60,148
1,322
708,832
584,415
¥310,329
$3,015,245
Secured debt
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
¥ 50
Thousands of
U.S. dollars (Note 1)
$ 486
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,906
132,540
115,682
1,287,796
¥144,496
$1,403,964
8. COMMITMENTS AND CONTINGENT LIABILITIES
(A) COMMITMENT
At March 31, 2014 and 2013, the Company had loan commitment agreements with certain affi liated companies. The nonexercised
portion of loan commitments was as follows:
Total loan limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥14,409
¥14,107
$140,002
Loan executions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
–
–
The nonexercised portion of loan commitments . . . . . . . . . . . . . . . . . . . . . . . .
¥14,409
¥14,107
$140,002
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
(B) CONTINGENT LIABILITIES
At March 31, 2014 and 2013, the Company and its consolidated subsidiaries were contingently liable mainly as guarantors or co-
guarantors of indebtedness of related and other companies in the aggregate amount of ¥78,169 million ($759,512 thousand) and
¥80,458 million, respectively.
9. NET ASSETS
Net assets comprises four sections, which are the owners’ equity, accumulated other comprehensive income, share subscription
rights and minority interests.
Under the Japanese Companies Act (“the Act”) and regulations, the entire amount paid for new shares is required to be desig-
nated as common stock. However, a company may, by a resolution of the board of directors, designate an amount not exceeding
one-half of the price of the new shares as additional paid-in-capital, which is included in capital surplus.
Under the Act, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the divi-
dend or the excess, if any, of 25% of common stock over the total of additional paid-in-capital and legal earnings reserve must be
set aside as additional paid-in-capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accom-
panying consolidated balance sheets.
Under the Act, appropriations (legal earnings reserve and additional paid-in-capital could be used to eliminate or reduce a defi -
cit or could be capitalized ) generally require a resolution of the shareholders’ meeting.
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(A) SHARES ISSUED AND OUTSTANDING
Changes in number of shares issued and outstanding during the years ended March 31, 2014 and 2013 were as follows:
Balance at April 1, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares of common
stock (Thousands)
1,206,286
Shares of treasury
stock (Thousands)
10,975
–
–
82
(555)
Balance at March 31 and April 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,206,286
10,502
Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
–
145
(274)
Balance at March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,206,286
10,373
(B) SHARE SUBSCRIPTION RIGHTS
Share subscription rights at March 31, 2014 and 2013 consisted of the following:
Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(C) DIVIDENDS
(1) Dividends paid for the year ended March 31, 2014 were as follows:
Millions of yen
2014
2013
¥2,391
¥2,391
¥2,115
¥2,115
Thousands of
U.S. dollars (Note 1)
2014
$23,232
$23,232
Approved at the board of directors held on October 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
¥2,392
¥2,392
Thousands of
U.S. dollars (Note 1)
$23,241
$23,241
(2) Dividends included in the retained earnings at March 31, 2014 and to be paid in subsequent periods were as follows:
Approved at the shareholders’ meeting held on June 24, 2014 . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
¥3,587
¥3,587
Thousands of
U.S. dollars (Note 1)
$34,852
$34,852
10. IMPAIRMENT LOSS
For the year ended March 31, 2014, the Group recorded an impairment loss on the following asset group.
Application
Assets to be disposed of by sale
Assets for operations
Type
Vessels and Other
Vessels
Millions of yen
¥ 498
Thousands of
U.S. dollars (Note 1)
$ 4,839
5,950
57,812
For the year ended March 31, 2013, the Group recorded an impairment loss on the following asset group.
Application
Assets to be disposed of by sale
Type
Vessels and Other
Millions of yen
¥10,978
The Group grouped operating assets based on management accounting categories, and also grouped assets to be disposed of
by sale and idle assets by structure.
For the year ended March 31, 2014 and 2013, with regard to the target price of assets to be disposed of by sale which fell
below book value, the Group reduced the book value on these assets to recoverable amounts and booked the reductions as impair-
ment losses.
The recoverable amount for this asset group is evaluated based on the asset’s net selling price. And the asset’s net selling price
is appraised based on the target price of assets to be disposed of by sale.
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For the year ended March 31, 2014, since profi tability of the overseas consolidated subsidiary’s assets for operations signifi -
cantly deteriorated, the Group reduced the book value on these assets to recoverable amounts and booked the reductions as
impairment losses.
The recoverable amount for this asset group is evaluated based on the value in use. The value in use is calculated from the
projected future cash fl ows discounted at a rate of 7%.
11. OTHER INCOME (EXPENSES): OTHERS, NET - BREAKDOWN
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
Others, net:
Exchange gain (loss), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥11,392
¥ (3,297)
$110,688
Amortization of goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of vessels, investment securities and others . . . . . . . . . . . . . . .
Gain on sale of securities issued by subsidiaries and affi liated companies . . .
Loss on sale and disposal of vessels, investment securities and others . . . . . .
Loss arising from dissolution of subsidiaries and affi liated companies . . . . . .
Loss on write-down of investment securities and others . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special retirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss arising from marine accident. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancellation fee for chartered ships, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
190
8,295
21,857
(7,041)
(1)
(106)
(218)
(76)
(2,397)
572
(6,448)
220
12,459
62
(4,187)
(152)
(2,892)
(90)
(79)
–
1,744
(10,978)
Cost of business structural reforms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
(101,463)
1,846
80,597
212,369
(68,412)
(10)
(1,030)
(2,118)
(738)
(23,290)
5,558
(62,651)
–
Sundries, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,075
(729)
88,174
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥35,094
¥(109,382)
$340,983
Note: Breakdown of cost of business structural reforms
Profi ts and losses associated with the business structural reforms in the dry bulker and tanker businesses such as loss on transfer of
time charter contracts, impairment loss, loss on sale of vessels and gain/loss on cancellation of derivatives were collectively recorded
as cost of business structural reforms. Breakdown of the cost was as follows:
Loss on transfer of time charter contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥103,422
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on cancellation of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,279
1,341
(10,346)
(233)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥101,463
Millions of yen
2013
(Impairment Loss)
For the year ended March 31, 2013, the Group recorded an impairment loss on the following asset group:
Application
Assets to be disposed of by sale
Type
Vessels
Millions of yen
¥7,279
The Group grouped operating assets based on management accounting categories, and also grouped assets to be disposed of by
sale and idle assets by structure. For the year ended March 31, 2013, with regard to the target price of assets to be disposed of by
sale which fell below book value, the Group reduced the book value on these assets to recoverable amounts and booked the reduc-
tions as cost of business structural reforms.
The recoverable amount for this asset group is evaluated based on the asset’s net selling price. And the asset’s net selling price
is appraised based on the target price of assets to be disposed of by sale.
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12. LEASES
AS LESSEE:
(A) INFORMATION ON FINANCE LEASES ACCOUNTED FOR AS OPERATING LEASES:
(1) A summary of assumed amounts of acquisition cost, accumulated depreciation and net book value at March 31, 2014 of
fi nance leases that do not transfer ownership to the lessee was as follows:
Acquisition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment,
mainly
containers
¥16,243
15,855
¥ 388
Millions of yen
Others
¥190
144
¥ 46
Total
¥16,433
15,999
¥ 434
Thousands of U.S. dollars (Note 1)
Equipment,
mainly
containers
$157,822
154,052
$ 3,770
Others
$1,846
1,399
$ 447
Total
$159,668
155,451
$ 4,217
A summary of assumed amounts of acquisition cost, accumulated depreciation and net book value at March 31, 2013 of
fi nance leases that do not transfer ownership to the lessee was as follows:
Acquisition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Future lease payments at March 31, 2014 and 2013
Millions of yen
Equipment,
mainly
containers
¥26,337
25,171
¥ 1,166
Total
¥26,337
25,171
¥ 1,166
Amount due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Lease payments, depreciation equivalent and interest equivalent
Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
2014
2013
¥1,221
122
¥1,343
¥2,041
1,177
¥3,218
Thousands of
U.S. dollars (Note 1)
2014
¥11,864
1,185
¥13,049
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
¥2,234
796
49
2013
¥2,713
1,322
79
2014
$21,706
7,734
476
(4) Calculation of depreciation equivalent
Assumed depreciation amounts are computed using the declining-balance method or the straight-line method over the lease terms
assuming no residual value.
