NS United REPORT 2019 · NS United REPORT 2019 1 Editorial Policy This report is intended to provide all of our stakeholders with an understanding of how the NS United Kaiun Group

NS United REPORT

http://www.nsuship.co.jp/en/

2019

NS United REPORT 2019For the fiscal year ended March 31, 2019

CSR Committee Secretariat, General Affairs GroupOtemachi 1st Square West Tower, 5-1, Otemachi 1-Chome, Chiyoda-ku, Tokyo 100-8108, JapanTEL: +81-3-6895-6404 FAX: +81-3-6388-2366E-mail: [email protected]

Message from the Management

Message from the President 8 ...

Business Activities that Provide Value

1. Overview by Business Segment

2. Financial and ESG Data Highlights

3. Topics

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14 ...

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Sustainable Growth and Value Creation Initiatives

1. Stakeholders Supporting the NS United Kaiun Group

(1) With Our Employees

(2) With Our Shareholders and Investors

(3) With Our Customers and Suppliers

(4) Contributing to Society

2. Safe Navigation

(1) Promoting Safe Navigation

(2) Securing Safe Navigation

3. Response to Environment

(1) Environmental Policy and Environmental Management System Organization Chart

(2) Results of Environmental Management Programs Implemented in FY 2018 and Goals of the Programs in FY 2019

(3) Reducing Environmental Impact

4. Corporate Governance

5. Directors, Audit & Supervisory Board Members and Executive Officers

Corporate Data

Fleet List

Glossary

History

Company OutlineStock Information

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43 ...

44 ...

45 ...

Group Overview

1. NS United Kaiun Group Basic Philosophy

2. Statistical Profile of the NS United Kaiun Group

3. Main Transport Services

2 ...

4 ...

6 ...

Financial Data

Consolidated Financial Statements (Summary)40 ...

Contents

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1NS United REPORT 2019

● Editorial PolicyThis report is intended to provide all of our stakeholders with an understanding of how the NS United Kaiun Group has been achieving our goals—for profit and otherwise—while supplying the marine transportation services that are the Group’s primary business.

To clearly present the actions being taken to realize our sustainable growth, this report refers to Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation – For encouraging ESG Integration, Non-Financial Information Disclosure, and Investment in Intangibles (published by the Ministry of Economy, Trade and Industry in May 2017). The Group will hold proactive dialogues with stakeholders through this report and will strive to disclose corporate information in an easy-to-understand way into the future.

● Period CoveredApril 1, 2018 through March 31, 2019Please note that some matters that fall outside this period are also reported.Fiscal years referred to in this report cover the period from April 1 to March 31.Fiscal 2018 refers to the fiscal year ended March 31, 2019.

● Organizations CoveredThe NS United Kaiun Group and related affiliates

● Other NS United Kaiun Publications(1) Corporate Brochure (in English, Japanese and Chinese; printed only)(2) Interim Business Reports (in Japanese)(3) Securities Report, Quarterly Securities Report (in Japanese)(4) Financial Highlights by Quarter (in English)

Copies of these publications can be requested from the e-mail address below.

In addition to the publications listed here, various other types of information are available on the NS United Kaiun website.http://www.nsuship.co.jp/en/

● Status of Compliance with Environmental RegulationsWe have had no violations of environmental laws, regulations, or other rules that involve guidance, warnings, orders, or punishment by regulatory authorities during the year under review.

● Forward-Looking StatementsThis report includes statements on forward-looking plans and business strategies concerning the future performance of the NS United Kaiun Group.

The statements are based on assumptions and projections by the Company’s management in light of information available at the time. Please note that these assumptions and projections may be affected by changes in social and economic circumstances that could cause the actual business results of the Company to differ.

A questionnaire has been included with this report. Please take a moment to give us your opinion so that we can

improve the content of future editions.

CSR Committee Secretariat

General Affairs Group, NS United Kaiun Kaisha, Ltd.Tel: +81-3-6895-6404 Fax: +81-3-6388-2366

E-mail: [email protected]

2 NS United REPORT 2019

Group Overview

NS United Kaiun Group Basic Philosophy

NS United Kaiun Group ESG Activities Related SDGs

Credibility and Reliability Increase the corporate value of the Group as a whole by practicing sound management that is credible and reliable. G Corporate Governance

Corporate governance system

Risk management

Efforts to promote compliance

Internal controls

Safe Navigation and Environmental Protection

Strive to ensure the safe navigation of vessels at all times and continue training to improve the operational skills of crews on vessels in order to take a role in protecting the global environment including the seas.

E Reducing Environmental Impact

Responding to the Ballast Water Management Convention

Responding to SOx emissions regulations

Reducing GHG emissions

S

Ensuring Safe Navigation

Safety & Environmental Committee

Vessel inspections

Safety campaigns

Emergency response exercise

Community InitiativesPromotion of recycling

Regional disaster preparedness

Support for disaster recovery

Response to Customers and Reform

Vigorously pursue further progress through reform while effectively responding to customer needs.

Relationships with Customers and Suppliers

Ensuring safety and quality in shipping services

Relationships with Shareholders and Investors

Timely disclosure of corporate information

Interactive communication

Dividends to shareholders

Nurture and Mobilize Employee Abilities

Nurture employees and mobilize their abilities to develop a dynamic group that employees can take pride in.

Relationships with EmployeesEmployee health and safety

Creation of positive working environments

Training system

What are SDGs?What is ESG?

SDGs, or Sustainable Development Goals, were developed as successors to the MDGs, or Millennium Development Goals, formulated by the UN in 2001. SDGs are international development goals for the years from 2016 to 2030 indicated in the 2030 Agenda for Sustainable Development, adopted at a UN summit in September 2015.

ESG is short for environment, social and governance. The idea that these three perspectives are necessary for long-term corporate growth has become widespread throughout the world.

Man

agem

ent P

hilo

soph

y

The NS United Kaiun Group will contribute to the development of society by providing trusted and high-quality marine transportation services.Guided by our Basic Philosophy and the following four Management Philosophies, we take ESG initiatives, looking ahead the SDGs adopted at the United Nations (UN).

NS United REPORT 2019 3

NS United Kaiun Group ESG Activities Related SDGs

Credibility and Reliability Increase the corporate value of the Group as a whole by practicing sound management that is credible and reliable. G Corporate Governance

Corporate governance system

Risk management

Efforts to promote compliance

Internal controls

Safe Navigation and Environmental Protection

Strive to ensure the safe navigation of vessels at all times and continue training to improve the operational skills of crews on vessels in order to take a role in protecting the global environment including the seas.

E Reducing Environmental Impact

Responding to the Ballast Water Management Convention

Responding to SOx emissions regulations

Reducing GHG emissions

S

Ensuring Safe Navigation

Safety & Environmental Committee

Vessel inspections

Safety campaigns

Emergency response exercise

Community InitiativesPromotion of recycling

Regional disaster preparedness

Support for disaster recovery

Response to Customers and Reform

Vigorously pursue further progress through reform while effectively responding to customer needs.

Relationships with Customers and Suppliers

Ensuring safety and quality in shipping services

Relationships with Shareholders and Investors

Timely disclosure of corporate information

Interactive communication

Dividends to shareholders

Nurture and Mobilize Employee Abilities

Nurture employees and mobilize their abilities to develop a dynamic group that employees can take pride in.

Relationships with EmployeesEmployee health and safety

Creation of positive working environments

Training system


Head office

53

3

9

3

612 (consolidated) ¥18.6 Billion

81.7 Million tonnes

12.0 Million DWT (consolidated)

201vessels (consolidated)

Others

¥0.3 Billion

International Shipping

¥126.6 Billion

Coastal Shipping

¥24.3 Billion

Asia (excluding Japan)

¥9.2 Billion6.1%

Other Regions

¥2.8 Billion1.7%

Middle East

¥26 Million0.0%

Japan

¥46.9 Billion31.0%

North & South America(excluding Brazil)

¥24.1 Billion15.9%

Brazil

¥17.7 Billion11.6%Australia

¥48.1 Billion31.8%

Europe

¥2.4 Billion1.5%

Revenues1 Number of Companies4(As of March 31, 2019)

Number of Fleet Vessels6

(As of March 31, 2019)

Fleet Tonnage7

Number of Employees5 Capital Investment9

Total Annual Cargo Volume8

Revenues by Business Segment2

Revenues by Region3

Consolidated subsidiaries

Nonconsolidated subsidiaries(unaccounted for by the equity method)

Affiliates(unaccounted for by the equity method)

Nonconsolidated subsidiaries(accounted for by the equity method)

¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥

¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥

83.8%

16.1%

0.2%

Overseas Subsidiaries United Kingdom, United States, Hong Kong, Singapore, Philippines

Representative Offices Shanghai, Vietnam

¥151.1 Billion

Statistical Profile of the NS United Kaiun Group

Group Overview


Head office

53

3

9

3

612 (consolidated) ¥18.6 Billion

81.7 Million tonnes

12.0 Million DWT (consolidated)

201vessels (consolidated)

Others

¥0.3 Billion


¥126.6 Billion

Coastal Shipping

¥24.3 Billion

Asia (excluding Japan)

¥9.2 Billion6.1%

Other Regions

¥2.8 Billion1.7%

Middle East

¥26 Million0.0%

Japan

¥46.9 Billion31.0%

North & South America(excluding Brazil)

¥24.1 Billion15.9%

Brazil

¥17.7 Billion11.6%Australia

¥48.1 Billion31.8%

Europe

¥2.4 Billion1.5%

Revenues1 Number of Companies4(As of March 31, 2019)

Number of Fleet Vessels6

(As of March 31, 2019)

Fleet Tonnage7

Number of Employees5 Capital Investment9

Total Annual Cargo Volume8

Revenues by Business Segment2

Revenues by Region3

Consolidated subsidiaries

Nonconsolidated subsidiaries(unaccounted for by the equity method)

Affiliates(unaccounted for by the equity method)

Nonconsolidated subsidiaries(accounted for by the equity method)

¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥

¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥

83.8%

16.1%

0.2%

Overseas Subsidiaries United Kingdom, United States, Hong Kong, Singapore, Philippines

Representative Offices Shanghai, Vietnam

¥151.1 Billion


Main Transport Services

Group Overview

Iron Ore and Coking Coal Transport ServiceReducing Costs through Efficient Transportation

Tramp Chartering ServiceFlexibly Responding to Various Transportation Needs, at Any time, to Any Place

Energy Resources Transport ServiceContributing to the Global Energy Supply

Since taking the global lead by building an 18,000 dwt iron ore carrier in 1958, we have stayed on the cutting edge of vessel size and efficiency improvements, contributing to more reliable transportation while reducing costs. Our fleet now includes bulk carriers ranging from 90,000 to 200,000 dwt and iron ore carriers (from 230,000 to 300,000 dwt). In 2019, we will be adding the world’s largest 400,000 dwt iron ore carrier.

We also aim to contribute to sustainable growth by investing in protecting the environment, not only by deploying the most advanced energy-saving bulkers, but also by introducing SOx scrubbers in response to the stricter environmental regulations starting in 2020.

Led by 20,000 to 60,000 dwt bulk carriers, we offer diverse transportation services to connect ports around the world. We transport a wide range of commodities, including steel products and heavy structures such as plant infrastructures, as well as raw materials, such as nonferrous metals, grains, fertilizer, salt, cement, and limestone. Especially for shipping steel products, we have developed unrivaled expertise since advancing into this field in 1966.

We were one of the first Japanese shipping companies to establish commercial bases in the U.K. and the U.S., which, along with Tokyo, enable us to closely monitor the global shipping market around the clock. Our U.S. subsidiary operates its own fleet in the Atlantic Ocean and focuses on developing new businesses and new customers by meeting local needs in a timely manner.

Led by 70,000 to 100,000 dwt bulk carriers and very large gas carriers (VLGCs), we transport coal and environmentally friendly biomass fuel to both domestic and overseas electric power companies as well as the LPG (liquefied petroleum gas) consumed by various industries and households. Our wide range of businesses include transporting raw materials to steel companies around the world, shipping grains across the Atlantic Ocean, and combined transportation: delivering raw materials from Asia to Europe and then delivering grains from Brazil to Asia. In addition, to secure a stable and cost-competitive supply of fuel oil (bunker oil) for our fleet, we have established strong relationships with domestic and overseas oil companies, including through futures trading.

Bulk carrier: ATLANTIC PRISMBuilt: 2019Length: 182.90 mBreadth: 31.00 mDead weight: 39,172 metric tons

Bulk carrier: RISING WINDBuilt: 2014Length: 228.99 mBreadth: 32.26 mDead weight: 82,151 metric tons

Bulk carrier: NSU YOUNG STARBuilt: 2019Length: 299.95 mBreadth: 50.00 mDead weight: 208,462 metric tons


Near Sea ServiceSupporting Logistics for China and Southeast Asian Countries

Coastal Shipping ServicePursuing Efficiency and Safety with One of the Largest Coastal Fleets NS United Naiko Kaiun Kaisha, Ltd.

An LNG Transport Pioneer NS United Coastal Tanker Kaisha, Ltd.

