Mitsui O.S.K. Lines Ltd. Annual Report 2015

Plain-text annual report

M i t s u i O . S . K . i L n e s , L t d . A n n u a l R e p o r t 2 0 1 5 Onward The Next 130 Years Annual Report 2015 Year ended March 31, 2015 15mol_表紙英文_0723入稿.indd 2 15mol_表紙英文_0723入稿.indd 2 2015/07/23 17:35 2015/07/23 17:35 The Next 130 Years In ﬁ scal 2014, MOL marked its 130th anniversary and initiated its midterm management plan “STEER FOR 2020,” under which the Company is making great strides toward the next 130 years by innovating its business portfolio, business model and business domain. MOL GROUP CORPORATE PRINCIPLES As a multi-modal transport group, we will actively seize opportunities that contribute to global economic growth and development by meeting and responding to our cus- tomers’ 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 management style that is guided by the highest ethical and social standards. We will promote and protect our environment by maintaining strict, safe operation and navigation standards. Layout and Contents of Annual Report 2015 Past 130 years A corporate culture fostered over the course of 130 years Challenge and Innovation FFea Feature: The Role of the Marine Transport Industry and MOL’s Value Creation P.3 M MOL at a Glance MM Manufactured Capital and Market Position Overview of Operations P.34 P.40 Onward Toward the Future Me Message from the Chairman and the CEO Strategy and Direction Inter w Interview with the CFO Feat Feature: Training LNG Carrier Seafarers Human Capital P.16 P.32 P.52 Next 130 years The The Management Foundation n Underpinning the Next 130 Years of Growth Intellectual, Social, Environmental Capital P.57 Fin Financial Section Financial Capital P.75 15mol_英文0723入稿PDF.indd a1 15mol_英文0723入稿PDF.indd a1 2015/07/23 17:32 2015/07/23 17:32 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Contents Value Creation Intellectual, Social, Environmental Capital Feature: The Role of the Marine Transport Industry and MOL’s Value Creation ......................................... 3 Management Strategy Message from the Chairman ......... 16 Message from the CEO .................. 22 Financial Highlights ................................... 28 Key Indicators ............................................ 30 Interview with the CFO ................. 32 Manufactured Capital MOL at a Glance ............................ 34 Market Position in the Industry .... 38 Overview of Operations ................ 40 Human Capital Feature: Training LNG Carrier Seafarers ......................................... 52 Safe Operation ........................................... 55 The Management Foundation Underpinning MOL ....................... 57 Board of Directors, Corporate Auditors and Executive Ofﬁ cers ...................................... 58 Outside Director and Corporate Auditor Roundtable Discussion .............................. 60 Corporate Governance ............................... 64 Risk Management ...................................... 68 Corporate Social Responsibility (CSR) ....... 70 Glossary ..................................................... 74 Financial Capital Financial Section ........................... 75 The MOL Group ........................................ 112 Worldwide Ofﬁ ces ................................... 114 Shareholder Information ......................... 115 Editorial Policy In this annual report, we have included a main feature explaining the characteristics and social signiﬁ cance of the marine transport industry as well as how MOL aims to create value. We have also included an additional feature about training LNG carrier seafarers, one of the issues related to successfully implementing the midterm management plan “STEER FOR 2020.” In addition, we strove to ensure readers fully understand MOL’s strategies as the Company sails ahead toward the next 130 years, using the international integrated reporting framework as a reference to explain long-term value creation. 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/ Annual Report Investor Guidebook Market Data http://www.mol.co.jp/csr-e/ Safety, Environmental and Social Report 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 23, 2015 unless otherwise speciﬁ ed. 15mol_英文0723入稿PDF.indd 1 15mol_英文0723入稿PDF.indd 1 2015/07/23 17:32 2015/07/23 17:32 Annual Report 2015 1 MOL’s 130 years: Challenge and Innovation 1964 Mitsui O.S.K. Lines (MOL) is founded by a merger of OSK Line and Mitsui Steamship. OSK Line’s former head- quarters building (Osaka) AMERICA MARU (700TEU) 1989 Navix Line is established by the merger of Japan Line and Yamashita-Shin- nihon Steamship. 1968 Full containership service commenced. 1884 Osaka Shosen Kaisha (OSK Line) is founded. 2004 Established the MOL Group Long-Term Vision. 1995 The ﬁ rst double hull very large crude carrier (VLCC), the ATLANTIC LIBERTY, is launched. 1999 New Mitsui O.S.K. Lines is established by the merger of MOL and Navix Line. 2007 The World’s largest iron ore carrier, the BRASIL MARU, is launched. 2012 The world’s ﬁ rst hybrid car carrier, the EMERALD ACE, is launched. 2001 Established the MOL Group Corporate Principles. 2015 Established the MOL CHART. 2009 Next-generation vessel concept, Senpaku ISHIN project announced. 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. 1983 Japan’s ﬁ rst specialized methanol tanker, the KOHZAN MARU, is launched. 1984 LNG carrier, the SENSHU MARU is launched. 2014 MOL celebrated its 130th anniversary. MOL has been navigating the oceans for over 130 years. During this time, MOL has grown into the world’s largest full-line marine transport group by anticipating the needs of its customers and the demands of the future, while overcoming various challenges along the way. What has supported us has been our “spirit of challenge and inno- vation.” What we have gained is the trust of our customers and other stakeholders. Making use of these irreplace- able assets, we will achieve “solid growth through innovative changes” as outlined in the midterm management plan and maintain course into the next 130 years. Long-Term Vision To make the MOL Group an excellent and resilient organization that leads the world shipping industry What is MOL CHART? MOL CHART represents the values that are to be shared by all members of the MOL Group worldwide. These values shall be common guidelines to pursue the best course of action for the highest quality of output for our stakeholders and to achieve MOL’s corporate goal and long term vision. Innovate through insight C hallenge H onesty A ccountability Do the right thing Commit to acting with a sense of ownership Gain the trust of customers R eliability T eamwork Build a strong team 2 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 2 15mol_英文0723入稿PDF.indd 2 2015/07/23 17:32 2015/07/23 17:32 l V a V l a u u e e C C r r e e a a t t i o i o n n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l What you should know about Shipping & MOL Feature: The Role of the Marine Transport Industry and MOL’s Value Creation This year’s special feature is dedicated to explaining the marine transport industry. Globally, seaborne trade exceeded 1.4 tons per person in 2013. Despite the indispensable role it plays in everyday life, many people don’t understand marine shipping that well. We hope the ﬁ ve questions and answers in this section will prove helpful, providing shareholders, investors and all our other stakeholders with a deeper understanding of the signiﬁ cance of the marine transport industry in society and how MOL creates value. i F n a n c a i Q1. What is marine transport? Q2. What are the important types of ships? Q3. Is marine transport a cyclical industry? Q4. Is bigger always better? Q5. Besides overall market conditions, what other risks confront the industry? l C a p i t a l Annual Report 2015 3 15mol_英文0723入稿PDF.indd 3 15mol_英文0723入稿PDF.indd 3 2015/07/23 17:32 2015/07/23 17:32 Question What is marine transport ? The social signiﬁ cance of the marine transport industry and MOL A nswer 1 Look around. A surprising amount of what you see— from the food and clothes inside the store where you’re standing to the cars outside in the parking lot, the oil that fuels them, and the coal and natural gas that provide the electricity to keep the lights on over- head—was transported by ship. Marine transport has long been recognized as essential to bulk transport over great distances. Compared with the alternatives, shipping is especially cost effective for bulk, long-dis- tance cargo. Indeed, most natural resources and ener- gy sources are transported by ship as producers need to transport items like petroleum, coal, LPG, iron ore and wood chips in bulk volumes at low cost. Modern container shipping was introduced in the 1950s to facilitate the trade of food, electric appliances and other consumer goods. Loading cargo into standardized metal boxes for shipping proved revolutionary. Container shipping mecha- nized the loading and unloading of cargo, which had previously relied heavily on manual labor, and enabled a streamlined transport system spanning sea and land. As a result, shipping was able to reliably connect production sites with consumers separated by vast distances at lower cost. Beginning in 1970, container shipping began expanding at a rate great- ly in excess of global economic growth, accelerating the development of global supply chains. Though largely invisible—ships don’t need tracks or roads—marine transport serves as indispensable 4 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 4 15mol_英文0723入稿PDF.indd 4 2015/07/23 17:32 2015/07/23 17:32 l V a V l a u u e e C C r r e e a a t t i o i o n n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l World Population & Global Seaborne Trafﬁ c 18 16 14 12 10 8 6 4 2 0 Seaborne traffic (bn t) World Population (bn) estimate (2015–) 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: World population=UN, Seaborne trafﬁ c=Fearnley/ Clarkson (–2014), MOL estimation based on assumption that the trend of trafﬁ c per capita in the past continues in the future (2015–) The amount of gas a large LNG carrier can transport in one trip 1Year’s Worth* for 270,000 Households *Calculated using the average amount of gas used by an ordinary family in Japan. i F n a n c a i l C a p i t a l infrastructure supporting the global economy. The world’s manufacturing base has shifted from the United States and Japan, to Southeast Asia, China and Latin America. This is expanding and diversify- ing the trade ﬂ ows of materials, components and ﬁ nished products. More and more countries, and the people living in them, have begun participating in the rich bounty of global trade. Fifty years ago in 1965, the global population was 3.3 billion and glob- al 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 2000, the population increased to 6.1 bil- lion, but seaborne trade grew even faster to 6.3 bil- lion tons, surpassing one ton per person. In 2013, seaborne trade exceeded 1.4 tons per person, and the gap is only continuing to widen. MOL’s more than 130 years of history is the histo- ry of modern marine transport. We transport cargo in step with expanding seaborne trade to contribute to the development of the global economy and sup- port people’s lives. While advancing by adapting our businesses to the changing business environment, MOL fulﬁ lls the social responsibility of marine trans- port. As we continue to do this, we will further enhance the tangible and intangible assets MOL has accumulated, including our diverse ﬂ eet of vessels, the human resources supporting safe operations, our ability to anticipate transport demand and customer needs, the trust placed in us by stakeholders, our solid ﬁ nancial foundation and earnings power. This is MOL’s value creation model. We will continue to create new value by continuing to transport cargo globally for the next 130 years. Annual Report 2015 5 15mol_英文0723入稿PDF.indd 5 15mol_英文0723入稿PDF.indd 5 2015/07/23 17:32 2015/07/23 17:32 Types of commercial vessels and MOL’s portfolio A nswer 2 Ships have evolved to transport a wide variety of cargo efﬁ ciently. Through innovation, conventional designs for multipurpose cargo ships have been adapted with structures optimized to transport spe- ciﬁ c types of cargo. Adaptation has resulted in crude oil tankers; bulk carriers for iron ore, coal, wood chips and other dry bulk cargoes; container ships to transport clothes, household goods, appliances and other manufactured goods; and car carriers for com- pleted vehicles. LNG carriers, which transport natural gas that has been cooled to minus 162 degrees Celsius to liquefy it, are a relatively recent arrival. Of course, there are also ships that transport passengers and MOL’s ﬂ eet includes ferries that can simultane- ously transport automobiles and trucks, as well as a cruise ship featuring an array of facilities, from a pool to a movie theater, to make voyages more enjoyable. As a full-line marine transport group, MOL cur- rently operates a wide range of ships. This is an upshot of the strong link between our business and the growth of the Japanese economy. Shipping was vital for resource-poor Japan to become a major trading country, importing resources from overseas and manufacturing value added products for export. MOL drew upon the growth of the Japanese econo- my and grew in tandem by supporting imports and exports. For example, we readied dry bulkers to Question What are the important types of ships ? 6 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 6 15mol_英文0723入稿PDF.indd 6 2015/07/23 17:32 2015/07/23 17:32 import iron ore and coal, and expanded our tanker ﬂ eet to transport crude oil in the economic boom period following WWII. When the Japanese auto industry expanded exports, we readied car carriers and supported the industry’s bulk transport. Since then, with the overseas shift of our client companies and the rise of emerging countries, the global level of trade to and from Japan has been in relative decline. Simultaneously, we have allocated more vessels to countries and regions outside of Japan. The knowhow and ﬂ eet composition attained through trade with Japanese companies over many years is also perfectly suited to the transport demands of emerging countries. At present, as trade structures diversify, we provide a broad spectrum of services to meet marine transport needs around the world. In addition, as a full-line marine transport group active around the globe, MOL is able to diver- sify its risk. Should the trade volume of one type of cargo temporarily drop due to economic conditions or global events, we are better able to mitigate the impact on the Company’s overall earnings and ﬁ nan- cial strength. MOL has a diverse portfolio comprising 411 dry bulkers, the world’s largest dry bulker ﬂ eet; 176 tankers to transport crude oil and petroleum prod- ucts; 67 LNG carriers; 127 car carriers; 118 container- ships; and 48 other vessels, such as ferries, domestic transport vessels and a cruise ship. This constitutes the world’s largest ﬂ eet for a full-line marine trans- port group. MOL’s ﬂ eet 947 Vessels As of March 31, 2015 MOL’s Fleet Portfolio Products/ passengers ターミナル Terminal Ground transport Ferries Automobiles Cruise ship Everyday goods Electrical appliances Car carriers Wood chips Raw materials Woodchip carriers Oil products Containerships Grain, Iron ore, Lumber Dry bulkers l V a V l a u u e e C C r r e e a a t t i o i o n n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Product tankers Natural gas LNG carriers Crude oil Energy Crude oil tankers Offshore businesses Coal Dry bulkers FPSO Annual Report 2015 7 15mol_英文0723入稿PDF.indd 7 15mol_英文0723入稿PDF.indd 7 2015/07/23 17:32 2015/07/23 17:32 Question Is marine transport a cyclical industry ? Characteristics of the marine transport industry and MOL’s business model A nswer 3 One noteworthy characteristic of the international marine transport industry is that it conducts business on a single global market. Unlike real estate or other ﬁ xed assets, vessels can move freely across oceans. They’re globally mobile and fairly liquid. In addition, due to the principle of freedom of the seas, there are virtually no barriers to entry in terms of national regulations. Accordingly, the industry is market driven toward reestablishing equilibrium. When global cargo ﬂ ows outpace the supply of ves- sels, freight and charter rates soar; but when cargo ﬂ ows decline or fail to keep pace with vessel supply, freight and charter rates fall. This is why the marine transport industry is considered a cyclical industry. It is governed by economic principles and strongly inﬂ uenced by the various factors that cause the global economy to ﬂ uctuate. To generate proﬁ ts in this kind of industry, companies need to possess the foresight to procure vessels one step ahead of mar- ket surges as well as the ability to improve proﬁ t- ability under the complete range of market conditions. MOL makes full use of the business intel- ligence base it cultivates as a full-line marine trans- port group, optimizes the duration of vessel procurement and service, and has the knowhow to realize efﬁ cient operations. 8 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 8 15mol_英文0723入稿PDF.indd 8 2015/07/23 17:33 2015/07/23 17:33 Highly Stable Proﬁ ts ¥55 Billion* * Outlook for Fiscal 2015 (as of April 30, 2015) Outlook for Ordinary Income in Fiscal 2015: ¥60 billion (Highly Stable Proﬁ ts of ¥55 billion + Other Income of ¥5 billion) On the other hand, it is because marine transport is a cyclical industry that both customers and marine transport companies want to limit the risks from market volatility associated with freight and charter rates. Customers want to conclude long-term trans- port contracts at steady prices with reliable marine transport companies. Marine transport companies can expect, with certainty, to recover their expensive asset investments in vessels by concluding contracts that generate stable proﬁ ts over the long-term. Connecting both these aims, MOL’s strength lies in its ability to offer services and optimally sized vessels aligned with customer needs, its solid ﬁ nancial standing, and its track record of safe operations. Globally, it is actually rare for a marine transport company to have as many long-term contracts as MOL has secured. In the mid 2000s, thanks to the vessels it had ordered in advance, MOL was able to take advan- tage of bullish market conditions as China rapidly expanded its imports of natural resources. Subsequently, however, a sudden turn in the supply- demand environment left us exposed to spot market conditions and restrained by an oversupply of vessels in operation. We are currently correcting this by fur- ther shifting investments to accumulate stable prof- its through medium- to long-term contracts and reducing MOL’s market exposure. Over its more-than- 130-year history, MOL has fre- quently experienced the undulations of the market. In marine transport, which is both a cyclical industry and a growth industry, we continue to aim for sus- tainable growth while mitigating the impact of mar- ket ﬂ uctuations by securing an appropriate contract portfolio. Underlined words are explained in the Glossary on page 74. l V a V l a u u e e C C r r e e a a t t i o i o n n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i A portfolio to achieve long-term, stable growth Optimal Cargo (Contract) Portfolio Optimal Vessel Procurement Portfolio Stable Earnings LNG carriers Dry bulkers and tankers (under long-term contracts) Owned and medium- and long-term chartered vessels Market-linked Earnings Containerships Dry bulkers and tankers (on spot operations) Short-term chartered vessels Low V o l a t i l i t y High l C a p i t a l L o n g - t e r m , s t a b l e g r o w t h Annual Report 2015 9 15mol_英文0723入稿PDF.indd 9 15mol_英文0723入稿PDF.indd 9 2015/07/23 17:33 2015/07/23 17:33 Question Is bigger always better ? The pursuit of economies of scale in bulk trans- port and MOL’s strategy A nswer 4 The history of marine transport is also the history of bigger and bigger ships. This is understandable. The lower operating costs per weight unit and distance unit achieved by large-volume shipping are beneﬁ cial for both marine transport companies and their cus- tomers. In terms of economic efﬁ ciency, bigger ships are better in many respects. Marine transport is the most economical and environmentally friendly mode of transport, considering CO2 emissions and fuel con- sumption in terms of weight of cargo transported and distance traveled. Larger ships further enhance this advantage. Nearly every type of cargo ship has gotten larger over time. Ships traveling through transport routes like the Panama and Suez canals, which restrict the maximum length and draft of a ship, have increased to the very limit in size. Most other ships have gotten even larger. MOL has decided to launch six of the world’s larg- est containerships, which are each capable of carrying 20,000 containers of twenty-foot equivalent units (TEU), on the Asia-Europe route in 2017. Our aim is clear: to lower transport costs per container by increasing the size of the ship. Although many ultra- large containerships of 18,000 TEU or more have recently been launched on the same route, MOL’s new containerships will be highly competitive with expand- ed carrying capacity and more efﬁ cient engines. As for further increasing the size of containerships, it seems that we have reached the upper limit with these ves- sels due to the transit restrictions of the Suez Canal. On the other hand, larger vessels are not always 10 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 10 15mol_英文0723入稿PDF.indd 10 2015/07/23 17:33 2015/07/23 17:33 l V a V l a u u e e C C r r e e a a t t i o i o n n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l 20,000 Containers* 120 km** * Capacity of the world’s largest containerships, which MOL is currently building, in twenty-foot equivalent unit (TEU) containers. ** The total length of a ship’s containers when aligned in a row The transit restriction of the Panama Canal (after expansion) 55m 18.3m 427m The maximum size vessel that can transit the Panama Canal: Length: 360 m Breadth: 49 m the most logical choice. Crude oil tankers were at the forefront of the trend toward larger vessels and some decades ago saw the appearance of what were known as ultra-large crude carriers (ULCCs) capable of transporting 400,000 to 500,000 deadweight tons (DWT). However, ULCCs have since faded away. Currently the largest vessel size is the 300,000-DWT class very large crude carrier (VLCC). The reason lies in versatility. Companies need to decide on vessel size by carefully weighing the beneﬁ ts afforded by larger size against greater compatibility in various sea lanes and ports across the globe. The size of potential ports and the ability to transit straits must always be taken into account, something which applies to other vessel types as well. There are also other considerations. In car carriers, the overall trend in increasing size is continuing with the planned expansion of the Panama Canal in 2016. Yet, we decided to construct new vessels with roughly the same external dimensions as our existing standard size vessels that hold 6,400 vehicles, though we found ways to increase actual capacity to 6,800 vehicles on the new vessels. In light of how automakers are trying to optimally site production around the world, we priori- tized the ﬂ exibility provided by a standard-size ﬂ eet. Customer convenience can also be a factor in the decision not to choose larger vessels. We develop iron ore carriers customized for each customer’s port, with the intention of providing optimal solutions that bal- ance carrying capacity and convenience. The MOL Group Corporate Principles reﬂ ect this need to optimize ﬂ exibility, convenience and the eco- nomic efﬁ ciency of larger vessels as the Company strives to meet and respond to customers’ needs and to this new era. Annual Report 2015 11 15mol_英文0723入稿PDF.indd 11 15mol_英文0723入稿PDF.indd 11 2015/07/23 17:33 2015/07/23 17:33 Question Besides overall market conditions, what other risks confront the industry ? Other risks and MOL’s safe operation system A nswer 5 Other market risks facing the marine transport indus- try include ﬂ uctuations in exchange rates, interest rates and bunker prices. These market risks directly impact proﬁ tability, but other risks related to vessel operations can affect not only proﬁ tability but also the trust gained from customers and society. Ocean- faring vessels must always be on guard against the risk of a marine incident, which might lead to ocean pollution, arising from adverse weather or other unforeseen circumstances. Ships may also be exposed to geopolitical risks, such as encountering war zones, terrorists, and pirates among other threats. For example, it takes roughly three weeks to transport crude oil in a VLCC from the Middle East to Japan or another Asian country. Depending on the loading port, the VLCC departs from the Persian Gulf and transits the Strait of Hormuz, or departs from the Red Sea and passes through the Gulf of Aden. After traversing the Indian Ocean, she then must transit the Strait of Malacca between the Malay Peninsula and the island of Sumatra. The Middle East is fraught with political instability, and the Gulf of Aden, Indian Ocean and Strait of Malacca are treacherous areas plagued with pirates. Moreover, there are also encounters with adverse weather, super typhoons and other abnormal weather phenomena that seem to be increasing in intensity each year. Amid this challeng- ing environment, to safely transport cargo and live up to the trust placed in us by customers and the rest of society, we need to be more vigilant than ever. 12 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 12 15mol_英文0723入稿PDF.indd 12 2015/07/23 17:33 2015/07/23 17:33 View a video introducing MOL's measures to enhance safe operation. FOUR ZEROES This is MOL’s unwavering goal of achieving the world’s safest operations. l V a V l a u u e e C C r r e e a a t t i o i o n n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l The number of tropical storm alerts sent out to ships (Results in 2014) 17,349 Alerts i F n a n c a i l C a p i t a l MOL is committed to ensuring thoroughly safe operations through various initiatives, beginning with the recruitment and training of excellent seafarers. (See the special feature on p. 52.) But what makes MOL stand out in its response to the hazards of marine transport, including the aforementioned risks, is its Safety Operation Supporting Center (SOSC). The center monitors the position and movement of MOL- operated vessels as well as weather and ocean condi- tions in real time, supplying invaluable information to relevant personnel onboard and on land. The SOSC is staffed at all times by two marine technical specialists, including an experienced MOL captain, and supports the safe navigation of about 900 MOL Group- afﬁ liated vessels around the clock 365 days a year. They provide assistance from the captain’s perspective, supplying information gathered on weather and ocean conditions (including abnormal weather and tsunamis) and security threats (including piracy and terrorism) to the relevant personnel. As onboard equipment becomes increasingly sophisticated, engi- neers may during operations encounter situations not described in the manuals. Captains and navigators may encounter unexpected weather phenomena. In these instances, the knowledge and judgment of an experienced MOL captain is invaluable. Recently, as political instability, abnormal weather conditions and other uncertainties intensify, transport technology continues to increase in sophistication, with LNG carri- ers being the most representative example. The slogan of the SOSC is: “The captain must never feel alone” The center provides robust support for seafarers work- ing on the open ocean and underpins the safe opera- tions of MOL-operated vessels day and night. Annual Report 2015 13 15mol_英文0723入稿PDF.indd 13 15mol_英文0723入稿PDF.indd 13 2015/07/23 17:33 2015/07/23 17:33 Strategy and 14 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 14 15mol_英文0723入稿PDF.indd 14 2015/07/23 17:33 2015/07/23 17:33 Contents the Chairman 16 Message from 22 Message from the CEO 28 Financial Highlights 30 Key Indicators 32 Interview with the CFO l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Direction Annual Report 2015 15 15mol_英文0723入稿PDF.indd 15 15mol_英文0723入稿PDF.indd 15 2015/07/23 17:33 2015/07/23 17:33 Message from the Chairman Koichi Muto Chairman Maintain course, Full speed ahead “We have concluded the ﬁ rst year of the midterm management plan ‘STEER FOR 2020,’ which was crafted with the intention of adjusting the Company’s rudder to head for our desired course in 2020. I’ve been at the helm of MOL for the past ﬁ ve years as president but have now decided to hand over management duties to the new president, Junichiro Ikeda. In my new role as Chairman of the Board of Directors, I am in a position where I can strengthen governance and support management. I will support President Ikeda’s leadership as he continues uniting the Company’s comprehensive strengths to solve the issues that face us and to reinforce sustainable growth.” 16 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 16 15mol_英文0723入稿PDF.indd 16 2015/07/23 17:33 2015/07/23 17:33 l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Progress Made in the First Year of the Midterm Management Plan and Subsequent Evaluation of Results Fiscal 2014 was the ﬁ rst year of “STEER FOR 2020,” which centered on solid growth through innovative changes. Please tell us about the progress of the overall strategies and your evaluation of the results. Although we did not achieve the targets for our ﬁ nancial results, I’d say we got off to a good start in line with the gen- eral direction of the strategies. Solid growth through innovative change, the main theme of “STEER FOR 2020,” refers to moving away from business dependent on strong markets and instead accumulating long-term and stable proﬁ ts to contribute to solid growth. To achieve these aims, our main strategies are the Three Innovations: Innovation of Business Portfolio, Innovation of Business Model and Innovation of Business Domain. The core of these strategies is Innovation of Business Portfolio. The aim of this strategy is to allo- cate management resources to ﬁ elds where we expect to secure strong growth and long-term, sta- ble proﬁ ts, especially to LNG carriers and offshore businesses. In ﬁ scal 2014, we made great strides toward achieving our goals, especially in LNG carri- ers, where we secured new long-term contracts for 10 vessels. Under the plan, we aimed to increase the size of MOL’s LNG carrier ﬂ eet from 67 vessels at the end of ﬁ scal 2013 to 120 by the end of ﬁ scal 2019. Including those under construction, our ﬂ eet has grown to 92 vessels as of the end of ﬁ scal 2014. Another major accomplishment was securing a long- term contract for six very large ethane carriers, a new ﬁ eld. With the second strategy—Innovation of Business Model—we aim to rein in effects from mar- ket volatility and build a corporate structure that can record solid proﬁ ts regardless of market conditions. To do this, we are reducing market exposure in dry bulkers and tankers as we transform our ﬂ eet for higher market tolerability and competitiveness while also continuing to focus efforts on transport ﬁ elds, where we provide added value in response to cus- tomer needs. Market exposure is being reduced mostly according to the plan. With small and medi- um-sized dry bulkers, we are beginning to establish a business model where we don’t own a large num- ber of ships and try to slot in cargo, but instead ﬁ rst secure cargo and then ready the necessary vessels, including short-term chartered ships. We are also making solid progress in strengthening our cost competitiveness, including the disposal of unproﬁ t- able vessels. Turning to Innovation of Business Domain, in which we outlined expanding our business domain to both the upstream and downstream of marine transport, we secured a long-term contract for one FPSO and entered the shuttle tanker business by establishing a joint venture with Viken Shipping. And as for the container terminal business, the auto- mated terminal at the Port of Los Angeles began operations in November 2014. Another accomplish- ment was launching a joint venture with the Synergy Group in India to begin external sales of our ship management knowhow. Although we were able to rack up solid accom- plishments in line with the general direction of the overall strategies in this way, we unfortunately fell 27% short of our originally planned target of ¥70.0 billion in consolidated ordinary income for ﬁ scal 2014, instead recording ¥51.3 billion. Underlined words are explained in the Glossary on page 74. Annual Report 2015 17 15mol_英文0723入稿PDF.indd 17 15mol_英文0723入稿PDF.indd 17 2015/07/23 17:33 2015/07/23 17:33 Message from the Chairman What were the factors that kept the Company from attaining the ﬁ nancial targets? The biggest factor was the inability of containerships to turn a proﬁ t In bulkships, while the dry bulker market stagnated, tankers saw a lot of activity beginning in autumn last year due to the low price of oil. Supported by hefty, stable proﬁ ts, the segment as a whole posted proﬁ ts at about the level originally forecast. The primary reason we did not meet the target despite strong tailwinds from the weak yen and lower bunker pric- es was containerships. Containerships not only failed to turn a proﬁ t, it actually widened its losses from the previous ﬁ scal year and even performed more poorly than some other containership companies. Port congestion on the U.S. West Coast and within Asia hurt revenues across the industry, but the following detrimental factors were unique to MOL. As Brazil’s economy stalled due to lower natural resource prices, cargo ﬂ ows stagnated on the Asia- South America route, in which MOL had been lever- aging its historically superior presence. This pushed down freight revenues from the route. The com- mencement of operations of the automated terminal at the Port of Los Angeles was delayed about half a year from schedule. In addition, we incurred wide losses on bunker price hedges placed at the begin- ning of the ﬁ scal year. Effects from the Changing Business Environment and the Falling Prices of Crude Oil and Natural Resources Considering the assumptions about the business environment at the time “STEER FOR 2020” was formulated, do you think revisions are necessary due to subsequent changes in the business environment? I believe that, regardless of the short- term market conditions, we must respond by calmly assessing the situation without losing sight of the big picture. Our understanding of the business environment pro- vided the basis for the formulation of the midterm management plan. These assumptions can be divid- ed into the short-term environment and the medi- um- to long-term environment. The short-term business environment (essentially foreign exchange rates, bunker prices, and marine transport markets for each vessel type) did not progress quite as expected. However, the medium- to long-term envi- ronment, which formed the basis for focusing on solid growth through innovative changes, proceeded just as we expected. There was a surplus of ship- building facilities, and demand rose for transporting new energy sources. I think we need to calmly observe major trends and respond with resolute direction, without losing sight of the big picture due to short-term changes in the environment. The drop in crude oil prices led to lower fuel prices and simultaneously lifted the tanker market due to increased trade, including demand for reserves, of crude oil and reﬁ ned petroleum prod- ucts. The additional trade provided strong tailwinds for the Company’s operating results. Despite con- cerns over slowing projects in the LNG carrier busi- ness, the projects MOL incorporated into its plan have been largely unaffected and are proceeding mostly as expected. On the other hand, lower natu- ral resource prices contributed to economic stagna- tion in natural resource exporting countries, especially Brazil, and this did in fact have a negative impact on containerships. So while there were pluses and minuses, it appears that on the whole the posi- tive effects outweighed the negative ones. Underlined words are explained in the Glossary on page 74. 