(5) Calculation of interest equivalent
The excess of total lease payments over acquisition cost equivalents is regarded as amounts representing interest payable equiva-
lents and is allocated to each period using the interest method.
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(6) Impairment loss
There was no impairment loss on fi nance lease accounted for as operating leases.
(B) FUTURE LEASE PAYMENTS UNDER OPERATING LEASES FOR ONLY NON-CANCELABLE CONTRACTS AT MARCH 31, 2014
AND 2013:
Amount due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
¥ 48,825
256,912
¥305,737
2013
2014
¥ 43,810
$ 474,398
252,281
2,496,230
¥296,091
$2,970,628
AS LESSOR:
(A) FUTURE LEASE INCOME UNDER OPERATING LEASES FOR ONLY NON-CANCELABLE CONTRACTS AT MARCH 31, 2014 AND
2013:
Amount due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
¥13,021
40,325
¥53,346
2013
¥13,571
47,167
¥60,738
2014
$126,516
391,809
$518,325
13. RENTAL PROPERTIES
The Company and some of its consolidated subsidiaries own real estate for offi ce lease (including lands) in Tokyo, Osaka and other
areas.
Information about the book value and the fair value of such rental properties was as follows:
Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥280,121
¥279,130
$2,721,735
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
381,024
368,128
3,702,138
Notes: 1. Book value was calculated as the amount equivalent to the cost for acquisition deducting accumulated depreciation.
2. Fair value is mainly based upon the amount appraised by outside independent real estate appraisers.
In addition, information about rental revenue and expense from rental properties was as follows:
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
¥26,992
15,447
¥11,545
2013
2014
¥26,193
$262,262
14,776
150,087
¥11,417
$112,175
Note: Rental revenue is mainly recorded as “shipping and other revenues” and rental expense (depreciation expense, repairs and maintenance fee, utilities,
personnel cost, tax and public charge, etc.) is mainly recorded as “shipping and other expenses”.
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14. SEGMENT AND RELATED INFORMATION
(A) SEGMENT INFORMATION:
For the year ended March 31, 2014:
Bulkships
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Total
Adjustment
Consolidated
Millions of yen
1. Revenues:
(1) Revenues from customers,
unconsolidated subsidiaries and
affi liated companies . . . . . . . . . .
¥ 836,409
¥713,503
¥55,603
¥116,599
¥1,722,114
¥ 7,338
¥1,729,452
¥ –
¥1,729,452
(2) Inter-segment revenues . . . . . . . .
588
1,887
202
20,608
23,285
7,246
30,531
(30,531)
–
Total revenues . . . . . . . . . . . . . . .
¥ 836,997
¥715,390
¥55,805
¥137,207
¥1,745,399
¥ 14,584
¥1,759,983
¥ (30,531)
¥1,729,452
Segment income (loss) . . . . . . . .
¥ 57,122
¥ (14,554)
¥ 2,236
¥ 11,146
¥ 55,950
¥ 4,577
¥ 60,527
¥ (5,541)
¥ 54,986
Segment assets . . . . . . . . . . . . . .
¥1,501,313
¥449,725
¥35,089
¥386,852
¥2,372,979
¥325,937
¥2,698,916
¥(334,221)
¥2,364,695
2. Others
(1) Depreciation and amortization . .
¥ 55,546
¥ 15,014
¥ 3,303
¥ 8,623
¥ 82,486
¥ 326
¥ 82,812
¥ 1,172
¥ 83,984
(2) Amortization of goodwill, net . . .
(3) Interest income . . . . . . . . . . . . . .
(4) Interest expenses. . . . . . . . . . . . .
(5) Equity in earnings (losses) of
affi liated companies, net . . . . . . .
(6) Investment in affi liates . . . . . . . .
(7) Tangible/intangible fi xed assets
increased . . . . . . . . . . . . . . . . . .
(619)
1,565
9,837
(3,009)
97,802
18
172
2,454
1,404
3,385
305
6
204
179
1,777
105
75
(191)
1,818
1,935
14,430
1
1,191
743
(190)
3,009
15,173
–
(690)
(2,590)
(190)
2,319
12,583
193
(1,233)
(1)
(1,234)
1,506
104,470
2,308
106,778
–
–
(1,234)
106,778
140,189
28,511
1,424
10,484
180,608
146
180,754
5,395
186,149
For the year ended March 31, 2014:
Bulkships
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Total
Adjustment
Consolidated
Thousands of U.S. dollars (Note 1)
1. Revenues:
(1) Revenues from customers,
unconsolidated subsidiaries and
affi liated companies . . . . . . . . . .
$ 8,126,788
$6,932,598
$540,255 $1,132,909 $16,732,550 $ 71,298 $16,803,848 $ –
$16,803,848
(2) Inter-segment revenues . . . . . . . .
5,713
18,335
1,963
200,233
226,244
70,404
296,648
(296,648)
–
Total revenues . . . . . . . . . . . . . . .
$ 8,132,501
$6,950,933
$542,218 $1,333,142 $16,958,794 $ 141,702 $17,100,496 $ (296,648)
$16,803,848
Segment income (loss) . . . . . . . .
$ 555,013
$ (141,411) $ 21,726 $ 108,298 $ 543,626 $ 44,472 $ 588,098 $ (53,838)
$ 534,260
Segment assets . . . . . . . . . . . . . .
$14,587,184
$4,369,656
$340,935 $3,758,764 $23,056,539 $3,166,897 $26,223,436 $(3,247,387)
$22,976,049
2. Others
(1) Depreciation and amortization . .
$ 539,700
$ 145,880
$ 32,093 $ 83,784 $ 801,457 $ 3,168 $ 804,625 $ 11,387
$ 816,012
(2) Amortization of goodwill, net . . .
(3) Interest income . . . . . . . . . . . . . .
(4) Interest expenses. . . . . . . . . . . . .
(5) Equity in earnings (losses) of
(6,014)
15,206
95,579
175
2,963
1,671
58
1,020
729
(1,856)
10
17,664
11,572
(1,846)
29,236
–
(6,704)
(1,846)
22,532
23,844
1,982
18,801
140,206
7,219
147,425
(25,165)
122,260
affi liated companies, net . . . . . . .
(29,236)
13,642
1,739
1,875
(11,980)
(10)
(11,990)
(6) Investment in affi liates . . . . . . . .
950,271
32,890
17,266
14,633
1,015,060
22,425
1,037,485
–
–
(11,990)
1,037,485
(7) Tangible/intangible fi xed assets
increased . . . . . . . . . . . . . . . . . .
1,362,116
277,021
13,836
101,866
1,754,839
1,418
1,756,257
52,420
1,808,677
As noted in Note 2 (20) “Changes in accounting estimates”, in the year ended March 31, 2014, the period of estimated useful lives
of dry bulkers and car carriers were changed from 15 years to 20 years, and tankers from 13-18 years to 20-25 years, respectively.
As a result, operating income, segment income, and income before income taxes and minority interests for the year ended
March 31, 2014 was increased by ¥10,684 million ($103,809 thousand).
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100 Mitsui O.S.K. Lines
For the year ended March 31, 2013:
Bulkships
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Total
Adjustment
Consolidated
Millions of yen
1. Revenues:
(1) Revenues from customers,
unconsolidated subsidiaries and
affi liated companies . . . . . . . . . .
¥ 731,269
¥606,589
¥54,285
¥109,650
¥1,501,793
¥ 7,401
¥1,509,194
¥ –
¥1,509,194
(2) Inter-segment revenues . . . . . . . .
735
1,678
193
18,377
20,983
7,061
28,044
(28,044)
–
Total revenues . . . . . . . . . . . . . . .
¥ 732,004
¥608,267
¥54,478
¥128,027
¥1,522,776
¥ 14,462
¥1,537,238
¥ (28,044)
¥1,509,194
Segment income (loss) . . . . . . . .
¥ (24,800)
¥ (11,291)
¥ 1,283
¥ 10,746
¥ (24,062)
¥ 2,449
¥ (21,613)
¥ (6,955)
¥ (28,568)
Segment assets . . . . . . . . . . . . . .
¥1,298,682
¥403,167
¥36,420
¥379,969
¥2,118,238
¥303,650
¥2,421,888
¥(257,277)
¥2,164,611
2. Others
(1) Depreciation and amortization . .