With vessels ranging in size from 8,000 to 16,000 dwt, we provide transportation services throughout China and Southeast Asia for steel products, plant infrastructures, fertilizers, and biomass fuels which has growing demand as a renewable energy source. Especially in the Japan–China trade, we maintain a top market share, taking advantage of our proven track record in transport services for the Japan–China route beginning in the 1950s. Through our subsidiaries in Hong Kong and Singapore and representative offices in Shanghai and Vietnam, we are gathering information in the continuously developing China and Southeast Asian region.

Since its fundation in 1961, NS United Naiko Kaiun Kaisha has built and maintained many specialized, advanced vessels, such as self-unloading limestone carriers, cement carriers, and calcium carbonate/fly ash carriers, and has achieved reliable and efficient transport services. With the largest fleet tonnage in Japan, we accurately meet the various transport needs of customers including those with general cargoes and we have developed a wide range of transport services.

NS United Coastal Tanker Kaisha provides coastal shipping services for liquefied petroleum gas (LPG) and coal chemical products in addition to liquefied natural gas (LNG), which is drawing attention as an environmentally friendly energy source. For LNG transportation, in particular, the company launched the first coastal LNG carrier in Japan in 2003, and now operates three of Japan’s six coastal LNG carriers, the largest operating volume in Japan.

All the company’s staff, at shore and sea, work together to refine the safety management system and to further solidify our position as a pioneer in coastal LNG transport.

Near sea going vessel: OCEAN FORCEBuilt: 2019Length: 99.90 mBreadth: 19.20 mDead weight: 8,242 metric tons

Limestone carrier: KIMITETSU MARUBuilt: 2018Length: 163.03 mBreadth: 25.50 mDead weight: 21,000 metric tons

LNG carrier: AKEBONO MARUBuilt: 2011Length: 99.37 mBreadth: 17.20 mTank capacity: 3,556 m3


Message from the President


How did the company perform in fiscal year 2018, and how would you describe the operating environment?

During this period, the global economy gradually expanded until the early autumn of 2018, when from the end of the year there was an increased risk of an

economic downturn: such as the growing impact of trade friction between the U.S. and China; China’s economy slowing down; the U.S. financial policies; economic concerns in Europe such as Brexit; and others. In Japan, the gradual recovery continued, led by demand driven by consumer spending and private-sector capital investment, but corporate revenue improvements came to a standstill and there were concerns about the future, including weakening exports to destinations such as China and sluggish capital investment.

In the international dry bulk shipping market, from the end of the year onward, the market experienced the usual period of slow demand and there was trouble with iron ore loading in Brazil and Australia. These factors resulted in a larger downturn than usual, but thanks to support from earlier solid shipping demand, there was some later improvement, leading to stronger overall business results for us over the period.

Though the coastal shipping market was affected by several factors, including bad weather, the market remained steady supported by solid shipping demand mainly in dry bulk cargoes.

During fiscal year 2018, the average price of bunker C fuel oil for the international shipping business was roughly 429 dollars per tonne during the first half and roughly 464 dollars during the second half of the fiscal year. The average for the entire fiscal year was 446 dollars per tonne, up by 92 dollars compared with the previous fiscal year. The dollar-yen exchange rate was generally stable. The exchange rate averaged 109.67 yen to the dollar during the first half and 111.67 yen to the dollar during the second half of the fiscal year. The average exchange rate for the entire year was 110.67 yen, yen appreciated by 0.50 yen year on year.

Given that business environment, thanks to stronger sales activities and more efficient vessel operations, the Company succeeded in increasing both consolidated revenues and operating income compared with the previous fiscal year. Revenues rose 8.7% to 151.068 billion yen, operating income increased 21.1% to 8,911 million yen, ordinary income climbed 40.1% to 7,784 million yen, and profit attributable to owners of the parent company shot up 41.3% to 9,343 million yen.

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What issues does the Company face in fiscal year 2019?

This fiscal year, the Company faces two issues. The first is effectively responding to the stricter sulfur oxide (SOx) emission regulations on ships that go into effect in

January 2020. These regulations can be met in two ways: switching to fuel oils that comply with the new regulations (compliant fuel oil) or installing exhaust gas purifiers (SOx scrubbers) on our vessels.

We will effectively switch to compliant fuel, and request the understanding of our customers regarding the increased bunker oil costs that will result. Switching to compliant fuel oil will start in October, and by the end of the year we plan to have completely replaced high-sulfur fuel oil with compliant fuel.

Regarding the installation of scrubbers on existing vessels, approximately 20 of our vessels will be docked to install this new equipment during the fiscal year. Installations will cost on the order of 10 billion yen in total, making this one of the biggest projects the Company has ever carried out. Not only will we need to install these systems, but also need to confirm that the scrubbers work correctly. NSU OBELISK was the first vessel to have a scrubber installed; the work was completed in July this year (2019).

In June, two new vessels that have scrubbers installed were delivered: NSU YOUNG STAR, a 200,000 dwt bulk carrier, and NS DREAM, a very large gas carrier (VLGC). Installation work for both new and existing vessels is on schedule.

The second issue is the prompt replacement of fleet to secure stable returns. We plan to add 12 new vessels to our core fleet in fiscal 2019. These include a Valemax, or a 400,000 dwt iron ore carrier, as well as dry bulk carriers from capesize to near sea going ship, and our third VLGC.

Furthermore, looking not just at the immediate fiscal year but instead taking a longer view, the Company faces several financial hurdles. Given the stricter regulations on greenhouse gas (GHG) emissions expected in the future, it is highly likely that we will order new vessels that use liquefied natural gas (LNG) for fuel, and prices for these vessels are expected to be higher than prices for conventional ships. In addition to this new investment, I believe the Company will need to establish an even more solid financial foundation in order to further reinforce our marine technical skills and to develop new business.

Fiscal year 2019 is the final year of NSU 2021, the medium-term business plan. What progress has been made so far?

In NSU 2021, the three-year medium-term business plan that began in fiscal year 2017, we defined four key

strategies for developing sustainably together with our customers by providing even greater added value. We have been steadily implementing these strategies.

The first strategy is allocating operational resources to businesses that generate stable returns. We are working to expand our revenue base through short- to medium-term shipping contracts. From fiscal year 2019, a number of large, energy-saving vessels have been delivered and we are further reinforcing our foundation to secure more stable revenue.

Our second key strategy is observing the highest transportation standards. In fiscal year 2018, we formed a cross-functional deliberation framework aimed at improving operating efficiency, including reducing bunker consumption. From the fiscal year 2019 on, we are taking concrete steps based on this framework.

The third key strategy is environmental conservation. In February this year, we took the delivery of UTASHIMA, the first hybrid vessel for coastal cargo shipping. This is our initial step for “zero-carbon ships.” Furthermore, as mentioned earlier, to prepare for stricter SOx regulations (going into effect in January 2020), we are working to keeping our Group’s fleet environmentally friendly by installing SOx scrubbers, primarily in our large vessels.

The fourth key strategy is increasing investment efficiency, where we focus on raising investment efficiency in order to maximize shareholder satisfaction. In March 2018, we raised our dividend payout ratio from 25% to 30%, and last fiscal year, for the first time in 10 years, we paid an interim dividend to convey our proactive stance on distributing profits to shareholders.

This medium-term business plan aimed for consolidated operating income of 12.0 billion yen, ROE of 10% or more, and a debt equity ratio of under 1.3 by fiscal year 2021. In fiscal year 2018, consolidated operating income increased by 1.4 billion yen

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Medium-Term Business Plan Key Strategies

Changed dividend policy (changed dividend payout ratio to “approximately 30%”)

Paid interim dividend for the first time in 10 years

2017

2018

Increase investment efficiency

A lithium-ion battery hybrid vessels was delivered

Complying with SOx regulations, by installing SOx scrubbers

2018

2019

Environmental conservation

Launched a project to improve operating efficiency

Taking concrete action

2018

2019

Observe the highest transportation standards

Expanded the revenue base through medium- to long-term contracts

Delivery of new vessels, such as Valemax, goes into full swing

2018

2019

Allocate resources to stable return businesses

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Medium-Term Business Plan – Progress on Revenue Targets

2017 2018 2019 2021

■■●

Operating income: Initial plan and targetsOperating income: Results and latest forecastROE

(Unit: billion yen)

6.77.4 7.5

8.9 9.2

7.7

12.0

8.4%

11.0%10.0%

8.2%

First half: 2.2 billion yen

Second half: 5.5 billion yen


over the initial target of 7.5 billion yen to 8.9 billion yen. ROE was 11% and the debt equity ratio was 1.28, surpassing their targets. In fiscal year 2019, we expect consolidated operating income to fall by 1.5 billion yen, in comparison with the initial plan, to 7.7 billion yen. This is due to lower vessel operation rates resulting from docking to install SOx scrubbers, a measure decided on after the current medium-term business plan was formulated, as well as a revised market outlook. However, during the second half of the fiscal year, when a number of energy-saving vessels are delivered, we will reinforce our revenue base to achieve the targets for the period.

We are continuing to work to improve business results for the final year of the current medium-term business plan, NSU 2021, and we have begun deliberations that involve the entire Group, in preparation for formulating the next medium-term business plan, which will begin in fiscal 2020.

What are the Company’s major strengths and growth strategy?

We have developed two types of businesses: one as an industrial carrier of Nippon Steel Corporation, and the other as a common carrier, meeting a wide range of

marine transportation needs, such as materials, foods, products, and energy resources. This dual nature of our business is our major strength. We will selectively allocate operational resources for businesses with stable returns in fields where we have built up a strong track record, such as shipping raw materials for the steel industry as well as shipping energy

resources, and will further boost our market share in the shipping market by broadening our services. At the same time, to drive our business in growth regions, such as Asia and India, and to uncover and tap into new demand such as biomass shipping, we are accelerating Group-wide initiatives, including those for our international and coastal shipping businesses, the head office in Japan, and subsidiaries around the world.

We are capitalizing on opportunities for acquiring commercial rights by preparing for further stricter environmental regulations ahead of our competitors, while mitigating risks associated with these regulations. In cooperation with shippers, including Nippon Steel, we are already installing SOx scrubbers in our vessels to comply with the SOx regulations tighted in 2020, thereby raising the value of our fleet. For the next challenge, cutting CO2 emissions, we are keeping our eye on long-term global trends and focusing on ships powered by LNG and LNG bunkering vessels.

We are doing our best to support these kinds of initiatives through investments in vessels founded on stable financial fundamentals and comprehensive measures to ensure safe navigation, as I mentioned earlier, in anticipation of reaching the next stage of growth.

We will continue to focus on safe navigation and environmental conservation, meeting the constantly changing needs of customers through our precise, optimized services, but I believe that when thinking about the future, we must take a long-term view.

Next year, ten years will have passed since NS United Kaiun was established (in 2010) through the merger of Shinwa Kaiun Kaisha and Nippon Steel Shipping. We must both look back on the past ten years and look forward to the next ten years to envision a system that will enable us to become an even more sustainable marine transportation company, including through ship management. As a mid-sized shipping company, to strengthen our brand (the NSU brand), we must hold discussions on whether we can continue operating in the same way as in the past and whether we can continue to operate for another ten years in the same way. I believe that fiscal 2019 will be an important one for us, as we will be formulating the next medium-term business plan in fiscal 2020 through these discussions.

In recent years, a great deal of attention has been directed towards ESG investment. What are the ESG activities that the Company is engaged in?

First, with regard to the environment, the Company, as an international shipping company that does business around the world, is closely involved with environmental

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Message from the President


What is your message to stakeholders?

Guided by our basic philosophy, we are committed to contributing to the development of society through business operations, always mindful of our role as a

good corporate citizen. For that reason, we will continue carrying out CSR activities that are appropriate for the scale and characteristics of the shipping industry.

Foremost among these activities is safe navigation, essential for the Group to earn the trust of the entire community.

Looking ahead, by integrating our Group strengths, we will continue to strive to achieve sustainable growth to meet the expectations of the communities we serve. As we pursue these goals, we ask for the ongoing support and encouragement of our stakeholders around the world.

Kazuo TanimizuPresident and Representative Director

NS United Kaiun Kaisha, Ltd.

issues, especially global warming. To address these issues, from fiscal 2019, we have defined a new medium-term target for our environmental management system: reducing CO2 emissions per ton-mile by fiscal 2030 by 40% compared with fiscal 2008. Vessels and the departments in our head office, such as the ship management department, are collaboratively taking initiatives that include: further improving the efficiency of vessel allocations and operations; using new digital technologies; making further improvements through test deploying navigation support systems and ultra-slow steaming; and the study of next-generation vessels, especially those powered by new types of fuel, primarily LNG, and those equipped with engines that are highly fuel efficient.

In February 2019, Group company NS United Naiko Kaiun took delivery of UTASHIMA, a coastal cargo carrier with a lithium-ion battery system. This energy-saving vessel is the first Japanese coastal cargo carrier equipped with a hybrid propulsion system that uses lithium-ion batteries. (See page 16 for the details.)

Next, for the social aspects of management, we are working to help conserve the environment and contribute to society in several ways: by donating plastic bottle caps to an NPO to promote the employment of people with disabilities and the elderly; by collaborating on a calendar donation project with a public interest foundation (with the proceeds being used to support forest conservation and to maintain woodlands); and by donating to the Japanese Red Cross Society to support disaster recovery.