18 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 18 15mol_英文0723入稿PDF.indd 18 2015/07/23 17:33 2015/07/23 17:33 Main theme: Solid growth through innovative changes Overall Strategies Ⅰ Ⅱ Ⅲ 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 value and meet customer needs Create value chains by expanding business domain to both upstream and downstream of ocean shipping transport Proﬁ t Targets/Financial Targets (Billions of yen) Revenue Ordinary income (Highly stable proﬁ ts) Net income ROA*1 ROE*2 Equity ratio Net gearing ratio Exchange rate JPY/US$ Bunker price US$/MT FY2013 FY2014 FY2015 (Forecast)*3 FY2016 (Plan) FY2019 (Target) 1,729.4 54.9 57.3 2.4% 9.5% 29% 135% 99.79 610 1,817 51.3 42.3 2.1% 5.8% 30% 135% 1,820 60 (55) 43 2.3% 5.4% 31% 127% 1,900 100 (55) 80 4-5% above 10% (around FY2019) (around FY2019) 108.34 529 118.00 380 100 620 2,100 140 (75) 110 35-40% 100% 100 620 *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 *3 As of April 30, 2015 Expansion of LNG carrier and Offshore business (Innovation of Business Portfolio / Innovation of Business Domain) l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i LNG carriers Offshore Businesses 1 March 31, 2014 March 31, 2015 (Including on order) March 31,2020 (Target) l C a p i t a l 67 7 92 120 15 March 31, 2014 March 31, 2015 (Including on order) Downsize Market Exposure in Dry Bulkers and Tankers (Innovation of Business Model) 0 20 40 60 80 100% FY2013 (Result) FY2014 (Result) FY2016 (Plan) FY2019 (Target) 52% 48% 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 Annual Report 2015 19 15mol_英文0723入稿PDF.indd 19 15mol_英文0723入稿PDF.indd 19 2015/07/23 17:33 2015/07/23 17:33 Message from the Chairman Unﬁ nished Business With the ﬁ rst year of “STEER FOR 2020” wrapped up, what business remains to be ﬁ nished? The ﬁ rst thing is rebuilding the contain- ership business. Of course we must continue to steadily implement concrete measures related to the Three Innovations, but the most pressing priority for MOL is rebuilding the containership business. Previously mentioned temporary factors like port congestion, delayed start of automated operations at the Port of Los Angeles or losses on bunker hedges in ﬁ scal 2014, will most- ly disappear by ﬁ scal 2015, but we need to address the structural factors. As part of these efforts, we have already decided to launch new joint service with Maersk and MSC for the Asia-South America East Coast route in July. We can expect sizable ratio- nalization effects by reshufﬂ ing the ports of call and decreasing the number of vessels deployed while maintaining capacity. Along with this rationalization of unproﬁ table routes, we are accelerating disposal of relatively expensive small and medium-sized ves- sels. In addition, we recently ordered six large 20,000 TEU containerships as we look to the future. We plan to launch these ships on the Asia-Europe route in 2017, and expect improved fuel efﬁ ciency and decreased unit costs. Interest-bearing debt is increasing, so what are your thoughts on strengthening the ﬁ nancial foundation? Behind the increase in interest-bearing debt are businesses that generate long- term and stable proﬁ ts. Because of large initial investments centering on LNG carriers and offshore businesses in line with “STEER FOR 2020,” interest-bearing debt will be hard to suppress until ﬁ scal 2016. What I’d like to emphasize here, though, is that these investments are being made in order to generate long-term and stable proﬁ ts in the future. Although strengthening the ﬁ nancial foundation is important, it isn’t neces- sarily management’s ov erriding goal. When there is an investment opportunity that can assuredly con- tribute to stable proﬁ t—the foundation of future growth—management should pursue it without hes- itation. Behind the temporary increase in interest- bearing debt are remarkably stable businesses, which will certainly help strengthen MOL’s ﬁ nancial foundation in the long-term. Meanwhile, we have been continuing to move assets off the balance sheet. By accumulating solid proﬁ ts, we plan to improve the net gearing ratio to 100% and the equity ratio to 35–40% by around ﬁ scal 2019. Building up Highly Stable Proﬁ ts (Billions of yen) 160 140 120 100 80 60 40 20 0 (Ordinary Income = Stable Profits + Other Profits) 140 100 (Ordinary Income) 60 55 55 75 Highly Stable Proﬁ ts 1) Proﬁ ts that are ﬁ xed, or expected to be ﬁ xed during this midterm management plan, from contracts of two years or more. 2) Projected proﬁ ts from highly stable businesses. (The included segments: Drybulkers, Tankers, LNG Carriers, Offshore businesses, Associated businesses and Others) FY2015(Forecast) *As of April 30,2015 FY2016(Plan) *As of April 30,2014 FY2019(Target) *As of April 30,2014 (cid:2) Stable proﬁ ts (cid:2) Other proﬁ ts 20 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 20 15mol_英文0723入稿PDF.indd 20 2015/07/23 17:33 2015/07/23 17:33 l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Initiatives as Chairman Following your appointment as chairman, what do plan to pursue going forward? As Chairman of the Board of Directors, I will do all I can to make corporate gov- ernance more transparent. Working with the president, I’d like to improve cor- porate value, especially by improving corporate gov- ernance and supervising Group companies. As for corporate governance, I’m proud of the fact that MOL led Japan in carrying out management reforms from the shareholders’ perspective, including having had external directors since 2000, but I think we now need to consider further improvements to corporate governance in response to the needs of the times. I’m currently advancing discussion on pertinent topics at the Board of Directors’ meetings, such as what kind of system is needed to amply fulﬁ ll the oversight function expected of the board and how we can ensure the level of transparency that needs to be achieved for our shareholders and other external stakeholders. With Japan’s Corporate Governance Code, which has now come into effect, I will contin- ue working hard as the Chairman of the Board of Directors to reinforce our management foundation. Summation of Five Years as President What are your thoughts as you reﬂ ect on the turbulent time during your term as president? I did what had to be boldly done for MOL’s future. Some people say the ﬁ ve years since I became presi- dent in June 2010 have been turbulent. In MOL’s his- tory of over 130-years, however, I believe there were harsher times. I think I can safely say that I consis- tently kept the long-term in mind, focusing on what needed to be done for the future and decisively car- rying it out. Of course, I feel genuine regret for our shareholders that we posted the largest loss in the Company’s history in ﬁ scal 2012. However, this was also due to our focus on the future, having executed the Business Structural Reforms for dry bulkers. We seized business opportunities that generate long-term, stable proﬁ ts (such as those presented by the shale revolution) and accumulated contracts. In my ﬁ ve years as president, I approved investments for 120 new vessels. Over 70% of these are for LNG carriers, offshore businesses, dry bulkers, tankers and other vessels that will generate stable proﬁ ts for about 20 years. The remaining 30% or so were for investments to raise the cost-competitiveness of con- tainerships, car carriers, chemical tankers, ferries and other vessels. There were almost no orders for free vessels with speculation on strong market condi- tions. If stable proﬁ ts could be expected, I approved the investment, even for projects that presented a high degree of technical difﬁ culty, including the Russian Yamal project to transport LNG across the Northern Sea route by ice class vessels. I concentrated MOL’s business intelligence, thought about what needed to be done at that par- ticular point in time while looking ahead to the next ten to twenty years, and implemented those initia- tives. That direction is clearly reﬂ ected in “STEER FOR 2020.” Essentially, I issued a rudder command to effect a great corporate change in direction. Although there is still unﬁ nished business, including securing and training seafarers and rebuilding the containership business, I’d like the new president Junichiro Ikeda to maintain course, accelerate and proceed full steam ahead. Underlined words are explained in the Glossary on page 74. Annual Report 2015 21 15mol_英文0723入稿PDF.indd 21 15mol_英文0723入稿PDF.indd 21 2015/07/23 17:33 2015/07/23 17:33 Message from the CEO Junichiro Ikeda President & CEO What we are doing now for 2020 and beyond “I, Junichiro Ikeda, assumed the position of president on June 23rd. As president, my main duty is to safeguard the strategies of the midterm management plan “STEER FOR 2020,” launched under the direction of the previous president Koichi Muto, ensuring the strategies are carried out effectively and elevating MOL as a truly global corporation.” 22 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 22 15mol_英文0723入稿PDF.indd 22 2015/07/23 17:33 2015/07/23 17:33 Issues and Resolutions for the Second Year of “STEER FOR 2020” Please tell us about the issues and strategies heading into the second year of “STEER FOR 2020.” A major medium- to long-term issue is the advancement of globalization. An immediate, pressing issue is rebuilding the containership business. As for “STEER FOR 2020,” solid progress was made in the ﬁ rst year of the plan under the leadership of the previous president Koichi Muto. We’ve already attained substantial accomplishments in Innovation of Business Portfolio and Innovation of Business Model, and I will continue to steer this course. In Innovation of Business Domain, however, we need to further ramp up our efforts, and I’d like to fulﬁ ll my role as president by motivating or, when neces- sary, even directing the sales division. I believe the globalization of MOL is the key to further support the Three Innovations. You might ﬁ nd it surprising that the Company, which has a net- work of trade routes spanning the globe, would aim for globalization, but there are various facets of glo- balization. In what might be called a ﬁ rst phase, glo- balization of our customer base has already progressed considerably and it’s probably safe to say that each department has ﬁ nished establishing over- seas bases to facilitate this. What we need to strengthen going forward, however, is the second phase: recruiting globally competitive personnel. For example, in such energy- related ﬁ elds as LNG carriers and offshore business- es, which aim to expand overseas going forward, we need to recruit experts like those that have worked for global resource majors in Europe or the United States. While we are already conducting this type of hiring in some ﬁ elds, we need to reinforce our efforts. Related human resource measures will be another major issue. For example, how should we compensate and motivate our hires based on their experience and accomplishments? Simultaneously we will devote attention to ele- vating MOL’s brand around the world as the third phase of globalization. Even if each business receives high praise from customers, that doesn’t necessarily mean MOL receives global recognition for being the world’s largest full-line marine transport group, which operates a wide array of vessels and is able to meet comprehensive transport needs. By raising MOL’s proﬁ le as a full-line marine transport group, it’s my aim to have our clients around the world think ﬁ rst and foremost of consulting MOL for their transport needs. As for pressing issues, it goes without saying that we need to rebuild the containership business. We are already taking measures to resolve MOL’s unique structural problems, including measures to rationalize North-South trade. I will give my all to see this is implemented without fail and that the busi- ness becomes proﬁ table. l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l 15mol_英文0723入稿PDF.indd 23 15mol_英文0723入稿PDF.indd 23 2015/07/23 17:33 2015/07/23 17:33 Annual Report 2015 23 Message from the CEO Please tell us about the medium- to long-term strategies for containerships. I aim to get the Company in the top one-third in terms of cost competitive- ness and seek synergies with the con- tainer terminal business. The key to rebuilding the containership business is strengthening cost competitiveness and securing efﬁ cient revenue streams. If we can enter the top tertile of major containership companies in terms of cost competitiveness, we could weather the ups and downs of the market. We’ve already been working towards this goal. Although we slipped in ranking between ﬁ scal 2013 and ﬁ scal 2014, we maintained a similar position before then, so we have both latent abilities and executable abilities. We will swift- ly recover our leading position in the top third by successfully implementing measures to resolve struc- tural problems once we have quickly eliminated tem- porary negative factors. Let’s examine the trade routes separately. On East-West routes, operating through the G6 Alliance and lowering unit costs by launching large vessels remain effective strategies. Currently, we have char- tered 14,000 TEU vessels from another company to tide us over. But using this time, we determined the optimal vessel size and were able to order 20,000 TEU vessels, which are the largest ships able to tran- sit the Suez Canal, at a competitive price. On the other hand, medium-sized vessels continue to cas- cade from East-West routes to North-South routes and Inter-Asian routes, where the market environ- ment is expected to remain unstable. On these routes, we need to streamline our core ﬂ eet and switch over to a trade route operation structure that takes advantage of short-term chartered vessels. In this respect, MOL has been slow to dispose of small and medium-sized vessels but is now accelerating these efforts. As for securing efﬁ cient revenue streams, we are working to pursue comprehensive yield manage- ment and strengthen our sales capabilities. These measures will maintain MOL’s presence in container shipping, but our target business model is combining this business with the container terminal business—a part of Innovation of Business Domain. The container terminal business is expected to gen- erate relatively stable proﬁ t and, typical of the capi- tal-intensive industry, proﬁ t margins rise rapidly after exceeding certain volume thresholds. We are able to secure a high level of stable income by operating highly competitive terminals like the automated one at the Port of Los Angeles and attracting vessels operated by alliances of which MOL is a member. Aiming to expand this business model beyond North America, we are currently pursuing new investment opportunities with Brookﬁ eld, a major Canadian fund with which we agreed to a strategic alliance in January 2014. 24 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 24 15mol_英文0723入稿PDF.indd 24 2015/07/23 17:33 2015/07/23 17:33 Proﬁ t Opportunities and Risk Controls The marine transport market for dry bulkers and containerships was worse than expected under “STEER FOR 2020.” How do you plan to control the impact of this kind of market volatility? We will continue to strengthen total risk control. The foundation of management at a marine trans- port company lies in working to correctly perceive the balance of supply and demand and the market conditions while keeping the big picture in mind. But what is more important is recognizing as a company the total volume of risk, namely the size of the impact that would be incurred if you misread the business environment. Based on this, you should take only risks that the company is capable of taking and that are worth taking. MOL calls this total risk control. “STEER FOR 2020” is based on this idea, and we are continuing to reduce market exposure. However, the risk positions are, once taken, not easi- ly lifted. In formulating “STEER FOR 2020,” there were indications from outside ofﬁ cers that the Company’s quantitative risk analysis was insufﬁ cient. In light of such reﬂ ections, we are currently working to reinforce total risk control. In LNG carriers and offshore businesses, some are voicing concerns about the impact of the decrease in crude oil prices and geopolitical risks. What do you think the impact will be on MOL? We devote considerable effort to evalu- ating opportunities and risks. While there may be some delays in new proj- ects, I don’t think there will be a large impact on achieving the plan’s goals. The drop in crude oil prices is certainly worsening the proﬁ tability of some shale gas ﬁ elds, and I think some of the new developments are being put on hold at the moment. However, MOL is not partici- pating in any upstream shale gas projects. We placed orders with a shipyard after concluding a contract with a highly reliable customer to charter LNG carriers over the long term, only for projects that had received ﬁ nal investment decisions. In this way, we are strategically selecting the risks we take as a marine transport company. The same goes for other projects in LNG carriers and offshore business- es. Conversely, when we determine that we can con- trol for related risk by making use of the Company’s insight and technical capabilities as a marine trans- port company, we will pursue even challenging ini- tiatives and earnings opportunities. The Russian Yamal project mentioned by the chairman is an example of this. While some people are also con- cerned about the geopolitical risks associated with the project, we can effectively control them through the contract. Projects aiming to secure future contracts are mostly competitive ones incorporated into the plan. Some of those are even government projects. Accordingly, I believe these projects will proceed steadily even if they are somewhat delayed. l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Underlined words are explained in the Glossary on page 74. Annual Report 2015 25 15mol_英文0723入稿PDF.indd 25 15mol_英文0723入稿PDF.indd 25 2015/07/23 17:33 2015/07/23 17:33 Message from the CEO The Social Signiﬁ cance of the Marine Transport Industry and How MOL Creates Value What do you think is the signiﬁ cance of the marine transport industry in society? It is the duty of a marine transport com- pany to move things across the ocean to enrich the lives of people around the world. I believe the social signiﬁ cance of the marine trans- port industry, especially the international marine transport industry, is to make people happy by trans- porting things. Of course there is spiritual enrich- ment, but I think the physical sense of fulﬁ llment and economic improvement makes it easier to really feel happy. This means supporting economic growth by transporting oil and iron from resource rich coun- tries to resource poor ones, or delivering a region’s special delicacy to people all over the world. Enriching the lives of people all around the world by moving things across the ocean is the duty of a marine transport company. What’s more, per unit CO2 emissions from trans- port are smallest in the marine transport industry, and we can reinforce this advantage by increasing the size of vessels or developing even more energy- efﬁ cient technology. That is why we can say the marine transport industry provides a mode of trans- port that enriches people all over the world while also being gentle on the environment. It is an indis- pensable industry for society. In their work, I’d also like our employees to be proud of this important role. Q. What strengths and competitive elements underpin the sustainable growth of MOL? Deﬁ nitely credibility. MOL has been backed by credibility for over 130 years. Beginning with MOL, Japan’s marine transport com- panies have mirrored the progress of Japan’s econo- my. MOL has also grown by developing ships and services to meet customer needs across the archipel- ago of Japan, which developed by importing resources and exporting products. I think you can say that MOL’s strength lies in its credibility, which has been cultivated over the years as we worked to gain the trust of Japan’s customers, who have high standards, including seeking improvements in trans- port efﬁ ciency and thoroughly safe transport. Although credibility cannot be seen with the eyes, it attracts customers and business partners. Credibility could be the ability to uncover customer needs and offer appropriate solutions, the approach of the Company to work hard with an indomitable ﬁ ghting spirit to make that solution a reality, the track record of safe transport, or the technical capabilities under- pinning everything. All of these comprise the Company’s credibility. Through all those things we gain new transport opportunities, further polishing our credibility and creating a virtuous cycle. Thanks to this, MOL has amassed the intangible asset of credibility, in addition to its more tangible asset: the world’s largest ﬂ eet with a wide range of vessel types. Our credibility has long since been accepted by customers outside Japan as well and is even today helping us secure overseas projects. For example, in January 2015, we safely delivered the ﬁ rst LNG carrier made in a shipyard in China by a non-Chinese shipping company. I think one of the reasons we were chosen as a shipping company part- ner for this challenging project was, without a doubt, our credibility. Thanks to our participation in this proj- ect, we gained the trust of China Shipping, who co- owns the vessels, and secured a separate opportunity to participate in a project for China. Capitalizing on our strengths comprising both tangible and intangible assets accumulated over our more than 130 years of history, we continue to fulﬁ ll the social duty of marine transport. This then helps us accumulate more tangible and intangible assets and, through this process, we improve corporate value in a broad sense. 26 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 26 15mol_英文0723入稿PDF.indd 26 2015/07/23 17:33 2015/07/23 17:33 Improving Shareholder Value Please describe your thoughts on improving shareholder value and providing shareholder returns. I will continue to improve medium- to long-term shareholder value and strengthen shareholder returns by seiz- ing prime business opportunities and accumulating stable proﬁ ts. To improve medium- to long-term shareholder value, I will continue to decide on investments aimed at accumulating stable proﬁ ts and strengthening cost competitiveness in line with “STEER FOR 2020.” ﬁ nancial standing, it would be illogical to raise ROE in the short term by such a measure as stock buy- back. On the other hand, the funding necessary for capital investment is mostly backed by long-term contracts, and if cash ﬂ ows from operating activities prove insufﬁ cient, we could easily cover the rest with bank loans. There is neither need nor plan to cover capital investment by raising capital. There is no change in MOL’s policy on sharehold- I think it’s helpful to realize that there is a baton er returns 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 aimed at securing future stable proﬁ ts, MOL expects to achieve its ﬁ nancial targets, equity ratio of 35% to 40% and net gearing ratio of 100%, no earlier than around ﬁ scal 2019. However, we have determined that now is the best time to seize business opportunities and actively invest in sources of stable proﬁ ts. Sound ﬁ nancial standing is also important for securing long-term contracts. Business opportunities will not wait for us. Prioritizing capital investment 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 request the understanding of our shareholders. Of course, when deciding on investments, we use ROI and other standards to facilitate the selec- tion. Aiming to improve our ability to generate cash, we are encouraging all business divisions to strive to strengthen cost competitiveness and improve oper- ating efﬁ ciency. Through this, ROA will be lifted to between 4% and 5% within the term of “STEER FOR 2020,” and ROE should reach 10% early on in the plan, a level we seek to maintain or improve. I intend to increase ROE by consistently raising proﬁ ts. Looking at our present capital requirements and in management that is carried by one person and handed off to the next. Just like a long-distance relay race, each person gives their all to get closer to the goal. It goes without saying that each year’s operat- ing results are important. But if you only focus on that amid changing business environments, you lose sight of the goal you should be aiming for, namely meeting shareholders’ expectations by improving medium- to long-term corporate value. I have been entrusted with the baton from the previous president Koichi Muto. Over its more than 130 years of history, there have been times when MOL has encountered great swells, but I think our forebears succeeded in opening many navigable channels through their ingenuity and drive. When I reﬂ ect on this, I am once again moved deeply by the meaning of “excellent and resilient” in the Company’s long-term vision “To make the MOL Group an excellent and resilient organization that leads the world shipping industry.” To ensure that I carry the baton forward in a way that contributes to the next 130 years, I, too, will boldly face change and advance full steam ahead. l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l 15mol_英文0723入稿PDF.indd 27 15mol_英文0723入稿PDF.indd 27 2015/07/23 17:33 2015/07/23 17:33 Annual Report 2015 27 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) Depreciation and amortization 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) Net assets Cash dividends applicable to the year Management indicators: Gearing ratio (%) Net gearing ratio (%) Equity ratio (%) ROA (%)(*) ROE (%) Dividend payout ratio (%) MOL STEP 2005/3 2006/3 2007/3 2008/3 ¥1,173,332 ¥1,366,725 ¥1,568,435 ¥1,945,697 917,149 1,101,459 1,300,038 1,544,109 84,388 171,795 174,979 155,057 98,261 80,230 167,897 (87,667) 52,969 92,273 172,993 176,502 188,290 113,732 8,838 163,914 100,324 168,073 182,488 197,854 120,940 20,369 156,418 110,303 291,285 302,219 318,202 190,321 23,291 283,359 (155,076) (136,049) (260,068) 65,700 68,581 74,481 1,232,252 1,470,824 1,639,940 769,902 571,429 424,461 424,461 847,660 569,417 620,989 550,764 1,900,551 1,047,825 601,174 751,652 679,315 ¥94.98 354.01 18.00 ¥101.20 ¥159.14 459.55 20.00 567.74 31.00 135 120 28.9 13.1 31.5 19.0 104 94 33.6 11.7 24.8 19.8 88 79 35.8 17.1 30.9 19.5 665,320 514,131 298,258 298,258 ¥81.99 248.40 16.00 173 157 24.2 15.7 37.8 19.5 Number of MOL Group employees: (the parent company and consolidated subsidiaries) 7,385 8,351 8,621 9,626 (*) Ordinary income (loss) /Average total assets at the beginning and the end of the ﬁ scal year. 28 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 28 15mol_英文0723入稿PDF.indd 28 2015/07/23 17:33 2015/07/23 17:33 MOL ADVANCE GEAR UP! MOL RISE 2013 STEER FOR 2020 Millions of yen 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 ¥1,865,802 ¥1,347,965 ¥1,543,661 ¥1,435,221 ¥1,509,194 ¥1,729,452 ¥1,817,070 1,564,486 1,228,479 1,328,960 1,368,795 1,432,014 1,587,902 1,683,795 104,105 197,211 204,511 197,732 126,988 (71,038) 118,984 98,547 20,939 24,235 27,776 12,722 (40,055) 93,428 91,300 123,401 121,622 95,367 58,277 46,970 181,755 90,886 (24,460) (24,320) (33,516) (26,009) (129,298) 5,014 92,946 (15,766) (28,568) (137,939) (178,847) (25,285) 78,956 100,458 116,025 41,092 54,986 71,710 57,394 (25,615) 94,256 17,250 51,330 58,332 42,356 (66,656) 92,495 (190,022) (133,484) (134,785) (134,313) (104,241) (119,871) (159,151) 78,156 88,366 77,446 85,624 94,685 83,984 87,804 1,807,080 1,106,746 702,617 695,022 623,714 1,861,312 1,209,176 775,114 735,702 659,507 1,868,741 1,257,823 724,259 740,247 660,795 1,946,162 1,293,803 869,619 717,909 637,422 2,164,611 1,303,967 1,046,865 619,493 535,423 2,364,695 1,379,245 1,094,081 783,549 679,160 ¥106.13 521.23 31.00 ¥10.63 551.70 3.00 ¥48.75 552.83 10.00 (¥21.76) 533.27 5.00 (¥149.57) 447.76 − ¥47.99 567.90 5.00 2,624,050 1,498,028 1,183,401 892,435 782,557 Yen ¥ 35.42 654.26 7.00 l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i 113 99 34.5 11.0 19.5 29.2 118 105 35.4 1.3 2.0 28.2 110 100 35.4 6.5 8.8 20.5 136 123 32.8 (1.3) (4.0) − 196 158 24.7 (1.4) (30.5) − 161 135 28.7 2.4 9.5 10.4 151 135 29.8 2.1 5.8 19.8 10,012 9,707 9,438 9,431 9,465 10,289 10,508 l C a p i t a l 15mol_英文0723入稿PDF.indd 29 15mol_英文0723入稿PDF.indd 29 2015/07/23 17:33 2015/07/23 17:33 Annual Report 2015 29 Key Indicators Shipping and Other Revenues/ Ordinary Income (Loss) Total Assets/Net Assets Ordinary Income (Loss) by Consolidated Segment (¥ billions) 2,000 1,500 1,000 500 0 –500 (¥ billions) 400 3,000 300 2,400 200 1,800 100 1,200 0 600 (¥ billions) 1,000 180 800 600 400 200 120 60 0 10/3 11/3 12/3 13/3 14/3 15/3 –100 0 10/3 11/3 12/3 13/3 14/3 15/3 0 -60 10/3 11/3 12/3 13/3 14/3 15/3 (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 FY2014 Shipping and Other Revenues ¥1,817.0 billion ¥51.3 billion Ordinary Income FY2014 Total Assets Net Assets ¥2,624.0 billion ¥892.4 billion FY2014 Bulkships Containerships Other segments, etc. ¥54.1 billion ¥(24.1) billion ¥21.3 billion Ordinary income decreased ¥3.6 billion year on year due mainly to a drop in freight rates for container- ships, offshoring in car carriers and stagnant market conditions for dry bulkers despite tailwinds from the weaker yen, lower bunker prices and improving mar- ket conditions for tankers. Total assets as of March 31, 2015 were ¥259.3 billion higher than at March 31, 2014 due to increases in vessels and long-term loans receivable attributable to investment for ﬂ eet enhancement. Net assets increased ¥108.8 billion year on year due mainly to increases in retained earnings and unrealized gains on hedging derivatives. In the bulkships segment, while the tanker division greatly increased proﬁ ts, dry bulkers, car carriers and other divisions recorded lower proﬁ ts. The containerships segment posted a larger ordinary loss than ﬁ scal 2013 due mainly to a decrease in freight rates and lower utilization rates. Net Income (Loss) per Share/Cash Dividends Applicable to the Year Dividend Payout Ratio Cash Flows (¥) 150 100 50 0 –50 –100 –150 10/3 12/3 13/3 14/3 15/3 11/3 (cid:2) Net income (Loss) per share (cid:2) Cash dividends applicable to the year (%) 30 20 10 0 10/3 11/3 12/3 13/3 14/3 15/3 FY2014 Net Income per Share Cash Dividends Applicable to the Year ¥35.42 ¥7 FY2014 Dividend Payout Ratio 19.8% (¥ billions) 200 150 100 50 0 –50 –100 –150 –200 10/3 11/3 12/3 13/3 14/3 15/3 (cid:2) Cash ﬂ ows from operating activities (cid:2) Cash ﬂ ows from investing activities Free cash ﬂ ows FY2014 Cash Flows from Operating Activities Cash Flows from Investing Activities ¥92.4 billion ¥(159.1) billion In contrast with the previous year, which had large extraordinary gains due mainly to sales of afﬁ liates’ stocks, net income declined ¥15.0 billion. MOL paid ¥7 per share in dividends for the ﬁ scal year, including a ¥3 interim dividend, a year-on-year increase of ¥2 per share. Due to the ¥2 increase in the dividends paid for the year, the dividend payout ratio increased from 10% in the previous ﬁ scal year to 20%, reaching our present guideline. We aim to raise this to 30% as a medium- to long-term issue. Operating activities provided net cash of ¥92.4 billion, down ¥1.7 billion year on year. Investing activities used net cash of ¥159.1 billion, ¥39.2 billion more than a year prior, due to continued active capital investments. This resulted in continuous negative free cash ﬂ ows. 30 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 30 15mol_英文0723入稿PDF.indd 30 2015/07/23 17:33 2015/07/23 17:33 ROA/ROE (%) 20 10 0 –10 –20 –30 –40 10/3 11/3 12/3 13/3 14/3 15/3 ROA ROE FY2014 ROA ROE Interest-bearing Debt / Net Interest- bearing Debt / Shareholders’ Equity Gearing Ratio / Net Gearing Ratio / Equity Ratio (¥ billions) 1,200 1,000 800 600 400 200 0 10/3 11/3 12/3 13/3 14/3 15/3 (cid:2) Interest-bearing Debt (cid:2) Net Interest-bearing Debt (cid:2) Shareholders’ Equity (%) 200 150 100 50 0 40 30 20 10 0 10/3 11/3 12/3 13/3 14/3 15/3 Gearing Ratio (left scale) Net Gearing Ratio (left scale) Equity Ratio (right scale) 2.1% 5.8% FY2014 Interest-bearing Debt Net Interest-bearing Debt * Shareholders’ Equity ** ¥1,183.4 billion ¥1,054.6 billion ¥782.5 billion FY2014 Gearing Ratio Net Gearing Ratio Equity Ratio 151% 135% 29.8% ROA and ROE were both lower as ordinary income and net income both fell due to the lower market- linked proﬁ ts and a decrease in extraordinary gains, while total assets increased due to prior investments for future stable proﬁ ts. * Interest-bearing debt – cash & cash equivalents ** “Shareholders’ equity” in this section comprises the total of owners’ equity and accumulated other comprehensive income (loss). Interest-bearing debt increased ¥89.3 billion to ¥1,183.4 billion, as the Company procured funds by bank loans to cover negative free cash ﬂ ows. The gearing ratio improved 10 points and the equity ratio improved 1 point, reﬂ ecting the ¥103.3 billion increase in shareholders’ equity, the ¥89.3 billion rise in interest-bearing debt, and the ¥259.3 billion increase in total assets. Enhancement of Cost Competitiveness (¥ billions) Credit Ratings (As of June 2015) Capital Expenditure Type of Rating Rating (¥ billions) 40 30 20 10 0 (cid:2) Target (cid:2) Result FY2014 Target Result Short-term debt rating (CP) JCR Long-term preferred debt (issuer) rating Long-term debt rating J-1 A A Issuer rating BBB+ Target Result R&I Short-term debt rating (CP) Long-term individual debt rating Moody’s Corporate family rating ¥30.0 billion ¥30.0 billion JCR R&I Moody’s a-2 A– Ba1 A BBB+ Ba1 250 200 150 100 50 0 10/3 11/3 12/3 13/3 14/3 15/3 l C a p i t a l FY2014 Capital Expenditure ¥164.2 billion l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i In ﬁ scal 2014, MOL achieved its target of ¥30.0 bil- lion total cost reductions. This was accomplished by further reducing bunker expenses through fuller implementation of slow steaming, improving vessel allocation efﬁ ciency, delivering large containerships