¥ 66,689
¥ 14,901
¥ 3,530
¥ 7,964
¥ 93,084
¥ 410
¥ 93,494
¥ 1,191
¥ 94,685
(2) Amortization of goodwill, net . . .
(3) Interest income . . . . . . . . . . . . . .
(573)
1,144
34
178
(4) Interest expenses. . . . . . . . . . . . .
10,785
2,501
(5) Equity in earnings (losses) of
affi liated companies, net . . . . . . .
(6,551)
1,258
(6) Cost of business structural reforms. .
101,463
–
273
37
331
153
–
63
97
(203)
1,456
1,957
15,574
(17)
1,252
858
(220)
2,708
16,432
–
(1,034)
(3,411)
140
–
(5,000)
101,463
64
–
(4,936)
101,463
(7) Investment in affi liates . . . . . . . .
66,624
6,031
1,625
1,190
75,470
2,282
77,752
(220)
1,674
13,021
(4,936)
101,463
77,752
–
–
–
(8) Tangible/intangible fi xed assets
increased . . . . . . . . . . . . . . . . . .
128,440
11,463
1,102
20,339
161,344
622
161,966
2,924
164,890
(Segment income (loss))
Segment income (loss) is calculated by adjusting operating income for gains on management of surplus funds (interest income, etc.) and the cost of
raising funds (interest expense, etc.)
(B) RELATED INFORMATION:
(1) Information about geographic areas:
Our service areas are not necessarily consistent with our customer’s location in our core ocean transport business.
That’s why the revenues of geographic areas are revenues, wherever they may be earned, of companies registered in countries
in the geographic areas.
For the year ended March 31, 2014:
Japan
North America
Europe
Asia
Others
Consolidated
Revenues . . . . . . . . . . . . . . . . . . . . . .
¥1,496,846
Tangible fi xed assets. . . . . . . . . . . . . .
¥1,220,942
¥19,559
¥33,589
¥43,094
¥ 3,940
¥169,890
¥113,904
¥ 63
¥6,870
¥1,729,452
¥1,379,245
Millions of yen
For the year ended March 31, 2014:
Japan
North America
Europe
Asia
Others
Consolidated
Revenues . . . . . . . . . . . . . . . . . . . . . .
$14,543,781
$190,041
$418,714
$1,650,700
$ 612
$16,803,848
Tangible fi xed assets. . . . . . . . . . . . . .
$11,863,020
$326,360
$ 38,282
$1,106,724
$66,751
$13,401,137
Thousands of U.S. dollars (Note 1)
For the year ended March 31, 2013:
Japan
North America
Europe
Asia
Others
Consolidated
Revenues . . . . . . . . . . . . . . . . . . . . . .
¥1,400,961
Tangible fi xed assets. . . . . . . . . . . . . .
¥1,211,948
¥17,422
¥23,456
¥35,220
¥ 3,651
¥55,591
¥64,844
¥ –
¥68
¥1,509,194
¥1,303,967
Millions of yen
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(2) Information about impairment loss by reportable segment:
For the year ended March 31, 2014:
Bulkships
Millions of yen
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Adjustment
and elimination
Consolidated
Impairment loss . . . . . . . . . . . . . . . .
¥6,368
¥ –
¥80
¥ –
¥6,448
¥ –
¥ –
¥6,448
For the year ended March 31, 2014:
Bulkships
Thousands of U.S. dollars (Note 1)
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Adjustment
and elimination
Consolidated
Impairment loss . . . . . . . . . . . . . . . .
$61,874
$ –
$777
$ –
$62,651
$ –
$ –
$62,651
For the year ended March 31, 2013:
Bulkships
Millions of yen
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Adjustment
and elimination
Consolidated
Impairment loss . . . . . . . . . . . . . . . .
¥8,407
¥ –
¥368
¥ –
¥8,775
¥278
¥1,925
¥10,978
Note: Other than the amounts written above, impairment loss associated with bulkships segment (¥7,279 million) was included in cost of business
structural reforms.
(3) Information about goodwill (negative goodwill) by reportable segment:
For the year ended March 31, 2014:
Bulkships
Millions of yen
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Adjustment
and elimination
Consolidated
Goodwill (Negative goodwill) at
the end of current year . . . . . . . . .
¥(379)
¥(1)
¥398
¥1,554
¥1,572
¥1
¥ –
¥1,573
For the year ended March 31, 2014:
Bulkships
Thousands of U.S. dollars (Note 1)
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Adjustment
and elimination
Consolidated
Goodwill (Negative goodwill) at
the end of current year . . . . . . . . .
$(3,682)
$(10)
$3,867
$15,099
$15,274
$10
$ –
$15,284
For the year ended March 31, 2013:
Bulkships
Millions of yen
Reportable segment
Container-
ships
Ferry &
Domestic
transport
Associated
business
Sub Total
Others
Adjustment
and elimination
Consolidated
Goodwill (Negative goodwill) at
the end of current year . . . . . . . . .
¥(1,014)
¥16
¥704
¥1,397
¥1,103
¥2
¥ –
¥1,105
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15. INCOME TAXES
The Company is subject to a number of taxes based on income, which, in the aggregate, indicate statutory rates in Japan of
approximately 34.25% for the years ended March 31, 2014 and 2013.
(A) Signifi cant components of deferred tax assets and liabilities at March 31, 2014 and 2013 were as follows:
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
Deferred tax assets:
Excess bad debt expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 787
¥ 1,772
$ 7,647
Reserve for bonuses expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefi ts expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defi ned benefi t liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement allowances for directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of securities and other investments . . . . . . . . . . . . . . . . . . . . . .
Accrued business tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss carried forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on sale of fi xed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,590
–
2,726
655
1,791
410
54,982
1,675
1,351
5,003
70,970
(64,817)
6,153
1,463
4,287
–
728
1,576
423
69,292
1,699
1,212
3,287
85,739
(77,693)
8,046
15,449
–
26,487
6,364
17,402
3,984
534,221
16,275
13,127
48,610
689,566
(629,781)
59,785
Deferred tax liabilities::
Reserve deductible for tax purposes when appropriated for deferred
gain on real properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,920)
(1,815)
(18,655)
Reserve deductible for tax purposes when appropriated for
special depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized holding gains on available-for-sale securities . . . . . . . . . . . . . . . .
Gain on securities contributed to employee retirement benefi t trust . . . . . . .
Revaluation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings of consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains on hedging derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(760)
(19,391)
(3,667)
(14,566)
(11,591)
(31,373)
(333)
(83,601)
(889)
(15,200)
(3,698)
(14,811)
(16,489)
(21,127)
(325)
(7,384)
(188,408)
(35,630)
(141,527)
(112,621)
(304,829)
(3,237)
(74,354)
(812,291)
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(77,448)
¥ (66,308)
$(752,506)
Following the promulgation on March 31, 2014 of the “Act for Partial Revision of the Income Tax Act” (Act No. 10 of 2014),
the special reconstruction corporation tax, a surtax for reconstruction funding after the Great East Japan Earthquake will not be
imposed for the fi scal years beginning on or after April 1, 2014. In line with these revisions, the Company changed the statutory tax
rate to calculate deferred tax assets and liabilities from 34.25% to 31.75% for temporary differences which are expected to reverse
from the fi scal years beginning on or after April 1, 2014.
The effect on the consolidated fi nancial statements of the change is not material.
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(B) Signifi cant difference between the statutory tax rate and the effective tax rate for the fi nancial statement purpose for the year
ended March 31, 2014 was as follows:
Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax exempt revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on tonnage tax system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on net loss carried forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on elimination of dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on elimination of loss on valuation of stocks of subsidiaries and affi liates . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
34.3 %
0.5 %
(4.3)%
(6.6)%
(18.3)%
10.6 %
(2.6)%
(0.7)%
12.9 %
* For the year ended March 31, 2013, the difference between the statutory tax rate and the effective tax rate is not stated as the Company recorded
loss before income taxes and minority interests.
16. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS
(A) DEFINED BENEFIT PLANS
(1) MOVEMENTS IN RETIREMENT BENEFIT OBLIGATIONS EXCEPT PLAN APPLIED SIMPLIFIED METHOD
Balance at April 1, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥42,258
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefi ts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Past service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,484
837
(326)
(2,510)
–
Millions of yen
Thousands of
U.S. dollars (Note 1)
$410,591
14,419
8,133
(3,168)
(24,388)
–
Balance at March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥41,743
$405,587
(2) MOVEMENTS IN PLAN ASSETS EXCEPT PLAN APPLIED SIMPLIFIED METHOD
Balance at April 1, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥56,636
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions paid by the employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefi ts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,133
3,191
1,189
(2,243)
Millions of yen
Thousands of
U.S. dollars (Note 1)
$550,291
11,009
31,005
11,553
(21,794)
Balance at March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥59,906
$582,064
(3) MOVEMENTS IN NET LIABILITY FOR RETIREMENT BENEFITS BASED ON THE SIMPLIFIED METHOD
Balance at April 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,918
Millions of yen
Thousands of
U.S. dollars (Note 1)
$106,082
Retirement benefi t costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefi ts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions paid by the employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,237
(1,473)
(783)
12,019
(14,312)
(7,608)
Balance at March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 9,899
$ 96,181
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(4) RECONCILIATION FROM RETIREMENT BENEFIT OBLIGATIONS AND PLAN ASSETS TO LIABILITY (ASSET)
FOR RETIREMENT BENEFITS INCLUDING PLAN APPLIED SIMPLIFIED METHOD
Funded retirement benefi t obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 49,534
Millions of yen
Plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unfunded retirement benefi t obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net liability (asset) for retirement benefi ts at March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . .
Asset for retirement benefi ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(68,750)
(19,216)
10,952
(8,264)
12,936
Thousands of
U.S. dollars (Note 1)
$ 481,286
(667,994)
(186,708)
106,413
(80,295)
125,690
Liability for retirement benefi ts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net liability (asset) for retirement benefi ts at March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . .
(21,200)
¥ (8,264)
(205,985)
$ (80,295)
(5) RETIREMENT BENEFIT COSTS
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,484
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial loss amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Past service costs amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefi t costs calculated by the simplifi ed method . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
837
(1,133)
(1,111)
–
1,237
287
Millions of yen
Thousands of
U.S. dollars (Note 1)
$ 14,419
8,133
(11,009)
(10,795)
–
12,019
2,789
Total retirement benefi t costs for the year ended March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,601
$ 15,556
(6) BREAKDOWN OF ITEMS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME
Unrealized past service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized actuarial differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
¥ –
Thousands of
U.S. dollars (Note 1)
$ –
(1,763)
¥(1,763)
(17,130)
$(17,130)
(7) PLAN ASSETS
1. Plan assets comprise:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jointly invested assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefi t trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54%
22%
17%
6%
1%
100%
36%
2. Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered in
determining the long-term expected rate of return.
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(8) ACTUARIAL ASSUMPTIONS
The discount rate for the year ended March 31, 2014 used by the Company is mainly 2.0%. Also, the rate of expected return on
plan assets for the year ended March 31, 2014 is mainly 2.0%.
(B) DEFINED CONTRIBUTION PLANS
The estimated amount of contributions to defi ned contribution plans at March 31, 2014 was ¥855 million ($8,307 thousand).
Employees’ severance and retirement benefi ts included in the liability section of the consolidated balance sheets at March 31, 2013
consisted of the following:
Projected benefi t obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 61,280
Unrecognized actuarial differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid pension expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less fair value of pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(712)
17,576
(64,672)
Employees’ severance and retirement benefi ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 13,472
Millions of yen
2013
Included in the consolidated statements of operations for the year ended March 31, 2013 was severance and retirement benefi t
expenses, which comprised the following:
Millions of yen
2013
Service costs — benefi ts earned during the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,054
Interest cost on projected benefi t obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
873
(1,087)
239
1,102
Employees’ severance and retirement benefi ts expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,181
* “Others” represents special retirement and expenses related to the defi ned contribution pension plan of the Group.
The discount rate for the year ended March 31, 2013 used by the Company is mainly 2.0%. Also, the rate of expected return
on plan assets for the year ended March 31, 2013 is mainly 2.0%.
The estimated amount of all retirement benefi ts to be paid at the future retirement date is allocated equally to each service year
using the estimated number of total service years.
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17. STOCK OPTIONS
(A) EXPENSED AMOUNT
Expensed amounts on stock options for the years ended March 31, 2014 and 2013 were as follows:
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
¥275
¥275
¥110
¥110
$2,672
$2,672
(B) TERMS AND CONDITIONS
The following table summarizes terms and conditions of stock options for the years when they were granted:
Number of grantees
2003
2004
2005
2006
Directors: 11
Executive offi cers: 16
Employees: 37
Presidents of the Company’s
domestic consolidated
subsidiaries: 34
Directors: 11
Executive offi cers: 16
Employees: 32
Presidents of the Company’s
domestic consolidated
subsidiaries: 34
Directors: 11
Executive offi cers: 17
Employees: 38
Presidents of the Company’s
domestic consolidated
subsidiaries: 34
Directors: 11
Executive offi cers: 17
Employees: 34
Presidents of the Company’s
domestic consolidated
subsidiaries: 37
Number of stock options
Common stock 1,590,000
Common stock 1,570,000
Common stock 1,650,000
Common stock 1,670,000
Grant date
August 8, 2003
August 5, 2004
August 5, 2005
August 11, 2006
Vesting conditions
Service period
Exercise period
No provisions
No provisions
No provisions
No provisions
No provisions
No provisions
No provisions
No provisions
From June 20, 2004 to
June 25, 2013
From June 20, 2005 to
June 24, 2014
From June 20, 2006 to
June 23, 2015
From June 20, 2007 to
June 22, 2016
Number of grantees
2007
2008
2009
2010
Directors: 11
Executive offi cers: 20
Employees: 33
Presidents of the Company’s
domestic consolidated
subsidiaries: 36
Directors: 11
Executive offi cers: 20
Employees: 38
Presidents of the Company’s
domestic consolidated
subsidiaries: 36
Directors: 11
Executive offi cers: 20
Employees: 33
Presidents of the Company’s
domestic consolidated
subsidiaries: 35
Directors: 10
Executive offi cers: 21
Employees: 36
Presidents of the Company’s
domestic consolidated
subsidiaries: 33
Number of stock options
Common stock 1,710,000
Common stock 1,760,000
Common stock 1,640,000
Common stock 1,710,000
Grant date
August 10, 2007
August 8, 2008
August 14, 2009
August 16, 2010
Vesting conditions
Service period
Exercise period
No provisions
No provisions
No provisions
No provisions
No provisions
No provisions
No provisions
No provisions
From June 20, 2008 to
June 21, 2017
From July 25, 2009 to
June 24, 2018
From July 31, 2011 to
June 22, 2019
From July 31, 2012 to
June 21, 2020
Number of grantees
2011
2012
2013
Directors: 10
Executive offi cers: 22
Employees: 34
Presidents of the Company’s
domestic consolidated
subsidiaries: 33
Directors: 9
Executive offi cers: 22
Employees: 33
Presidents of the Company’s
domestic consolidated
subsidiaries: 30
Directors: 9
Executive offi cers: 18
Employees: 38
Presidents of the Company’s
domestic consolidated
subsidiaries: 33
Number of stock options
Common stock 1,720,000
Common stock 1,640,000
Common stock 1,600,000
Grant date
August 9, 2011
August 13, 2012
August 16, 2013
Vesting conditions
Service period
Exercise period
No provisions
No provisions
No provisions
No provisions
No provisions
No provisions
From July 26, 2013 to
June 22, 2021
From July 28, 2014 to
June 21, 2022
From August 2, 2015 to
June 20, 2023
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(C) CHANGES IN NUMBER AND UNIT PRICES
The following tables summarize changes in number and unit prices of stock options for the years when they were granted:
(1) Changes in number of stock options
Non-vested stock options
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Balance at March 31, 2013 . . . . . . .
Options granted during the year . .
Options expired during the year . . .
Options vested during the year . . .
Balance at March 31, 2014 . . . . . . .
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1,720,000 1,640,000
–
–
–
–
–
– 1,720,000
– 1,600,000
–
–
–
–
–
– 1,640,000 1,600,000
Vested stock options
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Balance at March 31, 2013 . . . . . . .