Finally, regarding governance, in April 2018, we updated the discussion standards for our Regulations of the Board of Directors, enhancing the Board of Directors’ functions as a strategic decision-making and supervisory body. In addition, in April 2018, we merged the Internal Control Committee and the Compliance Committee into the Internal Control and Compliance Committee with a view to more effectively implement internal controls Company-wide. The system to strengthen our own internal controls was built with every executive officer in charge of a business division being appointed as members and the president and representative director being appointed as the chairperson.

In this way, we have developed corporate governance systems suited to the characteristics of the Group’s business. These systems are periodically reviewed—with an eye on continual improvement—to raise the level of efficiency, soundness, and transparency of corporate management.

In the future, we will continue to examine our ESG approach for achieving the UN’s SDGs to contribute to greater Company value, including the formulation of a new medium-term business plan.

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Summary for Fiscal Year 2018

Group Fleet Development Results(including vessels chartered for 5 years or longer)

4 vessels533,112 DWT (kt)

Capesize Bulk CarriersIn the capesize bulk carrier market (roughly 180,000 dwt), the average daily charter rates for the five primary routes dropped to the 7,000-dollar level in April 2018, but robust iron ore shipping demand, bolstered by increased steel production in China, caused the daily charter rate to recover to the 25,000-dollar level by August. However, the off-season in 2019, together with concerns over lower shipping volume due to a mine dam collapse in Brazil, led to the daily charter rate falling back down to the 3,000-dollar level in March 2019. Given these business circumstances, in addition to the delivery of two new ships, we continued taking the initiative with sales, including concluding shipping contracts with domestic and overseas customers, such as Nippon Steel Corporation. As a result, we successfully achieved our initial targets for this business segment.

Panamax Bulk CarriersIn the market for Panamax bulk carriers (between 70,000 and 80,000 dwt), the average daily charter rate for the four primary routes began at over 10,000 dollars. Although the rate rose and fell afterwards due to changes in shipping demand for coal for China and grain from South America, by November 2018 it recovered to the 14,000-dollar level. The market then slumped due to reduced demand for grain shipping from North America and Chinese coal import restrictions, falling to the 4,000-dollar level in January 2019. Under these circumstances, we were able to meet our initial targets for this business segment by

concluding shipping contracts with domestic power companies, general industries, and overseas customers and by efficiently allocating our fleet.

Supramax/Handy-Size Bulk CarriersThe market for supramax/handy-size bulk carriers (between 20,000 and 50,000 dwt) was overall stable. Conditions were as expected until late 2018, when grain and other shipments fell, as did shipments of coal to China due to the warm winter and tighter environmental regulations, resulting in a downswing. In these business circumstances, our major outbound shipments of steel products fell slightly to the U.S. due to tariff increases, and in order to make up for this, we tapped into demand for shipments to Central America and other regions. For our major return shipments of non-ferrous ore from ports along the western coasts of Central and South America, we strove to secure revenue by efficiently allocating vessels to handle existing cargoes, but due to a market downturn, we were unable to achieve our initial targets in this business segment.

Near Sea Going VesselsIn the market for shipments by near sea going vessels (around 16,000 dwt or below), overall shipping volume for exporting steel products fell below our initial expectations due to the slowdown in China’s economy, but in our main business of steel shipments to China, demand from the automotive industry remained strong. These shipments to China, together with efficient allocation of vessels, enabled us to achieve our initial targets in this business segment.

VLCC and VLGCThe market for VLCCs (very large crude oil carriers) and VLGCs (very large gas carriers), we generally secured stable revenue through long-time charter out contracts, but we were not able to achieve our initial targets in this business segment because of the impact of a sluggish market on some market-linked contracts.

Coastal VesselsFor dry bulk shipping, steel-related shipping was affected by bad weather due to typhoons in the summer, and domestic crude steel production fell slightly below previous fiscal year levels. Overall though, business was backed by solid demand in the manufacturing and construction fields. The amount of electrical-related cargo shipments remained constant, and while cement-related cargo shipments were affected by the Hokkaido Eastern Iburi Earthquake, we were able to secure roughly the same amount of cargo as forecast. As a result, we were able to meet the initial targets for this business segment overall.

For tankers, demand for liquefied natural gas (LNG) shipments fell due to energy conservation measures and a relatively warm winter. While there was strong internal demand for shipments of liquefied petroleum gas (LPG) for use as a chemical ingredient, the overall shipment volume fell since consumer demand fell due to the warm winter and industrial demand was sluggish. Against this backdrop, we strove to allocate and operate vessels more efficiently. As a result, we were able to meet the initial targets for this business segment.

International Shipping Coastal Shipping

Revenue

¥24.3 Billion

16.1%

2017

1.3

2.0

22.324.3

2018

Revenue

¥126.6 Billionup 8.9% year on year

Operating income

¥6.9 Billion

Operating income


up 8.7% year on year


83.8%

2017

6.0

6.9

116.2 126.6

2018


Coastal Shipping

FY 2018

International shipping


Coastal shipping

Group Fleet Development Plans(including vessels chartered for 5 years or longer)

12 vessels1,870,450 DWT (kt)

FY 2019



Coastal shipping

The economic downturn risk increased in 2019 due to factors such as trade friction between the U.S. and China. As well, the global economic outlook became increasingly unclear. However, solid demand in the international dry bulk market supported our business until late 2018. As a result, our international shipping business posted more revenues and income than the previous fiscal year, with revenues of ¥126,557 million and operating income of ¥6,906 million.

The coastal shipping business posted more revenues and income than the previous fiscal year, with revenues of ¥24,261 million and operating income of ¥2,020 million.

Change in revenues / operating income(billion yen)■ Revenues● Operating income

Breakdown of revenues Change in revenues / operating income(billion yen)■ Revenues● Operating income

Breakdown of revenues

Business Activities That Provide Value

Overview by Business Segment


Summary for Fiscal Year 2018

Group Fleet Development Results(including vessels chartered for 5 years or longer)


Capesize Bulk CarriersIn the capesize bulk carrier market (roughly 180,000 dwt), the average daily charter rates for the five primary routes dropped to the 7,000-dollar level in April 2018, but robust iron ore shipping demand, bolstered by increased steel production in China, caused the daily charter rate to recover to the 25,000-dollar level by August. However, the off-season in 2019, together with concerns over lower shipping volume due to a mine dam collapse in Brazil, led to the daily charter rate falling back down to the 3,000-dollar level in March 2019. Given these business circumstances, in addition to the delivery of two new ships, we continued taking the initiative with sales, including concluding shipping contracts with domestic and overseas customers, such as Nippon Steel Corporation. As a result, we successfully achieved our initial targets for this business segment.

Panamax Bulk CarriersIn the market for Panamax bulk carriers (between 70,000 and 80,000 dwt), the average daily charter rate for the four primary routes began at over 10,000 dollars. Although the rate rose and fell afterwards due to changes in shipping demand for coal for China and grain from South America, by November 2018 it recovered to the 14,000-dollar level. The market then slumped due to reduced demand for grain shipping from North America and Chinese coal import restrictions, falling to the 4,000-dollar level in January 2019. Under these circumstances, we were able to meet our initial targets for this business segment by

concluding shipping contracts with domestic power companies, general industries, and overseas customers and by efficiently allocating our fleet.

Supramax/Handy-Size Bulk CarriersThe market for supramax/handy-size bulk carriers (between 20,000 and 50,000 dwt) was overall stable. Conditions were as expected until late 2018, when grain and other shipments fell, as did shipments of coal to China due to the warm winter and tighter environmental regulations, resulting in a downswing. In these business circumstances, our major outbound shipments of steel products fell slightly to the U.S. due to tariff increases, and in order to make up for this, we tapped into demand for shipments to Central America and other regions. For our major return shipments of non-ferrous ore from ports along the western coasts of Central and South America, we strove to secure revenue by efficiently allocating vessels to handle existing cargoes, but due to a market downturn, we were unable to achieve our initial targets in this business segment.

Near Sea Going VesselsIn the market for shipments by near sea going vessels (around 16,000 dwt or below), overall shipping volume for exporting steel products fell below our initial expectations due to the slowdown in China’s economy, but in our main business of steel shipments to China, demand from the automotive industry remained strong. These shipments to China, together with efficient allocation of vessels, enabled us to achieve our initial targets in this business segment.

VLCC and VLGCThe market for VLCCs (very large crude oil carriers) and VLGCs (very large gas carriers), we generally secured stable revenue through long-time charter out contracts, but we were not able to achieve our initial targets in this business segment because of the impact of a sluggish market on some market-linked contracts.

Coastal VesselsFor dry bulk shipping, steel-related shipping was affected by bad weather due to typhoons in the summer, and domestic crude steel production fell slightly below previous fiscal year levels. Overall though, business was backed by solid demand in the manufacturing and construction fields. The amount of electrical-related cargo shipments remained constant, and while cement-related cargo shipments were affected by the Hokkaido Eastern Iburi Earthquake, we were able to secure roughly the same amount of cargo as forecast. As a result, we were able to meet the initial targets for this business segment overall.

For tankers, demand for liquefied natural gas (LNG) shipments fell due to energy conservation measures and a relatively warm winter. While there was strong internal demand for shipments of liquefied petroleum gas (LPG) for use as a chemical ingredient, the overall shipment volume fell since consumer demand fell due to the warm winter and industrial demand was sluggish. Against this backdrop, we strove to allocate and operate vessels more efficiently. As a result, we were able to meet the initial targets for this business segment.

International Shipping Coastal Shipping

Revenue

¥24.3 Billion

16.1%

2017

1.3

2.0

22.324.3

2018

Revenue


Operating income

¥6.9 Billion

Operating income




83.8%

2017

6.0

6.9

116.2 126.6

2018


Coastal Shipping

FY 2018



Coastal shipping

Group Fleet Development Plans(including vessels chartered for 5 years or longer)

12 vessels1,870,450 DWT (kt)

FY 2019



Coastal shipping

The economic downturn risk increased in 2019 due to factors such as trade friction between the U.S. and China. As well, the global economic outlook became increasingly unclear. However, solid demand in the international dry bulk market supported our business until late 2018. As a result, our international shipping business posted more revenues and income than the previous fiscal year, with revenues of ¥126,557 million and operating income of ¥6,906 million.

The coastal shipping business posted more revenues and income than the previous fiscal year, with revenues of ¥24,261 million and operating income of ¥2,020 million.

Change in revenues / operating income(billion yen)■ Revenues● Operating income

Breakdown of revenues Change in revenues / operating income(billion yen)■ Revenues● Operating income

Breakdown of revenues


Fiscal Year (consolidated) unit 2011 2012 2013 2014 2015 2016 2017 2018 Target 2021Revenues million yen 135,044 131,379 153,665 157,625 137,148 125,276 139,000 151,068

Operating income million yen 1,627 1,173 8,842 9,474 6,475 6,558 7,361 8,911 12,000

Ordinary income million yen 496 2,529 8,920 10,380 4,064 4,607 5,555 7,784

Profit before income taxes million yen (1,446) (14,977) 12,005 10,691 4,343 3,814 6,419 10,502

Profit attributable to owners of parent million yen (914) (15,505) 10,778 8,626 4,110 3,322 6,613 9,343

Per share data*

Net income yen (39.6) (672.1) 467.2 374.0 175.4 140.9 280.6 396.4

Net assets yen 2744.0 2192.8 2709.1 3,195.6 3,197.2 3,259.0 3,423.2 3,778.0

Dividends yen — — 90 90 40 40 85 115

Share Price (Closing price on March 31) yen 1,340 1,600 2,450 2,920 1,520 2,400 2,170 2,369

At fiscal year-end

Total assets million yen 190,659 181,682 224,507 227,663 217,524 233,071 228,229 223,528

Net assets million yen 65,581 52,633 64,943 76,481 75,372 76,826 80,691 89,038

Equity ratio % 33.2 27.8 27.8 32.4 34.6 33.0 35.3 39.8

Major Financial Indicators

Return on equity (ROE) % (1.4) (27.2) 19.1 12.7 5.5 4.4 8.4 11.0 Exceed 10%

Price earnings ratio (PER) times — — 5.2 7.8 8.7 17.0 7.7 6.0

Dividend payout ratio % — — 19.3 24.1 22.8 28.4 30.3 30.3

Interest-bearing debt million yen 95,917 99,723 135,716 125,912 121,880 133,707 125,729 113,801

Debt equity ratio (DER) times 1.52 1.97 2.17 1.71 1.62 1.74 1.56 1.28 Less than 1.3 times

Capital investment million yen 30,505 23,275 58,295 20,344 24,733 29,491 23,656 18,602

ESG Data (nonconsolidated)

Fleet tonnage ten thousand tonnes 10.8 10.1 10.7 11.4 11.2 12.2 12.8 11.8

Cargo volume kton 55,643 59,475 58,772 65,099 64,088 62,483 62,134 64,205

Fuel consumption (MDO/HFO) kton 15/718 12/696 13/694 15/686 19/658 21/644 22/634 28/672

Fuel consumption per unit load t/kt 13.2 11.9 12.0 10.8 10.6 10.6 10.6 10.9

CO2 emission volume kton 2,230 2,153 2,149 2,132 2,058 2,023 1,996 2,129

CO2 emissions per load unit (compared with fiscal year 2000, the fiscal year ended March 31, 2001)

% 91 82 83 74 73 73 73 75

Number of employees Number 221 225 226 228 227 228 226 227

Revenues / Operating income■■ Revenues (million yen)■■ Operating income (million yen)

■■ Profit attributable to owners of parent (million yen)●● ROE (%)

2014

157,625

2015

137,148

2016

125,276

2017

139,000

2011

135,044

2012

131,379

2013

153,665

2018

151,068

Profit attributable to owners of parent / ROE

2014

8,626

2015

4,110

2016

3,322

2017

6,613

2011

(914)(1.4%)

(27.2%)

12.7%5.5% 4.4%

8.4%11.0%

2012(15,505)

2013

10,778

2018

9,343

Dividends(yen)

2014

90

2015

40

2016

40

2017

85

2011 2012 2013

90

2018

115

1,627 1,173

8,842 9,474

6,475 6,5587,361

8,911

19.1%

■■ Interest-bearing debt (million yen)●● DER (times)

Interest-bearing debt / Debt equity ratio (DER)

2014

125,912

2015

121,880

2016

133,707

2017

125,729

2011

95,91799,723

1.71 1.62 1.741.56

1.28

2012 2013

135,716

2018

113,8012.17

1.97

1.52

Fiscal years referred to in this report cover the period from April 1 to March 31. Fiscal 2018 refers to the fiscal year ended March 31, 2019.