and taking other actions. MOL provides explanations to the credit rating agen- cies about how its increased capital investments promise to generate future cash ﬂ ows and are backed by solid, long-term contracts, and seeks to improve its 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. Annual Report 2015 31 15mol_英文0723入稿PDF.indd 31 15mol_英文0723入稿PDF.indd 31 2015/07/23 17:33 2015/07/23 17:33 Interview with the CFO Masahiro Tanabe Senior Managing Executive Ofﬁ cer Q.1 What is your assessment of the ﬁ scal 2014 ﬁ nancial results? Especially in the second half of the year, bunker prices continued to fall, and while it did provide a signiﬁ cant tailwind, we could not fully take advantage of the lower prices for the full year, resulting in a 7% year-on-year decrease in consolidated ordinary income to ¥51.3 billion. In bulkships, the market remained weak due to stagnation of Brazilian iron exports and a decrease in the volume of coal imported into China. The market for tankers, however, was weak until autumn but then remained at a ﬁ rm level due in part to fall- ing bunker prices and the subsequent demand for oil reserves on top of winter demand. Underpinned by stable proﬁ ts from medi- um- to long-term contracts for dry bulkers, tankers and LNG car- riers, we secured ¥54.1 billion in ordinary income overall in this segment, a bit of a decrease from the previous ﬁ scal year. Containerships aimed to regain proﬁ tability, but ended up performing below original expectations, posting an ordinary loss of ¥24.1 billion, which was even worse than the results of many competitors. This was due to both temporary and structural fac- tors. The temporary factors are rapidly disappearing, and we are simultaneously implementing measures to eliminate the structur- al factors. term stable proﬁ ts, especially LNG carriers and offshore business- es. While we place orders for the vessels after securing long-term transport contracts, there is a gap of around three years between order and delivery, when the vessels begin contributing to prof- its. Therefore, it will be 2017, before cash ﬂ ows from operating activities increase considerably as a return on the investment. Accordingly, total cash ﬂ ows used in investing activities between the period between ﬁ scal 2014 and 2016 are expected to exceed total cash ﬂ ows provided by operating activities for the same period. Interest-bearing debt, which had been ¥1,094.0 billion at the end of ﬁ scal 2013, increased ¥89.3 billion to ¥1,183.4 billion at the end of ﬁ scal 2014. Fiscal 2015 is a transition year for payments to shipyards dur- ing the construction of vessels, so cash ﬂ ows from operation will cover the cash used for investment. However, we will continue with additional investments mainly in LNG carriers and offshore businesses. To suppress the increase in interest-bearing debt, we intend to utilize off-balance sheet structures, such as chartering (instead of owning vessels) and inviting partners on suitable proj- ects. However, as mentioned before, these are upfront invest- ments to secure future stable proﬁ ts and will lead to improvements in shareholder value in the medium- to long-term, so we ask for your understanding. Q.2 Due to prior investments in LNG carriers and offshore businesses, interest-bear- ing debt is increasing… In line with Innovation of Business Portfolio, one of the Three Innovations outlined in “STEER FOR 2020,” we are actively investing in new shipbuilding in ﬁ elds that will generate long- Q.3 What are your thoughts about credit ratings? We are exchanging information more closely with the credit rat- ing agencies, which have raised concerns over the increase in interest-bearing debt. I think we ﬁ rst need to show we are on course to implement our growth strategies and the accompany- 32 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 32 15mol_英文0723入稿PDF.indd 32 2015/07/23 17:33 2015/07/23 17:33 ing improvement in ﬁ nancial standing by ﬁ rmly achieving the proﬁ t targets. But I’d also like to emphasize that behind this increase in interest-bearing debt are sound long-term transport contracts with highly credible customers. We are carefully explaining that these investments promise to generate future cash ﬂ ows and greatly differ in essence from investments in spot operations, which are exposed to the waves of the market. Q.4 What kind of policy do you have towards procuring funds? For the time being, investments exceed cash ﬂ ows provided by operating activities, but this can easily be covered by funding, mainly by bank loans. The funding will be used for investments in LNG carriers and offshore businesses, a ﬁ eld backed by long- term contracts. The Company will also utilize project ﬁ nance according to each contract’s characteristics. Through these and other measures, MOL is also focusing on maintaining its corpo- rate credibility. Q.5 What is the impact of exchange rate and bunker price ﬂ uctuations on ﬁ nancial results? As for exchange rates, our ﬁ nancial results are primarily impacted by the Japanese yen-U.S. dollar exchange rate. This is because freight revenues are primarily denominated in U.S. dollars while a certain portion of costs are in yen. In ﬁ scal 2015, we project that each ¥1-per-dollar change against the assumed ¥118-to-U.S. dollar yearly average exchange rate will have an impact of approximately ¥1.8 billion in ordinary proﬁ t. (If the yen weakens, it will improve proﬁ tability.) Turning to bunker prices, the yearly average price was assumed to be US$380 per metric ton, and we calculated at the beginning of the ﬁ scal year that every dollar deviation would have an impact of ¥190 million. (If the price falls, it will improve proﬁ tability.) But this impact could be smaller due to the status of bunker price hedges. Some hedges were placed at the beginning of ﬁ scal 2014, and bunker prices fell signiﬁ cantly afterward, resulting in a hedge loss of ¥13.0 billion. A large portion of these hedges were related to the containership business, and this was one of the factors that caused the business to fare worse than other containership companies. Although the bunker price hedg- es produced a loss in ﬁ scal 2014, we will continue to strategically utilize hedging in order to control the effect of ﬂ uctuating bun- ker prices going forward. With the progress made in placing hedges, the degree of impact from ﬂ uctuating bunker prices will become smaller. Q.6 What is the outlook for operating results in ﬁ scal 2015? We are expecting consolidated ordinary income to increase 17% year on year to ¥60.0 billion and net income to rise 2% to ¥43.0 billion, on the assumption that the exchange rate will be ¥118 to the U.S. dollar and bunker prices will be US$380, as mentioned previously. In bulkships, the stagnant market for dry bulkers will contrib- ute to a decline in proﬁ t from the previous ﬁ scal year. In contain- erships, however, we aim for a return to proﬁ tability with a year- on-year improvement of ¥29.1 billion. The temporary factors in ﬁ scal 2014, including bunker price hedge losses, will be gone, and by effectively implementing measures to resolve the structur- al factors unique to MOL, we believe this is an achievable target. l V a u e C r e a t i o n M a M n a a n g a e g e m m e e n n t t S S t r t a r t a e t g e y g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Impact of Exchange Rate Fluctuations (Model) Impact=1+2 Revenues Expenses Proﬁ t 2 U.S. Dollar Revenue Impact of Bunker Prices Fluctuations (Model) Exposure I m p a c t U.S. Dollar Expense 1 Imbalance Japanese Yen Revenue Japanese Yen Expense T o t a l C o n s u m p t i o n Hedged portion Customer’s share Consolidated Ordinary Income (Loss) by Segment Bulk ships Containerships Ferry/Domestic transport Associated business Other Corporate/Eliminate Total FY2014 Result 54.1 (24.1) 4.4 10.9 4.1 1.8 51.3 (Billions of yen) FY2015 Outlook* 38.0 5.0 6.0 10.0 3.0 (2.0) 60.0 Exchange rate Bunker price ¥108.34/$ ¥118.00/$ $529/MT $380/MT *As of April 30, 2015 Annual Report 2015 33 15mol_英文0723入稿PDF.indd 33 15mol_英文0723入稿PDF.indd 33 2015/07/23 17:33 2015/07/23 17:33 MOL at a Glance Revenues Breakdown by Segment (Fiscal 2014 results) ASSOCIATED BUSINESSES 6% OTHERS 1% BULKSHIPS 47% Dry Bulkers 23% Tankers 8% LNG Carriers/Offshore Businesses 2% Car Carriers 14% FERRY & DOMESTIC TRANSPORT 3% CONTAINERSHIPS 43% Fleet Table As of March 31, 2015 As of March 31, 2014 Number of vessels Thousand dwt Number of vessels Thousand dwt Dry Bulkers 411 36,217 403 35,760 Tankers 176 16,644 180 16,874 LNG Carriers 67 5,233 67 5,182 Offshore Businesses (FPSO) 2 − 1 − Car Carriers 127 2,105 125 2,033 Containerships 118 7,401 119 7,091 Ferry & Domestic Transport Cruise Ships Others Total 43 171 40 160 1 2 5 13 1 2 5 13 947 67,789 938 67,117 (Note) Including spot-chartered ships and those owned by joint ventures Underlined words are explained in the Glossary on page 74. 34 Mitsui O.S.K. Lines Business Activities With the world’s largest ﬂ eet, MOL Dry Bulkers reliably transports such dry bulk cargo as iron ore, coal, grains, wood, wood chips, cement, fertilizer and salt. Our ﬂ eet includes highly versatile bulk carriers and specialized vessels for speciﬁ c cargo types. With the world’s largest ﬂ eet, MOL is Tankers expanding activities globally. Our ﬂ eet includes crude oil tankers; product tankers that carry naphtha, gaso- line and other reﬁ ned petroleum products; chemical tankers that carry liquid chemical products; and LPG tankers that carry liqueﬁ ed petroleum gas. With the LNG Carriers/Offshore Businesses world’s largest LNG carrier ﬂ eet, MOL safely transports liqueﬁ ed natural gas (LNG), which is experiencing growing global demand. In addition, we are active in offshore businesses, including FSPOs and FSRUs, which are poised for continued growth. MOL is stably expanding transport Car Carriers services to meet the changing needs of automakers as they move production to optimal sites around the world. We operate globally with specialized car carri- ers that can effectively transport any type of vehicle from passenger cars to construction machinery. Through MOL’s global network of sea routes, we transport containers loaded with electric products, automotive parts, clothes, furniture, food products and many other products to deliver them around the world. We are expanding our network with wider port coverage and increased service frequency, not only on our self-operated routes but also in joint operations with partners, e.g. by forming the G6 Alliance with ﬁ ve other major shipping companies. In addition, we are actively developing the termi- nal business—part of the container shipping value chain—for use as a tool to differentiate ourselves from peers. MOL develops the ferry business, which transports both passengers and vehicles (automobiles, trucks, etc.) and simultaneously raises our proﬁ le as the leader of an eco-friendly modal shift in domestic logistics. We also promote the domestic transport business, connecting important domestic sites and transporting large amounts of raw materials and energy for industry. Leveraging the knowhow accumulated over more than 130 years in the marine transport business, we are promoting various businesses in related activities including real estate, tugboats, cruise ships (the NIPPON MARU), and trading. B u l k s h p s i a n d C a r C a r r i e r s ) ( D r y B u l k e r s , T a n k e r s , L N G C a r r i e r s / O f f s h o r e B u s i n e s s e s C o n t a i n e r s h p s i T r a n s p o r t F e r r y & D o m e s t i c B u s i n e s s e s A s s o c i a t e d 15mol_英文0723入稿PDF.indd 34 15mol_英文0723入稿PDF.indd 34 2015/07/23 17:33 2015/07/23 17:33 Dry Bulkers [Dry Bulker] Capesize Bulker: MIDNIGHT DREAM [Dry Bulker] Wood Chip Carrier: DALIA Tankers [Tanker]VLCC: AZUMASAN [Tanker] Product tanker: OPAL EXPRESS LNG Carriers/Offshore Businesses Car Carriers [LNG Carrier] ENERGY NAVIGATOR [Car Carrier] EMERALD ACE [Containership] MOL MAJESTY [Terminal] Los Angeles Container Terminal Strengths and Strategies Dry Bulkers Strengths: A diverse ﬂ eet suited to customer needs and a rich transport track record Strategies: Expanding stable proﬁ ts from large vessels and specialized vessels, while reducing market expo- sure in small and medium-sized vessels. Tankers Strengths: A long track record of safe operations and cus- tomer trust Strategies: Strengthening our presence mainly by setting up pools with other operators in various ﬁ elds, including crude oil tankers, petroleum product tankers and chemical tankers. LNG Carriers/Offshore Businesses Strengths: An outstanding track record, knowhow related to safe operations and a global customer base Strategies: We take on technologically challenging projects by encompassing technology, ship management and specialized business divisions. Car Carriers Strengths: Worldwide service to meet and surpass the high transport quality standards of our customers Strategies: Flexibly responding to diversifying cargo ﬂ ows with our highly versatile ﬂ eet that features a uniform vessel size. Strengths: A global network of sea lanes and high quality service, beginning with high on-time perfor- mance percentages Strategies: Raising our cost competitiveness while maintain- ing an expansive network of sea routes through the leading G6 Alliance, launching large vessels and ceaselessly rationalizing costs. We also built up a foundation for stable proﬁ ts by expanding terminal and other businesses. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i Strengths: The largest ferry network in Japan and the MOL Group’s solid customer base Strategies: Capturing domestic transport demand, which is expanding thanks to the rebounding Japanese economy and the modal shift, while raising the competitiveness of our ﬂ eet. l C a p i t a l [Ferry] SUNFLOWER SAPPORO Shin -Daibiru Building Strengths: A customer base and business knowhow culti- vated in the marine transport industry Strategies: Leveraging the MOL Group’s network to expand business globally, beginning in Southeast Asia, where demand is growing. [Cruise ship] NIPPON MARU Annual Report 2015 35 15mol_英文0723入稿PDF.indd 35 15mol_英文0723入稿PDF.indd 35 2015/07/23 17:33 2015/07/23 17:33 MOL at a Glance Year in Review Performance (¥ billions) B u l k s h p s i ( D r y B u l k e r s , T a n k e r s , L N G C a r r i e r s / O f f s h o r e B u s i n e s s e s a n d C a r C a r r i e r s ) C o n t a i n e r s h p s i T r a n s p o r t F e r r y & D o m e s t i c B u s i n e s s e s A s s o c i a t e d This division maintained a high level of earn- Dry Bulkers ings by securing stable proﬁ ts from long-term contracts for iron ore, steaming coal, and wood chip carriers. However, the market stagnated due to sluggish Brazilian exports of iron ore and a lower volume of coal imports to China. As a result, proﬁ ts declined year on year. Market conditions remained ﬁ rm overall for Tankers crude oil tankers, product tankers and LPG tankers. The division sustained efforts to improve operational efﬁ ciency by setting up pools. As a result, the division greatly improved proﬁ tability from the previous ﬁ scal year and succeeded in turning a proﬁ t. Although the division LNG Carriers/Offshore Businesses accumulated proﬁ ts from long-term contracts, proﬁ ts declined year on year due to a worsening in the operating rates from scheduled dry-dockings and the incurrence of seafarer training and other expenses. In offshore businesses, the 2nd FPSOs commenced operations. Despite the yen remaining weak, there was no Car Carriers major change in the trend of automakers moving production overseas, and exports of vehicles from Japan declined. Although the division strengthened the volume of cross trades and import cargo by launching new services, proﬁ ts declined year on year. The rate increase on Asia to Europe /East Coast of South America did not take root, and the Company was unable to fully enjoy a rate increase for North America bound cargo due to a high proportion of year-long freight rate contracts already in effect. In addition, cargo volume from Europe/ North America to Asia stalled, and our lifting in Intra-Asia trade also declined due to port congestion. MOL strove to bolster its cost competitiveness mainly through the expansion of the G6 Alliance, the delivery of large vessels, the disposal of medium-sized vessels, and the rationalization in some North-South trades. However, due in part to losses on bunker price hedges, the loss widened year on year. 900 600 300 0 75 50 25 0 FY2014 Revenues ¥857.2 billion 2% Increase YoY Ordinary income ¥54.1billion 5% Decrease YoY 13/3 14/3 15/3 -25 ■ Revenues (left scale) ■ Ordinary income (loss) (right scale) 800 600 400 200 0 100 FY2014 75 50 25 0 Revenues ¥787.0 billion 10% Increase YoY Ordinary loss ¥(24.1) billion — 13/3 14/3 15/3 -25 ■ Revenues (left scale) ■ Ordinary income (loss) (right scale) As the modal shift accelerated, primarily driven by the short- age of truck drivers, cargo movements increased. The seg- ment also enhanced its ﬂ eet amid steady volumes of mainstay cargo such as steel. As a result, proﬁ ts expanded year on year. 60 40 20 0 13/3 ■ Revenues (left scale) ■ Ordinary income (loss) (right scale) 14/3 15/3 Daibiru Corporation, which is the core of the real estate business, sustained stable proﬁ ts. Operating results also remained ﬁ rm for cruise ships, tugboats and trading. The segment recorded stable proﬁ ts roughly level with the previ- ous ﬁ scal year. 120 90 60 30 0 13/3 14/3 15/3 ■ Revenues (left scale) ■ Ordinary income (loss) (right scale) 6 4 2 0 12 9 6 3 0 FY2014 Revenues ¥56.0 billion 1% Increase YoY Ordinary income ¥4.4 billion 100% Increase YoY FY2014 Revenues ¥108.3 billion 7% Decrease YoY Ordinary income ¥10.9 billion 2% Decrease YoY 36 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 36 15mol_英文0723入稿PDF.indd 36 2015/07/23 17:33 2015/07/23 17:33 Business Environment Highlights of the Year Dry Bulker Market (Spot Charter Rate/Capesize, TC Average) (Unit: US $/Day) 40,000 30,000 20,000 10,000 0 14/1 14/4 14/7 14/10 15/1 15/4 Source: MOL internal calculation based on TDS and others VLCC Market (World Scale) (AG - Japan) (WS) 90 60 30 0 14/1 14/4 14/7 14/10 15/1 15/4 WS for 2014 has been translated by the Flat Rate of 2015. Source: Researched by MOL Containership Market (CCFI) (Jan 1, 1998=1,000) Europe Trade U.S. West Coast Trade U.S. East Coast Trade 1,800 1,200 600 0 14/1 14/4 14/7 14/10 15/1 15/4 Source: SSE l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i Dry Bulkers Delivered three coal carriers with long-term contracts for domestic electric companies Tankers Established a joint venture with Viken Shipping (Norway) and embarked on a shuttle tanker business Launched ship management and seafarer training business in partnership with Synergy Group (India) Started pool operation in MR product tankers and large LPG tankers LNG Carriers/Offshore Businesses Signed new long-term contracts for 10 LNG carriers and one FPSO. Delivered the ﬁ rst vessel from the LNG carrier construction project in China Concluded a long-term contract for shipping liqueﬁ ed ethane to India using six very large ethane carriers—the ﬁ rst of their kind in the world Car Carriers Began transport service from Mexico to other NAFTA regions Expanded service for the G6 Alliance, Asia- North America West Coast and Transatlantic routes Began operations of the automated terminal on the North America West Coast Ordered six 20,000 TEU containerships MOL Ferry Co., Ltd. decided to launch two energy efﬁ cient, high-speed ferries on the Hokkaido route l C a p i t a l Delivered three new domestic transport vessels Daibiru acquired an ofﬁ ce building in Hanoi, its second in Vietnam Orders for Propeller Boss Cap Fins (PBCFs), which are devices to improve energy efﬁ ciency, reached 3,000 vessels Underlined words are explained in the Glossary on page 74. Annual Report 2015 37 15mol_英文0723入稿PDF.indd 37 15mol_英文0723入稿PDF.indd 37 2015/07/23 17:33 2015/07/23 17:33 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. 1,000 947 1,200 World Major Carriers’ Fleets (All Vessel Types) (Number of vessels) 0 200 400 600 800 68 MOL (Japan) NYK (Japan) COSCO (China) K Line (Japan) China Shipping (China) APM-Maersk (Denmark) Oldendorff (Germany) MSC (Switzerland) Swiss Marine (Switzerland) CMA-CGM (France) Fredriksen (Norway) Teekay (Canada) 0 20 40 60 80 100 120 (Million deadweight tons (DWT)) ■■ Number of vessels ■■ Million deadweight tons (DWT) Source: MOL internal estimation based on each companies’ published data, Clarkson and Alphaliner (March 2015) 40 47 60 80 43 10 100 World Major Carriers’ Revenue Portfolio by Segment (%) 0 20 MOL NYK K Line APM-Maersk COSCO NOL OOIL MISC Frontline Teekay Paciﬁ c Basin Golar LNG ■ Bulkships ■ Containerships and related business ■ Other businesses Source: MOL calculations based on each company’s ﬁ nancial statements and/or news. 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. COSCO’s containerships and related business includes revenue from Terminal business. 38 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 38 15mol_英文0723入稿PDF.indd 38 2015/07/23 17:33 2015/07/23 17:33 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i Dry Bulkers (Thousand deadweight tons) 0 10,000 20,000 30,000 40,000 50,000 NYK MOL Oldendorff K Line Swiss Marine COSCO MOL SCF NYK MISC Fredriksen Teekay Source: Companies’ published data and Clarkson (March 2015) Tankers (Thousand deadweight tons) Source: Companies’ published data and Clarkson (March 2015) LNG Carriers (Number of vessels) ■■ In operation ■■ On Order *Qatar Gas Transport Company Ltd. Source: MOL (March 2015) (Note) The numbers include the vessels which are owned by each company (wholly or par- tially) and the vessels for which vessel opera- tion is entrusted to each company. MOL NYK Nakilat(*) K Line Shell MISC Car Carriers (Number of vessels) Source: MOL (March 2015) Note: Excluding spot-chartered vessels Containerships (Thousand TEU) NYK MOL K Line EUKOR GLOVIS HOEGH Maersk MSC CMA-CGM Evergreen Hapag-Lloyd COSCO CSCL Hanjin MOL Hamburg-Sud NOL OOCL NYK Yang Ming K Line UASC Hyundai Source: MDS (April 2015) 36,217 0 0 0 5,000 10,000 15,000 20,000 16,664 25 50 75 67 100 25 92 40 80 120 160 116 0 600 1,200 1,800 2,400 3,000 577 l C a p i t a l Annual Report 2015 39 15mol_英文0723入稿PDF.indd 39 15mol_英文0723入稿PDF.indd 39 2015/07/23 17:33 2015/07/23 17:33 Overview of Operations Kenichi Nagata, Executive Vice President Fiscal 2014 in Review— The First Year of “STEER FOR 2020” The division experienced a year-on-year decline in proﬁ ts due to stagnation in the dry bulker market. Looking at the bigger pic- ture, however, even amid this difﬁ cult business environment we were able to sustain margins, which were underpinned by long- term, stable proﬁ ts. As for large iron ore and coking coal carriers, proﬁ ts exceeded those of the previous ﬁ scal year owing to a weaker yen, lower bunker prices and such operating techniques as slow steaming, all of which offset a deterioration in proﬁ tabili- ty due to the weak market. Steaming coal and wood chip carri- ers maintained consistent proﬁ tability on the back of medium- to Bulkships Dry Bulkers long-term contracts. On the other hand, small and medium-sized vessels of Panamax size or under, which have a relatively low per- centage of medium- to long-term contracts, posted a loss stem- ming from the stagnant market. Even for MOL’s highly cost-competitive ﬂ eet, which resulted from the Business Structural Reforms carried out in ﬁ scal 2012, the effects of the dormant market were formidable. As ﬁ scal 2014 began, the general consensus was that the dry bulker market would improve during the year as vessel supply tightened. The initial results were good, but shortly thereafter the market took a sharp dive. Even the boost at the beginning of autumn was short-lived. Chinese imports of iron ore remained ﬁ rm and its Australian exports reached a record high, but there were also negative factors such as sluggish Brazilian iron ore exports, which involve long transport distances, and decreased coal imports to China. In addition, freight derivatives, which cur- rently have a large impact on the physical market, weighed on the market, amplifying the pessimistic sentiment in contrast with early expectations of a market recovery. Outlook for Fiscal 2015 and Beyond The Baltic Dry Index recorded an all-time low in February 2015 and remains at historic lows. Even with a certain degree of mar- ket recovery expected as more vessels are scrapped, proﬁ ts in ﬁ s- cal 2015 will be under more pressure than in ﬁ scal 2014. Despite this, the division as a whole is expected to remain in the black, Consolidated Revenues Breakdown (FY2014) General Cargo Carrier/ Heavy Lifter 7% Steaming Coal Carrier 10% Wood Chip Carrier 10% General Bulk Carrier 28% Dry Bulker Fleet Table (Number of vessels) Standard DWT At the end of Mar.2014 At the end of Mar.2015 180,000 107 104 Vessel Type Capesize Panamax Handymax Small handy Steaming coal carriers 72,000 55,000 28,000 93,000 37 72 56 44 38 67 56 40 42 53 403 411 Iron Ore and Coking Coal Carrier 46% Use 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 43 Wood chips, soybean meal, etc. 55 Steel products, plants, etc. [Steaming Coal Carrier] HAKUTAKA Wood chip carriers 50,000 Others (Heavy lifter, General cargo carriers) Total 12,000 40 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 40 15mol_英文0723入稿PDF.indd 40 2015/07/23 17:33 2015/07/23 17:33 buoyed by stable proﬁ ts. Beyond ﬁ scal 2015, we will continue to expand long-term and stable proﬁ ts and reduce market exposure as outlined in “STEER FOR 2020.” To achieve an expansion in long-term and stable proﬁ ts amidst a harshly competitive environment, we will need to serve an indispensable role in our customers’ supply chain. The ﬁ rst key is maintaining an organizational structure that guarantees safe and dependable transportation. The second key is accurately perceiving customer needs to make the best proposal. While some shipping companies are outsourcing vessel operations and marine technical specialists, MOL’s organizational system provides fully integrated services encompassing sales and customer ser- vice, vessel operation, ship management and technical divisions. Our scale as a full-line marine transport group makes such an organization possible, and the ﬁ nance division, which procures funding for shipbuilding, provides yet another competitive advantage. MOL’s integrated organization also enables new buildings of vessels perfectly sized to match customer needs and proposals to make loading and unloading more efﬁ cient. For example, we recently developed a vessel size capable of efﬁ ciently transport- ing iron ore to shallow unloading ports, securing a long-term contract. In addition, a growing number of customers now con- sider low environmental burden an integral aspect of transport service quality. In response, we are developing newer, more advanced vessels that surpass current environmental regulations, spurring demand for new and replacement vessels. We are also working to reduce market exposure. We will accelerate the reduction of vessels without medium- to long- term contracts, especially those of small and medium-sized ves- sels of Panamax size or under. Small and medium-sized dry bulk carrier transport is a very ﬂ uid business ﬁ eld catering to a wide range of cargo where it is easy to charter vessels on the spot market. We strive to improve proﬁ tability by combining various types of cargo and optimizing operations, while carefully match- ing terms of procurement and freight contracts so that stable proﬁ ts are not negatively impacted under any market environ- ment. If MOL leverages the operational knowhow cultivated over its 130-year history, this will be possible. At their heart, ships are just tools. Our goal should not be to simply increase the number of ships, but rather to ensure we have the right number and types of ships to meet the needs of our customers. We will balance ﬂ exible transport via small and medium-sized vessels with long-term stable transport centering mainly on large vessels that play an integral role in the supply chain. We will do this while ratcheting up operational efﬁ ciency, including the use of slow steaming. In these ways, the dry bulker division will continue to make a sustainable contribution to the results of the entire MOL Group. Vessels Supply (Capesize) (Number of vessels) China: Dependence on Imported Iron Ore (Million tons) Underlined words are explained in the Glossary on page 74. 300 200 100 0 -100 2009 2010 2011 2012 2013 2014 (cid:2) Deliveries (cid:2) Demolitions YOY % Source: MOL internal calculation based on IHS-Fairplay 24% 16% 8% 0% -8% 1,600 1,200 800 400 80% 60% 40% 20% 0 2009 2010 2011 2012 2013 2014 (cid:2) Crude steel production (cid:2) Imported iron ore (cid:2) Domestic production Import dependency (%)* Source: MOL estimation *MOL internal calculation based on the premises of Fe content of 96% in pig iron and 62% in imported iron one 0% l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Iron Ore: Global Seaborne Trade by Country/Area (Million tons) Steaming Coal: Global Seaborne Trade by Country/Area (Million tons) 1,400 1,200 1,000 800 600 400 200 0 (cid:2) Others (cid:2) Europe (cid:2) Taiwan (cid:2) Korea (cid:2) Japan (cid:2) China 09 10 11 12 13 14 Import 13 14 Export 1,000 800 600 400 200 0 (cid:2) Others (cid:2) North America (cid:2) Europe (cid:2) Taiwan (cid:2) Korea (cid:2) Japan (cid:2) India (cid:2) China/ Hong Kong (cid:2) Others (cid:2) India (cid:2) Sweden (cid:2) Canada (cid:2) South Africa (cid:2) Brazil (cid:2) Australia Source: MOL internal calculation based on Tex Report, Clarkson, Trade Statistics Source: SSY (cid:2) Others (cid:2) FSU (cid:2) U.S. (cid:2) Columbia (cid:2) South Africa (cid:2) Australia (cid:2) Indonesia 09 10 11 12 13 14 14 Import Export Annual Report 2015 41 15mol_英文0723入稿PDF.indd 41 15mol_英文0723入稿PDF.indd 41 2015/07/23 17:33 2015/07/23 17:33 Overview of Operations Akio Mitsuta, Managing Executive Ofﬁ cer Fiscal 2014 in Review— The First Year of “STEER FOR 2020” Proﬁ tability improved greatly year on year. Not only did the tank- er division successfully secure ordinary income for the ﬁ rst time in six years, results surpassed targets for the ﬁ rst year of “STEER FOR 2020.” We operate a wide variety of vessel types: crude oil tankers, product tankers, LPG tankers, methanol tankers and chemical tankers. We have endeavored to improve our operating efﬁ ciency by setting up pools with other operators and worked to reduce bunker costs by slow steaming. With market condi- tions remaining favorable overall, those efforts paid off. Bulkships Tankers The market for very large crude carriers (VLCCs) and product tankers improved despite only a gradual increase in worldwide petroleum demand. This is because long-distance Indian and Chinese imports of West African crude oil grew faster than U.S. imports fell due to the shale revolution, as well as an underlying trend of improving supply and demand balance. As the price of crude fell, rising demand for oil reserves and increased operating rates at reﬁ neries also supported the market. In the LPG tanker market as well, favorable market conditions persisted as U.S. exports of LPG, a by-product of shale gas, increased throughout the year. The market for chemical tankers also remained ﬁ rm. Amid this upswing in the external environment, we are still aggres- sively pursuing initiatives to improve efﬁ ciency, including through the Clean Products Tankers Alliance, a new medium range (MR) product tanker pool arrangement established in ﬁ scal 2014. The division’s dual mission outlined in “STEER FOR 2020” is to reduce market exposure and accumulate long-term stable proﬁ ts. We made solid achievements toward both targets in ﬁ scal 2014. As for reducing market exposure, we carried out such strategic initiatives as taking advantage of favorable market conditions to ﬁ rm up earnings, in addition to selling and redelivering vessels to reduce the size of our ﬂ eet. As a result, we reduced MOL’s mar- ket exposure beyond the targets set at the beginning of the year. We also made progress in terms of accumulating long-term stable proﬁ ts. The most notable example is our entry into the Consolidated Revenues Breakdown (FY2014) Chemical Tanker 19% LPG Tanker 11% Methanol Tanker 10% Crude Oil Tanker 35% Product Tanker 25% Tanker Fleet Table (Number of vessels) At the end of Mar.2014 At the end of Mar.2015 Vessel type under pool management (at the end of March 2015) Crude oil tankers Product tankers*1 Chemical tankers*2 Including Methanol tankers LPG tankers 38 59 72 11 42 50 LR1 (70,000 DWT) MR (50,000 DWT) 75 Chemical tanker 9 VLGC (very large gas carrier, 80,000m3) Total 180 176 42 Mitsui O.S.K. Lines [Tanker] VLCC: MITAKE *1 Petroleum products: gasoline, naphtha, kerosene, jet fuel and gas oil, etc. *2 Chemical products: xylene, benzene, methanol and plant oil, etc. 15mol_英文0723入稿PDF.indd 42 15mol_英文0723入稿PDF.indd 42 2015/07/23 17:33 2015/07/23 17:33 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l shuttle tanker business by establishing a joint venture to operate ﬁ ve vessels with Norway-based Viken Shipping. This joint venture recorded a proﬁ t from the very ﬁ rst year. This is one of the expansions of our offshore businesses, which is integral to realiz- ing the “innovation of our business domain” outlined in the medium-term management plan. Taking advantage of this opportunity, we aim to accumulate stable proﬁ ts by deepening alliances with Viken in other businesses. Outlook for Fiscal 2015 and Beyond In ﬁ scal 2015, we expect to record a similar level of proﬁ t as the previous year. Although we forecast market conditions will remain ﬁ rm overall, we formulated our ﬁ nancial outlook based on rela- tively conservative assumptions regarding market conditions. The volume of crude oil transported by sea is not expected to increase greatly going forward, but ton-miles are likely to rise in tandem with the growing transport volume of West African and South American crude oil to China and India. In the medium and long term, demand for product tankers will likely remain ﬁ rm due to higher operational rates at reﬁ neries in oil-producing nations. We also expect rising demand for LPG and chemical tankers owing to the shale revolution. On the supply side, we foresee increased supply of new vessels in certain types of ships, which will in some ways increase downward pressure on market conditions over the medium term. Amid this environment, there is no change in our policy of aiming to reduce market exposure and accumulate long-term stable proﬁ ts. We aim to accumulate medium- to long-term con- tracts while reducing market exposure at appropriate times. We will simultaneously expand the pool arrangement to various types of vessels. As for large LPG tankers, we began pool arrangements in March 2015, preparing ourselves for a market correction due to an increase in the number of new ships to be supplied in the second half. While we continue to reduce our ﬂ eet, we make use of those pool arrangements to maintain our broad market presence and expand beneﬁ ts for our customers. As pool managers, we dispatch personnel and take responsibility for chartering and operations, further deepening our relation- ships with our customers. Leveraging the knowhow cultivated through our safe opera- tion initiatives, which is our core competence, we entered a new business ﬁ eld in October 2014 by establishing a joint-venture with Synergy Group in India that provides ship management and seafarer training. We decided to commercialize ship manage- ment and seafarer training, an area where we really differentiate ourselves from other companies, amid growing requirements for safe operations and better responses to environmental regula- tions. By providing our customers with value-added services, we will contribute to the sustainable growth of the Company. Vessels Supply (VLCC) (Number of vessels) Crude Oil: Global Seaborne Trade by Import Country/Area (Million tons) Underlined words are explained in the Glossary on page 74. 