14,000 286,000 878,000 1,443,000 1,680,000 1,750,000 1,630,000 1,710,000
–
Options vested during the year . . .
–
Options exercised during the year . .
10,000
Options expired during the year . . .
4,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1,720,000
–
–
–
–
Balance at March 31, 2014 . . . . . . .
– 286,000 878,000 1,443,000 1,680,000 1,750,000 1,630,000 1,710,000 1,720,000
–
–
–
–
–
–
–
–
–
–
(2) Unit prices of stock options exercised during the year
Exercise price
¥377
¥644
¥762
¥841
¥1,962
¥1,569
¥639
¥642
¥468
¥277
¥447
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Average market price of share
at exercise . . . . . . . . . . . . . . . . . . .
¥410
Fair value per stock option
at grant date . . . . . . . . . . . . . . . . .
–
–
–
–
–
–
–
–
–
–
–
–
–
¥219
¥ 352
¥ 217
¥136
¥208
¥ 87
¥ 67
¥172
(D) KEY FIGURES FOR FAIR VALUE PER STOCK OPTION
The Company utilized the Black Scholes Model for calculating fair value per stock option. Key fi gures of the calculation were as
follows:
Stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49.0%
Expected remaining term of the option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 years and 11 months
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥0 per share
0.36%
2013
18. MATERIAL NON-CASH TRANSACTIONS
Amounts of lease assets and lease obligations recognized for the years ended March 31, 2014 and 2013 were ¥355 million ($3,449
thousand) and ¥495 million, respectively.
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19. COMPREHENSIVE INCOME
For the years ended March 31, 2014 and 2013, the amounts reclassifi ed to net income (loss) that were recognized in other compre-
hensive income and tax effects for each component of other comprehensive income were as follows:
Millions of yen
Thousands of
U.S. dollars (Note 1)
2014
2013
2014
Unrealized holding gains on available-for-sale securities, net of tax:
Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥13,764
¥10,770
$133,735
Reclassifi cation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains on hedging derivatives, net of tax:
Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifi cation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments of acquisition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(780)
12,984
(4,137)
8,847
48,719
(9,896)
3,425
42,248
(9,523)
32,725
2,801
13,571
(4,478)
9,093
70,181
17,796
2,712
90,689
(34,276)
56,413
(7,579)
126,156
(40,196)
85,960
473,368
(96,152)
33,278
410,494
(92,529)
317,965
Foreign currency translation adjustments:
Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,158
14,902
302,740
Reclassifi cation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
7
–
31,158
14,909
302,740
Share of other comprehensive income of associates
accounted for using equity method:
Increase (Decrease) during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifi cation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments of acquisition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,039
5,654
(408)
19,285
¥92,015
(3,560)
4,664
–
1,104
¥81,519
136,407
54,936
(3,964)
187,379
$894,044
20. RELATED PARTY TRANSACTIONS
For the year ended March 31, 2014
Category
Affi liated
company
Name of
company
Daiichi Chuo
Kisen Kaisha
Address
Chuo-ku,
Tokyo
Millions
of yen
Paid-in
capital
Business
description
¥28,958 Marine
transporta-
tion
Millions of yen
Thousands of
U.S. dollars (Note 1)
Transactions during
the year ended
March 31, 2014
Balance at
March 31, 2014
Transactions during
the year ended
March 31, 2014
Balance at
March 31,
2014
Ratio of
the Group’s
voting rights
Directly
26.96%
Relation
with related
party
Interlocking
directorate Ship
chartering
Description of
transaction
Underwriting
of capital
increase
Transacted
amount Account Amount
–
¥15,000
–
Transacted
amount
$145,744
Amount
–
Notes: 1. With regard to underwriting of capital increase, the Company underwrote capital increase through a third-party allotment of new shares of
Daiichi Chuo Kisen Kaisha at ¥1,000 per share.
2. Consumption taxes are not included in transacted amount.
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Millions of yen
Transactions during
the year ended
March 31, 2013
Balance at
March 31, 2013
Description of
transaction
Underwriting of
capital increase
Loans of capital
Transacted
amount Account Amount
–
¥15,000
38,400
–
For the year ended March 31, 2013
Category
Affi liated
company
Name of
company
Daiichi Chuo
Kisen Kaisha
Address
Chuo-ku,
Tokyo
Millions
of yen
Paid-in
capital
Business
description
¥20,758 Marine
transporta-
tion
Ratio of
the Group’s
voting rights
Directly
26.96%
Relation
with related
party
Interlocking
directorate
Ship chartering
Loans of capita
Notes: 1. (1) With regard to underwriting of capital increase, the Company underwrote capital increase through a third-party allotment of new shares
of Daiichi Chuo Kisen Kaisha at ¥1,000 per share.
(2) With regard to loans of capital, interest rates on loans were decided after considering market interest rates. Furthermore, collateral was not accepted.
2. Consumption taxes are not included in transacted amount.
21. SUBSEQUENT EVENT
The Company, by a resolution of a Board of Directors’ meeting held on April 8, 2014, issued Euro US dollar Zero Coupon
Convertible Bond due 2018 and Euro US dollar Zero Coupon Convertible Bond due 2020. All payments were made on April 24,
2014. An outline of these bonds is as follows.
(1) Securities offered
(2) Total issue amount
(3) Issue prices
(4) Offer prices
(5) Coupon
(6) Closing and issue date
(7) Redemption prices
(8) Redemption at maturity
Early redemption and cancellation by
acquisition
(9) Particulars of stock acquisition rights
i. Class of share to be issued upon exercise
of the stock acquisition rights
Euro US dollar Zero Coupon Convertible
Bond due 2018
US$300,000,000
Euro US dollar Zero Coupon
Convertible Bond due 2020
US$200,000,000
100.0% of principal amount
102.5% of principal amount
Zero
April 24, 2014
100% of principal amount
April 24, 2018
Early redemption and cancellation by
acquisition by the bonds under certain
circumstances was provided in the
Information Memorandum.
Same as to the left
Same as to the left
Same as to the left
Same as to the left
Same as to the left
April 24, 2020
Same as to the left
Common stock of the Company
Same as to the left
ii. Total number of stock acquisition rights
3,000 units
US$5.34
2,000 units
US$4.80
iii. Conversion price
iv. Exercise period
Supplementary provisions
v. Amount to be paid upon exercise of the
stock acquisition rights
vi. Capital and capital reserve increased in
the case stocks are issued by exercising
stock acquisition rights
(10) Security or guarantee
(11) Use of proceeds
Same as to the left
Same as to the left
From May 8, 2014 to April 9, 2020
From May 8, 2014 to April 10, 2018
*Before three months prior to redemption
date, the said stock acquisition rights shall
not be exercised unless the stock price
exceeds 130% of the conversion price for
a certain period.
*After three months prior to redemption
date, the Company will have a right to
acquire the bonds in exchange for 100%
of principal amount in cash and common
stock for value exceeded principal amount.
The bonds in respect of the relevant stock acquisition rights shall be contributed
upon exercising of each stock acquisition right, and the price of the bonds shall
be equal to the principal amount of the bonds.
The amount of capital increased in case the stocks are issued by exercising stock
acquisition rights shall be half of the maximum increase of capital, etc., calcu-
lated in accordance with Article 17 of the “Company Calculation Ordinance,”
and any amount less than one yen arising from such calculation shall be rounded
up. The increase in capital reserve shall be obtained by subtracting the capital
increased from the maximum increase of capital, etc.
None
Proceeds from issuance of the bonds will be used as capital investment for ships,
including LNG carriers, which are expected to be built and completed from now,
and the offshore business.
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110 Mitsui O.S.K. Lines
22. OTHERS
The Group is subject to investigations by overseas competition law authorities including those of the U.S. and Europe for violation
of competition laws of those countries regarding price control negotiations for ocean transport services of completely built-up
vehicles. In addition, a class-action lawsuit was fi led in the U.S. and other countries against the Group for damage claims and for a
cease and desist order for the questioned conduct. Meanwhile, the effect of these investigations and lawsuit on the fi nancial results
of Group is uncertain as its fi nancial impact is not estimable at this stage.