Financial and ESG Data Highlights

The Company conducted a reverse stock split at a ratio of 1 to 10 common shares effective from October 1, 2017. The per share data shown above has been calculated as if the reverse stock split had been conducted at the beginning of fiscal year 2011.



Fiscal Year (consolidated) unit 2011 2012 2013 2014 2015 2016 2017 2018 Target 2021Revenues million yen 135,044 131,379 153,665 157,625 137,148 125,276 139,000 151,068

Operating income million yen 1,627 1,173 8,842 9,474 6,475 6,558 7,361 8,911 12,000

Ordinary income million yen 496 2,529 8,920 10,380 4,064 4,607 5,555 7,784

Profit before income taxes million yen (1,446) (14,977) 12,005 10,691 4,343 3,814 6,419 10,502

Profit attributable to owners of parent million yen (914) (15,505) 10,778 8,626 4,110 3,322 6,613 9,343

Per share data*

Net income yen (39.6) (672.1) 467.2 374.0 175.4 140.9 280.6 396.4

Net assets yen 2744.0 2192.8 2709.1 3,195.6 3,197.2 3,259.0 3,423.2 3,778.0

Dividends yen — — 90 90 40 40 85 115

Share Price (Closing price on March 31) yen 1,340 1,600 2,450 2,920 1,520 2,400 2,170 2,369

At fiscal year-end

Total assets million yen 190,659 181,682 224,507 227,663 217,524 233,071 228,229 223,528

Net assets million yen 65,581 52,633 64,943 76,481 75,372 76,826 80,691 89,038

Equity ratio % 33.2 27.8 27.8 32.4 34.6 33.0 35.3 39.8

Major Financial Indicators

Return on equity (ROE) % (1.4) (27.2) 19.1 12.7 5.5 4.4 8.4 11.0 Exceed 10%

Price earnings ratio (PER) times — — 5.2 7.8 8.7 17.0 7.7 6.0

Dividend payout ratio % — — 19.3 24.1 22.8 28.4 30.3 30.3

Interest-bearing debt million yen 95,917 99,723 135,716 125,912 121,880 133,707 125,729 113,801

Debt equity ratio (DER) times 1.52 1.97 2.17 1.71 1.62 1.74 1.56 1.28 Less than 1.3 times

Capital investment million yen 30,505 23,275 58,295 20,344 24,733 29,491 23,656 18,602

ESG Data (nonconsolidated)

Fleet tonnage ten thousand tonnes 10.8 10.1 10.7 11.4 11.2 12.2 12.8 11.8

Cargo volume kton 55,643 59,475 58,772 65,099 64,088 62,483 62,134 64,205

Fuel consumption (MDO/HFO) kton 15/718 12/696 13/694 15/686 19/658 21/644 22/634 28/672

Fuel consumption per unit load t/kt 13.2 11.9 12.0 10.8 10.6 10.6 10.6 10.9

CO2 emission volume kton 2,230 2,153 2,149 2,132 2,058 2,023 1,996 2,129

CO2 emissions per load unit (compared with fiscal year 2000, the fiscal year ended March 31, 2001)

% 91 82 83 74 73 73 73 75

Number of employees Number 221 225 226 228 227 228 226 227

Revenues / Operating income■■ Revenues (million yen)■■ Operating income (million yen)

■■ Profit attributable to owners of parent (million yen)●● ROE (%)

2014

157,625

2015

137,148

2016

125,276

2017

139,000

2011

135,044

2012

131,379

2013

153,665

2018

151,068

Profit attributable to owners of parent / ROE

2014

8,626

2015

4,110

2016

3,322

2017

6,613

2011

(914)(1.4%)

(27.2%)

12.7%5.5% 4.4%

8.4%11.0%

2012(15,505)

2013

10,778

2018

9,343

Dividends(yen)

2014

90

2015

40

2016

40

2017

85

2011 2012 2013

90

2018

115

1,627 1,173

8,842 9,474

6,475 6,5587,361

8,911

19.1%

■■ Interest-bearing debt (million yen)●● DER (times)

Interest-bearing debt / Debt equity ratio (DER)

2014

125,912

2015

121,880

2016

133,707

2017

125,729

2011

95,91799,723

1.71 1.62 1.741.56

1.28

2012 2013

135,716

2018

113,8012.17

1.97

1.52

Fiscal years referred to in this report cover the period from April 1 to March 31. Fiscal 2018 refers to the fiscal year ended March 31, 2019.


On February 27, UTASHIMA, the first hybrid vessel for coastal cargo shipping operated by the Group company NS United Naiko Kaiun Kaisha, Ltd. was delivered at Koike Shipbuilding & Shipping. Co., Ltd. This vessel is environmentally friendly, emitting no CO2 when navigating and staying in ports. Moreover, it produces little vibration or noise, contributing to a more comfortable working environment for the crew. Our Group is continuing to take on the challenge of creating zero-carbon ships, including deploying her sister vessels, as part of our SDGs efforts.

UTASHIMA has two drive systems: a diesel engine (main engine) and an electric propulsion system with shaft generating function. These are combined with lithium-ion batteries to form a hybrid propulsion system. Normally, the main engine provides propulsion at sea, while at the same time driving the shaft generator to charge the lithium-ion batteries. Within ports, the main engine is stopped and the lithium-ion batteries provide power to the electric propulsion system, emitting no CO2.

S.H.V. stands for “Shore-Connect Hybrid Vessel” and the four stars indicate that it has earned the top rating under the “energy conservation rating system for coastal ships” of the Ministry of Land, Infrastructure, Transport and Tourism’s, by offering 15% or greater energy-saving performance for both hardware and software.

Plug mark on the side of the ship

Propulsion

Main generator

Vesselinterior power

Lithium-ion batteries

Electric propulsionsystem and

shaft generator

Diesel main engine

Main generator Lithium-ion batteries


shaft generator

Diesel main engine

Main generator Lithium-ion batteries


shaft generator

Diesel main engine

Normal navigation Navigation in ports Stay in ports

Most Advanced Hybrid Vessel

Delivery of UTASHIMA

What is the vessel’s specifications?Q

Does the vessel operate under battery power only in ports?Q How much does the system improve fuel efficiency?Q

Does it offer the crew benefits, too?QWhat are the capacity and lifespan of the lithium-ion batteries?Q

For short distances, the main engine can be stopped and the propellers can be turned using battery power alone, so this system is suited to port use. Electric propulsion also offers excellent steering performance, and therefore it improves safety.

The main engine and generator are used for less time, which has the potential to ease the burden on the crew and reduce maintenance costs. At the same time, the batteries, instead of the generator, can supply power for use on the ship while the ship stays in ports, eliminating all noise and vibration, which will reduce the impact on sleep and work of the crew. Crewmembers on the vessel are already experiencing how quiet it is when navigating and staying in ports under battery power. We aim to utilize the characteristics of the labor-saving and improvements in the vessel’s interior environment to secure seamen in the future.

The vessel has 2,828 modules, each containing 24 lithium-ion battery cells. This capacity is the equivalent to 2,700 hybrid cars, when converted to kilowatts. The batteries’ lifespan is expected to be 15 to 20 years, so we believe that they will not be replaced before the vessel finishes its duties, but if a problem occurs, only the modules with problems will be replaced.

Precise information will not be available until a good deal of operating data has been accumulated, but using shaft generators and supplying power from lithium-ion batteries while staying in ports are expected to reduce energy consumption by roughly 15%. If rapid charging systems became available on land, we believe that it is highly likely that it will improve by 30%.

Length: 76.19 mBreadth: 12.00 mDepth: 7.13 mDead weight: 1,700 metric tonsGross tonnage: 499 tons

Specifications

TOPICS



Propulsion



The NS United Kaiun Group’s business is supported by alarge number of stakeholders,

including various maritime personnel, government offices,calling/passing port states and local communities.

Local community

Globalenvironment

Legal offices

Marine surveyors

Courts

Marine arbitration (London, New York, Tokyo)

Educational institutions

Cargo owners(Steel mills, power stations, refineries, other manufacturing plants and trading companies)

Shipping exchanges

Vessel brokers (UK, USA, Tokyo)

Cargo brokers and agents

Warehouse companies

Maritimeauthorities

NS United Kaiun GroupEmployees(and their family members)

Partners

OtherorganizationsCustomers

General consumers and civil society

Shareholdersand

investors

Stakeholders Supporting the NS United Kaiun Group

Owner work-related partners Operator work-related partners

Organizations such as the Japanese Shipowners’ Association

Vessel owners

Shipyards

Classification societies

Marine insurance companies

Salvage companies

Financial institutions

Manning agents (the Philippines and other countries)

Vessel management companies

Spare vessel parts and chandlery suppliers

Shipping agents

Fuel suppliers

Stevedoring companies

Pilots’ associations and tugboat companies

Calling/passing port states(Malacca Straits, Panama Canal, Suez Canal, and others)

Ministry of Land, Infrastructure, Transport and Tourism

Japan Meteorological Agency

Japan Coast Guard

Japan Marine Accident Tribunal

Japan Transport Safety Board

Port authorities

Customs

International organizations(such as the International Maritime Organization)

Flag state administration (such as Japan, Panama, Liberia, etc.)



With Our Employees


We have a fundamental assumption that our core staff, both administrative and technical, are permanent employees. In the spirit of Japan's Law on Securing Equal Opportunity and Treatment between Men and Women in Employment, employment is based solely on the abilities and aptitude of each person, and the growth of employees is fostered by the Company's training system.

Concerning our non-Japanese crews, we strive to improve retention rates on vessels managed by the Group by increasing the types of training available to officers and ratings, supporting in-house executive training through our qualification support system, and giving preference to long-term employees. Further, to explore and develop outstanding human resources, NS United Kaiun establishes a scholarship system.

In fiscal year 2001, the Company introduced a personnel system for promotions and advancement based on an assessment of the individual’s abilities, motivation, and performance. Since its introduction, the Company has fine-tuned the system based on the opinions of employees. This system has the primary aim of making certain that every individual works at his or her level of competence, and to help them develop his or her abilities, while ensuring fair treatment.

Through recent workstyle reforms and the diversification of workstyles, we are now cultivating a corporate culture where employees can maximize their potential and their individuality. We strive to further improve productivity and create positive workplaces. Specific examples include maternity protection, including both maternity leave and maternity pay, as well as childcare support, such as childcare leave, and reduced working hours. This goes beyond what is required by law. We are also offering nursing care leave and reduced working hours for employees providing nursing care. Through these programs, also beyond what is required by law, we are creating working environments that are conducive to long-term employment, regardless of age or gender. While we have not introduced a flex-time system, from this spring we began pilot testing of staggered working hour, and, with the cooperation of shore unions, are listening to feedback from employees regarding the implementation.

We place high importance on enabling employees to maintain a good balance between work and home and to lead satisfying lives. As one example, we allow employees who meet certain conditions, such as years of continuous employment and age, to take sabbaticals for self-improvement, and we provide subsidies for these sabbaticals. Furthermore, on April 2012, NS United Kaiun established a system of leaves for important dates, and has been encouraging employees to take more paid leaves on birthdays and anniversaries to help boost the use of paid leave. In addition, Wednesday has been designated as a “no overtime workday,” and employees are encouraged to follow the campaign to ensure its effective implementation.

The Company provides dormitories for single employees (two locations in the Tokyo area), company housing, an employee savings system, a supplementary housing loan system, and various other welfare and benefit programs, in addition to helping fund for employee cultural groups that engage in cultural activities (including sports). In April 2008, the Company also introduced lump sum childrearing support payments.

Basic Employment Policy Personnel System

Work-Life Balance

All employees of the NS United Kaiun Group receive annual health checkups, and the Company pays for comprehensive physical examinations for employees who satisfy the requisite conditions. The head office also has a Health Maintenance Office where an industrial physician with professional knowledge of mental health and an administrator with nursing qualifications offer physical and mental health consultations and guidance on a regular basis.