75 50 25 0 -25 2009 2010 2011 2012 2013 2014 15% 10% 5% 0% -5% 2,000 1,500 1,000 500 0 2009 2010 2011 2012 2013 2014 2015 (forecast) (cid:2) Deliveries (cid:2) Withdrawal YOY % Source: MOL internal calculations based on IHS-Fairplay (cid:2) China (cid:2) Japan (cid:2) Other Asia/Paciﬁ c (cid:2) Europe (cid:2) North America (cid:2) Others Source: Clarkson Global Seaborne Trade from Africa/Latin America to Asia(*) (*) Japan, China, Korea, India (Million tons) Petroleum Products: Global Seaborne Trade by Import Country/Area (Million tons) 200 150 100 50 0 2009 2010 2011 2012 2013 2014 1,200 900 600 300 0 2009 2010 2011 2012 2013 2014 2015 (forecast) (cid:2) ex. Africa (cid:2) ex. Latin America Source: MOL internal calculation based on Japan METI / China Customs / Korea Customs / India MCI (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 Annual Report 2015 43 15mol_英文0723入稿PDF.indd 43 15mol_英文0723入稿PDF.indd 43 2015/07/23 17:33 2015/07/23 17:33 Overview of Operations for 10 LNG carriers. This increased the size of our ﬂ eet to more than 90 ships when including outstanding orders. Including con- tracts under negotiation, expansion of the ﬂ eet to 100 ships is now in sight. We made signiﬁ cant progress this year toward reaching a 120 LNG carrier ﬂ eet, the target set out in “STEER FOR 2020.” Another major accomplishment was the signing of a long-term contract with India’s Reliance Industries Limited to operate and manage six very large ethane carriers—the ﬁ rst ves- sels of their kind in the world. In offshore businesses, our second FPSO commenced opera- tions, and we secured a new contract for another FPSO. The off- shore businesses, which we embarked on in ﬁ scal 2010, turned a proﬁ t in ﬁ scal 2014, and stand poised to contribute solid proﬁ ts going forward. Outlook for Fiscal 2015 and Beyond We believe proﬁ ts will rise in ﬁ scal 2015 based on the rollback of temporary expenses incurred in ﬁ scal 2014 and the accumu- lation of highly stable proﬁ ts with the delivery of new LNG carri- ers and FPSO. Our mission in “STEER FOR 2020” is to accumulate long-term and stable proﬁ ts. While we do need to slightly reprioritize proj- ects in light of the recent drop in oil prices, there is no signiﬁ cant change in the targeted ﬂ eet scale. Amid the considerations, the Takeshi Hashimoto, Managing Executive Ofﬁ cer Fiscal 2014 in Review— The First Year of “STEER FOR 2020” We made dynamic, forward-looking investments despite lower proﬁ ts year on year due to increased seafarer training expenses and scheduled dry-dockings, which led to reduced vessels’ oper- ating rates. In this sense, I think it’s safe to say this year was highly productive. Even seafarer training expenses can be regarded as a prior investment which is indispensable for future ﬂ eet expansion. In more concrete terms, we signed new long-term contracts Bulkships LNG Carriers/Offshore Businesses [Offshore Business] FPSO: Cidade de Angra dos Reis MV22 (photo: MODEC, INC.) [LNG Carrier] GDF SUEZ POINT FORTIN [Offshore Business] FSRU (CG image) (photo: ENGIE) 44 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 44 15mol_英文0723入稿PDF.indd 44 2015/07/23 17:33 2015/07/23 17:33 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i previously mentioned contract for very large ethane carriers is pivotal. Beyond contributing to long-term and stable proﬁ ts, this contract positions us to capture new ﬂ ows of cargo arising from the shale revolution as the United States increases its exports of ethane. We secured the ethane project by keeping our ﬁ nger on the pulse of customer needs through our global business net- work, while optimizing tangible and intangible assets to give shape to solutions. When it comes to transporting ethane, the properties of ethane resemble those of LNG, but it’s also neces- sary to have a thorough understanding of how to transport LPG. Our wealth of experience in both ﬁ elds and our renowned ser- vice quality were deciding factors in securing the deal. Going for- ward, we will leverage our ﬁ rst-mover advantage to secure future contracts capturing this great cargo growth potential. The negative impact of falling oil prices on the offshore busi- nesses is a concern that has been raised. While FPSO projects currently underway will proceed largely according to plan, we expect to delay or revise some new projects. On the other hand, as the price of energy drops, demand for projects may accelerate in countries reliant on energy imports. So we could see an increase in FSRU and similar projects that facilitate LNG import into emerging economies. Here, too, we should be able to lever- age our competitive advantage of having intimate knowledge of both the FPSO and FSRU ﬁ elds. I feel it’s especially noteworthy that in January 2015 the ﬁ rst of the LNG carriers we are building in China was delivered. This is MOL’s ﬁ rst project to build LNG carriers in China. We organized a shipbuilding supervision team to the shipyard. At its height, the team expanded to nearly 50 people. As a result, the ﬁ rst carrier was delivered without a hitch, solidifying the trust placed in us by oil majors and our Chinese partner companies. The trust earned through this project, along with the knowledge and cus- tomers gained, will surely play a signiﬁ cant role in future projects to transport LNG to the burgeoning market in China. We have the ﬁ ghting spirit to boldly take on challenging projects and the technical capabilities to see them through suc- cessfully, as evidenced by the Uruguayan FSRU project, and the Russian Yamal project to operate ice class LNG carriers in the Northern Sea Route. As the division responsible for accumulat- ing long-term and stable proﬁ ts—the core of “STEER FOR 2020”—we will achieve ﬁ rm growth going forward. We will accomplish this by offering our customers comprehensive full line service encompassing technical, ship management and busi- ness divisions. FY2014: Signed Long-Term Contracts LNG: Seaborne Trade (Million tons) Underlined words are explained in the Glossary on page 74. LNG Carriers Tokyo Gas ex.USA To Japan 2 vessels Mitsui & Co. ex.USA To Japan 3 vessels Yamal ex.Russia To China 3 vessels E.ON ex.USA To Europe and others 2 vessels Offshore Businesses Petrobras Brazil FPSO To start in FY 2017 To start in FY 2017 To start in FY 2017 To start in FY 2018 To start in FY 2017 LNG: Demand Forecast by Area 37% 37% 6% 6% 6% 6% 8% 8% 9% 9% 2014 2014 13% 13% 16% 16% 25% 12% 7% 4% 19% 2020 (forecast) 5% 17% 450 400 350 300 250 200 150 100 50 0 l C a p i t a l 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018* 2019* 2020* *forecast (cid:2) Japan (cid:2) Korea (cid:2) Europe (cid:2) America (cid:2) China (cid:2) India (cid:2) Taiwan (cid:2) Others Source: MOL internal calculation based on Wood Mackenzie (cid:2) Middle East (cid:2) Australia (cid:2) Other A/P (cid:2) North America (cid:2) Africa (cid:2) South America (cid:2) Europe Source: MOL internal calculation based on Wood Mackenzie Annual Report 2015 45 15mol_英文0723入稿PDF.indd 45 15mol_英文0723入稿PDF.indd 45 2015/07/23 17:34 2015/07/23 17:34 Overview of Operations Naotoshi Omoto, Managing Executive Ofﬁ cer Fiscal 2014 in Review— The First Year of “STEER FOR 2020” Global auto sales reached 87 million units in 2014, a record high for the fourth straight year. The number of vehicles transported by sea worldwide, however, dipped below 15 million units. Despite a weakening yen, the number of vehicles exported from Japan declined from 4.2 million to 4.0 million as Japanese auto- makers continued to shift manufacturing toward end markets, accelerating local production for local consumption. We ﬂ exibly responded to these offshoring trends while strengthening bonds with customers and increased the volume of cargo transported Bulkships Car Carriers outside of Japan. However, due mainly to higher than expected costs associated with setting up new routes (cross trades involv- ing Mexico), income fell from the previous ﬁ scal year. Nevertheless, the new routes from Mexico got on track in the second half of the year. In addition, we kept up efforts to minimize ballast voyages by pursuing an appropriate mix of cargo amid diversifying trade patterns. As a result, operating results were better than originally forecast at the beginning of the year. I believe we put up a good ﬁ ght for the ﬁ rst year of “STEER FOR 2020.” Mexico has grown remarkably in recent years as an export hub for global automakers with many Japanese, American and European automakers building and enlarging plants in the coun- try. MOL is ahead of the game in Mexican vehicle exports, estab- lishing the industry’s ﬁ rst direct route to Europe in the second half of the ﬁ scal year. We will further strengthen our sales bases in each such region for cross trades and create a ﬂ exible service network able to meet customer needs. Outlook for Fiscal 2015 and Beyond In ﬁ scal 2015, we predict a similar level of earnings as the previ- ous year, even though the number of vehicles exported from Japan is expected to decline. We will maintain earnings by bol- stering the volume of cross trades and imported cargo, including inter-Asian trade, Transatlantic trade, China-bound cargo from Next-generation Car Carriers “FLEXIE” (Depiction) [Car Carrier] NEPTUNE ACE 46 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 46 15mol_英文0723入稿PDF.indd 46 2015/07/23 17:34 2015/07/23 17:34 Europe, and cargo from Mexico. Global auto sales are forecast to exceed 90 million units in 2015, led by sales in emerging countries. The number of vehicles transported by sea worldwide is expected rise along with global sales. Simultaneously, the diversiﬁ cation of trade patterns will likely be accelerated, most notably in cross trades. To capitalize on these developments, MOL is expanding busi- ness under the keyword ﬂ exibility. As part of this effort, in April we ordered four next-generation car carriers, each with capaci- ty for 6,800 vehicles. The vessels are scheduled to be delivered beginning in 2017. The structure of the hold has been greatly redesigned. The number of liftable decks with adjustable height has increased from two to six, providing the advantage of being able to ﬂ exibly respond to various vehicle heights. Another advantage of these vessels is that while the carrying capacity has increased to 6,800 vehicles, the size of the vessel is nearly the same as the standard vessel size of the 6,400 vehicle car carrier, ensuring high usability in various sea lanes and ports across the globe. Eyeing the expansion of the Panama Canal, some car carrier operators have placed orders for vessels with carrying capacity for 7,500 to 8,000 vehicles. MOL has seen beyond this trend and has instead been focusing on 6,400 vehicle capacity vessels to enhance its ﬂ eet. We reached this decision after considering the shipping patterns of our customers and physical port restrictions, determining that we could ﬂ exibly meet customer needs by hav- ing a uniform size vessel ﬂ eet compatible with various sea lanes and ports around the world. This is another strength of MOL’s car carrier ﬂ eet, and the new orders were placed based on this poli- cy. MOL has named the new ships the FLEXIE series after the word ﬂ exibility. This represents the ﬂ exibility of the ships to use space effectively and load various types of vehicles with their six liftable decks as well as the business style of the Company to ﬂ exibly respond to diversifying customer needs. We will continue working to improve proﬁ tability by mini- mizing ballast voyages in response to changes in trade and pur- suing synergies with the Group company Nissan Motor Car Carrier Co., Ltd. In July 2015, we united the MOL car carrier network under the new brand MOL AUTO CARRIER EXPRESS (MOL ACE) to strengthen our business on a global scale. Overseas bases are making better use of local talent and strengthening sales for export cargo. Under the new brand MOL ACE, we will leverage our ﬂ exibility to respond to the changing business environment while continuing to improve proﬁ tability and customer satisfaction. Main Routes Global Car Seaborne Trade (Thousand units) (excluding CKD) Underlined words are explained in the Glossary on page 74. 16,000 12,000 8,000 4,000 0 2009 2010 2011 2012 2013 2014 (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. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Car Export from Japan by Destination (Thousand units) (excluding CKD) Car Export from Emerging Countries (Thousand units) 6,000 4,500 3,000 1,500 0 2009 2010 2011 2012 2013 2014 6,000 4,000 2,000 0 2009 2010 2011 2012 2013 2014 (cid:2) North America (cid:2) Europe (cid:2) Middle East (cid:2) Oceania (cid:2) Asia (cid:2) LatinAmerica (cid:2) Africa Source: MOL internal calculation based on Trade Statistics of Japan (MOF) (cid:2) ex. Thailand (cid:2) ex. China (cid:2) ex. India (cid:2) ex. Mexico (cid:2) ex. South Africa Source: MOL internal estimation based on FOURIN data, etc. Annual Report 2015 47 15mol_英文0723入稿PDF.indd 47 15mol_英文0723入稿PDF.indd 47 2015/07/23 17:34 2015/07/23 17:34 Overview of Operations Akihiko Ono, Managing Executive Ofﬁ cer Fiscal 2014 in Review— The First Year of “STEER FOR 2020” At the beginning of ﬁ scal 2014, the containership business sought to reverse the ¥14.5 billion loss of ﬁ scal 2013 by posting a proﬁ t of ¥2.0 billion. Unfortunately, the loss widened to ¥24.1 billion despite successfully carrying out many of the measures to improve proﬁ tability outlined at the beginning of the year. For example, the delivery of large vessels, disposal of small and medium-sized vessels, the expansion of the G6 Alliance, and slow steaming went largely according to plan. On the other hand, the automation of our container terminal in Los Angeles was delayed from July to November. Containerships What really knocked us off course was a downswing in gross margins due to falling freight rates and rising costs. With ongo- ing deliveries of large containerships for Asia-Europe and other East-West routes, we assumed at the beginning of the year there would be a decline in our average freight rates, but the actual decline was worse than predicted. Freight rate increases could not gain traction, especially for Asia-Europe trade and Asia-South America East Coast trade, the latter having suffered stagnant cargo volumes. Meanwhile the volume of inbound cargo to Asia from North America and Europe could not keep pace with the increase in outbound cargo from Asia, which weakened the mar- ket. The stagnant inbound cargo volumes also put pressure on proﬁ tability by lowering average slot utilization rates and increas- ing costs due to the return of empty containers. This was exacer- bated by port congestion amid strained labor negotiations at U.S. West Coast ports. These factors, along with the congestion in Manila and other Asian ports, lowered slot utilization rates and raised costs. Nevertheless, amid this harsh environment, some container- ship companies improved their proﬁ tability and achieved proﬁ ts as bunker prices plunged with lower crude oil prices from the beginning of autumn. MOL, however, incurred a signiﬁ cant loss on bunker price hedges placed at the beginning of the year and could not fully beneﬁ t from the lower prices. Had it not been for this loss, we would have turned a proﬁ t in the fourth quarter of ﬁ scal 2014. Compared with other companies, we were also neg- Revenue Breakdown by Trade (FY2014) Intra-Asia Trade 19% North-South Trade 11% Europe Trade 30% Main Routes North America Trade 40% [Containership] MOL BRAVO (cid:3) Container Terminal Business (cid:2) North America Trade (cid:2) Europe Trade (cid:2) North-South Trade (cid:2) Intra-Asia Trade 48 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 48 15mol_英文0723入稿PDF.indd 48 2015/07/23 17:34 2015/07/23 17:34 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i atively impacted by our large share of trade from Asia to South America, especially Brazil, which stagnated due in part to falling natural resource prices. Another factor was our ﬂ eet’s relatively high number of small and medium-sized vessels, which are rath- er expensive at current charter market rates. Outlook for Fiscal 2015 and Beyond The factors that prevented our anticipated return to proﬁ tability can be broadly categorized into temporary factors and structural factors. Together, these knocked us off course, both compared to our plan and our competitors. The conclusion of the temporary factors and the abatement of the structural factors (especially those unique to MOL), will allow positive momentum, enabling our return to proﬁ tability. This will be underpinned by the accu- mulation of other positive factors. The loss on bunker hedges is one such temporary factor des- tined to end. Coupled with the positive effects of lower average bunker prices throughout the year, we should be able to improve our performance by around ¥40.0 billion compared with the pre- vious year. In addition, the congestion at U.S. West Coast ports disappeared at the end of May. As for freight rates, we foresee a year-on-year decline for the average of all routes as it will likely take more time for the struc- tural supply-demand balance of vessels to improve. To counteract this, we need to successfully carry out our unique cost cutting measures, including initiatives aimed at allaying negative struc- tural factors. First we will rationalize unproﬁ table routes, begin- ning by launching new joint service with Maersk and MSC for the Asia-South America East Coast route in July. Second we will ramp up the disposal of small and medium-sized vessels. This includes the redelivery of vessels to their shipowners before the expiry of charter contracts. In addition to the improvement in the proﬁ tability of vessel operations, the automated terminal in Los Angeles started full operations at the end of the previous year after a temporary delay, and is now expected to contribute to proﬁ tability. All things considered, we are on course to achieve a proﬁ t of ¥5.0 billion in ﬁ scal 2015. To further improve proﬁ tability going forward, we ordered six containerships of 20,000 TEU in March 2015. These vessels will succeed the 14,000 TEU vessels that were chartered to buy us time until we could determine the optimum vessel size for replacements. Considering the limits of the Suez Canal, the 20,000 TEU vessel is the largest and most efﬁ cient possible with current shipbuilding technology. With delivery of the vessels slat- ed for 2017, we expect a large improvement in proﬁ tability. Even in the container terminal business, we will accumulate stable proﬁ ts by expanding the automated area of our terminal in the U.S. and beginning the operation of new terminals in Rotterdam Port and Vietnam’s Hai Phong Port. We are deter- mined to transform the containerships business into one that can generate sustainable proﬁ ts. Global Containership Capacity by TEU Size Range (Thousand TEU) 20,000 15,000 10,000 5,000 0 2009 2010 2011 2012 2013 2014 20% 15% 10% 5% 0% Others 2% O3 15% 2M 16% (cid:2) 14,000TEU~ (cid:2) 11,000-13,999TEU (cid:2) 8,000-10,999TEU (cid:2) 5,100-7,999TEU (cid:2) 4,300-5,099TEU (cid:2) ~4,299TEU YOY % Source: MOL internal calculations based on Alphaliner / IHS-Fairplay Source: MDS Share by Major Carrier Alliance North America Routes Europe Routes Others 2% G6 18% O3 22% CKYHE 35% G6 32% 2M 35% CKYHE 23% l C a p i t a l Asia-North America Container Trade Cargo Movements (Million TEU) (Excluding Canada cargo) Asia-Europe Container Trade Cargo Movements (Million TEU) (Including Mediterranean cargo) 15 10 5 0 2009 2010 2011 2012 2013 2014 (cid:2) Outbound (cid:2) Inbound Source: Piers/JoC etc 15 10 5 0 View a video introducing the automated terminal in L.A. 2009 2010 2011 2012 2013 2014 (cid:2) Outbound (cid:2) Inbound Source: Drewry Annual Report 2015 49 15mol_英文0723入稿PDF.indd 49 15mol_英文0723入稿PDF.indd 49 2015/07/23 17:34 2015/07/23 17:34 Overview of Operations Ferry & Domestic Transport Hirokazu Hatta, Managing Executive Ofﬁ cer Fiscal 2014 in Review— The First Year of “STEER FOR 2020” The ferry & domestic transport segment comprises the ferry busi- ness, which transports passengers, automobiles and trucks, and the domestic transport business, which transports cement, heavy oil, steel, coal, salt and other cargoes. In ﬁ scal 2014, we recorded ¥4.4 billion in ordinary income, double that of the previous year. In the ferry business, a shortage of truck drivers helped accel- erate a modal shift in long distance transport from inland trans- port to ferries. Amid this shift, we have worked hard to meet the increase in transport demand. We also strove to unearth new demand in passenger transport. To this end, we worked to raise brand awareness by bolstering advertising efforts while offering products designed around the fun o f marine travel such as a project, recognized with an award from the Japan Tourism Agency, to promote voyages among young people. In the domestic transport business, while cargo ﬂ ows remain steady for steel products and other mainstay cargo, we seized the opportune time to launch three new vessels, increasing our loading volume. With declining bunker prices providing a tail- wind, our sales efforts and continual cost reductions bore fruit. Outlook for Fiscal 2015 and Beyond In ﬁ scal 2015, ordinary income is projected to rise to ¥6.0 billion as cargo transport volumes increase and bunker prices decline. Looking toward the Tokyo 2020 Olympic and Paralympic Games, demand for domestic transport, including the shipment of materials for renovating infrastructure, is likely to experience ﬁ rm growth. Amid an aging pool of truck drivers and enforce- ment of legitimate labor management, the shortage of truck drivers will only worsen. Considering this, we do not expect a reversal of the modal shift to ferries, which are superior in terms of cost, safety and environmental impact. To seize this opportunity, we decided to launch two new ves- sels in the ferry business on the Eastern Japan route. The vessels are scheduled to be delivered in 2017. Both vessels are energy- efﬁ cient ships with improved fuel efﬁ ciency, and are optimized to raise operational speed to provide more convenient schedules for customers. The passenger rooms are also being upgraded. We are trying to capture stable demand for manned truck transport, which can collect and deliver the small-lot cargoes of couriers and convenience stores, demand for which is expected to grow in the future. We are also working to shore up passenger demand by strengthening tie-ups with rail and bus companies. In the domestic transport business, we are pursuing synergis- tic effects with our overseas shipping business. In ﬁ scal 2014, we launched two bulk carriers much larger in size than our other domestic bulk carriers. One major aim is to expand business by leveraging the total power of the MOL Group, namely its rela- tionships of trust with customers fostered in the overseas ship- ping business. We aim to secure long-term contracts in the future and will help expand stable proﬁ ts. [Ferry] SUNFLOWER GOLD 50 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 50 15mol_英文0723入稿PDF.indd 50 2015/07/23 17:34 2015/07/23 17:34 Associated Businesses Hirokazu Hatta, Managing Executive Ofﬁ cer Fiscal 2014 in Review— The First Year of “STEER FOR 2020” 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 MOL’s stable proﬁ ts. Ordinary income for ﬁ scal 2014 was ¥10.9 billion, staying at roughly the same level as the previous year. Daibiru has been expanding the ofﬁ ce leasing business, particularly in central Tokyo and Osaka. The ofﬁ ce rental market in the Tokyo area is showing signs of improvement, and Daibiru strove to differenti- ate itself from its peers through strong customer relations, which is a core competence. As a result, Daibiru sustained steady revenues. The cruise ship business narrowed its loss thanks to higher numbers of passengers amid an active domestic market stimulat- ed by increased calls to Japanese ports by foreign luxury cruise ships. The trading business broke the sales record for Propeller Boss Cap Fins (PBCFs), a device to improve energy-efﬁ ciency. The tugboat business remained ﬁ rm. Outlook for Fiscal 2015 and Beyond In ﬁ scal 2015, ordinary income is expected to decline to ¥10.0 billion primarily because of increased depreciation expenses in the real estate business for newly constructed buildings. Nevertheless, we will aim to improve our bottom line by further reducing costs. Daibiru oversaw the completion of the Shin-Daibiru Building in Osaka in March 2015, and the number of tenant contracts has surpassed initial expectations. Also in March, Daibiru acquired the property neighboring the Akihabara Daibiru Building in front of Akihabara Station. This is projected to further enhance the value of Daibiru’s portfolio over the long term. Overseas, Daibiru acquired its second building in Vietnam in December 2014—the CornerStone Building in Hanoi—following its entry into Ho Chi Minh City. Daibiru embarked on a new medium-term manage- ment 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 proﬁ ts by approximately 20%, thus allow- ing the company to continue making steady contributions to MOL Group’s stable proﬁ ts. In the cruise ship business, large foreign cruise ships have been making inroads into the Japanese market, but they have also been raising awareness of cruises in Japan. Seizing this opportunity, we have worked to increase the number of passen- gers for the NIPPON MARU by differentiating our business through meticulous, high-class service with the aim of improving our proﬁ tability. The tugboat business, serving at the very front of shipping, will continue to support the reinforcement of the Group’s safe operating structure as outlined in the medium-term management plan. The tugboat business continues to leverage the MOL Group’s comprehensive strengths to capture growing demand not only in Japan but also Southeast Asia. It is also uncovering growth opportunities in related ﬁ elds of offshore business in line with the medium-term management plan’s strat- egy of realizing innovation throughout our business domain. The trading business is relentlessly pursuing research to fur- ther enhance the performance of PBCFs. Going forward, the trading business will expand proﬁ ts mainly by selling equipment to raise vessels’ environmental and safety performance. As a technology trading company, this business will also wield its product development capabilities to expand sales channels to include overseas shipping and ship-management companies. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a M n a u n f u a f a c c t t u u r r e e d d C C a a p i p t a i l t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l CornerStone Building (Vietnam) Annual Report 2015 51 15mol_英文0723入稿_初戻.indd 51 15mol_英文0723入稿_初戻.indd 51 2015/07/28 17:25 2015/07/28 17:25 Feature II: Training LNG Carrier Seafarers Global Demand Expands for Natural Gas amid Shortage of LNG Carrier Seafarers Demand is rapidly expanding for natural gas as an important green energy source to support our 21st century lives. Development projects are currently underway all around the world. Natural gas can be transported inland by pipelines or offshore by spe- cialized vessels in the form of liqueﬁ ed natural gas (LNG), the transport method for 30% of traded nat- ural gas. By 2020, transport demand for LNG is expected to increase by 50% from current levels. To support this demand, it is calculated that the num- ber of LNG carriers worldwide will need to increase from less than 400 vessels at present to around 550. Although this is a major business opportunity for marine transport companies, there are concerns about a severe shortage of LNG carrier seafarers in the near future for the marine transport industry as a whole given the rapid rise in transport demand. LNG is transported at a constant minus 162 degrees Celsius with a portion of it continuously vaporizing. Seafarers need to possess a high degree Investing in Human Capital to Implement “STEER FOR 2020” 52 Mitsui O.S.K. Lines 52 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 52 15mol_英文0723入稿PDF.indd 52 2015/07/23 17:34 2015/07/23 17:34 of technical skill to maintain the correct temperature and pressure inside the tanks of LNG carriers. To safely operate these LNG carriers, it is crucial to secure and train seafarers who possess specialized knowledge and experience. An essential part of the stable energy supply chain depends on LNG carriers and the seafarers who operate them. With the world’s largest ﬂ eet of LNG carriers, MOL is the company best positioned to fulﬁ ll this social duty and respond to rising demand. Under “STEER FOR 2020,” the midterm management plan currently being carried out, MOL is devoting attention to the LNG carrier business as a pillar of future growth strategies and is promoting concrete initiatives to train high-quality seafarers. MOL’s Initiatives Focus on LNG Carriers and Training Seafarers In line with the strategies outlined in “STEER FOR 2020,” MOL is actively investing in building new LNG carriers while stably acquiring long-term LNG trans- port contracts. Of the less than 400 LNG carriers cur- rently in operation around the world, 67 are fully or partially owned or operated by MOL. Including ships under construction, MOL boasts 92 LNG carriers as of March 31, 2015. This ﬂ eet is already the world’s larg- est and will expand to 120 vessels by March 31, 2020. Our plan is to solidify our dominant rank as a lead- ing company. The recruitment and training of LNG carrier seafarers are indispensable to implementing this plan. Succeeding in this effort is the key for MOL to seize solving social challenges as an opportunity to grow. MOL has therefore been actively training LNG seafarers. We operate eight training centers in six countries worldwide. We also implement the Cadet Actual Deployment for Education with Tutorial (CADET) Training, wherein hands-on training is con- ducted aboard operated vessels. In addition to sea- farers from Europe, a traditional source of LNG carrier seafarers, there are already 12 Indonesians aboard our LNG carriers as captains and chief engi- neers. MOL has a deep, long-lasting bond with Indonesia, which was the loading country when the Company entered the LNG carrier business in 1983. Another method of securing LNG carrier seafar- ers is to provide specialized training to seafarers who already possess a wealth of experience on tankers or other vessel types, remaking them into LNG carrier seafarers. This is a strategy that the MOL Group is specially placed to carry out, owing to its many skilled seafarers and the world’s largest diversiﬁ ed ﬂ eet. Long-term practical training aboard LNG carriers is indispensable in both cases. In order to deploy trainees to existing LNG carriers, MOL is investing around ¥2.0 billion each year on LNG carrier seafar- er training expenses for the duration of “STEER FOR 2020.” We believe this is a necessary forward- looking investment to ensure the sustainable growth of MOL. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H H u u m m a a n n C C a a p p i t i a t a l l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l 15mol_英文0723入稿PDF.indd 53 15mol_英文0723入稿PDF.indd 53 2015/07/23 17:34 2015/07/23 17:34 Annual Report 2015 53 Feature II: Training LNG Carrier Seafarers MOL operates MOL Training centers in eight locations spanning six countries and conducts a wide variety of training from lectures for learning theories to practical training using simulators and on operated vessels. The MOL Training Centers, where excellent seafarers around the world are trained MOLTC (Montenegro) MOLTC (MSU-Russia) MOLTC (Japan) MOLMC*(Japan) *MOL Marine MOLTC (MANET-India) MOLTC (MOL Mi-India) MOLTC (STIP-Indonesia) MOLTC (Philippines) Vessel Operation Simulator MOL employs an advanced onshore simulator, which perfectly rec- reates the bridge of a large vessel in operation. The highly func- tional vessel operation simulator is a cylinder 11 meters in diameter and provides a panoramic view of the ocean. The steering stand, control panel and radar used on the bridge are genuine articles. This system is run by about 50 high-speed computers, whose rapid processing power is capable of recreating any marine environment, and the 15 projectors on the ceiling generate life-like video. The captain and numerous seafarers, including deck ofﬁ cers, partici- pate in training, polishing their technical skills and improving team- work. In addition, this simulator is not only used for seafarer training, it is also used in our consulting business with municipal governments and port authorities mainly to design ports. In plan- ning ports, we evaluate the safety of operating vessels by adjusting the conditions in the port, including currents, waves and water depth. Before large bridges or other construction projects begin, we analyze the planned structure’s proﬁ le and the blind spots or hazards that might result. This simulator features concentrated real-life experiences of seafarers. Not only does this smart simulator improve the skills of Group employees, it accumulates data while providing a wide range of services, turning the skills and knowhow cultivated into effective intellectual assets. Training Simulator MESSAGE Captain Andy Dwi Putranto Message for the Captain I decided to become a seafarer when I was in Elementary school. We call Indonesia “JAMRUD KATULISTIWA” (“Equatorial Emerald”) because the islands lie like a necklace near the equator. I thought it would be beau- tiful to connect all the islands with a very long bridge, but my teacher said that reaching other islands depended on using a “seaplane” or airplane. Since it could accommodate so many things and pas- sengers in one trip, I thought the seaplane was more effective. I asked my teacher whether the seaplane could be “driven” by me. She smiled and said, “Of course, you can, but you have to study hard & enter Maritime School.” I was promoted to Captain in 2012, and my childhood dream came true. It was an amazing coincidence that the vessel’s name was “Dwiputra,” same as my name. We have a good Training Center in STIP Jakarta, namely the MOL Training Center (MTC). We’re proud of this because MOL is one of only a few shipping companies which have a Training Center in Indonesia. MOL’s education and training programs are very useful because they always provide good materials such as training vid- eos, books and magazines relating to ship safety, personal safety, the marine environment and crew orientation. Since being promoted to Captain, I have been focusing on the safe behavior, health, knowledge and prosperity of my crew. A skilled crew is a big investment/asset of a shipping company. If the crew are happy and comfortable working on board, I believe that they will perform well, which is important for not only the safety of the ship but also the Company. Safe ship operations and the long life of the ship can only be maintained by a good crew. For LNG vessels, expert and skillful seafarers are absolutely needed considering the nature of the cargo. Safe behavior on board is not only mandatory, it is our culture during life at sea. If safety on board is not implemented properly, it will negatively impact ship operation. On the other hand, fatal accidents, property loss, and environmental pollution can be avoided if safety is carved into the heart of every seafarer. 