In Japan, the Company had been under investigation by the Japan Fair Trade Commission (the “JFTC”) since September 2012
for violation of the Japanese Antimonopoly Act regarding certain car carrier shipping trades. However, the Company was exempted
from all of the Cease and Desist Orders and Surcharge Payment Orders issued by the JFTC in March 2014 because the JFTC
a ccepted an application made by the Company under the JFTC’s leniency program. Meanwhile, Nissan Motor Car Carrier Co., Ltd.,
which is a consolidated subsidiary of the Company, also made an application under the JFTC’s leniency program and secured a
reduc tion of its surcharge, but was not exempted from the Cease and Desist Order and Surcharge Payment Order.
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Independent Auditor’s Report
Annual Report 2014 111
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112 Mitsui O.S.K. Lines
The MOL Group Mitsui O.S.K. Lines, Ltd. March 31, 2014
■ Consolidated Subsidiaries
▲ Affi liated Companies Accounted for by the Equity Method
Bulkships
Containerships
Registered Offi ce
MOL's Voting
Rights (%)*
Paid-in Capital
(Thousands)
■ BGT Ltd.
■ BLNG Inc.
■ Chugoku Shipping Agencies Ltd.
■ El Sol Shipping Ltd. S.A.
■ Euro Marine Carrier B.V.
■ Euro Marine Logistics N.V.
■ Lakler S.A.
■ MOL LNG Transport Co., Ltd.
■ MCGC International Ltd.
■ Mitsui O.S.K. Bulk Shipping (Asia Oceania) Pte. Ltd.
■ Mitsui O.S.K. Bulk Shipping (Europe) Ltd.
■ Mitsui O.S.K. Bulk Shipping (USA), LLC
■ Mitsui O.S.K. Kinkai, Ltd.
■ MOG LNG Transport S.A.
■ MOL Bridge Finance S.A.
■ MOL Bulk Carriers Pte. Ltd.
■ MOL-NIC Transport Ltd.
■ MOL Cape (Singapore) Pte. Ltd.
■ MOL Netherlands Bulkship B.V.
■ Nissan Carrier Europe B.V.
■ Nissan Motor Car Carrier Co., Ltd.
■ Phoenix Tankers Pte. Ltd.
■ Samba Offshore S.A.
■ Shining Shipping S.A.
■ Shipowner/Chartering companies ( 199 companies) in Panama, Cayman Islands,
Liberia, Singapore, Hong Kong, Cyprus, Malta, Isle of Man, Marshall Islands and the UK
■ Tokyo Marine Asia Pte Ltd
■ Tokyo Marine Co., Ltd.
■ Unix Line Pte Ltd.
■ World Logistics Service (U.S.A.), Inc.
■ Others ( 3 companies)
▲ Act Maritime Co., Ltd.
▲ Aramo Shipping (Singapore) Pte Ltd.
▲ Asahi Tanker Co., Ltd.
▲ Carioca MV27 B.V.
▲ Cernambi Norte MV26 B.V.
▲ Cernambi Sul MV24 B.V.
▲ Daiichi Chuo Kisen Kaisha
▲ Gearbulk Holding Limited
▲ LNG Fukurokuju Shipping Corporation
▲ LNG Jurojin Shipping Corporation
▲ M.S.Tanker Shipping Limited
▲ T.E.N. Ghana MV25 B.V.
▲ Trans Pacifi c Shipping 2 Ltd.
▲ Shipowner/Chartering companies (49 companies) in Liberia, Panama, Bahamas,
Malta, Netherlands, Indonesia, Marshall Islands and Cayman Islands
■ Asia Utoc Pte. Ltd.
■ Bangpoo Intermodal Systems Co., Ltd.
■ Chiba Utoc Corporation
■ Hong Kong Logistics Co., Ltd.
■ International Container Transport Co., Ltd.
■ International Transportation Inc.
■ MOL Logistics (Taiwan) Co., Ltd.
■ Mitsui O.S.K. Lines (Australia) Pty. Ltd.
■ Mitsui O.S.K. Lines (Japan) Ltd.
■ Mitsui O.S.K. Lines (SEA) Pte Ltd.
■ Mitsui O.S.K. Lines (Thailand) Co., Ltd.
■ MOL (America) Inc.
■ MOL (Brasil) Ltda.
■ MOL (China) Co., Ltd.
■ MOL (Europe) B.V.
■ MOL (Europe) Ltd.
■ MOL (Singapore) Pte. Ltd.
■ MOL Consolidation Service Limited
■ MOL Consolidation Service Ltd. (China)
■ MOL Container Center (Thailand) Co., Ltd.
■ MOL Liner, Limited
■ MOL Logistics (Deutschland) GmbH
■ MOL Logistics (Europe) B.V.
■ MOL Logistics (H.K.) Ltd.
■ MOL Logistics (Japan) Co., Ltd.
■ MOL Logistics (Netherlands) B.V.
■ MOL Logistics (Singapore) Pte. Ltd.
■ MOL Logistics (Thailand) Co., Ltd.
■ MOL Logistics (UK) Ltd.
■ MOL Logistics (USA) Inc.
■ MOL Logistics Holding (Europe) B.V.
■ MOL South Africa (Proprietary) Limited
■ Shanghai Huajia International Freight Forwarding Co., Ltd.
■ Shipowner companies (14 companies) in Panama, Marshall Islands, Liberia and Hong Kong
Liberia
U.S.A.
Japan
Panama
Netherlands
Belgium
Uruguay
Japan
Bahamas
Singapore
U.K.
U.S.A.
Japan
Panama
Panama
Singapore
Liberia
Singapore
Netherlands
Netherlands
Japan
Singapore
Panama
Panama
Singapore
Japan
Singapore
U.S.A.
Japan
Singapore
Japan
Netherlands
Netherlands
Netherlands
Japan
Bermuda
Bahamas
Bahamas
Hong Kong
Netherlands
Bahamas
Singapore
Thailand
Japan
Hong Kong
Japan
U.S.A.
Taiwan
Australia
Japan
Singapore
Thailand
U.S.A.
Brazil
China
Netherlands
U.K.
Singapore
Hong Kong
China
Thailand
Hong Kong
Germany
Netherlands
Hong Kong
Japan
Netherlands
Singapore
Thailand
U.K.
U.S.A.
Netherlands
South Africa
China
100.00
75.00
100.00
100.00
75.50
50.00
100.00
100.00
80.10
100.00
100.00
100.00
100.00
100.00
100.00
100.00
75.00
100.00
100.00
100.00
70.01
100.00
100.00
100.00
100.00
100.00
100.00
100.00
49.00
50.00
24.75
20.60
20.60
20.60
26.96
49.00
30.00
30.00
50.00
20.00
50.00
67.43
74.62
100.00
100.00
51.00
100.00
100.00
100.00
100.00
100.00
47.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
75.06
100.00
100.00
98.00
100.00
100.00
100.00
100.00
76.00
US$5
US$1
¥10,000
US$10
A91
A900
US$20
¥40,000
US$1
S$2,350
US$8,402
-
¥660,000
¥200
US$8
US$3,500
US$13,061
US$14,752
A18
A195
¥640,000
US$379,311
US$10
US$10
S$138,018
¥100,000
US$344
US$200
¥90,000
US$20,743
¥600,045
A100
A100
A100
¥28,958,410
US$61,225
¥1,000
¥1,000
HK$2,000
A100
¥2,023,820
S$200
BT130,000
¥90,000
HK$58,600
¥100,000
US$0
NT$7,500
A$1,000
¥100,000
S$200
BT20,000
US$6
R$2,403
US$1,960
A456
£1,500
S$5,000
HK$1,000
RMB8,000
BT10,000
HK$40,000
A537
A414
HK$3,676
¥756,250
A3,049
S$700
BT20,000
£400
US$9,814
A19
R3,000
US$1,720
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Annual Report 2014 113
Registered Offi ce
MOL's Voting
Rights (%)*
Paid-in Capital
(Thousands)
Japan
Thailand
U.S.A.
U.S.A.
Japan
Singapore
Japan
Japan
Japan
China
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Hong Kong
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Vietnam
Japan
Japan
Japan
Japan
Hong Kong
Vietnam
Netherlands
Japan
Liberia
Japan
Japan
Japan
Japan
Netherlands
U.S.A.
Japan
Japan
Japan
U.S.A.
Japan
Panama
Japan
U.S.A.