The programs provided also include health guidance for preventing metabolic syndrome and other lifestyle-related diseases, preventive health education on infections, mental health checkups, and seminars on mental health.

Mandatory pre-embarkation health checkups are provided for crewmembers before boarding. They are also given guidance of periodic health checks while on board.

The percentage of women that make up our workforce is gradually rising. While today there are no women in executive positions, over the past three years women have made up 40% of all new graduate hires for the main career track. Considering the significant life events that can place a heavy burden on women, we believe that creating a workplace environment favorable to ongoing employment is an important task. We are undertaking this task by using a variety of effective means such as IT-based approaches to improve operational efficiency and information sharing.

Employee Health and Safety

Creation of Positive Working Environments

Number of Employees and Percentage of Females

2014 2015 2016 2017 2018

■■●

Number of male employeesNumber of female employeesPercentage of female employees

(Unit: person)

35

15.4%

193

37

16.3%

190

36

15.8%

192

38

16.8%

188

40

17.6%

187


We intend to contribute to the development of society by providing trusted and high-quality marine transportation services. To do this, we have identified nurturing and mobilizing employee abilities as one element of our management philosophy. Specifically, we provide training tailored to the rank and the requirements of employees so that all of them can become a professional in the field of international shipping. On-the-job training (OJT) is at the core of this system which includes training for new employees, training in shipping practices, language study (English, Chinese, and others), training at shipping agencies, onboard training, overseas training, and grade-specific and job-specific education.

Personnel Development

Natsuko MutoTramp Chartering Group

Ocean-going Tramp Team, Second

In July 2015, I had my first child. I returned to work in April 2016, and used the reduced working hour system. Then, in January 2019, I had my second child. I am now a member of the Tramp Chartering Group, while I am taking my second period of childcare leave.

The content of my work changed little before and after my first leave period, when I managed operations of vessels in the Pacific region. Before I returned to work, I was very worried about whether I would be able to balance childcare and my work, which involved vessels around the world and various parties both inside Japan and overseas. Immediately after returning, I was incredibly busy, both at work and in my private life, but I was able to carry out my duties with the support of my superiors and colleagues. They scheduled meetings during my work hours and were very understanding when I suddenly needed to take days off, such as when my child got sick. Thanks to all of the people who have used this system and returned to work, the Company has established a robust leave system. Our personnel section also provides close support, so I felt no anxiety about any processes or procedures.

In recent years, there has been a great deal of discussion about

workstyle reform. I feel that workstyles have also become more flexible within the Company, not only for women and people taking care of children, but for all employees, such as men taking leave for family reasons. In addition to improving operational efficiency and revising systems, I feel that the mentality of employees is also changing.

I am now taking childcare leave for the second time, and after returning to work I plan to again use the reduced working hour system. I have concerns about returning to work while raising two children, but I hope, through my day-to-day operations, to contribute to the company’s business and to support future employees by serving as an example of a diverse workstyle.

● Training in shipping practices allows trainees to select from among multiple courses offered by the Company and maritime industrial associations covering a broad range of subjects from sales/marketing, insurance, and regulations to technology and treaties. Mid-career employees serve as instructors for internal education programs for employees learning about business practices, and we

focus on providing trainees with practical skills, giving concrete examples.

● In the onboard training program, shore-based employees (second year or later) plan and execute two to four weeks of work on one of the vessels under the Company’s operation. This training focuses on increasing the trainees’ understanding of ships and their awareness of the importance of communication between shore and sea and safe navigation.

● In the overseas training program, shore-based employees in roughly their fifth year or later are sent for one year or so to the Company’s overseas subsidiaries to improve their language skills, their negotiating skills in a global environment, and their understanding of other cultures, with the aim of shaping them into future global leaders.

● The grade-specific training includes basic MBA training provided in-house for assistant managers and managers. There are six educational themes: leadership, management strategy, critical thinking, marketing, accounting, and finance. The goal of this training is to develop future business leaders.

Guided by the Company’s plan for developing young crewmembers in the short term, exacting guidance and education are provided, allowing new crewmembers to play instructive roles as chief officers or first engineers in just four to five years after joining the Company. For non- Japanese crewmembers, we have a promotion support system and skill improvement training programs that include pre-boarding seminars both in the country of recruitment and in Tokyo, classroom training, assistance in obtaining advanced marine certifications, and OJT.

Training system

New

hire

trai

ning

(bus

ines

s m

anne

rs, c

ompu

ter s

kills

)

Personal development support(language skills, official certifications)

Grade-specific training(officers, assistant managers, managers, etc.)

Training in shipping practices

Assi

gnm

ent

Follo

w-u

p tra

inin

g

On-th

e-jo

b tra

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With a broker with whom I had established a close rapport, at the New Year’s Party held by NSU UK Fellow crewmembers who also performed hold preparation work

* Palm kernel shell. The shells of palm kernels left over when manufacturing palm oil. Palm kernel shell is used as a biomass energy source.

Nagamichi Kin Capesize Team, Second

Tetsuya Miura Near Sea Team, First

My overseas training was my first time handling chartering for Panamax vessels. I collected information from the never-ending flood of phone calls that started first thing in the morning, and was surprised by the aggressiveness of the European brokers. Needless to say, all negotiations were carried out in English, and I struggled with this, but with the help of my superior and the brokers, I was able to secure contracts. It was a truly stimulating experience. On heavy days, we received over 3,000 emails. Even though I knew that London was a key center for shipping industry, I was still surprised by a huge amount of information.

I was put in a London broker for a week, so I was able to experience many things that could only be understood by actually dealing with them firsthand, such as how to handle the information that comes in from around the world or how to encourage parties when they are matching the needs of charterers and shipowners.

How the training helped me: Broader perspective and a larger personal network

I was able to carry out my duties, while taking into consideration the different positions of the people I dealt with, by living in a different environment, experiencing different cultures firsthand, and dealing with people who spoke different languages and had different backgrounds. I also developed personal connections with the customers and the brokers I met, something that will be extremely important for my future career.

What made a particularly strong impression on me was the hold preparation work done in the sweltering heat. Doing physical labor inside the hold while at sea in the tropics, where the temperature was always over 35 degrees, was even harder than I imagined. I generally don’t get enough exercise in the first place, so the experience made a tremendous impression on me, both for its physical and mental demands. On-board the ship, everyone had to work in constantly unstable conditions, with limited time and personnel. This experience showed me firsthand just how difficult that is. Having completed the training, when I do my work now I can imagine the different situations on board vessels. The training was truly valuable to me.

Living on the ship, everything was new and different, and by just taking in my surroundings, I could make many new discoveries. I hope that anyone who takes this training stays attentive and observant, noticing even the little things, to take full advantage of what this experience has to offer.

Off-duty time was also a valuable experience

During off-duty time, I fished with the crewmembers, sang karaoke in languages I didn't understand, and enjoyed the lively activities on the vessel. I have wonderful memories of the time I spent off duty.

August 2017 to July 2018NS United Shipping (U.K.) Ltd.

May 17 to June 5, 2019MERCURY TRIUMPH (13,060 DWMT V-17 PKS*)Bintulu - Hososhima

U . K . Onboard training

Overseas Training Onboard Training

What impressed me most:A flood of calls and emails from the very start of the day

What impressed me most:Hard physical labor in the sweltering heat

With Our Employees


With Our Shareholders and Investors

We comply with all laws and regulations of the Financial Instrument Exchange Act, and with the timely disclosure rules set by the Tokyo Stock Exchange. Based on transparency, fairness, and continuity, we strive to ensure the timely and appropriate disclosure of IR information, by providing shareholders and investors with important information that could affect investment decisions, through our website, news media, and the Tokyo Stock Exchange's Timely Disclosure Network (TDnet). We also proactively provide certain information that is not required to be disclosed according to the timely disclosure rules if we believe the information is important for shareholders and investors.

In addition, the Company's Investor Relations Committee—composed of executives and general managers in the General Affairs Group, the Finance and Accounting Group, and the Project Group—has formulated a public relations policy governing the release of information intended for investors. This committee is charged with responding to media coverage, holding press conferences and posting articles on the Company's website.

NS United Kaiun works to provide information to domestic and overseas institutional investors. As much as possible, the Company holds individual briefings with securities analysts and investors upon request, answering questions and explaining the status of operations. In line with a policy established by the Investor Relations Committee, at least one executive and one person from the committee secretariat participate in these briefings. We held 18 individual briefings during fiscal year 2018.

To the Company, shareholder returns are an essential aspect of management. Our policy is to maintain sustainable dividend payments that match the Company's performance while securing enough retained earnings to generate stable corporate growth and to respond to changes in the business environment.

One important strategy in our current Medium-Term Business Plan is to “increase investment efficiency,” where we focus on “raising investment efficiency in order to maximize shareholder satisfaction.” So, we have improved our dividend policy to better convey our proactive stance on profit distribution: We decided on a payout ratio of approximately 30% to reflect consolidated financial results. In fiscal year 2018, we paid out an interim dividend of 50 yen per share, our first interim dividend in a decade (since fiscal year 2008), and a year-end dividend of 65 yen, for a total annual dividend of 115 yen.

IR Materials on Our Website● Securities Report, Quarterly Securities Report (in Japanese)● Corporate Governance Report (in Japanese)● Corporate Disclosure● Financial Results and Supplementary Financial Highlights● NS United REPORT (integrated report in Japanese and English)● Interim Business Reports (in Japanese)

Timely Disclosure of Company Information Interactive Communication

Dividends to Shareholders

Front page of the Company's website

IR web page


With Our Customers and Suppliers

NS United Kaiun is principally engaged in the worldwide shipping of raw materials, energy resources, and products for industry. Toward the customers’ needs for cargo transportation throughout the world, we strive to offer timely shipments employing the most suitable vessels, safely and at competitive rates.

We enable this by fully employing the information and know-how on trade that we have accumulated over time at bases in the U.K., the U.S., and in Tokyo, as well as by keeping up with the global shipping market with our 24-hour system.

We believe our business style, visiting domestic and overseas customers to actively communicate with them, as the foundation of generating customer satisfaction, regardless of whether a project is long term or a spot voyage. We further build trust and develop our reputation from customers worldwide as “a first-class tramper.”

The mission of the Group is to provide customers with high-quality marine transportation services. Therefore, we established and are maintaining an environmental management system that complies with the ISO 14001 international standard for environmental management, and implemented the system throughout the Group’s marine shipping services. Moreover, NS United Kaiun Kaisha, Ltd. and NS United Naiko Kaiun Kaisha, Ltd., respectively implemented a safety management system by incorporating the ISO 9001 international standard for quality management, into ship management.

The Group draws up stowage plans for high-value steel products, plant infrastructures, and other cargoes, as well as supervises cargo operations on site. We use our accumulated experience and expertise on cargo characteristics and world port conditions to preserve and efficiently transport cargoes.

NS United Kaiun Kaisha, Ltd., together with coastal shipping companies NS United Naiko Kaiun Kaisha, Ltd. and NS United Coastal Tanker Kaisha, Ltd., has continued to forge strong ties with domestic parties from shippers in various industries such as steel mills, power stations, oil refineries, gas plants to port-related personnel, and has participated in many safety conferences all over Japan to ensure the safety of vessels entering/leaving port and the safety of the region. We cooperate on periodic surveys and have implemented risk management programs related to accidents, disasters, and environmental pollution.

Customer Satisfaction Ensuring Safety and Quality in Shipping Services

Efficient Stowage and Cargo Preservation

Participation in Safety Meetings with Customers and Partners

Emergency Response and Public Communication

ISO 9001:2015 certificate of QMS registration

Loading eye-up coils

Emergency response Simulated (mock) press conference

ISO 14001:2015 certificate of EMS registration


NS United Kaiun Kaisha, Ltd. is always ready to manage an emergency response together with customers, salvagers, insurers, shipping agents, shipyards, and other partners, as well as related authorities, in accordance with regulations regarding the handling of disasters at sea and other emergency circumstances. We also have systems in place to provide public explanations at appropriate times through the media and the Company's website.

Members from the group operating the targeted vessels

Forest conservation activities funded by the donation drive

Emergency supply replacement


One of our environmental targets is the promotion of recycling, so we have carried out the following activities.

As part of our support for areas affected by the Heavy Rain Event of July 2018 and the 2018 Hokkaido Eastern Iburi Earthquake, we donated ¥3 million yen to the Japanese Red Cross Society and sent donations from individuals within the Group.

The Port of Long Beach, California, has been running the voluntary Green Flag Incentive Program since 2005. This program encourages vessels to sail at low speeds in the coastal area to lower exhaust gas emissions. The vessels calling at the port are recommended to sail at 12 knots or less within 40 or 20 nautical miles of the harbor. Shipping companies with 90% or more of their operating ships complying with the requirements annually, are presented with green flags and the environmental award.

Company ships called at the port seven times in 2018, complying with the requirements 90% or more of the time. So this year (the same as last year), the Company was presented with a green flag and a letter of appreciation by the Port of Long Beach. We will continue our voluntary a c t i v i t i e s a s w e l l a s collaboration with ports of call and related parties to protect the environment.