54 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 54 15mol_英文0723入稿PDF.indd 54 2015/07/23 17:34 2015/07/23 17:34 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H H u u m m a a n n C C a a p p i t i a t a l l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l i F n a n c a i l C a p i t a l Safe Operation Safe operation is of the utmost importance and lies at the heart of MOL’s management. In the 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 imple- mentation 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 reorganized the division responsible for safe operation in February 2015. This move was aimed at integrating and horizon- tally disseminating information among different types of vessels while maintaining a structure that focuses on the front-line opera- tion of every vessel type, reinforcing company-wide operational safety measures, and developing an organizational structure that focuses all the authority necessary to be responsible for the entire Group’s safe vessel operations into the Marine Safety Division. Under the new structure, all land-based and ocean-going person- nel are united to strive to maximize operating safety, with the goal of becoming the world leader in safe operation. Organizational Structure Supporting Safe Operation Executive Committee Operational Safety Committee Safety Assurance Committee Ship Standard Speciﬁ cation Committee Manning Committee Safety Operations Headquarters • Marine Safety Division • Ship management coordinating divisions • Marine technical teams supporting vessel operations for business divisions • In-house ship management companies leading work- ing-level ship management * *MOL Ship Management Co., Ltd., and MOL LNG Transport Co., Ltd. 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, includ- ing an experienced MOL captain, and supports the safe navigation of MOL- operated vessels around the clock 365 days a year. The center monitors the position and movement of more than 900 MOL Group-afﬁ liated vessels in real time, providing assis- tance 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 supporting the safe Safety Operation Supporting Center (SOSC) 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 num- ber of incidents involving adverse weather or emergency entry*1. For detailed SOSC information, see the Safety, Environmental and Social Report. Evacuation drill on board Accident Response Drills MOL regularly con- ducts accident response drills on vessels while at sea. These drills simulate various situations such as an on- board ﬁ re or water immersion, or act of piracy or terror- ism, so that seafar- ers can respond swiftly and appropriately in an emergency. Head Ofﬁ ce conducts serious marine incident 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, representatives of relevant departments and ship manage- ment companies, and vessels. In October 2014, we conducted an emergency response drill based on the premise of a collision of our product tanker while underway in Galveston Bay. In May 2015, we conducted an emergency response drill based on the premise of our cruise ship colliding with a containership while under way on the Kanmon passage. Furthermore, MOL Group companies that operate ferries and cruise ships conduct emergency response drills, including evacuation guidance, on a regular basis, as they put the highest priority on ensuring customer safety in an emergency. Safe Operation Measures Efforts to ensure safe operation will never end. Coupled with the revision and continuation of policies already in place to strength- en safe operation, MOL will thoroughly implement 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, includ- ing the Four Zeroes. 1. Four Zeroes (an unblemished record in terms of serious marine incidents, oil pollution, fatal accidents and cargo damage) 2. LTIF *2 (Lost Time Injury Frequency): 0.25 or below 3. Operational stoppage time *3: 24 hours/ship or below 4. Operational stoppage accident rate *4: 1.0/ship or below In ﬁ scal 2014, MOL worked on three important targets: (1) eradicate work-related accidents causing death, and reduce work-related accidents causing injury, Annual Report 2015 55 15mol_英文0723入稿PDF.indd 55 15mol_英文0723入稿PDF.indd 55 2015/07/23 17:34 2015/07/23 17:34 Safe Operation (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 implementing and raising aware- ness 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 consid- eration to improving teamwork, safety awareness, awareness of relevant parties and vessel management quality. We will continue to adapt our accident prevention system by making improve- ments related to both seafarer training and ship facilities to break the chain of errors in which minor factors combine and ultimate- ly lead to major maritime accidents. In terms of seafarer training, we are thoroughly implementing drills prior to boarding and supervising the instruction of less expe- rienced seafarers. We are also enhancing land-based education and training curriculum and programs such as “Hazard experi- ence” training sessions and BRM drills*5. These measures are geared towards enhancing the ability of seafarers to perceive dan- ger and promoting teamwork. In addition, we are working to raise safety awareness among seafarers by collecting information from each vessel in operation on examples of incidents and problems as well as close calls*6 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 information 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 problems as if they were each wholly responsible as part of efforts to prevent accidents. Cooperation for Safe Operation The MOL Group works together with vessels, shipowners, and ship management companies to work toward achieving the world’s highest level of safe operation of all owned and char- tered vessels by sharing safety-related information. The Company regularly broadcasts “Safety Alerts”— information pertaining to safe operation, including work-related incidents involving casual- ties—to every vessel. MOL conducts “Safety Operation Meetings” and “Safety Campaigns” involving vessels, shipown- ers, ship management companies and even the sales division to deepen understanding of its safety standards and to discuss safe- ty 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, communicating with the vessel, shipowner and ship management company in the process. For detailed safe operation, see the Safety, Environmental and Social Report. 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 AS *** 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 seafarer education and training was recognized 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). Lost Time Injury Frequency (LTIF) 1.8 1.5 1.2 0.9 0.6 0.3 0 2014 average for all industries: (1.66) MOL target: 0.25 or below 0.31 0.24 0.38 0.44 0.30 2010 2011 2012 2013 2014 (Fiscal year) 56 Mitsui O.S.K. Lines Operational Stoppage Accidents Average Time and Frequency (Hour/ship) (Number of accidents/ship) 40 30 20 10 0 Average operational stoppage time target: 24 hours or below 28.45 25.04 22.96 19.82 19.04 0.64 0.66 0.52 2.0 1.5 1.0 0.40 0.51 0.5 Operational stoppage accident rate target: 1.00 or below 2010 2011 2012 2013 2014 0 (Fiscal year) Average operational stoppage time (hour/ship) (left scale) Operational stoppage accident rate (accidents/ship) (right scale) Glossary *1 Emergency entry: Entering foreign territory due to severe weather on the sea, serious hull or engine distress, or the injury of a crew member. *2 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 (2014) was 1.66; for shipping industry, 1.33; for transportation equipment manufacturing industry, 0.51. (Source: 2014 Survey on Industrial Accidents issued by the Ministry of Health, Labour and Welfare) *3 Operational stoppage time: Expresses the amount of ship operational stoppage time due to an accident per ship per year. *4 Operational stoppage accident rate: Expresses the number of accidents that result in ship operational stoppage per ship per year. *5 Bridge resource management drill: Simulating an inci- dent on a vessel operation simulator to enable seafarers to acquire response techniques. It includes MOL’s original programs. *6 Close calls: Risky incidents that came very close to causing a more serious accident. 15mol_英文0723入稿PDF.indd 56 15mol_英文0723入稿PDF.indd 56 2015/07/23 17:34 2015/07/23 17:34 Management Foundation Underpinning MOL: Corporate Governance and Corporate Social Responsibility Contents 58 Board Of Directors, Corporate Auditors and Executive Ofﬁ cers 60 Outside Director and Corporate Auditor Roundtable Discussion 64 Corporate Governance 68 Risk Management 70 Corporate Social Responsibility (CSR) l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l Annual Report 2015 57 15mol_英文0723入稿PDF.indd 57 15mol_英文0723入稿PDF.indd 57 2015/07/23 17:34 2015/07/23 17:34 Board of Directors, Corporate Auditors and Executive Ofﬁ cers (As of June 23, 2015) Board of Directors 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 Jun. 2015 Representative Director, Chairman of the Board, Chairman Executive Ofﬁ cer (current) Apr. 1979 Joined Mitsui O.S.K. Lines, Ltd Jun. 2005 General Manager of Coal and Iron Ore Carrier Division Jun. 2007 Executive Ofﬁ cer, General Manager of Coal and Iron Ore Carrier Division Jun. 2009 Managing Executive Ofﬁ cer Jun. 2013 Senior Managing Executive Ofﬁ cer Jun. 2015 Representative Director, Executive Vice President Executive Ofﬁ cer (current) Junichiro Ikeda Representative Director Born 1956 Kenichi Nagata Representative Director Born 1956 Masahiro Tanabe Director Born 1957 Apr. 1981 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2006 General Manager of Corporate Planning Division Jun. 2008 Executive Ofﬁ cer, General Manager of Corporate Planning Division Jun. 2010 Executive Ofﬁ cer Jun. 2011 Managing Executive Ofﬁ cer Jun. 2014 Director, Managing Executive Ofﬁ cer Jun. 2015 Director, Senior Managing Executive Ofﬁ cer (current) Takeshi Hashimoto Director Born 1957 Shizuo Takahashi Director Born 1959 Independent Ofﬁ cers 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 Jun. 2015 Representative Director, President, Chief Executive Ofﬁ cer (current) 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 Jun. 2015 Director, Senior Managing Executive Ofﬁ cer (current) Apr. 1982 Joined Mitsui O.S.K. Lines, Ltd Jun. 2008 General Manager of LNG Carrier Division Jun. 2009 Executive Ofﬁ cer, General Manager of LNG Carrier Division Jun. 2011 Executive Ofﬁ cer Jun. 2012 Managing Executive Ofﬁ cer Jun. 2015 Director, Managing Executive Ofﬁ cer (current) 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) Sept. 2014 Senior Advisor of Integral Corporation (current) Takeshi Komura Outside Director Born 1939 Masayuki Matsushima Born 1945 Outside Director Jun. 2014 Director of Mitsui O.S.K. Lines, Ltd. (current) Jun. 2014 Advisor to the Board of Toshiba Corporation (current) Atsutoshi Nishida Outside Director Born 1943 58 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 58 15mol_英文0723入稿PDF.indd 58 2015/07/23 17:34 2015/07/23 17:34 Corporate Auditors Takehiko Ota Corporate Auditor Born 1960 Takashi Nakashima Corporate Auditor Born 1959 Apr. 1984 Joined Mitsui O.S.K. Lines, Apr. 1982 Joined Mitsui O.S.K. Lines, Ltd. Ltd. Jun. 2008 General Manager of Jun. 2009 General Manager of Investor Relations Ofﬁ ce Research Ofﬁ ce Jun. 2013 Corporate Auditor of Jun. 2011 General Manager of Mitsui O.S.K. Lines, Ltd. (current) General Affairs Division Jun. 2015 Corporate Auditor of Mitsui O.S.K. Lines, Ltd. (current) Independent Ofﬁ cers Hideki Yamashita Outside Corporate Auditor Born 1954 Hiroyuki Itami Outside Corporate Auditor Born 1945 Apr. 1982 Attorney-at-Law (current) Apr. 1985 Established YAMASHITA & TOYAMA LAW AND PATENT OFFICE Mar. 1993 Patent Attorney (current) Jun. 2014 Corporate Auditor of Mitsui O.S.K. Lines, Ltd. (current) Apr. 2008 Professor of Tokyo University of Science, Graduate School of Innovation Studies (current) Jun. 2011 Corporate Auditor of Mitsui O.S.K. Lines, Ltd. (current) Executive Ofﬁ cers Koichi Muto Chairman Junichiro Ikeda President, Chief Executive Ofﬁ cer Kenichi Nagata Executive Vice President (Assistant to President, Bulk Carrier Ofﬁ ce) Masaaki Nemoto Senior Managing Executive Ofﬁ cer (Dry Bulk Carrier Supervising Ofﬁ ce, Tanker Safety Management Ofﬁ ce, LNG Safety Management Ofﬁ ce, Human Resources Division, Marine Safety Division, Safe Operation) Masahiro Tanabe Senior Managing Executive Ofﬁ cer (Finance Division, Accounting Division, Investor Relations Ofﬁ ce, Liner Division, Port Projects & Logistics Business Division, Research Ofﬁ ce) Shizuo Takahashi Senior Managing Executive Ofﬁ cer (Internal Audit Ofﬁ ce, Secretaries Ofﬁ ce, Corporate Planning Division, Public Relations Ofﬁ ce, MOL Information Systems, Ltd., Compliance) Hirokazu Hatta Managing Executive Ofﬁ cer (General Affairs Division, Group Business Division, Kansai Area) Akio Mitsuta Managing Executive Ofﬁ cer (Tanker Division, Tanker Safety Management Ofﬁ ce) Takeshi Hashimoto Managing Executive Ofﬁ cer (LNG Carrier Division, Offshore and LNG Project Division, LNG Safety Management Ofﬁ ce) Tetsuro Nishio Managing Executive Ofﬁ cer (Dedicated Bulk Carrier Division) Toshiya Konishi Managing Executive Ofﬁ cer (Port Projects & Logistics Business Division, Chief Executive Representative in Americas) Takaaki Inoue Managing Executive Ofﬁ cer (Tanker Safety Management Ofﬁ ce, LNG Safety Management Ofﬁ ce, Marine Safety Division) Takashi Maruyama Managing Executive Ofﬁ cer (Finance Division, Investor Relations Ofﬁ ce) Akihiko Ono Managing Executive Ofﬁ cer (Liner Division) Naotoshi Omoto Managing Executive Ofﬁ cer (Car Carrier Division) Toshiyuki Sonobe Executive Ofﬁ cer (Managing Director of Mitsui O.S.K. Bulk Shipping (Asia Oceania) Pte. Ltd., Chief Executive Representative in Asia, Middle East & Oceania) Yoshikazu Kawagoe Executive Ofﬁ cer (Technical Division) Hideo Horiguchi Executive Ofﬁ cer (Accounting Division) Koichi Yashima Executive Ofﬁ cer (Human Resources Division) Mitsujiro Akasaka Executive Ofﬁ cer (Managing Director of MOL (ASIA) LIMITED, Deputy Chief Executive Representative in Asia, Middle East & Oceania) Toshikazu Inaoka Executive Ofﬁ cer (Dry Bulk Carrier Supervising Ofﬁ ce, Marine Safety Division, General Manager of Dry Bulk Carrier Supervising Ofﬁ ce) Toshiaki Tanaka Executive Ofﬁ cer (Coal and Iron Ore Carrier Division) Nobuo Ishihara Executive Ofﬁ cer (Managing Director of Mitsui O.S.K. Bulk Shipping (Europe) Ltd., Chief Executive Representative in Europe & Africa) Kenta Matsuzaka Executive Ofﬁ cer (General Manager of LNG Carrier Division) l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l 15mol_英文0723入稿PDF.indd 59 15mol_英文0723入稿PDF.indd 59 2015/07/23 17:34 2015/07/23 17:34 Annual Report 2015 59 Outside Director and Corporate Auditor Roundtable Discussion We interview two outside ofﬁ cers (one director and one corporate auditor) on a range of topics from the insight they provide the Board of Directors to their impression of MOL's governance. Masayuki Matsushima Outside Director Hiroyuki Itami Outside Corporate Auditor “ To help the Company establish a sus- tainable growth model as a truly global corporation, I’d like to fulﬁ ll my role as an outside ofﬁ cer and trusted advisor. ” –Matsushima “ I believe outside ofﬁ cers can make the most of their position and contribute to effective management by taking the initiative to say the things people inside the Company are afraid to say. ” –Itami What are your thoughts on your respective roles as an outside director and an outside corporate auditor? Matsushima: I’d like to ﬁ rst start off by saying that outside ofﬁ cers are not all powerful or all knowing. When it comes to business operations, ofﬁ cers from inside an organization can be more knowledgeable. So if you think about what kind of expectations outside ofﬁ cers can fulﬁ ll, the answer is clear: things that internal ofﬁ cers are unable to do, namely providing outside perspective. From the outside, it’s possible to view the Company’s management more objectively. ideas that lead to new creation. I think being able to provide an original point of view is one of the things expected of outside directors. Itami: While I wholly agree with what Mr. Matsushima just said, I’d like to add that outside ofﬁ cers can talk straight about things that are known within the Company but talked about in hushed tones. Since outside ofﬁ cers don’t have conﬂ icts of interest with the Company or its management, they’re in a good position to speak truth to management. I believe outside ofﬁ cers can make the most of their position and contribute to effective management by taking the initia- tive to say the things people inside the Company are afraid Opinions rejected internally as nonsensical could be the very to say. 60 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 60 15mol_英文0723入稿PDF.indd 60 2015/07/23 17:34 2015/07/23 17:34 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l What about the difference between a director and a corporate auditor? M: I don’t believe there are problems with the Company’s governance overall. The board rarely simply approves the M: In terms of actual function, there does seem to be a lot of overlap. When some- thing comes up, if it’s something the corpo- rate auditor’s responsi- ble for, that doesn’t mean we as directors can avoid our responsibility. I: Speaking from the position of an outside corporate auditor, there are functions set by law as speciﬁ cally the responsibility of corporate auditors, like accounting audits and internal controls, and these must of course be fulﬁ lled. However, on top of that, the auditor is in the position to attend Board of Directors’ meetings and speak about management decisions. How should the auditor take on this involvement? The reac- tion could be completely different depending on the corpo- rate auditor’s own mindset or the corporate culture at the company. There are actually companies where corporate auditors attend board meetings but hardly ever say anything. Corporate auditors, myself included, don’t have voting rights, but given our participation in board meetings, I feel we should voice our opinions about business management frank- ly. Corporate auditors have an obligation to audit manage- ment. Midterm management plans and management strategies are subject to auditing. And that’s why while there is a difference in what is required of directors and corporate auditors by law, there is very little difference when it comes to participating in deliberations during board meetings. What would you commend about MOL’s governance and what do you think should be improved? I: I admire the system MOL has set up to reserve time for the Deliberation on Corporate Strategy and Vision(*), and encour- age thorough discourse when outside directors and outside corporate auditors are in attendance. This is really good. As for what should be improved, there are times when the agenda items. The Board of Directors is highly open, debating the issues from various angles, setting aside issues for further debate, and offering support for items but with provisions attached. What I’m concerned about, though, is that while, in terms of corporate culture, everyone has superb communi- cation skills and good character, nobody volunteers to play devil’s advocate or say something unconventional when something happens. Considering MOL has in the past posted wide losses and once violated Japan’s Antimonopoly Act, dur- ing trying times such as these, it would be much better if someone is brave enough to voice a contrary viewpoint. I: That could also be because there’s not enough time for that during the meeting. M: Yeah, that’s true. It would be even better if they could use technology or something during meetings to shorten speakers’ explanations and set aside time to explain how the item relates to the strategies of the Company as a whole and how it connects with the corporate vision. Do you feel there are times when outside directors and corporate auditors should take on a leading role for the management team? What kind of situation do you think would merit such action at MOL? I: I think taking on a leading role for the management team means speaking frankly with them. In general terms, the greatest responsibility of an out- side ofﬁ cer is reining in management when they begin to get out of control. How you design a system or a control for that purpose is impor- tant. To be clear, I’m not implying or aware that any members of MOL’s management team are out of control at present. But, as someone who thinks a lot about governance, it’s important to have a system that can function during emer- gencies. Governance systems are like air: normally it’s better agenda is not implemented in a way that takes advantage of not to be aware of its presence. But, if you fall to the bottom that system. Meaning: sometimes there are a large number of agenda items, explanations are too long, and insufﬁ cient time is left for discussion, albeit the company provides ample time for board meetings. Basically, I think the way the meet- ings are conducted needs to be improved. of a hole and begin running out of oxygen, that’s when you ﬁ rst realize how much you need it. So I feel it’s a really sound idea to ensure it is ready before something urgent happens. M: Moreover, in terms of organizational change, people out- side the company may be more likely to provide insight since * Deliberation on Corporate Strategy and Vision— A major feature of MOL’s Board of Directors. At each meeting, the board focuses on a particular topic concerning management strategies, MOL’s long-term vision or other subjects involving management. These discussions provide an opportunity for lively debates that include the outside directors and corporate auditors. Annual Report 2015 61 15mol_英文0723入稿PDF.indd 61 15mol_英文0723入稿PDF.indd 61 2015/07/23 17:34 2015/07/23 17:34 Outside Director and Corporate Auditor Roundtable Discussion internal ofﬁ cers and employees are prone to following in the become quite lively and things begin to pick up steam. I have same old tracks. This includes reforming the organization and a positive impression of that. cutting losses. I think there are times when outside ofﬁ cers assess the situation from a long-term perspective and give management a bit of a push when they are hesitant to cut losses. In addition, speaking from my experience, I feel that outside directors can especially contribute to pointing out and preventing compliance issues. As an outside director and outside corporate auditor, looking back on major proposals and agendas for past board meetings and the Deliberation on Corporate Strategy and Vision, was there anything that left a particularly strong impression? I: As for the matters in which people outside the Company played an important role, what most sticks in my memory are “STEER FOR 2020” was, in a sense, crafted in response to the result of a previous investment that led to excessive market exposure. Could you tell me what kind of opinions you gave as an outside director and outside corporate auditor? M: I stressed three points. The ﬁ rst was that, for manage- ment to really do its job, it would have to consider better insulating the Company from market forces, since shipping market conditions, exchange rates, bunker prices and other such factors are directly connected to corporate proﬁ ts. I said that structural reform seemed necessary. Since it is the marine transport industry, I do think that it’s impossible to be completely free from market forces and it’s necessary to learn to live with them, but I added that I believe the Company those times when a wide range of opinions arose, such as should get out of the situation where it’s easily shaken by the the time when we discussed moving part of the dry bulkers markets. The second point was truly global management. division to Singapore. This move would lead to an extraordi- Until now, Japan has been the Company’s major location. But nary loss over ¥100.0 billion but improve the Company’s with the changing demographics and geopolitics, Japan’s standing. Another debate that stands out is when we dis- proportion of global production and consumption are declin- cussed what to do about a struggling afﬁ liate requesting ing over the long term. To respond to these changes, I said ﬁ nancial support. I feel those were times I could really fulﬁ ll the Company needs to pivot from its current business model my function. M: I recall one quite heated debate. Many opinions conﬂ ict- ed, causing the decision to be postponed to the next meet- to become a truly global corporation and establish a model for sustainable growth. This could be done by employing new technology or reorganizing trade routes from a global ing. Ultimately an agreement was reached, but with perspective while making use of alliances and local subsidiar- provisions attached. I felt I was really able to contribute to the ies. Actually, I think management is aware of this as localiza- discussion as an outside director. And what impressed me tion progresses at bases in Singapore and Hong Kong. The when holding the Deliberations on Corporate Strategy and third was controlling risks for the Company as a whole. This Vision at the Board of Directors meetings was the frequent also includes responses to environmental changes, not just discussion of the containership business. The debates market conditions. I told them that they should have a better “ I do think that it’s… necessary to learn to live with market forces, but I added that I believe the Company should get out of the situation where it’s easily shaken by the markets. ” –Matsushima Underlined words are explained in the Glossary on page 74. 62 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 62 15mol_英文0723入稿PDF.indd 62 2015/07/23 17:34 2015/07/23 17:34 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l “ I asked if they’d done proper scientiﬁ c portfolio was harboring. ” calculations on how much risk the ﬂ eet –Itami sense of how much risk they are operating under. I: “STEER FOR 2020” was supposed to be formulated based on reﬂ ections of the past, and that’s just what happened. At do that, the Company needs to pour money and human resources into the expanding areas of their portfolio. Training personnel is especially important. I’d like to see the Company that time, I asked if they’d done proper scientiﬁ c calculations soundly carry out its plans for securing and training the sea- on how much risk the ﬂ eet portfolio was harboring. M: You said that at a board meeting, right? That left a last- ing impression. I: If you measure the total risk exposure of the ﬂ eet portfolio, you could say, “this is too much risk to bear” or “in that case, let’s try decreasing this or increasing that,” and at least have somewhere to start a discussion about reorganizing the portfolio. But if you have no idea about the amount of risk, even if you’re told that there are risks, you won’t know if they’re big risks or small risks, right? Actually, when we began trying to quantify the risks, albeit imperfectly, the ratio of free vessels became a subject of debate. So I think it was meaningful that someone outside the Company said some- thing should be done because it should be possible to express the risks quantitatively. In the meantime, while I do think it’s wonderful that the Company has recently been focusing on securing stable proﬁ ts under “STEER FOR 2020,” there is the danger that the Company may go too far to minimize risks in divisions naturally exposed to market conditions, such as con- tainerships and tankers. They really have to train people who can confront risks, but if the employees get immersed into “risk-free” tasks, the number of people who can grapple with risks will decrease. I asked them to consider that as well. Please tell us what your expectations are for MOL going forward, or share any last thoughts on your role. M: As I said before, I’d like the Company to establish a sus- tainable growth model as a truly global corporation. And, to help accomplish that, I’d like to fulﬁ ll my role as an outside ofﬁ cer and trusted advisor. I: I’d like MOL, as a world-leading shipping company with the world’s largest ﬂ eet, to continue to grow going forward. To farers and captains it will need as the focus begins shifting to LNG carriers. Because companies are people. What I can do to help achieve this is, I think, to just speak frankly with man- agement. Deliberation on corporate strategy and vision: Agenda Topics FY2012 Agenda May Oct. Dec. Feb. Strategies for securing and training seafarers Policy on formulating management plan Structural reforms The shale revolution and energy transport FY2013 Agenda May Oct. Nov. Feb. Prospects for offshore businesses and MOL's initiatives Apprehending the business environment prior to formulation of the next midterm plan Technological revolution in marine transport Outline of the next midterm management plan FY2014 – Agenda Aug. Sep. Nov. Dec. Benchmarking against the competition in container shipping “STEER FOR 2020” management issues of the Containership Business Introduction of investment risk control indicators Impact of hydrogen-based society on the marine transport industry Apr. Corporate governance 15mol_英文0723入稿PDF.indd 63 15mol_英文0723入稿PDF.indd 63 2015/07/23 17:34 2015/07/23 17:34 Annual Report 2015 63 Corporate Governance Governance at a Glance System of governance Total directors Outside directors (ratio) Total corporate auditors Outside corporate auditors (ratio) Independent ofﬁ cers (directors and corporate auditors) Board of Directors’ meetings held in ﬁ scal 2014 Term of directors Stock option system Retirement beneﬁ t system Anti-takeover measures Compliance rules External compliance advisory service desk Company with a board of corporate auditors 9 3 (1/3) 4 2 (1/2) 5 11 1 year Yes No No Yes Yes History 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 deci- sion-making body and the supervision of business activities) and reduced member- ship 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 number of outside directors to three Established Compliance Policy and a Compliance Committee 2002 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-mak- ing 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 business activities 2006 Decided basic policy on the establishment of internal 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 2011 Revised the MOL’s Compliance Policy and Rules of Conduct 2014 Revised the Compliance Policy, establishing a chief compliance ofﬁ cer (COO) Revised the Compliance Policy, establishing a chief compliance ofﬁ cer (COO) 64 Mitsui O.S.K. Lines Corporate Governance that Supports Growth Dynamics Effective corporate governance has two sides. The defensive side focuses 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 oppor- tunities, then actively taking those risks deemed reasonable. A company needs both wheels of governance. One brings order, the other provides growth dynamics. With both wheels ﬁ rmly in place, a company can gain the trust of its customers, stockhold- ers, business partners, employees, local communities and other stakeholders to sustainably conduct business. MOL greatly shored up its management structure between 1997 and 2002. Taking a lead position among Japanese compa- nies, MOL established an advanced, highly transparent corporate governance structure by, for example, inviting outside directors and introducing an executive ofﬁ cer system. We are reaping the beneﬁ ts of those efforts, yet MOL has only arrived at its current position through a process of continuous improvement and evo- lution. We work hard to enhance corporate value. 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 indispensable 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 functions effectively. The framework described in the preceding paragraph 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. And the Board of Directors holds Deliberation on Corporate 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 dis- cussions provide an opportunity for lively debates that include the outside directors and corporate auditors, thus helping to 15mol_英文0723入稿PDF.indd 64 15mol_英文0723入稿PDF.indd 64 2015/07/23 17:34 2015/07/23 17:34 ensure that the perspective of shareholders is reﬂ ected in how MOL is managed. The fruit of this comprehensive deliberation was reﬂ ected in “STEER FOR 2020.” 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. 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. (See the chart below) Functions of Outside Directors and Reasons for Appointment Although the revised Companies Act came into effect in May 2015, as part of efforts to strengthen corporate governance, MOL has been appointing outside directors since 2000, with the aim of bolstering oversight of the execution of business opera- tions by bringing an outside perspective to management. MOL has appointed three outside directors whose experience encompasses macroeconomic management, ﬁ nance, and busi- nesses in Japan. MOL has adjudged that all three individuals are independent 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 Reasons for Appointment of Outside Directors Name Position Reason for Appointment Takeshi Komura President of Capital Market Promotion Foundation Masayuki Matsushima Chairman of NWIC Co., Ltd. Senior Advisor of Integral Corporation Atsutoshi Nishida Advisor to the Board of Toshiba Corporation (As of June 23, 2015) 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 longtime experience in and knowledge of economic management and policy ﬁ nance of Japan. 