Singapore
79.98
100.00
100.00
100.00
67.55
100.00
100.00
100.00
31.98
22.05
100.00
100.00
100.00
100.00
100.00
¥300,000
BT77,500
US$3,000
-
¥2,155,300
S$2,000
¥50,000
¥50,000
¥100,000
US$1,240
¥54,600
¥50,000
¥30,000
¥100,000
¥650,000
100.00
¥1,577,400
38.73
¥880,000
51.07
100.00
100.00
100.00
100.00
100.00
86.27
100.00
100.00
95.25
100.00
100.00
100.00
62.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
87.26
100.00
100.00
99.39
50.00
36.00
25.00
40.00
100.00
100.00
100.00
100.00
100.00
100.00
80.42
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
¥12,227,847
¥17,000
¥95,400
¥172,000
¥50,000
¥26,500
¥99,960
¥236,000
¥60,000
¥32,000
US$0
¥20,000
¥14,400
¥50,000
¥50,000
¥200,000
¥100,000
¥300,000
¥100,000
¥95,000
¥490,000
¥250,000
¥134,203
VND48,166,000
¥20,000
¥14,950
¥290,000
¥100,000
HK$12,400
US$4,500
A8,444
¥100,000
US$3
¥10,000
¥100,000
¥50,000
¥350,000
A17,245
US$200
¥30,000
¥10,000
¥20,000
US$20
¥100,000
US$135
¥50,000
US$100
US$2,000
Japan
24.00
¥200,000
■ Shosen Koun Co., Ltd.
■ Thai Intermodal Systems Co., Ltd.
■ TraPac, LLC
■ TraPac Jacksonville, LLC
■ Utoc Corporation
■ Utoc Engineering Pte Ltd.
■ Utoc Logistics Corporation
■ Utoc Stevedoring Corporation
■ Others (9 companies)
▲ Shanghai Kakyakusen Kaisha, Ltd.
▲ Shanghai Longfei International Logistics Co., Ltd.
▲ Other company (1 company)
■ Blue Sea Network Co., Ltd.
■ Blue Highway Express Kyushu Co., Ltd
■ Blue Highway Service K.K.
■ Ferry Sunfl ower Limited.
■ MOL Naikou, Ltd.
■ Shipowner company (1 company) in Panama
■ MOL Ferry Co., Ltd.
■ Others (7 companies)
▲ Meimon Taiyo Ferry Co., Ltd.
▲ Others (2 companies)
■ Daibiru Corporation
■ Daibiru Facility Management Ltd.
■ Green Kaiji Kaisha, Ltd.
■ Green Shipping, Ltd.
■ Hokuso Kohatsu K.K.
■ Ikuta & Marine Co., Ltd.
■ Japan Express Co., Ltd. (Kobe)
■ Japan Express Co., Ltd. (Yokohama)
■ Japan Express Packing & Transport Co., Ltd.
■ Japan Hydrographic Charts & Publications Co., Ltd.
■ Jentower Limited
■ Kosan Kanri Service Co., Ltd.
■ Kosan Kanri Service • West Co.,Ltd
■ Kitanihon Tug-boat Co., Ltd.
■ Kobe Towing Co., Ltd.
■ Kusakabe Maritime Engineering Co., Ltd.
■ MOL Career Support, Ltd.
■ Mitsui O.S.K. Kosan Co., Ltd.
■ Mitsui O.S.K. Passenger Line, Ltd.
■ MOL Kaiji Co., Ltd.
■ MOL Techno-Trade, Ltd.
■ M.O. Tourist Co., Ltd.
■ Nihon Tug-Boat Co., Ltd.
■ Chartering company (1 company) in Panama
■ Saigon Tower Co., Ltd.
■ Tanshin Building Service Co., Ltd.
■ Ube Port Service Co., Ltd.
▲ Nippon Charter Cruise, Ltd.
▲ Shinyo Kaiun Corporation
▲ South China Towing Co., Ltd.
▲ Tan Cang-Cai Mep Towage Services Co., Ltd.
■ Euromol B.V.
■ MOL Ocean Expert Co., Ltd.
■ Linkman Holdings Inc.
■ MOL Cableship Ltd.
■ MOL Marine Consulting, Ltd.
■ MOL Ship Tech Inc.
■ Mitsui Kinkai Kisen Co., Ltd.
■ Mitsui O.S.K. Holdings (Benelux) B.V.
■ MM Holdings (Americas), Inc
■ MOL Accounting Co., Ltd.
■ MOL Adjustment, Ltd.
■ MOL Engineering Co., Ltd.
■ MOL FG, Inc.
■ MOL Information Systems, Ltd.
■ MOL Manning Service S.A.
■ MOL Ship Management Co., Ltd.
■ MOL SI, Inc.
■ MOL Treasury Management Pte. Ltd.
■ Shipowner/Chartering companies (4 companies) in Panama
▲ Minaminippon Shipbuilding Co., Ltd.
Ferry & Domestic
Transport
Associated
Business
Others
*MOL includes MOL and its subsidiaries
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114 Mitsui O.S.K. Lines
Worldwide Offi ces
Head Offi ce
1-1, Toranomon 2-chome, Minato-ku,
Tokyo 105-8688, Japan
P.O. Box 5, Shiba, Tokyo
Tel: 81-3-3587-6224 Fax: 81-3-3587-7734
Branch Offi ces
Nagoya, Kansai, Hiroshima, Kyushu
Japan
Mitsui O.S.K. Lines (Japan), Ltd.
Head Offi ce (Tokyo):
Yokohama:
Nagoya:
Osaka:
Kyushu:
Tel: 81-3-3587-7684
Tel: 81-45-212-7710
Tel: 81-52-564-7000
Tel: 81-6-6446-6501
Tel: 81-92-262-0701
Fax: 81-3-3587-7730
Fax: 81-45-212-7735
Fax: 81-52-564-7047
Fax: 81-6-6446-6513
Fax: 81-92-262-0720
Africa
MOL South Africa (Pty) Ltd.
Head Offi ce (Cape Town): Tel: 27-21-441-2200
Fax: 27-21-419-1040
Mitsui O.S.K. Lines (Nigeria) Ltd.
Head Offi ce (Lagos):
Tel: 234-1-2806556
Fax: 234-1-2806559
MOL (Ghana) Ltd.
Head Offi ce (Tema):
Tel: 233-22-212084
Fax: 233-22-210807
Middle East
Mitsui O.S.K. Lines Ltd. Middle East Headquarters
Dubai:
Tel: 971-4-3573566
Fax: 971-4-3573066
MOL (UAE) L.L.C.
Head Offi ce (Dubai):
Tel: 971-4-3573566
Fax: 971-4-3573066
Mitsui O.S.K. Bulk Shipping (Asia, Oceania) Pte. Ltd.
Doha:
Muscat:
Tel: 974-4-836541
Tel: 968-2440-0950
Fax: 974-4-836563
Fax: 968-2440-0953
North America
MOL (America) Inc.
Head Offi ce (Chicago):
Atlanta:
Long Beach:
New Jersey:
San Francisco:
Seattle:
MOL (Canada) Inc.
Head offi ce (Toronto):
Tel: 1-630-812-3700
Tel: 1-678-855-7700
Tel: 1-562-983-6200
Tel: 1-732-512-5200
Tel: 1-925-603-7200
Tel: 1-206-444-6905
Fax: 1-630-812-3703
Fax: 1-678-855-7747
Fax: 1-562-983-6292
Fax: 1-732-512-5300
Fax: 1-925-603-7229
Fax: 1-206-444-6909
Tel:1-905-629-5925
FAX: 1-905-629-5914
MOL (Europe) Ltd.
Beirut:
Tel: 961-3-809812
Oceania
Mitsui O.S.K. Lines (Australia) Pty. Ltd.
Head Offi ce (Sydney):
Tel: 61-2-9320-1600
Fax: 61-2-9320-1601
Mitsui O.S.K. Lines (New Zealand) Ltd.
Head Offi ce (Auckland):
Tel: 64-9-300-5820
Fax: 64-9-309-1439
Mitsui O.S.K. Bulk Shipping (USA) Inc.
Head Offi ce (New Jersey): Tel: 1-201-395-5800
Tel: 1-832-615-6470
Houston:
Tel: 1-562-528-7500
Long Beach:
Fax: 1-201-395-5820
Fax: 1-832-615-6480
Fax: 1-562-528-7515
MOL Logistics (USA) Inc.