The Group participates in a joint disaster preparedness council at the Otemachi First Square Building (Chiyoda-ku, Tokyo), where we lease office space. The Group participate in joint disaster preparedness activities including firefighting drills with the local district. In addition, while the Group has set up firefighting brigades, executives and employees participate in inspections and training sessions for disaster preparedness and crime prevention at their workplaces.

Every year since 2006, the Group has participated in a calendar donation drive for a forest conservation fund in Kagoshima Prefecture. For the eleventh time, this was held in the prefecture from December 19 to 23, 2018, with participation by companies and organizations from all over Japan. We donated 74 calendars and 21 notebooks to the event organizer, Kagoshima Green Foundation, as part of our social contribution. All proceeds from the sale of the calendars and notebooks are used by this foundation to maintain woodlands and to suppor t forest conservation.

Promotion of Recycling1

Support for Recovery from Disasters2

Awarded Green Flags by the Port of Long Beach3

Regional Disaster Preparedness4

Calendar Donation Drive5

Distribution and Donation of Emergency SuppliesThe Company has stocked enough food and drinking water for all Group executives and employees for three days in the event of a disaster that prevents them from returning home. With the expiration dates of some of these supplies drawing near, we replaced all of the supplies on November 26, 2018. Food and water with expiration dates still far away were donated to the NPO Disaster Prevention Bank, an organization that provides these types of supplies to social welfare councils and children’s cafeterias.

Participation in the Book Baton ProjectThe Book Baton Project sells used books, CDs, DVDs, and the like to secondhand dealers, and then donates all the proceeds to support child educational activities around the world through Room to Read, an international NGO. The Group collected and donated 394 books and 50 CDs and DVDs from December 10 to 25, 2018.

Participating in the Ecocap Recycling ProgramWe regularly send plastic bottle caps collected at the Company to the NPO Ecocap Movement. This program, in addition to promoting recycling, reduces CO2 emissions that would otherwise be produced when the caps were incinerated. Proceeds from the sale of the recycled caps are used to create job opportunities for the elderly and people with disabilities, helping them to be more independent.

Contributing to Society

Collecting bottle caps for the recycling program


Establishing a safe navigation management systemAiming for a stronger safe navigation management system and cooperation between sales and technology divisions, the NS United Kaiun Group has established a system to carry out the vessel safety management of the entire Group in an integrated fashion, and has built a Safety Management System based on the International Safety Management Code of the International Maritime Organization (IMO). The Safety Management System also meets the ISO 9001:2015 international quality management standard.

Convening the Safety and Environmental CommitteeThe Safety and Environmental Committee, headed by the president, regularly reviews our Environmental Management System (including our Environmental Policy) and ensures safe navigation. We are deeply committed to conserving the global environment by continually improving our Environmental Management System.

Establishing a crisis management systemBased on our regulations for handling casualties at sea and other emergencies, we have adopted initiatives to prevent marine accidents, including management strategies and internal systems to handle accidents, if and when they occur, focusing on such activities as periodic emergency response exercises and regular reviews of our risk management systems.

Offering training sessions for crewmembersWe provide training sessions, including seminars and OJT to all crewmembers on our owned vessels. For young Japanese officers, we established a “concentrated upgrade plan” to develop officers in the short term. To enhance the employment and training of non-Japanese crew, we continually send our staff for training to the Philippines and Vietnam.

Striving for zero marine accidents, the NS United Kaiun Group makes every effort to maintain safe navigation based on the following four principles both to

ensure high-quality services for our customers and to promote environmental conservation activities on a global scale.

Promoting Safe Navigation



Securing Safe Navigation

Safe navigation is at the core of the Company’s management. We work to achieve zero marine accidents, to say nothing of zero accidents causing injuries or casualties, and support safe navigation under the following systems with the knowledge that safe navigation of vessels is a top priority for promoting the conservation of the global environment, especially the marine environment.

At sea, on the bridge of ships that captain and watchkeepers work with sharing the information each other, and shall at all times be prepared to respond efficiently and effectively to changes in circumstances. Also in

Accident Zero Achievement CommitteeThe Accident Zero Achievement Committee analyzes the causes of accidents that have occurred for vessels managed by the Company, looking in detail at both physical/hardware aspects and systemic or “soft” aspects. The committee also analyzes the causes in chronological order and examines preventive measures. This information is fed back to each vessel with the aim of achieving zero accidents.

Safety Management System Management CommitteeProposals for improvements from vessels under our management, accident statistics, internal audit results of vessels and the Vessel Management Division, and matters pointed out by external vessel inspections, such as PSC (port state control), are reported to the Safety Management System Management Committee. This committee then reviews the safety management system and quality management system—the core components of vessel management—and continually makes improvements.

Near-Miss Reporting SystemIn April 2017, we established the Near-Miss Analysis Committee to more effectively utilize near-miss accidents.

The leader of the Safety Management Group serves as the committee chair and the leader of the Ship Management Group serves as the vice-chair. The committee also includes several other members and the secretariat. The aims of the Committee are to improve the crewmembers’ awareness of safety and to build a safety culture.

Near-miss accidents reported by vessels are first categorized by committee members into two categories: issues requiring more detailed analysis and other issues.

For issues requiring more detailed analysis, the superintendents in charge interviews crewmembers, requests an investigation to manufacturers, and reports to the committee. The committee performs a

Supporting Safe Navigation

BRM and ERM Training for Safe Navigation

Firefighting drill on a vessel

BRM training

A Shipboard Safety and Health Committee meeting

multifaceted investigation of incident causes, proposes effective countermeasures to prevent a reoccurrence, and reports them as official documents to each vessel.

With other issues, near-miss accidents are officially reported to vessels and they are provided with cautionary information.

Near-miss reporting systemIssues requiring detailed analysis

Superintendents in charge Interviews with crewmembers

On-site investigation

Manufacturer investigation

Near-Miss Analysis Committee

Vessels

Multifaceted cause investigation

Proposal for effectivereoccurrence prevention

Re-investigation

Notification

Reporting

Shipboard Safety and Health CommitteeA Shipboard Safety and Health Committee meeting is held every month, with the participation of all crewmembers. The aim is to raise crewmembers’ awareness of safety and health management as well as environmental conservation.


Vessels safety inspections are carried out by our marine superintendents once every year to ensure the safety of ships operated by the Company. In addition, technical superintendents visit vessels every six months to check the condition of the vessels, to give instructions to crewmembers, and to verify onboard maintenance plans. Internal audits are carried out annually to confirm compliance with our safety management system, quality management system, environmental management system, and ship security plan.

In addition to these inspections for our owned vessels, chartered vessel inspections are carried out based on the Company’s standard inspection checklists whose contents are regularly reviewed and revised. We visit overseas vessel owners and their ship management company, with whom we have close relationships, to explain the contents of our findings and the checked items, and to exchange information with them. By directly conveying this information to those in charge, we seek to maintain a high safety level of our fleet.

The NS United Kaiun Group conducts campaigns to raise safety awareness.

The Company carried out a six-month campaign from October 2018 to March 2019 with the theme “For Enhancing NSU Safety Culture!” Specifically, the goals were 1) eliminating accidents causing injuries or casualties, 2) eliminating oil spills, and 3) preventing onboard fires. During the campaign period, the president, executives, and group leaders visited vessels. Meetings were held with crewmembers regarding the above themes with the aim of improving onshore–onboard communication. The main objective of this project is for onshore and onboard staff to work together as one to further strengthen the Company’s fleet safety management system. To reach that objective, the crewmembers will be reminded of the significance of safe navigation, the foundation of the Company management.

Under the slogan of “Striving for Zero Accidents,” NS United Naiko Kaiun Kaisha, Ltd. formulates mottoes twice a year and visits vessels of their operation to raise awareness of the significance of safe navigation among the crewmembers.

During the first visit, the focus is on fostering awareness of safety. During the second visit, the focus is on preventing accidents that lead to marine casualties.

Campaign Challenges:(1) Distributing campaign posters(2) Presenting awards to the winning vessels of the previous FY(3) Distribution of campaign materials(4) Familiarization with preventive measures using past examples of

accidents and problems

Vessel Inspections

Safety Campaigns

NS United Coastal Tanker Kaisha, Ltd. announces Priority Safety Objectives and Voyage Safety Declarations every month. These announcements are shared with its operated vessels, as well as vessel owners, to improve safety awareness. The Company also conducts educational campaigns for safe operation, with an annual Zero Dense Fog Accident Campaign and a New Year’s Zero Accident Campaign.

Achieving zero accidents and zero injuries is a never-ending mission. To engage in sustained and concerted efforts to fulfill this mission, the NS United Kaiun Group will continue holding safety campaigns and offer a back-to-basics opportunity to maintain safety awareness. We will also continue working to communicate closely between the shore-based management and the onboard operation, as part of ongoing initiatives to ensure the safe navigation of all vessels.

Safety campaign: Executive Officer Fujita checks on safety during vessel’s loading work

Safety campaign: President Tanimizu visits a vessel

Sharing information with ship management company

the engine room, all engineers under chief engineer's command work together for achieving safe engineering operation by proactively managing equipment and information. Maritime incidents or disasters are mostly the result of an error chain consists of a series of non-serious incidents. Bridge and engine team members must recognize when error chain is developing, and take action to break the error-chain.

Bridge Resource Management (BRM) and Engine Resource Management (ERM) training are effective training for cutting error chain to prevent major incidents and disasters. These trainings are regularly given to all crew members using land-based training simulator.



Revised June 27, 2018

Kazuo TanimizuPresident, NS United Kaiun Kaisha, Ltd.

Environmental Policy

NS United Kaiun Group Environmental Policy and Environmental Management System Organization Chart

We, as a corporate group that provides marine transportation services worldwide, will strive to protect the global environment, the common property of all humankind.

1We will strive to ensure, through environmental education and promotion activities, that all employees of the NS United Kaiun Group raise their awareness of environmental issues and act in accordance with this Environmental Policy.

5

We will establish an environmental management system and commit to continually improving it to enhance environmental performance and to prevent pollution.

2When acquiring vessels, instruments, other products, and materials required for providing our services, we will procure them by taking into consideration a reduction of the environmental impact and a life cycle perspective.

6

We will comply with the laws, regulations, and other environment-related requirements that are applicable to the navigation of our vessels and to our business activities in offices.

3We, the NS United Kaiun Group as a whole, will promote energy and resource saving as well as the reduction and appropriate disposal of waste.

7

Every department of our company will establish environmental objectives and targets that comply with our Environmental Policy and strive to attain these object ives and targets based on our environmental program. We will also review their performance on a regular basis to ensure these environmental objectives and targets are being achieved.

4We will disclose our Environmental Policy and environmental preservation activities when necessary.

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General Management Division Operational Division

Environmental Protection Working Group

Safety and Environmental Committee

Secretariat (Safety Management Group)(General Affairs Group)

Internal Audit Team

Emergency Measures Headquarters

Board of Executive Officers

Top Management(President)

Management Representative

Capesize Group

Energy Group

Tramp Chartering Group

Near Sea Group

Vessel Management Division

Safety Management Group

Ship Management Group

Vessels under Management

MasterGeneral Affairs Group

Finance and Accounting Group

Project Group

Environmental Management System Organization Chart (NS United Kaiun Kaisha, Ltd.)



10-year Long-Term Target

PLAN DO CHECK / ACT Environmental

PoliciesEnvironmental

Objectives Target for FY 2018 Content of Activities Verification of Results Achievement

Implement in-house education(at least three times a year)

Designate a training program for new employees * Provided Environmental Policy and EMS training during orientation for new employees (100%).* Provided information on the status of measures aimed at achieving EMS environmental targets, Safety

and Environmental Committee meeting minutes, etc., through group meetings, circulars, etc. (three or more times per group)Provide in-company training making use of group meetings

Train internal environmental auditors (at least one) Foster internal auditors within the environment secretariat One employee participated in a related external program and became a qualified

internal environmental auditor.

Implement pre-boarding seminar (100%)

NS United Kaiun implements the educational training of the “top four” (Capt, C/E, C/O, and 1/E) and Japanese crew.To those other than the above, manning companies provide the training.

Provided pre-boarding seminars at the head office for the top four ranks of non-Japanese crewmembers and Japanese employees; 176 seminars for 264 crewmembers were held in FY 2018. Crew manning companies provided seminars to other crewmembers.

Implement onboard education of crew (once a year for each vessel) Implement onboard education of crew

The Quality Control Team conducted internal audits of all 31 vessels.The Marine Team visited every vessel, and safety inspections were conducted for 28 of the 31 vessels.Ship Management Group conducted maintenance inspections for 18 out of 34 vessels during the first half of the fiscal year and for 22 out of 31 vessels during the second half of the fiscal year.

Hold Shipboard Safety and Health Committee meetings (once a month)

Disseminate environment conservation materials by Shipboard Safety and Health Committee

Held meetings on every vessel every month and reported the findings of committee meetings to the Safety Management Group.

Zero oil spills from vessels(without regard to amount)

Promote safe navigation (prevent contamination) Zero oil spills* Carried out safety campaigns for vessels managed by the Company (30 out of 32

vessels).* Confirmed compliance with safety management manuals through internal audits.* Marine superintendents confirmed loading and discharging plans.* Dispatched safety superintendents when tankers discharged cargo in Japan (100%).* No oil spills occurred during fiscal year 2018.* Provided thorough instructions through Sailing Instructions, etc.* Conducted emergency response exercise on November 14 for a simulated

scenario where a vessel runs aground and spills oil.