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 long-time experience in and knowledge of the ﬁ nancial sector. MOL adjudged that he can offer advice from the shareholders’ perspective, with an objective view independent from that of internal executive management, based on his abundant experience and extensive knowledge as a corporate executive. Corporate Governance Organization (as of June 23, 2015) Elect and appoint/dismiss Board of Directors [11] Outside directors: 3 Internal directors: 6 Total: 9 General Shareholders’ Meeting 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 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l Elect and appoint/supervise Submit basic management policies and other issues for discussion Executive Committee [48] Internal directors and Executive officers: 8 Provide direction on important business issues Submit to Executive Committee after preliminary deliberations Committees Under the Executive Committee STEER Committee [10], Budget Committee [2], Investment and Finance Committee [38], Operational Safety Committee [2], CSR and Environment Committee [3], Compliance Committee [9], Business Reconstruction Committee [12], Global Strategy Committee [New] Submit report on important business and other issues Executive Officers Director/Executive officers: 6 Executive officers: 18 Total: 24 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 2014. The number of meetings of the compliance committee includes review committee of recurrence prevention measures for anti competitive practices. (6 meetings) Annual Report 2015 65 15mol_英文0723入稿PDF.indd 65 15mol_英文0723入稿PDF.indd 65 2015/07/23 17:34 2015/07/23 17:34 Corporate Governance Functions of Outside Corporate Auditors and Reasons for Appointment MOL has appointed 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 sys- tems of corporations are taking on added importance, it goes without saying that the independence of auditors from manage- ment 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 strengthening corporate governance and compliance throughout the group. Reasons for Appointment of Outside Corporate Auditors Name Position Reason for Appointment Hiroyuki Itami Professor of Tokyo University of Science, Graduate School of Innovation Studies 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 a scholar of business administration. 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 23, 2015) Compensation for Directors, Corporate Auditors and Independent Public Accountants 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 2014 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 remu- neration (¥ millions) (Thousands of U.S.$) Directors (Excluding outside directors) Corporate auditors (Excluding outside corporate auditors) Outside directors and outside corporate auditors 7 2 7 ¥306 $3,001 66 57 550 479 66 Mitsui O.S.K. Lines Compensation for Independent Public Accountants Compensation for audit operations (¥ millions) Compensation for non-audit operations (¥ millions) Total (¥ millions) (Thousands of U.S.$) Parent company Consolidated subsidiaries Total ¥109 111 ¥221 ¥17 1 ¥19 ¥127 $1,060 113 944 ¥240 $2,005 Independent Ofﬁ cers Due to partial amendments to the Securities Listing Regulations that came into force in December 2009, publicly listed companies are required to secure independent ofﬁ cer(s) from the standpoint of protecting general investors. An independent ofﬁ cer means an outside director or outside corporate auditor who is unlikely to have a conﬂ ict of interest with general investors. Independent ofﬁ cers are expected to act to protect the interests of general investors. For instance, they are expected to state necessary opin- ions to ensure the interests of general shareholders are taken into consideration in a situation where a decision is made con- cerning 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 outside corporate auditors as independent ofﬁ cers, respectively, because there is no concern about a conﬂ ict of interest with general inves- tors in conformity with the criteria for independent ofﬁ cers of listed securities exchanges. Each of these individuals plays a major role in corporate 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. Internal Control System Since the ﬁ scal year ended March 2009, the Financial Instruments and Exchange Act has obligated publicly listed companies to prepare a report evaluating their internal controls over ﬁ nancial reporting by manage- ment (Internal Control Reporting System) and to have this evaluation audited by auditors outside the Company. This internal control reporting system involves management themselves conﬁ rming the effectiveness of the framework for disclosing information such as appropriate and prop- er ﬁ nancial reporting through methods that visualize and evaluate oper- ations, 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 further enhance MOL Group management effectiveness, efﬁ ciency and trans- parency, namely ensuring the appropriateness of business operations and the trustworthiness of ﬁ nancial reporting. In ﬁ scal 2014, 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. Compliance 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. 15mol_英文0723入稿PDF.indd 66 15mol_英文0723入稿PDF.indd 66 2015/07/23 17:34 2015/07/23 17:34 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l We have established a Compliance Committee, which is headed by the Chief Compliance Ofﬁ cer, and formulated the Compliance Policy to assure strict adherence to rules and regula- tions. General managers of divisions and ofﬁ ces are appointed as Compliance Ofﬁ cers. They are responsible for enforcing compli- ance regulations and are also required to report to the Compliance Committee 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, we established an external com- pliance advisory service desk, which we entrusted an outside attor- ney to run. The desk provides anonymous counseling services. Measures Ensuring Compliance with the Antimonopoly Act On March 18, 2014, the Japan Fair Trade Commission (JFTC) found MOL had violated Article 3 of the Antimonopoly Act regarding certain car carrier ship- ping trades. Considering this legal violation to be a very serious matter, we established the Review Committee of Recurrence Prevention Measures for Anti-competitive Practices, which is headed by the President, in April 2014. The committee has examined and executed various concrete policies to pre- vent a recurrence of cartel activities, including revising the compliance system and reforming the corporate culture. The measures resolved by the Review Committee of Recurrence Prevention Measures for Anti-competitive Practices have been taken up by the Compliance Committee since October 2014. For more detailed compliance information, see the Safety, Environmental and Social Report. 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 2014, the President participated in the Company’s presentations of quarterly results and attended meetings with domestic and foreign 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 web- site with an accompanying English translation. The Japanese and English drafts of presentation materials are also posted on the web- site. This information is e-mailed on the same day to foreign inves- tors 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 and the Corporate Governance Code entered into force in June 2015. MOL has already been proactively holding constructive dialogues with institutional investors and there will be no change to that poli- cy. 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 com- munication 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. IR Activities in Fiscal 2014 (April 2014–March 2015) Activity For securities analysts and institutional investors For overseas institutional investors For individual investors Business performance presentations President’s small meetings Operations presentations Overseas investor road shows Conferences held by securities companies Corporate presentations for individual investors Frequency Details 4 times Quarterly results/forecasts 2 times Held for analysts in Japan 1 time 4 times 6 times 3 times LNG carriers and offshore businesses Once in North America, twice in Europe, once in Asia (Hong Kong and Singapore) Attended conferences in Japan and held individual meetings Attended seminars for individual investors in Tokyo, Osaka and Nagoya: once in each city. IR Materials (available on MOL’s website) Material Japanese English Financial reports Stock exchange ﬁ lings (ﬁ nancial highlights, etc.) Business performance presentation materials (including summaries of Q&A sessions) Annual reports Securities reports Quarterly reports Business reports for shareholders Safety, Environmental and Social reports Investor guidebooks Market data Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes Yes Yes Annual Report 2015 67 15mol_英文0723入稿PDF.indd 67 15mol_英文0723入稿PDF.indd 67 2015/07/23 17:34 2015/07/23 17:34 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, 2015) Others 46 5% Containerships 118 12% Car Carriers 127 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 411 43% Tankers 176 19% Dry Bulkers 35,760 53% Tankers 16,874 25% Underlined words are explained in the Glossary on page 74. 68 Mitsui O.S.K. Lines 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 2015, we operated around 950 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 2015, we project that each ¥1-per-dollar change in the yen-U.S. dollar exchange rate will have an impact of approximately ¥1.8 billion on consolidated ordinary income. 15mol_英文0723入稿PDF.indd 68 15mol_英文0723入稿PDF.indd 68 2015/07/23 17:34 2015/07/23 17:34 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l 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, 2015, interest-bearing debt totaled ¥1,183.4 billion, and around 60% 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 ¥4.0 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 950 vessels, whose annual fuel consump- tion amounts to around 6 million tons of bunker. The Company is able to pass on about 40% of the risk to customers. Therefore, an increase of US$1 per metric ton in the average annual price of bunker would lower earnings by approximately ¥0.19 billion (net of hedging) at the maximum. Sensitivity of Earnings to Exchange Rate/Interest Rate/ Bunker Price Fluctuations Exchange Rate (¥/US$) A ¥1 appreciation reduces ordinary income by approximately ¥1.8 billion Interest Rate (%) A 1 point rise in both yen- and U.S. dollar-denominated interest-bearing debt reduces ordinary income by approximately ¥4.0 billion Bunker Price (US$/MT) A US$1/MT increase reduces ordinary income by approximately ¥0.19 billion Average Bunker Price (US$/MT) 800 600 400 200 0 (FY) 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 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 950 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. Annual Report 2015 69 15mol_英文0723入稿PDF.indd 69 15mol_英文0723入稿PDF.indd 69 2015/07/23 17:34 2015/07/23 17:34 Corporate Social Responsibility (CSR) 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 developing together with society sustainably and harmoniously while earning the support and trust of stake- holders, including shareholders, customers, business partners, employees and local communities. forth in the MOL Group Corporate Principles. In order to contrib- ute to an international 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 established as a set of guidelines for executives and employees. CSR Overview Raise corporate value, contribute to stakeholders, help solve social issues and contribute to society’s sustainable growth Trust of Stakeholders Support of Stakeholders Business Activities CSR Activities Safe operation; environmental measures; compliance; 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 Midterm Management Plan MOL CHART Long-term Vision MOL Group Corporate Principles In order to fulﬁ ll these responsibilities, MOL deliberates on CSR-related policies and measures, primarily through the three committees under the Executive Committee. The MOL Group’s initiatives and policies regarding overall CSR are deliberated on by the CSR and Environment Committee, which then sets single-year, medium- and long-term targets and conducts regular reviews. The Operational Safety Committee discusses basic policies and measures for ensuring safe operation of MOL Group- operated vessels through rigorous attention to every detail. The Compliance Committee discusses basic policies and measures for enhancing the compliance system, dealing with compliance vio- lations, and establishing a structure for protecting and managing personal information. Organizational Framework for CSR Initiatives CSR and Environment Committee Chief Executive Ofﬁ cer (President) Executive Committee Operational Safety Committee Compliance Committee Participating in the UN Global Compact CSR activities are broad and, from time to time, the strength and priority of those activities change depending on the operating environment, global circumstances and region where business is being developed. With business activities spread across the globe, MOL believes that building good relationships with various stake- holders worldwide and contributing to the realization of sustain- able growth of society are vital as it seeks to realize the ideas set 70 Mitsui O.S.K. Lines 10 Principles of the Global Compact 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. The MOL Group Basic Procurement Policy We formulated the MOL Group Basic Procurement Policy in 2012. This clearly documents our CSR activity policy regarding 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 environmental protection in our activities, pursue safety, engage in fair trading and build trust, with the understanding and cooperation of business partners. In this way, we aim to con- tribute 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 execu- tion of such goods and/or services, that meet high safety standards. 3. We conduct fair trade, and endeavor to establish trusting relation- ships with contractors. We work to make sure that our contractors understand our Basic Procurement Policy, with the aim of contributing towards the realiza- tion 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. 15mol_英文0723入稿PDF.indd 70 15mol_英文0723入稿PDF.indd 70 2015/07/23 17:34 2015/07/23 17:34 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l i F n a n c a i l C a p i t a l 3. Strengthen initiatives on corporate governance. 4. Promote personnel training and diversity to strengthen compre- hensive Group capabilities. 5. Make further progress on solving social issues and promoting environment initiatives as an environmentally advanced company. 6. Actively disclose sustainability data. 7. Promote social contribution activities related to MOL’s businesses. For more detailed CSR information, see the Safety, Environmental and Social Report. For more detailed diversity information, see the Safety, Environmental and Social Report. Initiatives on the Environment Key Environmental Issues In March 2014, we identiﬁ ed the highest-priority environmental issues and set about addressing those issues in a proactive man- ner. To identify these priorities, we analyzed issues from interna- tional conditions regarding environmental issues; the opinions of stakeholders including customers, investors, and so on; as well as our own internal viewpoints. Finally, through discussions in the CSR and Environment Committee, we identiﬁ ed the following ﬁ ve issues. 1 Comply with environmental regulations 2 Utilize technologies to reduce environmental impact 3 Disclose environmental data 4 Ensure safe operation 5 Contribute to conservation of biodiversity Organizational Structure for Environmental Initiatives To effectively promote environmental initiatives based on the MOL Environmental Policy, the CSR and Environment Committee, a sub-committee of the Executive Committee, oversees planning and promotion of environment-related measures under the direc- tion of the president. The CSR and Environment Committee assesses environment-related risks and opportunities involving MOL, identiﬁ es the highest-priority issues in the group’s environ- mental management, and sets environmental targets, striving to achieve environment-friendly business activities. In March 2014, we set new environmental targets in the midterm management plan “STEER FOR 2020” for three years starting from FY2014. Organizational Structure to Promote the Environmental Executive Committee CSR and Environment Committee Director responsible for environmental management (Chairman of CSR and Environment Committee) Executive Ofﬁ cer of CSR and Environment Committee (Vice-Chairman of CSR and Environment Committee) (Secretariat ofﬁ ce: Corporate Planning Division, CSR and Environment Ofﬁ ce) Environmental Management System To precisely grasp and manage the environmental risks and opportunities in our businesses, we established the environmen- tal management system MOL EMS21 in April 2001, and since then we have made ongoing efforts to improve it. Every year, the CSR and Environment Ofﬁ ce conducts an internal audit based on MOL EMS21.The chairman, who is responsible for environmental management, receives the results of the internal audit and con- ﬁ rms whether the system is functioning effectively. We also have a third-party audit by DNV GL Business Assurance Japan KK every year, and a renewal audit every three years, and have earned ISO14001 certiﬁ cation for our environ- mental management system. The results of our FY2014 audit showed no non-conformity. The MOL Group Environmental Target System We have implemented the Group Environmental Target System, targeting major group companies in Japan and overseas. Every year, each company sets environmental targets to reduce the environmental impact of our business activities based on speciﬁ c guidelines that are in line with midterm management plan, and establishes action plans to achieve those targets. Along with those targets, we collect each company’s data on its own envi- ronmental impact (fuel consumption, electric power consump- tion, paper usage, waste, and so on). Ocean Shipping’s Impact on the Environment Compared to other modes of transport, ocean shipping can transport larger volumes of cargo at once and is an environmentally friendly mode, with lower emissions per ton-mile of CO2 and other air pollutants. However, with growth of the world economy spurred by the development of emerging markets, overall ocean cargo trafﬁ c continues to increase. Seaborne trade has exceeded 10 billion tons, and we anticipate further increases. As seaborne trade increases, CO2 emissions will rise in step with growing energy consumption. This can exacerbate pressing environmental issues. CO2 emissions from merchant vessels account for about 2% of global emissions, and the shipping industry must do more to pro- tect the environment. Comparison of CO2 Emissions from Aircraft, Trucks, and Ocean Vessels (Unit: grams/ton-km) More than 8,000 dwt 15 2,000-8,000 dwt 21 50 540 Divisions/Ofﬁ ces Divisions/Ofﬁ ces General Manager (Personnel responsible for environmental management) Source: ICS & NTM, Sweden For more detailed environmental initiatives information, see the Safety, Environmental and Social Report. Annual Report 2015 71 15mol_英文0723入稿PDF.indd 71 15mol_英文0723入稿PDF.indd 71 2015/07/23 17:34 2015/07/23 17:34 Corporate Social Responsibility (CSR) Schedule of Environmental Regulations by IMO, etc Regulations 2014 2015 2016 2017 2018 2019 2020 2025 Tackling Global Warming GHG emissions EEDI*1 SEEMP*2 Phase 0 Mandatory Phase 1 Phase 2 Phase 3 * Introduction of MRV (Monitoring, Reporting and Veriﬁ cation of actual fuel consumption) and MBM (Market-Based Measures) is under study toward further reduction of GHG emissions. Preventing Air Pollution NoX emissions*3 General Sea Areas ECA*4 Tier Ⅱ Tier Ⅱ Tier Ⅲ SoX emissions*5 General Sea Areas Sulfur limit 3.5% Sulfur limit 0.5%*6 ECA Sulfur limit 1.0% Sulfur limit 0.1% Marine Environment Protection Ballast Water Management Convention*7 General Sea Areas (Adopted in 2004: not ratiﬁ ed) Expected to be mandatory Regulation by USGC *8 (Enforced in 2012) Mandatory Minimizing the transfer of invasive aquatic species by shipping*9 (Guideline adopted in 2011) Ship Recycling Convention*10 (Adopted in 2009: not ratiﬁ ed) (*1) EEDI (Energy Efﬁ ciency Design Index) is a measure of ships energy efﬁ ciency (g/ton-mile). The required EEDI of each Phase is as follows:Phase 0=0%, Phase 1=10%, Phase 2=20% (Applied to new ships) (*2) SEEMP (Ship Energy Efﬁ ciency Management Plan) is required to be drawn up to show optimal measures of operation that should be adjusted to the characteris- tics of individual ships, and to be kept on board a ship. (Applied to both new and existing ships) (*3) The regulation for reduction of NOx in exhaust gases: Tier Ⅰ is applied to ships laid down in 2000-2010, Tier Ⅱ to ships laid down in/after 2011, and Tier Ⅲ to ships laid down in/after 2016. (*4) The existing ECAs (Emission Control Areas) are: 1.Within 200 miles off the coast of USA and Canada (NOx/SOx) 2.The USA Caribbean Sea area (NOx/SOx) 3.The Baltic Sea and the North Sea areas (SOx) (*5) The regulations for reduction of SOx contained in fuel oil (Applied to both new and existing ships) (*6) A review in 2018 on the availability of the required fuel oil may conclude to postpone the application to 2025. (*7) The convention shall enter in force 12 months after the following conditions are met, and it is increasingly likely that it enters into force in 2016. (Applied to both Environmental Investments and CO2 Reductions new ships and, after certain grace periods, to existing ships) Conditions: Ratiﬁ cation by not less than 30 countries representing a combined total G/T of more than 35% of the world’s merchant ﬂ eet. (As of March 2015, 44 countries representing a combined total G/T of 32.86% have ratiﬁ ed.) (*8) Regional regulation by U.S. Coast Guard. (*9) The guideline aimed at minimizing transfer of invasive aquatic species attaching to the bottom of ships, recommending installation of the systems on vessels to keep the bottom clean without marine organisms and other measures. (It remains as a voluntary guideline during the review period.) (*10) The convention prohibits and restricts the ﬁ tting and use of treaty-speciﬁ ed hazardous materials, and requires vessels to prepare, record and update invento- ry lists showing the quantity and location of hazardous materials on ships over a ship's lifetime. The convention shall enter into force 24 months after the follow- ing conditions are met: Conditions: Ratiﬁ cation by not less than 15 countries representing a combined total G/T of more than 40% of the world’s merchant ﬂ eet and an annual ship recycling volume not less than 3% of the combined tonnage of the ratifying countries .(As of March 2015, 3 countries have ratiﬁ ed.) Environmental Investments (Billions of yen) CO2 and Cost Reductions from Environmental Measures Fiscal 2014 Plan for FY2014–2016 (FY) 2012 302 ¥5.3 2013 279 ¥5.5 2014 348 ¥5.5 CO2 emissions reductions (1,000t) Cost Reductions (¥ billions) ¥20.0 Environment-related R&D activities Utilization and expansion of existing environmental technologies Responses to environmental regulations Initiatives to save bunker fuel Initiatives of Group companies Total ¥0.7 2.1 0.5 0.9 0.2 ¥4.3 Third-Party Evaluations Environment Related ■ ISO 14001 Certiﬁ cation MOL has used its own environmental man- agement system MOL EMS21 since April 2001, and also holds ISO 14001 certiﬁ cation, an international standard for environmental management. (Since 2003) ■ ISO 50001 Certiﬁ cation MOL acquired ISO 50001 certiﬁ cation for its energy management system and ISO 14001 certiﬁ cation for its environmental manage- ment system. (2014) Certiﬁ ed companies: MOL Ship Management Co., Ltd. (2014), 72 Mitsui O.S.K. Lines MOL Ship Management (Singapore) Pte. Ltd. (2014), MOL Ship Management (Hong Kong) Company Ltd. (2014) and Magsaysay MOL Ship Management, Inc. (2015) ■ Recognized by CDP as Leader in Climate Change Transparency and in Corporate Action on Climate Change MOL was recognized as a leader for the depth and quality of the climate change data it has disclosed for independent assessment through CDP, an international non-proﬁ t organization. At the same time, MOL earned a spot on the CDP Climate Performance Leadership Index (CPLI) for its actions to reduce carbon emissions and mitigate the business risks of climate change. (2014) 15mol_英文0723入稿PDF.indd 72 15mol_英文0723入稿PDF.indd 72 2015/07/23 17:34 2015/07/23 17:34 Social Contribution Activities MOL aims to be a company that grows sus- tainably and harmoniously with society. We therefore carefully consider social issues to tackle, and work to help solve them based on three principles. Guided by these princi- ples, we proactively undertake social contri- bution 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 II. Contribute to protecting III. Contribute to local Millennium Development Goals* biodiversity and preserving nature. communities * 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.” Liberia Pledging emer- gency support to combat spread of Ebola Cambodia and Myanmar Transport of medical equipment by sea Japan Educational support in communities affected by the Great East Japan Earthquake • Donation of books and book coupons to junior high schools in affected areas • Marine ofﬁ cers present career education lec- ture at junior high school in affected areas Somalia MOL and six other companies* 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 Provided Somalia’s youth with vocational skills training Hong Kong, Malaysia and Japan Coastal cleanup Philippines Supporting afﬂ icted people of typhoon Vietnam Transport of wheelchairs by sea Ghana In-house blood drive South Africa Transport of mobile libraries by sea Kenya Zambia Transport of children’s shoes by sea India Supporting an orphanage Paraguay • Transport of children’s wheel- chairs by sea • Transport of ﬁ re engines by sea l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I I n n t t e e l l l l e e c c t t u u a a l l , , S S o o c c i i a a l l , , E E n n v v i i r r o o n n m m e e n n t t a a l l C C a a p p i i t t a a l l 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. i F n a n c a i ■ 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. l C a p i t a l ■ 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. Annual Report 2015 73 15mol_英文0723入稿PDF.indd 73 15mol_英文0723入稿PDF.indd 73 2015/07/23 17:34 2015/07/23 17:34 (cid:2) Yamal LNG Project This project will use the world’s ﬁ rst ice class LNG carriers to transport LNG from the Yamal LNG Terminal located in the Arctic Circle on the Yamal Peninsula of Russia. The plan is to export 16.5 million tons of LNG every year—the highest volume of LNG exports from Russia. Operations are slated to begin in 2018. It is forecasted that about 15 ice class LNG carriers will be necessary, three of which are contracted with MOL. The Kara Sea, which adjoins the Yamal LNG Terminal, com- pletely freezes over in winter as the average temperature drops to around minus 30 degrees Celsius. This has proved a challenge for transporting LNG and long prevented development of the area. With this project, however, the introduction of ice class LNG carriers has resolved the persistent transportation issues, allowing development to ﬁ nally begin. View a video introducing "Yamal LNG Project" Winter Route Arctic Ocean Summer Route Russia Sea of Okhotsk (cid:2) Yield management In the containership business, this refers to a management tech- nique to maximize proﬁ tability for the round-trip voyage of each container. Freight rates are set and sales activities conducted to maximize net proceeds (gross proﬁ ts calculated by deducting direct costs from freight revenues) rather than freight rates themselves. Direct costs include loading and unloading costs, feeder costs, and the costs of returning empty containers (calcu- lated to reﬂ ect the aspect of surplus and shortage of containers at each point). Glossary (In alphabetical order) (cid:2) Ballast voyage Sailing to the next port of call without any cargo loaded. (cid:2) Baltic Dry Index Baltic Dry Index (BDI) is calculated by The Baltic Exchange as an arithmetic average of the drybulker markets of the four different vessel types.(1/4/1985=1,000) (cid:2) FPSO (Floating Production, Storage and Ofﬂ oading system) A ﬂ oating facility for producing oil offshore. The oil is stored in tanks in the facility and directly ofﬂ oaded to tankers for direct transport to the destination. (cid:2) FSRU (Floating Storage and Re-gasiﬁ cation Unit) A ﬂ oating facility for storing and regasiﬁ cation of LNG offshore, which is then pressurized and piped ashore. Plans to introduce FSRUs in regions around the world are making steady progress as they can be set up in less time and less cost than conventional onshore receiving terminals. (cid:2) Ice class LNG carrier The world’s ﬁ rst LNG carrier capable of breaking through sea ice. Normally on the Northern Sea Route, an escort ship breaks up the ice to open a channel. But the ice class LNG carriers to be deployed for the Yamal LNG Project will possess the same ice- breaking capabilities as the Antarctic research vessel Shirase, enabling it to break through sea ice of up to 2.1 meters thick on its own. (cid:2) Market exposure Vessels operating under contracts of less than two years, which are owned or mid-and long-term chartered vessels. (Includes ves- sels that combine multiple customers’ cargoes.) (cid:2) Pool arrangement Ship operators and owners pool certain ships to conduct joint operations. (cid:2) Shuttle tanker A specialized tanker that shuttles from offshore oil plants to onshore terminals to transport crude oil, which has been extract- ed from offshore oil wells. (cid:2) Ton-mile Transporting one ton of cargo one mile. Expressing the volume of cargo calculated by multiplying transported weight and trans- ported mile together. As opposed to just reporting cargo weight without reference to distance, ton-mile provides a complete pic- ture of total transport activity, reﬂ ecting the demand fulﬁ lled by vessels or other transport modes. (cid:2) Unit cost The ﬁ xed cost of transporting one TEU on a containership. Fixed costs include vessel costs (depreciation and interest, or charter rates) and ship operation expenses (bunker costs, port costs and so on). 74 Mitsui O.S.K. Lines 15mol_英文0723入稿PDF.indd 74 15mol_英文0723入稿PDF.indd 74 2015/07/23 17:34 2015/07/23 17:34 Financial Section Contents 76 Consolidated Balance Sheets 78 Consolidated Statements of Income 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 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 75 15MOL英文財務p75_111_0723入稿.indd 75 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 75 Consolidated Balance Sheets Mitsui O.S.K. Lines, Ltd. March 31, 2015 and 2014 ASSETS Current assets: Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Cash and cash equivalents (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade receivables (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred and prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥128,802 178,845 (1,538) 49,026 75,937 2,107 78,617 ¥180,126 146,787 $1,071,832 1,488,267 (697) 59,349 73,285 1,629 73,161 (12,799) 407,972 631,913 17,533 654,215 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511,796 533,640 4,258,933 Vessels, property and equipment (Notes 7 and 13): Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,527,590 1,434,505 12,711,908 Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equipment and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vessels and other property under construction . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net vessels, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 319,171 94,157 221,993 173,279 2,336,190 (838,162) 1,498,028 281,720 76,228 215,610 148,972 2,157,035 (777,790) 1,379,245 2,655,996 783,532 1,847,324 1,441,949 19,440,709 (6,974,802) 12,465,907 Investments and other assets: Investment securities (Notes 3, 4 and 7) . . . . . . . . . . . . . . . . . . . . . . 128,416 111,061 1,068,619 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative ﬁ nancial assets (Notes 3 and 6) . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,304 124,303 1,175,868 74,959 37,068 3,954 24,063 182,523 21,939 614,226 37,519 29,385 3,769 21,200 89,641 34,932 451,810 623,775 308,463 32,903 200,241 1,518,873 182,567 5,111,309 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,624,050 ¥2,364,695 $21,836,149 See accompanying notes. 76 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 76 15MOL英文財務p75_111_0723入稿.indd 76 2015/07/23 17:35 2015/07/23 17:35 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) . . . . . . . . . . . . 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 Unrealized holding gains on available-for-sale securities, net of tax . . . . Unrealized gains 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 . . . . . . . . . . . . . . . . . . Share subscription rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥74,203 5,500 79,703 105,186 15,000 120,186 167,002 36,280 7,639 593 93,944 505,347 688,332 270,185 958,517 1,803 15,803 109,043 13,660 127,442 1,226,268 1,731,615 65,400 44,469 533,485 (6,823) 636,531 44,261 68,770 27,673 5,322 146,026 2,553 107,325 892,435 ¥14,697 $617,484 — 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 45,768 663,252 875,310 124,823 1,000,133 1,389,715 301,906 63,568 4,935 781,759 4,205,268 5,727,985 2,248,357 7,976,342 15,004 131,505 907,406 113,672 1,060,514 10,204,443 14,409,711 65,400 44,517 502,833 (6,982) 605,768 32,810 39,711 (315) 1,186 73,392 2,391 101,998 783,549 544,229 370,051 4,439,419 (56,778) 5,296,921 368,320 572,273 230,282 44,287 1,215,162 21,245 893,110 7,426,438 Total liabilities and net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,624,050 ¥2,364,695 $21,836,149 Annual Report 2015 77 15MOL英文財務p75_111_0723入稿.indd 77 15MOL英文財務p75_111_0723入稿.indd 77 2015/07/23 17:35 2015/07/23 17:35 Consolidated Statements of Income and Consolidated Statements of Comprehensive Income Mitsui O.S.K. Lines, Ltd. Years ended March 31, 2015 and 2014 (Consolidated Statements of Income) Shipping and other revenues (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . Shipping and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income (expenses): Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings (losses) of afﬁ liated companies, net . . . . . . . . . . . . . . Others, net (Notes 10 and 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes and minority interests . . . . . . . . . . . . . . Income taxes (Note 15): Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥1,817,070 1,683,795 133,275 116,025 17,250 ¥1,729,452 $15,120,829 1,587,902 141,550 100,458 41,092 14,011,775 1,109,054 965,507 143,547 9,625 (12,556) 4,930 39,083 41,082 58,332 (12,440) 2,577 48,469 (6,113) 9,341 (12,583) (1,234) 35,094 30,618 71,710 (13,796) 4,526 62,440 (5,046) 80,095 (104,485) 41,025 325,230 341,865 485,412 (103,520) 21,445 403,337 (50,870) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 42,356 ¥ 57,394 $ 352,467 (Consolidated Statements of Comprehensive Income) Income before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 48,469 ¥ 62,440 $ 403,337 Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Other comprehensive income (Note 18): Unrealized holding gains on available-for-sale securities, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gains on hedging derivatives, net of tax . . . . . . . . . . . . . . . . Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . Remeasurements of deﬁ ned beneﬁ t plans, net of tax . . . . . . . . . . . . . . Share of other comprehensive income (loss) of associates accounted for using equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,892 46,674 20,802 4,134 (9,981) 74,521 8,847 32,725 31,158 — 19,285 92,015 107,281 388,400 173,105 34,401 (83,057) 620,130 Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥122,990 ¥154,455 $1,023,467 Comprehensive income Comprehensive income attributable to owners of the parent . . . . . . . . . . . Comprehensive income attributable to minority interests . . . . . . . . . . . . . . ¥114,990 8,000 ¥144,892 $ 956,894 9,563 66,573 (Amounts per share of common stock) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted net income (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends applicable to the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yen U.S. dollars (Note 1) ¥35.42 32.98 7.00 ¥47.99 47.97 5.00 $0.295 0.274 0.058 See accompanying notes. 78 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 78 15MOL英文財務p75_111_0723入稿.indd 78 2015/07/23 17:35 2015/07/23 17:35 Consolidated Statements of Changes in Net Assets Mitsui O.S.K. Lines, Ltd. Years ended March 31, 2015 and 2014 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, 2013 . . . . . . . ¥65,400 ¥44,483 ¥447,830 ¥(6,998) ¥24,753 ¥ (196) ¥(39,849) ¥ — ¥2,115 ¥ 81,955 ¥619,493 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 . . Balance at March 31 and April 1, 2014 . . . Cumulative effects of changes in accounting policies . . . . . . . . . . — — — — — — — 1 — 57,394 — 34 — — — (2,392) — — — — (62) 78 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1 57,394 (62) 112 (2,392) 8,057 39,907 39,534 1,186 276 20,043 109,003 ¥65,400 ¥44,517 ¥502,833 ¥(6,982) ¥32,810 ¥39,711 ¥ (315) ¥1,186 ¥2,391 ¥101,998 ¥783,549 — — (4,567) — — — — — — — (4,567) Restated balance . . . . . . . . . . . . ¥65,400 ¥44,517 ¥498,266 ¥(6,982) ¥32,810 ¥39,711 ¥(315) ¥1,186 ¥2,391 ¥101,998 ¥778,982 Issuance of new shares - exercise of subscription rights to shares . Due to change in consolidated subsidiaries . . . . . . . . . . . . . . . . Due to change in afﬁ liated companies accounted for by the equity method Net income . . . . . . . . . . . . . . . . Purchases of treasury stock . . . . Disposal of treasury stock . . . . . . Dividends paid . . . . . . . . . . . . . . Net changes of items other than owner's equity during the year . — — — — — — — — — — — — 205 (121) — 42,356 — (48) — (49) — (7,172) 19 — — — (56) 196 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — (19) — — — — — — — — — — — — — — 205 (121) 42,356 (56) 99 (7,172) — — — 11,451 29,059 27,988 4,136 181 5,327 78,142 Balance at March 31, 2015 . . . . ¥65,400 ¥44,469 ¥533,485 ¥(6,823) ¥44,261 ¥68,770 ¥27,673 ¥5,322 ¥2,553 ¥107,325 ¥892,435 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, 2014 . . . . . . $544,229 $370,450 $4,184,347 $(58,101) $273,030 $330,457 $(2,621) $9,869 $19,897 $848,781 $6,520,338 Cumulative effects of changes in accounting policies . . . . . . . . . . — — (38,004) — — — — — — — (38,004) Restated balance . . . . . . . . . . . . $544,229 $370,450 $4,146,343 $(58,101) $273,030 $330,457 $(2,621) $9,869 $19,897 $848,781 $6,482,334 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l Issuance of new shares - exercise of subscription rights to shares . Due to change in consolidated subsidiaries . . . . . . . . . . . . . . . . Due to change in afﬁ liated companies accounted for by the equity method Net income . . . . . . . . . . . . . . . . Purchases of treasury stock . . . . Disposal of treasury stock . . . . . . Dividends paid . . . . . . . . . . . . . . Net changes of items other than owner's equity during the year . — — — — — — — — — 158 — — — 1,706 (1,007) — — — — 352,467 — (399) — (466) (408) 1,631 — (59,682) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — (158) — — — — — — — — — — — — — — 1,706 (1,007) 352,467 (466) 824 (59,682) 95,290 241,816 232,903 34,418 1,506 44,329 650,262 Balance at March 31, 2015 . . . . $544,229 $370,051 $4,439,419 $(56,778) $368,320 $572,273 $230,282 $44,287 $21,245 $893,110 $7,426,438 See accompanying notes. Annual Report 2015 79 15MOL英文財務p75_111_0723入稿.indd 79 15MOL英文財務p75_111_0723入稿.indd 79 2015/07/23 17:35 2015/07/23 17:35 Consolidated Statements of Cash Flows Mitsui O.S.K. Lines, Ltd. Years ended March 31, 2015 and 2014 Cash ﬂ ows from operating activities: Income before income taxes and minority interests . . . . . . . . . . . . . . . . . . Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in losses (earnings) 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 dividends . . . . . . . . . . . . . . . . . . . . . . . . Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash 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 sale of investments in subsidiaries . . . . . . . . . . . . . . . . . . Net decrease (increase) in short-term loans receivables . . . . . . . . . . . . . Disbursements for long-term loans receivables . . . . . . . . . . . . . . . . . . . Collections of long-term loans receivables . . . . . . . . . . . . . . . . . . . . . . . Purchase of shares of subsidiaries resulting in change in scope of consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥ 58,332 ¥ 71,710 $ 485,412 87,804 10,198 (4,930) 2,356 (1,560) 377 (9,625) 12,556 (13,380) (24,801) (28,223) 11,750 19,756 (11,878) 108,732 12,411 (13,107) (15,541) 92,495 (14,594) 1,770 (186,317) 74,184 8,706 (4,526) (59,942) 27,957 (6,258) (131) (159,151) 59,030 5,500 107,951 (203,117) 95,280 (45,000) (57) 68 (7,177) (3,959) (2,008) 6,511 8,006 (52,139) 180,126 815 83,984 6,448 1,234 (13,899) (19,536) 13,035 (9,341) 12,583 (391) (15,671) 5,042 1,046 (3,875) (27,584) 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 1,617 730,665 84,863 (41,025) 19,606 (12,982) 3,137 (80,095) 104,485 (111,342) (206,383) (234,859) 97,778 164,400 (98,842) 904,818 103,279 (109,071) (129,325) 769,701 (121,445) 14,729 (1,550,445) 617,325 72,447 (37,663) (498,810) 232,645 (52,076) (1,089) (1,324,382) 491,221 45,768 898,319 (1,690,247) 792,877 (374,470) (474) 566 (59,724) (32,945) (16,709) 54,182 66,622 (433,877) 1,498,927 6,782 Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . ¥ 128,802 ¥ 180,126 $ 1,071,832 See accompanying notes. 80 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 80 15MOL英文財務p75_111_0723入稿.indd 80 2015/07/23 17:35 2015/07/23 17:35 Notes to Consolidated Financial Statements Mitsui O.S.K. Lines, Ltd. Years ended March 31, 2015 and 2014 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 adjusted according to ASBJ PITF No. 18. The accompanying consolidated ﬁ nancial statements have been restructured and translated into English (with some expanded descriptions) from the consolidated ﬁ nancial statements of Mitsui O.S.K. Lines, Ltd. (the “Company”) prepared in accordance with Japanese GAAP and ﬁ led with the appropri- ate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. Some supplemen- tary information included in the statutory Japanese language consolidated ﬁ nancial statements, but not required for fair presentation, 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, 2015, which was ¥120.17 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 The consolidated ﬁ nancial statements include the accounts of the Company and 371 subsidiaries for the year ended March 31, 2015 (357 subsidiaries for the year ended March 31, 2014). 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 are accounted for by the equity method. Companies accounted for using the equity method include 70 afﬁ liated companies for the year ended March 31, 2015, and 73 afﬁ liated com- panies for the year ended March 31, 2014. Investments in other subsidiaries and afﬁ liated companies 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 income. 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. (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. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 81 15MOL英文財務p75_111_0723入稿.indd 81 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 81 (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 com- panies 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 income 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 AND AMORTIZATION 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. Amortization of intangible assets is computed by the straight-line method. Computer software is amortized by the straight-line method based principally on the length of period it can be used inter- nally (ﬁ ve years). 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 ¥5,139 million ($42,764 thousand) for the year ended March 31, 2015 and ¥2,802 million for the year ended March 31, 2014. (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 domestic subsidiaries of the company recognize liabilities for retirement beneﬁ ts for directors and corporate auditors at an amount required in accordance with the internal regulations. 82 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 82 15MOL英文財務p75_111_0723入稿.indd 82 2015/07/23 17:35 2015/07/23 17:35 (12) EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS The Company and its consolidated subsidiaries (the “Group”) recognized net deﬁ ned beneﬁ t assets and net deﬁ ned beneﬁ t liabili- ties for employees’ severance and retirement beneﬁ ts and retirement beneﬁ ts based on the estimated amounts of projected beneﬁ t obligation and the fair value of the plan assets at end of the year. Projected beneﬁ t obligations are attributed to each period by the straight-line method. Actuarial gains and losses are recognized in the statements of income 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) RESERVE FOR PERIODIC DRYDOCKING Reserve for periodic drydocking is based on the estimated amount of expenditures for periodic drydocking in the future. (14) INCOME TAXES The Group recognizes tax effects of temporary differences between the ﬁ nancial statement basis and the tax basis of assets and lia- bilities. The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences. (15) AMOUNTS PER SHARE OF COMMON STOCK Net income 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. 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. (16) 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. 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. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 83 15MOL英文財務p75_111_0723入稿.indd 83 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 83 (17) RECLASSIFICATIONS Certain prior year amounts have been reclassiﬁ ed to conform to the 2015 presentation. (18)CHANGES IN ACCOUNTING POLICIES Application of accounting standards for retirement beneﬁ ts The Group adopted article 35 of the Accounting Standard for Retirement Beneﬁ ts (ASBJ Statement No.26, May 17, 2012 (“Statement No.26”) and article 67 of the Guidance on Accounting Standard for Retirement Beneﬁ ts (ASBJ Guidance No.25, March 26, 2015 (“Guidance No.25”) from the year ended March 31, 2015, and have changed the determination of retirement beneﬁ t obligations and current service costs. In accordance with article 37 of Statement No.26, the effect of changing the determination of retirement beneﬁ t obligations and current service costs has been recognized in retained earnings at the beginning of the year. As a result of the application, net deﬁ ned beneﬁ t assets decreased by ¥4,570 million ($38,029 thousand), net deﬁ ned beneﬁ t liabilities decreased by ¥5 million ($42 thousand), and retained earnings decreased by ¥4,567 million ($38,004 thousand) at the beginning of the year ended March 31, 2015. The effect of this change on the consolidated statement of income is immaterial. (19)ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED Revised Accounting Standard for Business Combinations (ASBJ Statement No.21, September 13, 2013), Revised Accounting Standard for Consolidated Financial Statements (ASBJ Statement No.22, September 13, 2013), Revised Accounting Standard for Business Divestitures (ASBJ Statement No.7, September 13, 2013), Revised Accounting Standard for Earnings Per Share (ASBJ Statement No.2, September 13, 2013), Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No.10, September 13, 2013) and Revised Guidance on Accounting Standard for Earnings Per Share (ASBJ Guidance No.4, September 13, 2013). 1. Summary The above standards and guidance have been revised primarily to account for: I. How the changes of the shares in subsidiaries, over which the Company continues to maintain control, should be treated by the Company when additional stock of a subsidiary is acquired. II. Treatment of acquisition related costs. III. Presentation of current net income and the change of shareholder’s equity from minority interests to non-controlling interests. IV. Provisional application of accounting treatments. 2. Effective dates These standards will be effective from the beginning of the year ending March 31, 2016. Provisional application of the accounting standards is scheduled to begin for business combinations effective after the beginning of the ﬁ scal year ending March 31, 2016. 3. Effect of application of the standard The Group is currently assessing the effects of these new standards on the consolidated ﬁ nancial statements. 84 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 84 15MOL英文財務p75_111_0723入稿.indd 84 2015/07/23 17:35 2015/07/23 17:35 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 primarily through bank loans. Furthermore, we have established commitment line with Japanese banks to maintain a sufﬁ cient amount of working capital and prepare supplementary liquidity for emergency situa- tions. 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 bank 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 bank 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 corporate 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 effectiveness), see Note 2 (16) 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 lines with several ﬁ nancial institutions, and adjusting the 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. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 85 15MOL英文財務p75_111_0723入稿.indd 85 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 85 (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, 2015 were the following; Millions of yen Book Value Fair Value Difference Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 128,802 ¥ 128,802 ¥ — 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 2,821 178,845 5,556 120,583 76,265 2,821 178,845 5,556 120,583 82,282 ¥ 512,872 ¥ 518,889 — — — — 6,017 ¥ 6,017 Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 167,002 ¥ 167,002 ¥ — Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds(*2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bank loans(*3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,203 5,500 285,185 793,518 74,203 5,500 288,298 807,099 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥1,325,408 ¥1,342,102 Derivative ﬁ nancial instruments(*4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 153,519 ¥ 153,082 — — 3,113 13,581 ¥16,694 ¥ (437) Thousands of U.S. dollars (Note 1) Book Value Fair Value Difference Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,071,832 $ 1,071,832 $ — Time deposits with a maturity of more than three months . . . . . . . . . . . . . . . . 23,475 23,475 Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,488,267 1,488,267 Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,235 46,235 Investment securities Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,003,437 1,003,437 — — — — Long-term loans receivable(*1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634,643 684,713 50,070 Total Liabilities $ 4,267,889 $ 4,317,959 $ 50,070 Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,389,715 $ 1,389,715 $ — Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds(*2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bank loans(*3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617,484 45,768 2,373,180 6,603,295 617,484 45,768 2,399,085 6,716,310 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,029,442 $11,168,362 Derivative ﬁ nancial instruments(*4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,277,515 $ 1,273,879 — — 25,905 113,015 $138,920 $ (3,636) *1 The book value of long-term loans receivable includes current portion amounting to ¥1,306 million ($10,868 thousand). *2 The book value of bonds includes current portion amounting to ¥15,000 million ($124,823 thousand). *3 The book value of long-term bank loans includes current portion amounting to ¥105,186 million ($875,310 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. 86 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 86 15MOL英文財務p75_111_0723入稿.indd 86 2015/07/23 17:35 2015/07/23 17:35 Book values and fair values of the ﬁ nancial instruments on the consolidated balance sheet at March 31, 2014 were 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 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 — — — — 5,733 ¥5,733 ¥ — — 5,453 2,564 ¥8,017 ¥ (400) *1 The book value of long-term loans receivable includes current portion amounting to ¥3,496 million. *2 The book value of bonds includes current portion amounting to ¥45,000 million. *3 The book value of long-term bank loans includes current portion amounting to ¥90,492 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. 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 book value because the interest rate reﬂ ects the market rate in the short term and their fair value is almost equal to the book value, unless the creditworthiness of the borrower 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 rate corporate bonds without market price is evaluated at the book value because the interest rate reﬂ ects the market rate in the short term and there has been no signiﬁ cant change in the Company’s creditworthiness before and after the issue. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 87 15MOL英文財務p75_111_0723入稿.indd 87 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 87 Long-term bank loans The fair value of long-term bank loans with variable interest rates is evaluated at book value because the interest rate reﬂ ects the market rate in the short term and there has been no signiﬁ cant change in the Company’s creditworthiness 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 currency swap is evaluated at the book value because such bank loans were deemed as the variable interest rate bank loans and the interest rate reﬂ ects the market rate in the 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. Unlisted stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) Book Value Book Value Book Value 2015 2014 ¥7,821 11 ¥7,832 ¥7,627 17 ¥7,644 2015 $65,083 92 $65,175 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, 2015, 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 (Governmental/municipal bonds) . . . . . . . . . . . . . . . . . . . . Available-for-sale securities (Corporate bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Within a year ¥128,802 2,821 178,845 5,556 — — 1,306 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥317,330 Millions of yen After one year through ﬁ ve years ¥ — — After ﬁ ve years through ten years ¥ — — After ten years ¥ — — — — 10 200 — — — — — — — — 44,390 ¥44,600 2,805 ¥2,805 27,764 ¥27,764 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 $1,071,832 23,475 After ten years $ — — Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,488,267 Short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 46,235 Marketable securities and investments securities Available-for-sale securities (Governmental/municipal bonds) . . . . . . . . . . . . . . . . . . . . Available-for-sale securities (Corporate bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . — — 10,868 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,640,677 — — 83 1,664 369,393 $371,140 — — — — — — — — 23,342 $23,342 231,040 $231,040 88 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 88 15MOL英文財務p75_111_0723入稿.indd 88 2015/07/23 17:35 2015/07/23 17:35 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 (Governmental/municipal bonds) . . . . . . . . . . . . . . . . . . . . Available-for-sale securities (Corporate bonds) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Within a year ¥180,126 1,023 146,787 1,445 10 — 3,496 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥332,887 Millions of yen After one year through ﬁ ve years ¥ — — After ﬁ ve years through ten years ¥ — — After ten years ¥ — — — — — — — — — — — — 23,134 ¥23,134 200 6,745 ¥6,945 — 7,640 ¥7,640 4. SECURITIES A. The following tables summarize acquisition costs, book values and fair values of securities with available fair values at March 31, 2015 and 2014. Available-for-sale securities: Securities with book values exceeding acquisition costs at March 31, 2015 Type Millions of yen Acquisition cost Book Value Difference Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥48,766 ¥115,824 ¥67,058 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 215 15 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥48,966 ¥116,039 ¥67,073 Type Thousands of U.S. dollars (Note 1) Acquisition cost Book Value Difference Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $405,809 $963,835 $558,026 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,664 1,789 125 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $407,473 $965,624 $558,151 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 226 16 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥41,908 ¥94,008 ¥52,100 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 89 15MOL英文財務p75_111_0723入稿.indd 89 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 89 Securities with book values not exceeding acquisition costs at March 31, 2015 Type Millions of yen Acquisition cost Book Value Difference Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥5,456 10 ¥5,466 ¥4,534 10 ¥4,544 ¥(922) 0 ¥(922) Type Thousands of U.S. dollars (Note 1) Acquisition cost Book Value Difference Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,402 $37,730 $(7,672) Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 83 0 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,485 $37,813 $(7,672) 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥11,545 ¥9,409 ¥(2,136) B. Total sales of available-for-sale securities sold in the years ended March 31, 2015 and 2014 and the related gains and losses were as follows: Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥290 134 — ¥3,880 1,200 214 $2,413 1,115 — C. Impairment losses of securities No impairment loss on the securities was recognized for the year ended March 31, 2015. For the year ended March 31, 2014, the Company reduced the book value on the securities and booked the reductions as impairment losses of ¥106 million. 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. 5. INVENTORIES Inventories as of March 31, 2015 and 2014 consisted of the following: Fuel and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 ¥48,030 996 ¥49,026 2014 ¥58,211 1,138 ¥59,349 2015 $399,684 8,288 $407,972 90 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 90 15MOL英文財務p75_111_0723入稿.indd 90 2015/07/23 17:35 2015/07/23 17:35 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, 2015 and 2014, for which hedge accounting has not been applied. (1) Currency related: Forward currency exchange contracts Sell (U.S. dollar): Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buy (U.S. dollar): Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buy (Others): Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥ — — ¥467 1 ¥ 24 0 ¥15,438 (1) ¥ 25 0 ¥ 22 1 $ — — $3,886 8 $ 200 0 Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 (2) Interest related Interest rate swaps Receive ﬂ oating, pay ﬁ xed Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥40,183 (1,213) ¥39,046 $334,385 (1,966) (10,094) 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. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 91 15MOL英文財務p75_111_0723入稿.indd 91 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 91 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, 2015 and 2014, for which hedge accounting has been applied. Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 (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 $ — Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (415) — Buy (U.S. dollar): Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥ 18,661 $ — Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,460 — b. Currency swaps contracts to hedge the risk for charterages Sell (U.S. dollar): Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 7,669 ¥ 8,022 $ 63,818 Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,664) (435) (13,847) Buy (U.S. dollar): Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥453,024 182,171 ¥507,607 $3,769,859 88,264 1,515,944 c. Interest rate swaps to hedge the risk for the long-term bank loans and charterages Receive ﬂ oating, pay ﬁ xed Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥290,387 ¥228,282 $2,416,468 Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,451) (7,133) (178,505) Receive ﬁ xed, pay ﬂ oating Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥ 5,810 $ — Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 136 — d. Commodities futures to hedge the risk for the fuel oil Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 11,907 ¥ 23,486 $ 99,085 Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,324) 461 (35,982) e. Freight futures to hedge the risk for the freight Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥ 649 $ — Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (77) — Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 (2) Special treatment Interest rate swaps to hedge the risk for the long-term bank loans Receive ﬂ oating, pay ﬁ xed Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥20,550 ¥18,687 $171,008 Fair values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (437) (400) (3,637) Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 (3) Allocation method Currency swaps to hedge the risk for the foreign bonds and long-term bank loans Contracts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥31,781 ¥31,788 $264,467 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. 92 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 92 15MOL英文財務p75_111_0723入稿.indd 92 2015/07/23 17:35 2015/07/23 17:35 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 7. SHORT-TERM DEBT AND LONG-TERM DEBT (1) SHORT-TERM DEBT Short-term debt amounting to ¥79,703 million ($663,252 thousand) and ¥14,697 million at March 31, 2015 and 2014, respec- tively, were principally unsecured. The average interest rates on short-term debt were 0.52% and 0.56%, respectively. (2) LONG-TERM DEBT Long-term debt at March 31, 2015 and 2014 consisted of the following: Bonds: 1.278% yen bonds due 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥ 30,000 $ — Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.000% U.S. dollars bonds due 2018* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.999% yen bonds due 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.670% yen bonds due 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.400% yen bonds due 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.000% U.S. dollars 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.970% yen bonds due 2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.803% yen bonds due 2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bank loans due within one year: — 15,000 10,000 15,000 20,000 20,000 36,051 18,500 10,000 15,000 24,034 17,800 5,000 9,200 10,000 15,000 29,600 15,000 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 — — — 124,823 83,215 124,823 166,431 166,431 300,000 153,949 83,215 124,823 200,000 148,124 41,608 76,558 83,215 124,823 246,319 124,823 Long-term bank loans due within one year at average interest rate of 0.64% and 0.70% at March 31, 2015 and 2014, respectively.. . . . . . . . . . . . . . . . . 105,186 90,492 875,310 Long-term bank loans due after one year: Long-term bank loans due through 2034 at average interest rate of 1.20% and 0.98% at March 31, 2015 and 2014, respectively.. . . . . . . . . . . . . . . . . 688,332 740,038 1,078,703 1,056,030 Amount due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,186 135,492 5,727,985 8,976,475 1,000,133 ¥ 958,517 ¥ 920,538 $7,976,342 *Zero coupon convertible bonds, details are as follows. (1) Exercise period (2) Conversion price The 2018 Bonds The 2020 Bonds From May 8,2014 to April 10, 2018 U.S.$ 5.34 per share From May 8, 2014 to April 9, 2020 U.S.$ 4.80 per share At March 31, 2015, the aggregate annual maturity of long-term debt was as follows: Year ending March 31 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen ¥ 120,186 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 and thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,850 115,864 148,095 80,220 477,488 Thousands of U.S. dollars (Note 1) $1,000,133 1,138,803 964,167 1,232,379 667,555 3,973,438 ¥1,078,703 $8,976,475 Annual Report 2015 93 15MOL英文財務p75_111_0723入稿.indd 93 15MOL英文財務p75_111_0723入稿.indd 93 2015/07/23 17:35 2015/07/23 17:35 (3) ASSETS PLEDGED AND SECURED DEBT At March 31, 2015, the following assets were pledged as collateral for short-term debt and long-term debt. Assets pledged Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥202,454 ¥177,092 $1,684,729 Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vessels and other property under construction . . . . . . . . . . . . . . . . . . . . . . . . . . Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt — 90,908 73,811 136 72,953 60,148 — 756,495 614,222 ¥367,173 ¥310,329 $3,055,446 Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 10 ¥ 50 $ 83 Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,759 156,237 11,906 132,540 114,496 1,300,133 ¥170,006 ¥144,496 $1,414,712 8. COMMITMENTS AND CONTINGENT LIABILITIES (A) COMMITMENT At March 31, 2015 and 2014, the Company had loan commitment agreements with certain afﬁ liated companies. The nonexercised portion of loan commitments was as follows: Total loan limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loan executions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 ¥15,622 — 2014 2015 ¥14,409 $130,000 — — The nonexercised portion of loan commitments . . . . . . . . . . . . . . . . . . . . . . . . ¥15,622 ¥14,409 $130,000 (B) CONTINGENT LIABILITIES At March 31, 2015 and 2014, 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 ¥112,360 million ($935,009 thousand) and ¥78,169 million, respectively. 94 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 94 15MOL英文財務p75_111_0723入稿.indd 94 2015/07/23 17:35 2015/07/23 17:35 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. (A) SHARES ISSUED AND OUTSTANDING Changes in number of shares issued and outstanding during the years ended March 31, 2015 and 2014 were as follows: Balance at April 1, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares of common stock (Thousands) 1,206,286 Shares of treasury stock (Thousands) 10,502 — — 145 (274) Balance at March 31 and April 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,206,286 10,373 Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 150 (337) Balance at March 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,206,286 10,186 (B) SHARE SUBSCRIPTION RIGHTS Share subscription rights at March 31, 2015 and 2014 consisted of the following: Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (C) DIVIDENDS (1) Dividends paid for the year ended March 31, 2015 were as follows: Millions of yen 2015 2014 ¥2,553 ¥2,553 ¥2,391 ¥2,391 Thousands of U.S. dollars (Note 1) 2015 $21,245 $21,245 Approved at the shareholders’ meeting held on June 24, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . Approved at the board of directors held on October 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen ¥3,588 Thousands of U.S. dollars (Note 1) $29,858 ¥3,588 ¥7,176 $29,858 $59,716 (2) Dividends included in the retained earnings at March 31, 2015 and to be paid in subsequent periods were as follows: Approved at the shareholders’ meeting held on June 23, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen ¥4,784 Thousands of U.S. dollars (Note 1) $39,810 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥4,784 $39,810 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 95 15MOL英文財務p75_111_0723入稿.indd 95 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 95 10. IMPAIRMENT LOSS For the year ended March 31, 2015, the Group recorded an impairment loss on the following asset group. Assets to be disposed of by sale Application Type Vessels and Other Millions of yen ¥10,198 Thousands of U.S. dollars (Note 1) $84,863 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 5,950 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 years ended March 31, 2015 and 2014, 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. 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) 2015 2014 2015 Others, net: Exchange gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 25,523 ¥11,392 $212,391 Gain on sale of vessels, property, equipment and others. . . . . . . . . . . . . . . . . Loss on sale and disposal of vessels, property, equipment and others . . . . . . . Loss arising from marine accident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,225 (2,853) — Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,198) Gain on change in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sundries, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,867 6,519 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 39,083 7,095 (6,702) (2,397) (6,448) 164 31,990 ¥35,094 135,017 (23,741) — (84,863) 32,179 54,247 $325,230 96 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 96 15MOL英文財務p75_111_0723入稿.indd 96 2015/07/23 17:35 2015/07/23 17:35 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, 2015 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 ¥2,425 2,401 ¥ 24 Millions of yen Others Total ¥190 162 ¥ 28 ¥2,615 2,563 ¥ 52 Thousands of U.S. dollars (Note 1) Equipment, mainly containers $20,180 19,980 $ 200 Others $1,581 1,348 $ 233 Total $21,761 21,328 $ 433 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 97 15MOL英文財務p75_111_0723入稿.indd 97 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 97 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Future lease payments at March 31, 2015 and 2014 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equipment, mainly containers ¥16,243 15,855 ¥ 388 Millions of yen Others ¥190 144 ¥ 46 Total ¥16,433 15,999 ¥ 434 Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥123 13 ¥136 ¥1,221 122 ¥1,343 $1,024 108 $1,132 Millions of yen Thousands of U.S. dollars (Note 1) 2015 ¥1,340 385 41 2014 ¥2,234 796 49 2015 $11,151 3,204 341 (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. (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, 2015 AND 2014: Amount due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 ¥ 54,586 264,331 ¥318,917 2014 2015 ¥ 48,825 $ 454,240 256,912 2,199,642 ¥305,737 $2,653,882 98 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 98 15MOL英文財務p75_111_0723入稿.indd 98 2015/07/23 17:35 2015/07/23 17:35 AS LESSOR: (A) FUTURE LEASE INCOME UNDER OPERATING LEASES FOR ONLY NON-CANCELABLE CONTRACTS AT MARCH 31, 2015 AND 2014: Amount due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 ¥13,212 46,912 ¥60,124 2014 ¥13,021 40,325 ¥53,346 2015 $109,944 390,381 $500,325 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: For the year ended March 31 Book value Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Balance at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥280,120 ¥279,130 $2,331,031 Changes during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,898 317,018 432,440 990 307,048 280,120 381,024 2,638,079 3,598,569 Notes: 1. Book value is calculated as the amount equivalent to the cost for acquisition deducting accumulated depreciation. 