Head Offi ce (New York):
Los Angeles:
Tel: 1-516-403-2100
Tel: 1-310-787-8351
Fax: 1-516-626-6092
Fax: 1-310-787-8168
Central and South America
MOL (Brasil) Ltda.
Head Offi ce (Sao Paulo):
Tel: 55-11-3145-3972 Fax: 55-11-3145-3945
MOL (Chile) Ltda.
Head Offi ce (Santiago):
Tel: 56-2-630-1950
Fax: 56-2-231-5622
Corporativo MOL de Mexico S.A. de C.V.
Head Offi ce (Mexico City): Tel: 52-55-5010-5200 Fax: 52-55-5010-5220
MOL (Panama) Inc.
Head Offi ce (Panama):
Tel: 11-507-300-3200 Fax: 11-507-300-3212
Mitsui O.S.K. Bulk Shipping (USA) Inc.
Sao Paulo:
Tel: 55-11-3145-3980 Fax: 55-11-3145-3946
MOL (Peru) S.A.C.
Head Offi ce (Lima):
Europe
MOL (Europe) B.V.
Head Offi ce (Rotterdam):
Antwerp:
Genoa:
Hamburg:
Le Havre:
Vienna:
Tel: 51-1-611-9400
Fax: 51-1-611-9429
Tel: 31-10-201-3200
Tel: 32-3-2024860
Tel: 39-10-2901711
Tel: 49-40-356110
Tel: 33-2-32-74-24-00 Fax: 33-2-32-74-24-39
Tel: 43-1-877-6971
Fax: 31-10-201-3158
Fax: 32-3-2024870
Fax: 39-10-5960450
Fax: 49-40-352506
Fax: 43-1-876-4725
MOL (Europe) Ltd.
Head Offi ce (Southampton): Tel: 44-2380-714500
Fax: 44-2380-714519
Mitsui O.S.K. Bulk Shipping (Europe) Ltd.
Head Offi ce (London):
Hamburg:
Tel: 44-20-7265-7676 Fax: 44-20-7265-7699
Tel: 49-40-3609-7410 Fax: 49-40-3609-7450
MOL Logistics (Deutschland) GmbH
Head Offi ce (Dusseldorf): Tel: 49-211-418830
Fax: 49-211-4183340
MOL Logistics (Netherlands) B.V.
Head Offi ce (Tilburg):
Tel: 31-13-537-33-73
Fax: 31-13-537-35-75
MOL Logistics (U.K.) Ltd.
Head Offi ce (London):
Tel: 44-1895-459700
Fax: 44-1895-449600
Mitsui O.S.K. Bulk Shipping (Asia, Oceania) Pte. Ltd.
Melbourne:
Perth:
Brisbane:
Tel: 61-3-9691-3224
Tel: 61-8-9278-2499
Tel: 61-7-3007-2115
Fax: 61-3-9691-3223
Fax: 61-8-9278-2727
Fax: 61-7-3007-2101
MOL Logistics (Australia) Pty. Ltd.
Head Offi ce (Melbourne): Tel: 61-3-9335-8555
Fax: 61-3-9335-8598
Asia
MOL Liner Ltd.
Head Offi ce (Hong Kong): Tel: 852-2823-6800
Fax: 852-2865-0906
Mitsui O.S.K. Lines (India) Private Limited
Head Offi ce (Mumbai):
Tel: 91-22-4054-6300 Fax: 91-22-4054-6301
Mitsui O.S.K. Lines Lanka (Private) Ltd.
Head Offi ce (Colombo):
Tel: 94-11-2304721
Fax: 94-11-2304730
MOL (Singapore) Pte. Ltd.
Head Offi ce (Singapore):
Tel: 65-6225-2811
Fax: 65-6225-6096
Mitsui O.S.K. Lines (Malaysia) Sdn. Bhd.
Head Offi ce (Kuala Lumpur): Tel: 60-3-5623-9666
Fax: 60-3-5623-9600
P.T. Mitsui O.S.K. Lines Indonesia
Head Offi ce (Jakarta):
Tel: 62-21-521-1740
Fax: 62-21-521-1741
Mitsui O.S.K. Lines (Thailand) Co., Ltd.
Head Offi ce (Bangkok):
Tel: 66-2-234-6252
Fax: 66-2-237-9021
MOL Philippines, Inc.
Head Offi ce (Manila):
Tel: 632-888-6531
Fax: 632-884-1766
Mitsui O.S.K. Lines (Vietnam) Ltd.
Head Offi ce (Ho Chi Minh): Tel: 84-83-8219219
Mitsui O.S.K. Lines (Cambodia) Co., Ltd.
Head Offi ce (Phnom Penh): Tel: 855-23-223-036
Fax: 84-83-8219317
Fax: 855-23-223-040
Mitsui O.S.K. Lines Pakistan (Pvt.) Ltd.
Head Offi ce (Karachi):
Tel: 92-21-35205397
Fax: 9221-35202559
MOL (China) Co., Ltd.
Head Offi ce (Shanghai):
Beijing:
Tianjin:
Shenzhen:
MOL (Taiwan) Co., Ltd.
Head Offi ce (Taipei):
Tel: 86-21-2320-6000 Fax: 86-21-2320-6331
Tel: 86-10-8529-9121 Fax: 86-10-8529-9126
Tel: 86-22-8331-1331 Fax: 86-22-8331-1318
Tel: 86-755-2598-2200 Fax: 86-755-2598-2210
Tel: 886-2-2537-8000 Fax: 886-2-2537-8098
Mitsui O.S.K. Bulk Shipping (Asia, Oceania) Pte. Ltd.
Head Offi ce (Singapore):
Bangkok:
Kuala Lumpur:
Seoul:
Mumbai:
Chennai:
Tel: 65-323-1303
Tel: 66-2-634-0807
Tel: 60-3-5623-9772
Tel: 82-2-5672718
Tel: 91-22-4071-4500 Fax: 91-22-4071-4557
Tel: 91-44-4208-1020 Fax: 91-44-4208-1020
Fax: 65-323-1305
Fax: 66-2-634-0806
Fax: 60-3-5623-3107
Fax: 82-2-5672719
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Shareholder Information
Annual Report 2014 115
Capital:
Head offi ce:
¥65,400,351,028
1-1, Toranomon 2-chome, Minato-ku,
Tokyo 105-8688, Japan
Number of MOL employees:
882
Number of MOL Group employees:
(The parent company and consolidated subsidiaries)
10,289
Total number of shares authorized:
3,154,000,000
Number of shares issued:
1,206,286,115
Number of shareholders:
109,304
Shares listed in:
Tokyo, Nagoya
Share transfer agent:
Sumitomo Mitsui Trust Bank, Limited
8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063, Japan
Communications materials:
Annual Report (English/Japanese)
Investor Guidebook (English/Japanese)
Market Data (English/Japanese)
News Releases (English/Japanese)
Website (English/Japanese)
Quarterly Newsletter Open Sea (English/Website)
Monthly Newsletter Unabara (Japanese)
Environmental and Social Report (English/Japanese)
(As of March 31, 2014)
Stock Price Range (Tokyo Stock Exchange) and Volume of Stock Trade
(¥)
800
700
600
500
400
300
200
100
0
Fiscal 2011 High ¥477
¥220
Low
Fiscal 2012 High ¥369
¥177
Low
Fiscal 2013 High ¥482
¥287
Low
11
/4 5 6 7 8 9 10 11 12
12
/1 2 3 4 5 6 7 8 9 10 11 12
13
/1 2 3 4 5 6 7 8 9 10 11 12
14
/1 2
6543
700
600
500
400
300
200
100
0
(Million shares)
800
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For further information, please contact:
Investor Relations Offi ce
Mitsui O.S.K. Lines, Ltd.
1-1, Toranomon 2-chome, Minato-ku,
Tokyo 105-8688, Japan
Telephone: +81-3-3587-6224
Facsimile: +81-3-3587-7734
E-mail:
URL:
iromo@molgroup.com
http://www.mol.co.jp/en/
This annual report is printed on Forest Stewardship Council™ (FSC)-certifi ed paper made of wood from responsibly managed forests.
It was also printed using vegetable oil inks.
Printed in Japan
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