Perform safe cargo handling on oil tankers

Implement safe bunkering and oil transfersCarry out maintenance work for potential oil leaks outside of vessels

Prevent oil leaks from the deck when at anchor and berthing

Familiarize crew with emergency response actions

Manage ballast water effectively

Execution of ballast water exchange in rigid compliance with port state regulations

* When exchanging ballast water, vessels follow all procedures on instructions from authorities and regulations in every country of calling.

* Installing ballast water treatment systems in all vessels by the end of the grace period.Responding to the Ballast Water Management Convention (BWMC)

Maintain 20% or more reduction in fuel oil consumption per ton-mile unit load over FY 2000

Implement effective operation by onshore organizationAchieved 29.78% reduction in fuel oil consumption per ton-mile unit load over FY 2000.* Continued efficient vessels’ allocation, and vessels navigation at economical/

reduced speed, taking customer conditions into consideration.* Maximized cargo volumes to the greatest degree possible for every voyage,

while confirming customer requests, conditions at loading/discharging ports.* Information from Weathernews is sent to all vessels. Vessels verify optimal

routes for reducing fuel consumption and sail economically.* Continued on vessels under our management and some chartered vessels.

Implement effective navigation by vessels

Adding chemicals to boost combustion efficiency and reducing fuel oil consumption

Reduction in consumption of paper per employee

Reduction through converting reference documents to electronic dataReduction by saving paper

Paper consumption:FY 2018: 8,615 sheets/personFY 2017: 8,593 sheets/personResults: An increase of 0.26%, or 22 sheets per person, compared with the previous fiscal year.* Continued to promote the use of electronic data for official documentation, etc.,

whenever possible to eliminate the use of paper.Promoting paperless operations by introducing onboard vessel a mangement software

Conserve electricity

Save energy to cope with low power distribution, turning off unused lights, computers, and equipment and eliminating unnecessary lighting Save energy through Cool-Biz (casual summer office clothes) and other initiatives during summer

Set air conditioners to make room temperatures 28°C during the summer months (from July to September). Encouraged wearing light casual clothing. Monitored temperatures at Group business offfices and at specific locations, adjusting the air conditioning accordingly.

Promote recycling

* Ensure full implementation of trash separation and recycling based on the laws, and the Company building regulations.

* Collaborate on recycling and social contribution activities through the collection of plastic bottle caps.

In addition to the collection of plastic bottle caps, we participated in the Book Baton Project, reused emergency supplies, and took part in a calendar donation drive. Continuing to prepare for internal awareness-raising activities, by several tours of recycling centers used by the Company building.

Maintain 20% or more reduction in CO2 emission per ton-mile unit load over FY 2000 Implement effective operation and navigation

Note: Even with the latest models, it is impossible to reduce CO2 emission as long as fossil fuels are being used. Therefore, reductions are derived only from more efficient navigation

Reduced CO2 emissions per ton-mile (unit load) by 29.79% compared with FY 2000.Verified and applied “eco speeds” to reduce fuel consumption and the emissions of harmful air pollutants, such as CO2.

Reduce 20% CO2 emission (average: FY 2013-2020) per transported unit over FY 1990 (to be in line with the Japanese Shipowners’ Association’s Commitment to a Low Carbon Society)

Reduced CO2 emissions per transported unit on average over the period from FY 2013 to FY 2018 by 29.00%, compared with FY 1990.(FY 2013: 21.75%, FY 2014: 29.93%, FY 2015: 31.29%, FY 2016: 30.72%, FY 2017: 31.27%, FY 2018: 29.05%)

Implement Green Flag Incentive Program (100%) in a vessel placed in service at Long Beach Harbor in the U.S.

Sail at 12 knots or less within 40 nautical miles of relevant port

Carried out by all three vessels that called at the port. (one vessel of Coal/Bulk Carrier Group and two vessels of Tramp Chartering Group)

Prevent use of low-quality fuel oil. Conduct fuel oil analysisUse lower sulfur fuel oil in designated emission control areas

Followed instructions and conducted oil analysis.Low sulfur fuel oil is procured in advance and consistently used by vessels sailing in designated emission control areas (ECAs).

Set in FY 2018 Reduce annual average of CO2 emissions per ton-mile by 20% compared with the FY 2000 level over the 10-year period from FY 2011 to FY 2020.

The Environmental Management Program is a plan for achieving environmental targets based on our Environmental Policy, with the aim of continually improving our environmental management system.

Results of Environmental Management Programs Implemented in FY 2018 and Goals of the Programs in FY 2019En

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PLAN DO

Target for FY 2019 Content of Activities Term

Implement in-house education (at least three times a year)Designate a training program for new employees Full year

Provide in-company training making use of group meetings Full year

Train internal environmental auditors (at least one) Foster internal auditors within the environment secretariat Full year

Implement pre-boarding seminar (100%)NS United Kaiun implements the educational training of the “top four” (Capt, C/E, C/O, and 1/E) and Japanese crew.To those other than the above, manning companies implement the training.

Full year

Implement onboard education of crew (once a year for each vessel) Implement onboard education of crew Full year

Hold Shipboard Safety and Health Committee meetings (once a month) Disseminate environment conservation matters by Shipboard Safety and Health Committee Full year

Zero oil spills from vessels (without regard to amount)

Promote safe navigation (prevent contamination) Full year

Implement safe bunkering and oil transfersCarry out maintenance work for potential oil leaks outside of vessels

Full year

Prevent oil leaks from the deck when at anchor and berthing Full year

Manage ballast water effectively

Execute ballast water exchange or ballast water management using ballast water treatment systems in compliance with regulations of calling ports Full year

Responding to the Ballast Water Management Convention (BWMC) Full year

Reduce fuel oil consumption per ton-mile (unit load) by 27% compared with FY 2008.

Implement effective operation by onshore organization Full year

Implement effective navigation by vessels Full year

Add chemicals to boost combustion efficiency and reduce fuel oil consumption Full year

Reduction in consumption of paper per employee

Reduction through converting reference documents to electronic dataReduction by saving paper

Full year

Promoting paperless operations by introducing vessel management software Full year

Conserve electricitySave energy to cope with low power distribution, turning off unused lights, computers, and equipment and eliminating unnecessary lighting. Save energy through Cool-Biz (casual summer office clothes) and other initiatives during summer

Full year

Promote recyclingEnsure full implementation of trash separation and recycling based on the laws, and the Company building regulations.Collaborate on recycling and social contribution activities through the collection of plastic bottle caps.

Full year

Reduce CO2 emissions per ton-mile (unit load) by 27% compared with FY 2008.

Implement effective operation and navigation

Plan new vessel types and installation of improved equipment

Full year

Reduce 20% CO2 emission (average: FY 2013 to FY 2020) per transported unit over FY 1990(to be in line with the Japanese Shipowners’ Association’s Commitment to a Low Carbon Society)

Full year

Implement Green Flag Incentive Program (100%) in a vessel placed in service at Long Beach Harbor in the U.S. Sail at 12 knots or less within 40 nautical miles of the relevant port Full year

Prevent use of low-quality fuel oil Implement fuel oil analysisUse lower sulfur fuel oil in specific ocean areas Full year

Prepare for compliance with the 2020 Global Sulphur Cap (MARPOL Convention)Install and start operation of SOx scrubbers Throughout the year

Complete replacement to compliant fuel by December By December

Medium-Term Target : Achieved : Partly achieved : Needs review

Set in FY 2019 By FY 2030, reduce annual CO2 emissions per ton-mile by 40%, compared with the FY 2008 level.

Results of Environmental Management Programs Implemented in FY 2018 and Goals of the Programs in FY 2019


Reducing Environmental Impact


The MARPOL Convention (The International Convention for the Prevention of Pollution from Ships, 1973, as Modified by the 1978 and 1997 Protocol) was initially developed to prevent oil spills and oil pollution of the sea caused by tanker accidents. It was then expanded to cover a wide variety of pollutants, such as chemical cargoes, urine and other water pollutants produced on vessels, as well as the waste produced on board and air pollutants, and it adopts emissions regulations. In addition to the MARPOL Convention, there are numerous other conventions and restrictions, such as those aimed at preventing damage to ecosystems caused by the exchange of ballast water, prohibiting the use of ship paints that contain toxic substances, and (though not yet effective) a convention that specifies hazardous substances on board of scrapped vessels.

Operating and owning vessels run the risk of causing environmental harm.

There are regulations that restrict or prohibit the release of harmful substances, and regular inspections are conducted to confirm compliance with these regulations. The Group must strictly implement measures to reduce any environmental impact.

Of the many environmental conservation regulations and the possible pollutants, this section will focus on trends in regulations and our initiatives for the regulation of the emissions of sulfur oxide that is receiving the most attention recently and greenhouse gasses (GHGs) which are believed to contribute to climate change.

For fuel, vessels generally use heavy oil. When sulfur in heavy oil is burned, it produces sulfur oxide (SOx), hazardous to people’s health and one of the causes of acid rain. To control SOx emissions, the sulfur content of fuel oil has been limited in the SOx Emission Control Areas (ECAs) of the coastal areas of North America, and the North and Baltic Seas in Europe. Following this initiative, from January 1, 2020, the

Vessels Continue Taking Action for Environmental Conservation

Regulation on Sulfur Oxide (SOx) Emissions from Vessels

permitted maximum sulfur content of fuel oil will be drastically lowered from 3.5% to 0.5% in open sea areas as well.

There are three potential ways to comply with these regulations. We have chosen to comply with SOx regulations using a two-tiered approach: Using low-sulfur fuel oil and installing SOx scrubbers (exhaust gas cleaning systems).

SOx ECA＊the North Sea

and the Baltic Sea

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

4.50%

1.50% 1.00% 0.10%

3.50% 0.5%Open sea area

Vessels themselvesbecome waste

Onboard waste

Hazardous substances that

leach out of paints

Emissions of air pollutants such as SOx, NOx, and PM (particulate matter)

CO2 and other greenhouse gases, fluorocarbon ozone-depleting

substances

Fuel oil,lubricating oil,

etc.Sewage, etc. Ballast water

disposal


The 21st Session of the Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) was held in Paris in 2015. The participating nations agreed to keep the average global temperature increase enough less than 2°C compared with pre-Industrial Revolution levels, and to work to limit the temperature increase to 1.5°C, with the goal of mitigating climate change.

Achieving these targets requires GHG emissions to be held in

The Future of GHG Emissions Regulations: The Paris Agreement and the IMO’s Strategy to Reduce GHG Emissions

balance with the level of being absorbed by ecosystems. Nations have begun initiatives aimed at achieving these targets. This means that every person needs to work to address climate change.

However, since the GHG emissions from international marine shipping do not fit in well with the country-specific measures of the UNFCCC, the International Maritime Organization (IMO) has considered this issue and developed the following measures for controlling GHG emissions from ships.

The use of low-sulfur fuel is the most common method of compliance, and in 2019 we are preparing to shift from the conventional high-sulfur fuel to low-sulfur fuel oil that meets the new regulations.

SOx scrubbers can also be installed to remove SOx from exhaust gas and to reduce the amount of SOx emitted into the atmosphere. We are retrofitting existing vessels with SOx scrubbers and sand installing them on new vessels.

Compliance approach Benefit Drawback

Low-sulfur fuel oil Requires no additional investment Higher fuel costs

SOx scrubber Enable the use of low-cost fuel oilEquipment is large and costly

(though retrofitting is possible)

Alternative fuels such as LNGCan reduce not only SOx but

CO2 emissions as well

LNG tanks are large and costly. LNG supply system is not fully developed.

Retrofitting is extremely difficult

Start Method for reducing emissions

SEEMP: Ship Energy Efficiency Management Plan January 2013 Self-help efforts by efficient operation

EEDI: Energy Efficiency Design Index Gradually tightened since 2013 Mandating of fuel efficiency standards for newly built vessels

DCS: Data Collection System January 2019 Reporting fuel consumption by individual vessels

Scrubber installation plan FY 2019 FY 2020

Number of retrofitted (existing) vessels 20 ―

Number of new vessels 10 6

Compliance Approaches plus Their Benefits and Drawbacks

GHG Reduction Measures

Number of Vessels with Scrubbers

SOx scrubber installation works



Strategy for Reducing GHG Emissions: Key Points

Fuel Consumption (nonconsolidated)(kt)

■ MDO■ HFO● Fuel consumption per unit load (t/kt)

■ Total CO2

● CO2 emissions per load unit (compared to FY 2000)

CO2 Emission Volume (nonconsolidated)(kt)

2014 2015 20162000

426

15

14.5

686

15

10.8

658

19

10.6

644

21

2011 2012 2013

718

15

696

12

694

13

2017

634

22

10.6

12.011.913.2

2014 2015 20162000

1,342

2,132 2,058 2,023

20172011 2012 2013

2,230 2,153 2,1491,996

100

74

8382

91

73 7310.6

2018

672

28

10.973

2018

2,129

75

This strategy defines targets for GHG emission reductions in the future, using 2008 as the base year. Emissions reductions are gradually tightened, with the ultimate goal being the complete elimination of GHG emissions by the end of the century.