2. Fair value is mainly based on the amount appraised by outside independent real estate appraisers. 3. Of changes during the year ended March 31, 2015,the primary increase was mainly due to completion of the Shin-Daibiru Building (¥20,822 million ($173,271 thousand)), acquisition of the CornerStone Building (¥11,135 million ($92,660 thou- sand)), and the acquisition of land near Akihabara Station from the Tokyo Metropolitan Government (¥7,151 million ($59,507 thousand)), while the primary decrease was mainly due to the depreciation of existing properties (¥6,176 million ($51,394 thousand)). In addition, information for rental revenue and expense from rental properties was as follows: Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 ¥27,058 16,041 ¥11,017 2014 ¥26,992 15,447 ¥11,545 2015 $225,164 133,486 $ 91,678 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”. l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 99 15MOL英文財務p75_111_0723入稿.indd 99 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 99 14. SEGMENT AND RELATED INFORMATION (A) SEGMENT INFORMATION: For the year ended March 31, 2015: 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 . . . . . . . . . . ¥ 857,290 ¥787,068 ¥56,032 ¥108,389 ¥1,808,779 ¥ 8,291 ¥1,817,070 ¥ — ¥1,817,070 (2) Inter-segment revenues . . . . . . . . 526 2,063 272 39,775 42,636 5,920 48,556 (48,556) — Total revenues . . . . . . . . . . . . . . . ¥ 857,816 ¥789,131 ¥56,304 ¥148,164 ¥1,851,415 ¥ 14,211 ¥1,865,626 ¥ (48,556) ¥1,817,070 Segment income (loss) . . . . . . . . ¥ 54,105 ¥ (24,147) ¥ 4,462 ¥ 10,925 ¥ 45,345 ¥ 4,183 ¥ 49,528 ¥ 1,802 ¥ 51,330 Segment assets . . . . . . . . . . . . . . ¥1,719,714 ¥496,487 ¥40,535 ¥426,130 ¥2,682,866 ¥346,183 ¥3,029,049 ¥(404,999) ¥2,624,050 2. Others (1) Depreciation and amortization . . ¥ 59,234 ¥ 16,109 ¥ 2,279 ¥ 8,511 ¥ 86,133 ¥ 283 ¥ 86,416 ¥ 1,388 ¥ 87,804 (2) Amortization of goodwill, net . . . (3) Interest income . . . . . . . . . . . . . . (4) Interest expenses. . . . . . . . . . . . . (307) 2,019 10,632 (5) Equity in earnings of afﬁ liated companies, net . . . . . . . 3,286 (6) Investment in afﬁ liates . . . . . . . . 110,452 17 261 2,314 1,096 4,873 45 3 170 225 1,694 130 62 1,780 269 1,971 (115) 2,345 14,896 (9) (124) 1,390 723 3,735 15,619 — (1,030) (3,063) (124) 2,705 12,556 4,876 54 4,930 118,990 1,967 120,957 — — 4,930 120,957 (7) Tangible/intangible ﬁ xed assets increased . . . . . . . . . . . . . . . . . . 138,059 21,783 3,193 32,341 195,376 182 195,558 587 196,145 For the year ended March 31, 2015: 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 . . . . . . . . . . $ 7,133,977 $6,549,621 $466,273 $ 901,964 $15,051,835 $ 68,994 $15,120,829 $ — $15,120,829 (2) Inter-segment revenues . . . . . . . . 4,377 17,167 2,264 330,989 354,797 49,264 404,061 (404,061) — Total revenues . . . . . . . . . . . . . . . $ 7,138,354 $6,566,788 $468,537 $1,232,953 $15,406,632 $ 118,258 $15,524,890 $ (404,061) $15,120,829 Segment income (loss) . . . . . . . . $ 450,237 $ (200,940) $ 37,130 $ 90,913 $ 377,340 $ 34,809 $ 412,149 $ 14,996 $ 427,145 Segment assets . . . . . . . . . . . . . . $14,310,676 $4,131,539 $337,314 $3,546,060 $22,325,589 $2,880,777 $25,206,366 $(3,370,217) $21,836,149 2. Others (1) Depreciation and amortization . . $ 492,918 $ 134,052 $ 18,965 $ 70,825 $ 716,760 $ 2,355 $ 719,115 $ 11,550 $ 730,665 (2) Amortization of goodwill, net . . . (3) Interest income . . . . . . . . . . . . . . (4) Interest expenses. . . . . . . . . . . . . (5) Equity in earnings of afﬁ liated companies, net . . . . . . . (6) Investment in afﬁ liates . . . . . . . . (7) Tangible/intangible ﬁ xed assets increased . . . . . . . . . . . . . . . . . . (2,554) 16,801 88,475 141 2,172 374 25 1,082 516 (957) 19,514 19,256 1,415 14,812 123,958 (75) 11,567 6,016 (1,032) 31,081 — (8,571) (1,032) 22,510 129,974 (25,489) 104,485 27,345 919,131 9,120 1,872 40,551 14,097 2,239 16,402 40,576 449 41,025 990,181 16,368 1,006,549 — — 41,025 1,006,549 1,148,864 181,268 26,571 269,127 1,625,830 1,515 1,627,345 4,884 1,632,229 100 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 100 15MOL英文財務p75_111_0723入稿.indd 100 2015/07/23 17:35 2015/07/23 17:35 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 — (690) (190) 2,319 15,173 (2,590) 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 (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, 2015: Japan North America Europe Asia Others Consolidated Revenues . . . . . . . . . . . . . . . . . . . . . . ¥1,538,042 Tangible ﬁ xed assets. . . . . . . . . . . . . . ¥1,229,237 ¥25,044 ¥42,750 ¥37,939 ¥ 4,055 ¥215,453 ¥197,392 ¥ 592 ¥24,594 ¥1,817,070 ¥1,498,028 Millions of yen For the year ended March 31, 2015: Japan North America Europe Asia Others Consolidated Revenues . . . . . . . . . . . . . . . . . . . . . . $12,798,885 $208,405 $315,711 $1,792,902 $ 4,926 $15,120,829 Tangible ﬁ xed assets. . . . . . . . . . . . . . $10,229,151 $355,746 $ 33,744 $1,642,606 $204,660 $12,465,907 Thousands of U.S. dollars (Note 1) 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 (2) Information about impairment loss by reportable segment: For the year ended March 31, 2015: Bulkships Millions of yen Reportable segment Container- ships Ferry & Domestic transport Associated business Sub Total Others Adjustment and elimination Consolidated Impairment loss . . . . . . . . . . . . . . . . ¥10,049 ¥ — ¥50 ¥ — ¥10,099 ¥ — ¥99 ¥10,198 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 101 15MOL英文財務p75_111_0723入稿.indd 101 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 101 For the year ended March 31, 2015: 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 . . . . . . . . . . . . . . . . $83,623 $ — $416 $ — $84,039 $ — $824 $84,863 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 (3) Information about goodwill (negative goodwill) by reportable segment: For the year ended March 31, 2015: 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 . . . . . . . . . . ¥128 ¥364 ¥ — ¥2,508 ¥3,000 ¥1 ¥ — ¥3,001 For the year ended March 31, 2015: 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 . . . . . . . . . . $1,065 $3,029 $ — $20,871 $24,965 $8 $ — $24,973 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 ¥ — ¥1,573 102 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 102 15MOL英文財務p75_111_0723入稿.indd 102 2015/07/23 17:35 2015/07/23 17:35 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 31.75% for the year ended March 31, 2015 and 34.25% for the year ended March 31, 2014. (A) Signiﬁ cant components of deferred tax assets and liabilities at March 31, 2015 and 2014 were as follows: Deferred tax assets: Excess bad debt expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,011 ¥ 787 $ 8,413 Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Reserve for bonuses 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities: Reserve deductible for tax purposes when appropriated for deferred gain on real properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,546 2,386 526 1,861 450 53,557 1,548 661 4,300 67,846 (61,414) 6,432 1,590 2,726 655 1,791 410 12,865 19,855 4,377 15,486 3,745 54,982 445,677 1,675 1,351 5,003 70,970 (64,817) 6,153 12,882 5,501 35,783 564,584 (511,060) 53,524 (1,897) (1,920) (15,786) (555) (760) (4,618) (22,760) (2,809) (15,436) (10,073) (53,880) (2,597) (19,391) (3,667) (14,566) (11,591) (31,373) (333) (83,601) (189,398) (23,375) (128,451) (83,823) (448,366) (21,612) (915,429) Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110,007) Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(103,575) ¥(77,448) $(861,905) On March 31, 2015, amendments to the Japanese tax regulations were enacted into law. Based on the amendments, the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities expected to be settled or realized from April 1, 2015 to March 31, 2016 and on or after April 1, 2016 are changed from 31.75% for the year ended March 31, 2015 to 29.75% and 29.50%, respectively, as of March 31, 2015. Due to these changes in statutory income tax rates, net deferred tax liabilities (after deducting the deferred tax assets) decreased by ¥7,269 million ($60,489 thousand) as of March 31, 2015, deferred income tax expense recognized for the ﬁ scal year ended March 31, 2015 decreased by ¥1,155 million ($9,611 thousand), unrealized holding gains on available-for-sale securities increased by ¥1,819 million ($15,137 thousand), unrealized gains on hedging derivatives increased by ¥4,164 million ($34,651 thousand) and remeasurements of deﬁ ned beneﬁ t plans increased by ¥132 million ($1,098 thousand). l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 103 15MOL英文財務p75_111_0723入稿.indd 103 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 103 (B) Reconciliation of the statutory tax rate to the effective tax rate for the years ended March 31, 2014 and 2015, were as follows: Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . Non-deductible expenses . . . . . . . . . . . . . . . Tax exempt revenues . . . . . . . . . . . . . . . . . . Effect on tonnage tax system . . . . . . . . . . . . Effect on elimination of dividend income . . . Equity in earnings of unconsolidated subsidiaries and afﬁ liated companies . . . . . . Effect on elimination of loss on valuation of stocks of subsidiaries and afﬁ liates . . . . . . . Effect on difference of effective tax rate for consolidated subsidiaries . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . 2015 31.8% 0.5% (7.8)% (12.2)% 22.9% 2014 Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . 34.3 % Non-deductible expenses . . . . . . . . . . . . . . . Tax exempt revenues . . . . . . . . . . . . . . . . . . Effect on tonnage tax system . . . . . . . . . . . . 0.5 % (4.3)% (6.6)% Effect on net loss carried forward . . . . . . . . . (18.3)% (2.3)% Effect on elimination of dividend income . . . 10.6 % (5.0)% Effect on elimination of loss on valuation of stocks of subsidiaries and afﬁ liates . . . . . . . (2.6)% (10.3)% Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.7)% (0.7)% 16.9% Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . 12.9 % 16. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS (A) OUTLINE OF EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS The Group have funded and un-funded deﬁ ned beneﬁ t pension plans and deﬁ ned contribution pension plans. The deﬁ ned beneﬁ t corporate pension plans provide for a lump-sum payment or annuity payment determined by reference to the current rate of pay and the length of service. The Company has a retirement beneﬁ t trust. The retirement lump-sum plans provide for a lump-sum payment, as employee retirement beneﬁ ts, determined by reference to the current rate of pay and the length of service. Certain consolidated subsidiaries calculate liabilities for retirement beneﬁ t and retirement beneﬁ t expenses, for the deﬁ ned beneﬁ t corporate pension plans and the retirement lump-sum plans based on the amount which would be payable at the year end if all eligible employees terminated their services voluntarily (a “simpliﬁ ed method”). (B) DEFINED BENEFIT PLANS (1) MOVEMENTS IN RETIREMENT BENEFIT OBLIGATIONS EXCEPT PLAN APPLIED SIMPLIFIED METHOD Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Balance at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥41,743 ¥42,258 $347,366 Cumulative effect of changes in accounting policies . . . . . . . . . . . . . . . . . . . . Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Beneﬁ ts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,565 1,723 497 (733) (2,294) — 1,484 837 (326) (2,510) 37,988 14,338 4,136 (6,100) (19,090) Balance at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥45,612 ¥41,743 $379,562 (2) MOVEMENTS IN PLAN ASSETS EXCEPT PLAN APPLIED SIMPLIFIED METHOD Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Balance at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥59,906 ¥56,636 $498,510 Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributions paid by the employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,198 5,845 1,293 Beneﬁ ts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,073) 1,133 3,191 1,189 (2,243) 9,969 48,639 10,760 (17,250) Balance at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥66,169 ¥59,906 $550,628 104 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 104 15MOL英文財務p75_111_0723入稿.indd 104 2015/07/23 17:35 2015/07/23 17:35 (3) MOVEMENTS IN NET LIABILITY FOR RETIREMENT BENEFITS BASED ON THE SIMPLIFIED METHOD Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Balance at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 9,899 ¥10,918 $82,375 Retirement beneﬁ t costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Beneﬁ ts paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributions paid by the employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,824 (267) (1,192) 1,237 (1,473) (783) 15,178 (2,222) (9,919) Balance at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥10,264 ¥ 9,899 $85,412 (4) RECONCILIATION FROM RETIREMENT BENEFIT OBLIGATIONS AND PLAN ASSETS TO LIABILITY (ASSET) FOR RETIREMENT BENEFITS INCLUDING PLAN APPLIED SIMPLIFIED METHOD Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Funded retirement beneﬁ t obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 53,665 ¥ 49,534 $ 446,576 Plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unfunded retirement beneﬁ t obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total net liability (asset) for retirement beneﬁ ts at end of the year . . . . . . . . . . . Asset for retirement beneﬁ ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75,930) (22,265) 11,862 (10,403) 13,660 (68,750) (19,216) 10,952 (8,264) 12,936 (631,855) (185,279) 98,710 (86,569) 113,672 Liability for retirement beneﬁ ts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total net liability (asset) for retirement beneﬁ ts at end of the year . . . . . . . . . . . (24,063) ¥ (10,403) (21,200) ¥ (8,264) (200,241) $ (86,569) (5) RETIREMENT BENEFIT COSTS Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,723 ¥ 1,484 $14,338 Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net actuarial loss amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement beneﬁ t costs calculated by the simpliﬁ ed method. . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497 (1,198) (715) 1,476 157 837 (1,133) (1,111) 1,237 287 Total retirement beneﬁ t costs for the ﬁ scal year . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 1,940 ¥ 1,601 4,136 (9,969) (5,950) 12,283 1,306 $16,144 (6) REMEASUREMENTS OF DEFINED BENEFIT PLANS Actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(5,863) ¥— $(48,789) Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 (7) ACCUMULATED REMEASUREMENTS OF DEFINED BENEFIT PLANS Unrecognized actuarial differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(7,626) ¥(1,763) $(63,460) Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 105 15MOL英文財務p75_111_0723入稿.indd 105 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 105 (8) PLAN ASSETS 1. Plan assets comprise Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jointly invested assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement beneﬁ t trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 2014 47% 22% 18% 13% 0% 100% 37% 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. (9) ACTUARIAL ASSUMPTIONS The discount rates ware mainly 0.6%~1.2% for the year ended March 31, 2015 and 2.0% for the year ended March 31, 2014. Also, the rates of expected return on plan assets were mainly 2.0% for the years ended March 31, 2015 and 2014. (C) DEFINED CONTRIBUTION PLANS The estimated amounts of contributions to deﬁ ned contribution plans were ¥747 million ($6,216 thousand) at March 31, 2015 and ¥855 million at March 31, 2014. 106 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 106 15MOL英文財務p75_111_0723入稿.indd 106 2015/07/23 17:35 2015/07/23 17:35 17. STOCK OPTIONS (A) EXPENSED AMOUNT Expensed amounts on stock options for the years ended March 31, 2015 and 2014 were as follows: Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥195 ¥195 ¥275 ¥275 $1,623 $1,623 (B) TERMS AND CONDITIONS The following table summarizes terms and conditions of stock options for the years when they were granted: Number of grantees 2004 2005 2006 2007 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 Directors: 11 Executive ofﬁ cers: 20 Employees: 33 Presidents of the Company’s domestic consolidated subsidiaries: 36 Number of stock options Common stock 1,570,000 Common stock 1,650,000 Common stock 1,670,000 Common stock 1,710,000 Grant date August 5, 2004 August 5, 2005 August 11, 2006 August 10, 2007 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, 2005 to June 24, 2014 From June 20, 2006 to June 23, 2015 From June 20, 2007 to June 22, 2016 From June 20, 2008 to June 21, 2017 Number of grantees 2008 2009 2010 2011 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 Directors: 10 Executive ofﬁ cers: 22 Employees: 34 Presidents of the Company’s domestic consolidated subsidiaries: 33 Number of stock options Common stock 1,760,000 Common stock 1,640,000 Common stock 1,710,000 Common stock 1,720,000 Grant date August 8, 2008 August 14, 2009 August 16, 2010 August 9, 2011 Vesting conditions Service period Exercise period No provisions No provisions No provisions No provisions No provisions No provisions No provisions No provisions From July 25, 2009 to June 24, 2018 From July 31, 2011 to June 22, 2019 From July 31, 2012 to June 21, 2020 From July 26, 2013 to June 22, 2021 Number of grantees 2012 2013 2014 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 Directors: 9 Executive ofﬁ cers: 19 Employees: 33 Presidents of the Company's domestic consolidated subsidiaries: 32 Number of stock options Common stock 1,640,000 Common stock 1,600,000 Common stock 1,480,000 Grant date August 13, 2012 August 16, 2013 August 18, 2014 Vesting conditions Service period Exercise period No provisions No provisions No provisions No provisions No provisions No provisions From July 28, 2014 to June 21, 2022 From August 2, 2015 to June 20, 2023 From August 2, 2016 to June 23, 2024 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 107 15MOL英文財務p75_111_0723入稿.indd 107 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 107 (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 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Balance at March 31, 2014 . . . . . . Options granted during the year . Options expired during the year . . Options vested during the year . . Balance at March 31, 2015 . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,640,000 1,600,000 — — — — — — 1,640,000 — 1,480,000 — — — — — — 1,600,000 1,480,000 Vested stock options 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 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 — Options vested during the year . . Options exercised during the year . — — Options expired during the year . . 286,000 — — — — — — — — — 10,000 20,000 20,000 — — — — — — — 1,640,000 — 283,000 — — Balance at March 31, 2015 . . . . . . — 878,000 1,433,000 1,660,000 1,730,000 1,630,000 1,710,000 1,720,000 1,357,000 — — — — — — — — — — (2) Unit prices of stock options exercised during the year Exercise price ¥644 ¥762 ¥841 ¥1,962 ¥1,569 ¥639 ¥642 ¥468 ¥277 ¥447 ¥412 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average market price of share at exercise . . . . . . . . . . . . . . . . . . Fair value per stock option at grant date. . . . . . . . . . . . . . . . . — — — — — — — — — — ¥390 — — ¥219 ¥ 352 ¥ 217 ¥136 ¥208 ¥ 87 ¥ 67 ¥172 ¥132 (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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.3% Expected remaining term of the option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years and 11 months Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥5 per share 0.19% 2014 108 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 108 15MOL英文財務p75_111_0723入稿.indd 108 2015/07/23 17:35 2015/07/23 17:35 18. COMPREHENSIVE INCOME For the years ended March 31, 2015 and 2014, 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: Unrealized holding gains on available-for-sale securities, net of tax: Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 16,331 ¥13,764 $ 135,899 Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustments: Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reclassiﬁ cation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remeasurements of deﬁ ned beneﬁ t plans: Increase during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reclassiﬁ cation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sub-total, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *Remeasurements of deﬁ ned beneﬁ t plans is disclosed from the current term. (57) 16,274 (3,382) 12,892 97,875 (18,834) (9,136) 69,905 (23,231) 46,674 20,635 167 20,802 6,578 (715) 5,863 (1,729) 4,134 (780) 12,984 (4,137) 8,847 48,719 (9,896) 3,425 42,248 (9,523) 32,725 31,158 — 31,158 — — — — — (474) 135,425 (28,144) 107,281 814,471 (156,728) (76,025) 581,718 (193,318) 388,400 171,715 1,390 173,105 54,739 (5,950) 48,789 (14,388) 34,401 Share of other comprehensive income of associates accounted for using equity method: Increase (Decrease) during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,827) Reclassiﬁ cation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments of acquisition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,680 (834) (9,981) Total other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 74,521 14,039 5,654 (408) 19,285 ¥92,015 (106,740) 30,623 (6,940) (83,057) $ 620,130 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 109 15MOL英文財務p75_111_0723入稿.indd 109 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 109 19. RELATED PARTY TRANSACTIONS For the year ended March 31, 2015 There are no applicable matters to report. For the year ended March 31, 2014 Millions of yen Category Afﬁ liated company Name of company Daiichi Chuo Kisen Kaisha Address Chuo-ku, Tokyo Paid-in capital ¥28,958 Marine Business description transportation Millions of yen 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 ¥15,000 Account — 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. 20. SUBSEQUENT EVENT There is no applicable matter. 21. 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 vehi- cles. 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 the Group is uncertain as its ﬁ nancial impact is not estimable at this stage. 110 Mitsui O.S.K. Lines 15MOL英文財務p75_111_0723入稿.indd 110 15MOL英文財務p75_111_0723入稿.indd 110 2015/07/23 17:35 2015/07/23 17:35 Independent Auditor’s Report l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l 15MOL英文財務p75_111_0723入稿.indd 111 15MOL英文財務p75_111_0723入稿.indd 111 2015/07/23 17:35 2015/07/23 17:35 Annual Report 2015 111 The MOL Group Mitsui O.S.K. Lines, Ltd. March 31, 2015 ■ Consolidated Subsidiaries ▲ Afﬁ liated Companies Accounted for by the Equity Method Bulkships Containerships ■ 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. ■ 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 Cape (Singapore) Pte. Ltd. ■ MOL LNG Transport Co., Ltd. ■ MOL Netherlands Bulkship B.V. ■ MOL-NIC Transport Ltd. ■ Nissan Carrier Europe B.V. ■ Nissan Motor Car Carrier Co., Ltd. ■ Phoenix Tankers Pte. Ltd. ■ Samba Offshore S.A. ■ Shining Shipping S.A. ■ Tokyo Marine Asia Pte Ltd ■ Tokyo Marine Co., Ltd. ■ Unix Line Pte Ltd. ■ World Logistics Service (U.S.A.), Inc. ■ Shipowner/Chartering companies (205 companies) in Panama, Marshall Islands, Liberia, Hong Kong, Cayman Islands, Singapore, Indonesia, Isle of Man and Malta ■ Others (2 companies) ▲ 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 Ltd. ▲ LNG Fukurokuju Shipping Corporation ▲ LNG Jurojin Shipping Corporation ▲ M.S.Tanker Shipping Ltd. ▲ T.E.N. Ghana MV25 B.V. ▲ Trans Paciﬁ c Shipping 2 Ltd. ▲ Viken MOL AS ▲ Viken Shuttle AS ▲ Shipowner/Chartering companies (47 companies) in Panama, Marshall Islands, Hong Kong, Liberia, Cayman Islands, Bahamas, Malta, Cyprus and Singapore ■ Asia Utoc Pte. Ltd. ■ Bangkok Container Service Co., Ltd. ■ Bangpoo Intermodal Systems Co., Ltd. ■ Chiba Utoc Corporation ■ Hong Kong Logistics Co., Ltd. ■ International Container Transport Co., Ltd. ■ International Transportation Inc. ■ Mitsui O.S.K. Lines (Australia) Pty. Ltd. ■ Mitsui O.S.K. Lines (Japan) Ltd. ■ Mitsui O.S.K. Lines (Nigeria) 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) Central Support Unit SP. Zoo ■ MOL (Europe) Ltd. ■ MOL (Ghana) Ltd. ■ MOL (Singapore) Pte. Ltd. ■ MOL Consolidation Service Ltd. ■ MOL Consolidation Service Ltd. (China) ■ MOL Container Center (Thailand) Co., Ltd. ■ MOL Cote D’ivoire S.A. ■ MOL Egypt for Maritime Services Ltd. ■ MOL Liner, Ltd. ■ 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 (Taiwan) Co., Ltd. ■ MOL Logistics (Thailand) Co., Ltd. ■ MOL Logistics (UK) Ltd. ■ MOL Logistics (USA) Inc. ■ MOL Logistics Holding (Europe) B.V. ■ MOL South Africa (Pty) Ltd. Registered Ofﬁ ce MOL's Voting Rights (%)* Paid-in Capital (Thousands) Liberia U.S.A. Japan Panama Netherlands Belgium Uruguay Bahamas Singapore U.K. U.S.A. Japan Panama Panama Singapore Singapore Japan Netherlands Liberia Netherlands Japan Singapore Panama Panama Singapore Japan Singapore U.S.A. Singapore Japan Netherlands Netherlands Netherlands Japan Bermuda Bahamas Bahamas Hong Kong Netherlands Bahamas Norway Norway Singapore Thailand Thailand Japan Hong Kong Japan U.S.A. Australia Japan Nigeria Singapore Thailand U.S.A. Brazil China Netherlands Poland U.K. Ghana Singapore Hong Kong China Thailand Ivory Coast Egypt Hong Kong Germany Netherlands Hong Kong Japan Netherlands Singapore Taiwan Thailand U.K. U.S.A. Netherlands South Africa 100.00 75.00 100.00 100.00 75.50 50.00 100.00 80.10 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 75.00 100.00 70.01 100.00 100.00 100.00 100.00 100.00 100.00 100.00 50.00 24.75 20.60 20.60 20.60 16.99 49.00 30.00 30.00 50.00 20.00 20.00 50.00 50.00 100.00 100.00 74.62 100.00 100.00 51.00 51.00 100.00 100.00 100.00 100.00 47.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 99.60 100.00 49.00 100.00 100.00 100.00 100.00 75.06 100.00 100.00 100.00 98.00 100.00 100.00 100.00 100.00 US$5 US$1 ¥10,000 US$10 €91 €900 US$91,401 US$1 S$2,350 US$8,402 — ¥660,000 ¥0 US$8 US$3,500 US$51,752 ¥40,000 €18 US$13,061 €195 ¥640,000 US$379,311 US$10 US$10 S$138,018 ¥100,000 US$344 US$200 US$20,743 ¥600,045 €100 €100 €162,160 ¥28,958,411 US$61,225 ¥1,000 ¥1,000 HK$2,000 €100 ¥3,961,100 US$18 US$338 S$200 THB10,000 THB130,000 ¥90,000 HK$58,600 ¥100,000 US$0 A$1,000 ¥100,000 NGN25,000 S$200 THB20,000 US$6 BRL2,403 US$1,960 €456 PLN2,000 £1,500 US$50 S$5,000 HK$1,000 RMB8,000 THB10,000 XOF5,000 EGP750 HK$40,000 €537 €414 HK$3,676 ¥756,250 €3,049 S$700 NT$7,500 THB20,000 £400 US$9,814 €19 ZAR3,000 112 Mitsui O.S.K. Lines 15mol_英文_p112_114_0723入稿.indd 112 15mol_英文_p112_114_0723入稿.indd 112 2015/07/23 17:35 2015/07/23 17:35 l V a u e C r e a t i o n M a n a g e m e n t S t r a t e g y M a n u f a c t u r e d C a p i t a l H u m a n C a p i t a l I n t e l l e c t u a l , S o c a l , i E n v i r o n m e n t a l C a p i t a l F i n a n c i a l C a p i t a l Registered Ofﬁ ce MOL's Voting Rights (%)* Paid-in Capital (Thousands) ■ Shanghai Huajia International Freight Forwarding Co., Ltd. ■ 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 ■ Shipowner companies (15 companies) in Panama, Marshall Islands, Hong Kong and China Japan Thailand U.S.A. U.S.A. Japan Singapore Japan Japan Ferry & Domestic Transport Associated Business Others Liberia ■ Others (8 companies) ▲ Shanghai Kakyakusen Kaisha, Ltd. ▲ Shanghai Longfei International Logistics Co., Ltd. ▲ Other (1 company) ■ Blue Highway Express Kyushu Co., Ltd ■ Blue Highway Service K.K. ■ Blue Sea Network Co., Ltd. ■ Ferry Sunﬂ ower Ltd. ■ MOL Coastal Shipping, Ltd. ■ MOL Ferry Co., Ltd. ■ Shipowner companies (2 companies) in Panama ■ Others (7 companies) ▲ Meimon Taiyo Ferry Co., Ltd. ▲ Other (1 company) ■ 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 Ltd. ■ Kitanihon Tug-boat Co., Ltd. ■ Kobe Towing Co., Ltd. ■ Kosan Kanri Service Co., Ltd. ■ Kosan Kanri Service West Co.,Ltd. ■ Kusakabe Maritime Engineering Co., Ltd. ■ M.O. Tourist Co., Ltd. ■ Mitsui O.S.K. Kosan Co., Ltd. ■ Mitsui O.S.K. Passenger Line, Ltd. ■ MOL Career Support, Ltd. ■ MOL Kaiji Co., Ltd. ■ MOL Techno-Trade, Ltd. ■ Nihon Tug-Boat Co., Ltd. ■ Saigon Tower Co., Ltd. ■ Tanshin Building Service Co., Ltd. ■ Ube Port Service Co., Ltd. ■ Vibank-Ngt Co. Ltd. ■ White Lotus Properties Ltd. ■ Chartering company (1 company) in Panama ▲ Shinyo Kaiun Corporation ▲ South China Towing Co., Ltd. ▲ Tan Cang-Cai Mep Towage Services Co., Ltd. ■ Euromol B.V. ■ Linkman Holdings 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 Marine Co., Ltd. ■ MOL Ocean Expert Co., Ltd. ■ MOL Ship Management Co., Ltd. ■ MOL Ship Tech Inc. ■ MOL SI, Inc. ■ MOL Treasury Management Pte. Ltd. ■ Shipowner/Chartering companies (4 companies) in Panama ▲ Minaminippon Shipbuilding Co., Ltd. *MOL includes MOL and its subsidiaries Japan China Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan British Virgin Islands Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Vietnam Japan Japan Vietnam British Virgin Islands Japan Hong Kong Vietnam Netherlands Liberia Japan Netherlands U.S.A. Japan Japan Japan U.S.A. Japan Panama Japan Japan Japan Japan U.S.A. Singapore Japan 76.00 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 99.00 100.00 100.00 US$1,720 ¥300,000 THB77,500 — — ¥2,155,300 S$2,000 ¥50,000 ¥50,000 ¥100,000 US$1,240 ¥50,000 ¥30,000 ¥54,600 ¥100,000 ¥650,000 ¥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 62.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 87.26 100.00 100.00 99.39 99.00 100.00 36.00 25.00 40.00 100.00 100.00 80.42 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 24.00 ¥12,227,847 ¥17,000 ¥95,400 ¥172,000 ¥50,000 ¥26,500 ¥99,960 ¥236,000 ¥60,000 ¥32,000 US$0 ¥50,000 ¥50,000 ¥20,000 ¥14,400 ¥200,000 ¥250,000 ¥300,000 ¥100,000 ¥100,000 ¥95,000 ¥490,000 ¥134,203 VND48,166,000 ¥20,000 ¥14,950 VND349,000,000 ¥6,910,000 ¥100,000 HK$12,400 US$4,500 €8,444 US$3 ¥350,000 €17,245 US$200 ¥30,000 ¥10,000 ¥20,000 US$20 ¥100,000 US$135 ¥100,000 ¥100,000 ¥50,000 ¥50,000 US$100 US$2,000 ¥200,000 Annual Report 2015 113 15mol_英文_p112_114_0723入稿.indd 113 15mol_英文_p112_114_0723入稿.indd 113 2015/07/23 17:35 2015/07/23 17:35 Worldwide Ofﬁ ces Japan Mitsui O.S.K. Lines, Ltd. Head Ofﬁ ce (Tokyo): Nagoya Branch: Kansai Branch: Hiroshima Branch: Kyushu Branch: Tel: 81-3-3587-6224 Tel: 81-52-564-7020 Tel: 81-6-6446-6522 Tel: 81-82-252-6020 Tel: 81-92-262-0701 Fax: 81-3-3587-7734 Fax: 81-52-564-7047 Fax: 81-6-6446-6513 Fax: 81-82-254-0876 Fax: 81-92-262-0720 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 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 Mitsui O.S.K. Bulk Shipping (USA) LLC. Head Ofﬁ ce (New Jersey): Tel: 1-201-395-5800 Tel: 1-832-615-6470 Houston: Tel: 1-562-528-7500 Long Beach: Tel: 1-954-861-1034 Miami: 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: 55-11-3145-3980 Fax: 55-11-3145-3946 MOL (Chile) Ltda. Head Ofﬁ ce (Santiago): MOL (Panama) Inc. Head Ofﬁ ce (Panama): MOL (PERU) S.A.C. Head Ofﬁ ce (Lima): Tel: 56-2-2630-1950 Fax: 56-2-2231-5622 Tel: 11-507-300-3200 Fax: 11-507-300-3212 Tel: 51-1-611-9400 Fax: 51-1-611-9429 Corporativo MOL de Mexico S.A. de C.V. Head Ofﬁ ce (Mexico City): Tel: 52-55-5010-5200 Fax: 52-55-5010-5220 Mitsui O.S.K. Bulk Shipping (USA) LLC. Mexico City: Sao Paulo: Tel: 52-55-5550-1612 Fax: 52-55-5089-2280 Tel: 55-11-3145-3980 Fax: 55-11-3145-3946 MOL Logistics (Mexico) S. de R. L. de C.V. Head Ofﬁ ce (Monterrey): Tel: 52-81-8134-2400 Fax: 52-81-8134-2200 Europe MOL (Europe) B.V. Head Ofﬁ ce (Rotterdam): Genoa: Hamburg: Le Havre: Vienna: Basel: Fax: 31-10-201-3158 Fax: 39-10-5960450 Fax: 49-40-352506 Tel: 31-10-201-3200 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 Tel: 41-61-716-8001 Fax: 43-1-876-4725 Fax: 41-61-716-8070 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: Moscow: Tel: 44-20-3764-8000 Fax: 44-20-3764-8393 Tel: 49-40-3609-7410 Fax: 49-40-8430-6105 Tel: 7-495-369-90-58 MOL Logistics (Deutschland) GmbH Head Ofﬁ ce (Dusseldorf): Tel: 49-211-418830 Fax: 49-211-4188340 MOL Logistics (Netherlands) B.V. Head Ofﬁ ce (Tilburg): Tel: 31-13-537-33-73 Fax: 31-13-5373-575 MOL Logistics (U.K.) Ltd. Head Ofﬁ ce (London): Tel: 44-1895-459700 Fax: 44-1895-449600 114 Mitsui O.S.K. Lines 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 MOL Egypt for Shipping Agencies S.A.E. Head Ofﬁ ce (Cairo): Tel: 20-22-456-8900 Fax: 20-22-259-5857 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 (Asia, Oceania) Pte. Ltd. Melbourne: Perth: Sydney: Tel: 61-3-9691-3224 Tel: 61-8-9278-2499 Tel: 61-2-9320-1629 Fax: 61-3-9691-3223 Fax: 61-8-9278-2727 Fax: 61-2-9320-1601 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 MOL Myanmar Limited Head Ofﬁ ce (Yangon): Tel: 95-9-7318-9815 Fax: 95-9-5137-7174 P.T. Mitsui O.S.K. Lines Indonesia Head Ofﬁ ce (Jakarta): Tel: 62-21-5288-0008 Fax: 62-21-5292-0920 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 Mitsui O.S.K. Lines Pakistan (Pvt.) Ltd. Head Ofﬁ ce (Karachi): Tel: 92-21-35205397 Fax: 84-83-8219317 Fax: 855-23-223-040 Fax: 92-21-35202559 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: 86-755-8400-7900 Fax: 86-755-8400-7901 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: 65-6323-1303 Tel: 66-2-634-0807 Tel: 60-3-5623-9772 Tel: 82-2-567-2718 Tel: 91-22-4071-4560 Fax: 91-22-4071-4557 Tel: 91-44-4208-1020 Fax: 91-44-4208-1020 Fax: 65-6323-1305 Fax: 66-2-634-0806 Fax: 60-3-5623-3107 Fax: 82-2-567-2719 15mol_英文_p112_114_0723入稿.indd 114 15mol_英文_p112_114_0723入稿.indd 114 2015/07/23 17:35 2015/07/23 17:35 Shareholder Information Capital: Head ofﬁ ce: ¥65,400,351,028 1-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8688, Japan Number of MOL employees: 890 Number of MOL Group employees: (The parent company and consolidated subsidiaries) 10,508 Total number of shares authorized: 3,154,000,000 Number of shares issued: 1,206,286,115 Number of shareholders: 104,192 Shares listed in: Tokyo, Nagoya Share transfer agent: (Contact information) Sumitomo Mitsui Trust Bank, Limited Stock Transfer Agency Business Planning Department 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) Safety, Environmental and Social Report (English/Japanese) (As of March 31, 2015) Stock Price Range (Tokyo Stock Exchange) and Volume of Stock Trade (¥) 800 700 600 500 400 300 200 100 0 Fiscal 2012 High ¥369 ¥177 Low Fiscal 2013 High ¥482 ¥287 Low Fiscal 2014 High ¥450 ¥308 Low 12 /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 3 4 5 6 7 8 9 10 11 12 15 /1 2 6543 700 600 500 400 300 200 100 0 (Million shares) 800 15mol_英文0723入稿PDF.indd 115 15mol_英文0723入稿PDF.indd 115 2015/07/23 17:34 2015/07/23 17:34 Annual Report 2015 115 M i t s u i O . S . K . i L n e s , L t d . A n n u a l R e p o r t 2 0 1 5 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 15mol_表紙英文_0723入稿.indd 1 15mol_表紙英文_0723入稿.indd 1 2015/07/23 17:35 2015/07/23 17:35

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