We are also installing operation support systems to achieve even higher GHG emissions reduction targets, in addition to the steps we have already taken: vessels navigation at reduced speed and efficient allocation to achieve both of economic efficiency and reduction of GHG emissions. We are collecting an even greater amount of data, with more detail, and using it to choose optimal routes and speeds in our pursuit of more efficient operation. The accumulated data will not only assist with operation efficiency, but the analysis of big data about machineries operation will assist with the prevention of equipment problems. We are investing ship hardware and software, including the expansion of data communications equipment. We are also considering having new ships use LNG as fuel, as this can reduce not only GHG but SOx and NOx emissions as well. In this way, we are engaged in a wide range of environmental conservation initiatives.

Based on these measures, one of our critical tasks will be to develop concrete measures reflecting our commitment to the UNFCCC and the IMO’s strategy on the reduction of GHG emissions, and we are currently creating an action plans for adapting to climate change.

We are sure that adapting to climate change, which will have a tremendous impact not only on the natural environment but also on peoples’ lives, societies, and economies, will be achievable if nations, local governments, enterprises, and individual people develop their own climate change countermeasures and work collectively.

SEEMP (Ship Energy Efficiency Management Plan):Vessels are required to strive to reduce GHG emissions by formulating and implementing plans for efficient operation.

EEDI (Energy Efficiency Design Index):EEDI regulations on the fuel efficiency of newly built vessels gradually tighten requirements for fuel efficiency and permit the use of vessels only with lower GHG emissions than conventional vessels.

DCS (Data Collection System): These regulations mandate the reporting of the amount of GHGs emitted by vessels, and GHG emissions are specified for each vessel.

However, even if these measures are implemented, the increase in trade backed by global economic growth is expected to result in an increase in GHG emissions by international shipping. In these circumstances, the IMO adopted a strategy on the reduction of GHG emissions from ships in April 2018.

Aim for zero GHG emissions as early as possible in this century!

Improve fuel efficiency in international shipping by 40% by 2030.

Cut total GHG emissions by 50% by 2050.

Reducing Environmental Impact


In-house EducationWe created an Environmental Education Implementation Plan to provide education on the environment, and carry out it at the training for new employees, including seamen, and at the meetings of each group.

While the Environmental Management System that focuses on Environmental Policy is introduced in new employee training, the agenda of the Safety and Environmental Committee, and the status of internal and external environmental audits are shared at the meeting of each group.

Education for CrewmembersFor crewmembers of our managing vessels, we have developed and conducted onboard education and training programs as OJT (on-the-job training) in addition to classroom training on land. The curriculum covers environmental protection and is being implemented during pre-boarding seminars and in-house seminars by crew manning companies to reinforce awareness of safe, efficient vessel operation and environmental preservation. We provide pre-boarding seminars at the head office to all Japanese seamen and the top four ranks of non-Japanese seamen (captain, C/E, C/O and 1/E). For crewmembers other

than these, overseas crew manning companies provide seminars on our behalf. The in-house seminars provide a curriculum related to MARPOL Convention compliance including vessel trash management, operation of the Ship Energy Efficiency Management Plan (SEEMP), and the structure and operation of scrubbers, together with the switchover of fuels, in order to comply with stricter NOx and SOx emission regulations. Furthermore, participants are provided with an overview of past accidents and countermeasures, and the seminars raise awareness of cybersecurity countermeasures. These seminars help crewmembers acquire new skills and improve existing ones.

Environmental Education

Seminar by a manning company in the Philippines

The president and other members took part in a meeting of the Emergency Measures Headquarters

8:55 The vessel runs aground

9:00 The vessel makes its first report to the Company (Marine Team leader)[Company] Related internal parties are informed, in compliance with the Emergency Response Manual (Red Book)An Marine Casualty Headquarters is establishedRelated outside parties, such as the Coast Guard Headquarters and insurance companies, are notified

9:15 The vessel observes a layer of oil on the surface of the water and notifies the Company and the Coast Guard[Company] An Emergency Measures Headquarters is established (headed by the president)

9:30 The vessel provides the Company with an overview of the accident (deducing that oil is spilling from the bilge sludge tank) in compliance with the Safety Management Manual

10:00 [Company] First meeting of the Emergency Measures Headquarters Crisis Communication Center* established

*The director in charge of the General Affairs Group serves as the Crisis Communication Center’s supervisor, and the Center handles public relations activities for the media, etc., in the event of an emergency

Internal information restrictions are implemented and the General Affairs Group leader is designated as the only contact pointContent to be disclosed to outside parties is decided onVessel support activities, oil spill prevention and removal methods, and other information is discussedAfter the meeting, related parties, such as shipper and authorities, are notified

11:00 Coast Guard personnel arrives at the vessel and begin investigating the accident

11:30 Tugboats begin providing support to the vessel[Company] Second meeting of the Emergency Measures HeadquartersConfirmation of vessel conditions, oil spill conditions, internal information restrictions, disclosure of information to related external parties, etc.Decision is made on whether or not to hold a press conference, etc.

13:30 [Company] Third meeting of the Emergency Measures HeadquartersVessel and oil spill status confirmationPreparation of materials for press conference, etc.

14:00 Salvage vessel arrives at the vessel

14:30 [Company] Press conference

[Emergency response drill] Accident timeline and responseEmergency Response DrillsNS United Kaiun Kaisha, Ltd., NS United Naiko Kaiun Kaisha, Ltd., and NS United Coastal Tanker Kaisha, Ltd. regularly hold emergency response drills. The Company develops the scenario of an accident involving an oil spill from a vessel, enabling participants to confirm the emergency procedures used to minimize marine pollution.

On November 14, 2018, we conducted emergency response drill based on the scenario of an accident in which one of our operating bulk carriers loaded iron ore and on its way to Oita suffered a power outage due to a generator failure, and a rudder problem occurred at the same time, making the vessel unable to steer. The vessel then ran aground and began spilling oil. The president, directors, and members of related departments participated in the drill.

As with actual accidents, an Emergency Measures Headquarters was established within the Company, and information was relayed between the shore and the vessel, and a mock (simulated) press conference was held by inviting journalists from the maritime media.


Corporate Governance


Based on our corporate philosophy of contributing to the development of society by providing trusted and high-quality marine transportation services, we strive for the sound and sustainable growth of the Group and to improve corporate value over the medium to long term, while responding to the expectations and earning the trust of shareholders, customers, and all other stakeholders. To this end, we have developed corporate governance systems suited to the characteristics of the Group’s operations. These systems are periodically reviewed, with an eye on continual improvement, by enhancing the efficiency, soundness, and transparency of corporate management.

Basic PrinciplesThe Board of Directors, having members who are highly knowledgeable about the Company’s business and management, makes decisions on important operational concerns as well as basic management policies. Further, the Company has established an Audit & Supervisory Board, or a board of auditors as defined in Japan’s Companies Act. From their independent standpoint, the Audit & Supervisory Board members are expected to exercise their authority to supervise directors and executive officers in the performance of their duties, particularly by attending Board of Directors’ meetings. We believe that this system is effective for ensuring efficient and sound corporate management.

The members of the Audit & Supervisory Board, who have a wealth of related experience and advanced knowledge in their fields of expertise, carry out routine audits of the Company’s financial status and monitor the activities of directors and executive officers to ensure that their duties are being effectively carried out, in cooperation with the

Company’s independent public accountant, the Internal Audit Office, and corporate auditors from Group companies, as appropriate.

In addition, to increase the opportunities for the Board of Directors to make decisions from a broader perspective and to boost management supervision, the Board of Directors includes outside directors with a wealth of experience and broad knowledge of corporate management and other areas of expertise.

The Company seeks to appropriately disclose information to increase the transparency of management and to help our stakeholders more accurately understand the Group’s business conditions. In addition to compulsory disclosures, including legal and regulatory requirements relating to financial instruments exchange, we voluntarily offer financial and nonfinancial information to the best extent possible and in a timely and easy-to-understand way.

Corporate Governance SystemNS United Kaiun Kaisha, Ltd. strives to maintain and improve management efficiency through meetings of the Board of Directors, composed of nine directors including four outside directors (as of June 26, 2019). In June 2007, the Company introduced an executive officer system to precisely address changes in the management environment. Three of the four Audit & Supervisory Board members are also outside Audit & Supervisory Board members (as of June 26, 2019). Audit & Supervisory Board members attend meetings of the Board of Directors, the Board of Executive Officers, the CSR Committee, and various other committees to conduct audits of business operations and accounting in a timely, appropriate way. Two of the directors and one of the Audit &

Corporate Governance1

Elections

Advice

Supervision

Supervision

Cooperation Cooperation

Supervision

Supervision

Supervision

Report

Elections Elections

Audit & Supervisory Board4 Audit & Supervisory Board Members

3 Outside Audit & Supervisory Board Members (Including 1 Independent Audit & Supervisory Board Member)

Outside Audit & Supervisory Board Members

Independent Board Members

Note: Composed of the Company’s group leaders.

Exchange of opinions

Operational audit

Audit of accounts

Audit of accounts(Resolutions)

Board of Directors9 Directors Including 4 Outside Directors (Including 2 Independent Directors)

Outside Directors

Independent Board Members

Board of Executive OfficersExecutiveOfficers

Various CommitteesCSR Committee

Internal Control and Compliance Committee

Project Teams

Budget Execution Committee General Systems Planning Committee Investment Committee

Executive Officer in charge of Internal Controls and Corporate Ethics

Assisting with monitoring system operations

Suggestion/Recommendation

GL Committee (Note)

Executives and Employees of Company Divisions,

Overseas Offices, ShipsSubsidiaries

Assistance; coordinator

Internal Audit OfficeInternal audit

AssistanceAssistance

Attorneys

President

Office of the Internal Control and

Compliance Committee

Each Executive Officer

General Shareholders’ Meeting

IndependentPublic

Accountants

Nomination and

Compensation Advisory

Committee

Safety and Health Committee Investor Relations Committee

Safety and Environmental Committee Disaster Prevention and Countermeasures Committee

Inquiries

Organization Chart Including the Management System of Internal Controls (As of June 26, 2019)


Supervisory Board members are appointed to serve as independent board members who ensure the objectivity and neutrality of the management review process.

The Company also established the Internal Audit Office in July 2006 to manage risk and support the evaluation of internal controls in compliance with Japan’s Companies Act and the Financial Instruments and Exchange Act. By order and instruction from the president, the Internal Audit Office audits operations in every division in cooperation with the Audit & Supervisory Board to improve the effectiveness of corporate governance.

In addition, we established control systems at the Company as well as Group companies in compliance with the Corporate Governance Code, formulated by the Financial Services Agency and the Tokyo Stock Exchange. We will also revise internal rules, as needed, to further enhance corporate governance.

Since September 2016, we have arranged opportunities for the president and internal directors to regularly exchange information with outside directors.

● Board of DirectorsThe Board of Directors, as the Company’s primary decision-making body, discusses and decides on basic policy and the most important matters connected with Group management. The Board of Directors is the decision-making body regarding matters stipulated by law; and the articles of incorporation and critical management issues defined in the discussion standards in our Regulations of Board of Directors. Furthermore, it is the body that supervises business operations. As a rule, the Board of Directors meets once per month.

The Board of Directors comprises five internal directors (five of whom concurrently serve as executive officers), including the chairperson, the president, and representative director and four outside directors (two of whom are outside directors who are registered with the Tokyo Stock Exchange as independent directors as defined by the Tokyo Stock Exchange).

● Board of Executive OfficersIn accordance with the basic policy decided on by the Board of Directors, the Board of Executive Officers, as a rule, meets weekly to deliberate and decide on important matters related to business execution and management and to coordinate in advance the matters to be discussed by the Board of Directors. It includes 14 executive officers, selected by the Board of Directors, including the chairperson, the president executive officer.

● Audit & Supervisory BoardThe Audit & Supervisory Board has four members; one is an internal Audit & Supervisory Board member and three are outside Audit & Supervisory Board members. This board wields the authority required by law, organizes Board of Directors meetings, defines auditing standards, and performs effective audit of the legal issues and the reasonableness of operations by directors, executive officers, and employees. Specifically, members attend the above-mentioned meetings of the Board of Directors and the Board of Executive Officers, as well as important meetings and committee sessions of the CSR Committee, Internal Control and Compliance Committee, the Safety and Environmental Committee, and the Budget Execution Committee. The Audit & Supervisory Board strives to identify management issues, to assess business conditions, to prevent violations of laws and the articles of incorporation, and to perform accurate and effective audits.

● CSR CommitteeThe CSR Committee meets regularly every year to deliberate and decide on issues related to corporate social responsibility, one of the core elements of the company’s foundation. It comprises seven executive officers at managing director level and above, including its chair, the president executive officer, as well as the president of NS United Naiko Kaiun Kaisha, Ltd. and the president of NS United Coastal Tanker Kaisha, Ltd., key Group companies. The CSR Committee deliberates and decides on CSR activity policies, provides direction from a CSR perspective to the internal committees (the Internal Control and Compliance Committee, Safety and Environmental Committee, Investor Relations Committee, Disaster Prevention and Countermeasures Committee, and Safety and Health Committee). It also approves the editing of this report (NS United REPORT).

● Nomination and Compensation Advisory CommitteeThe Nomination and Compensation Advisory Committee was established as an advisory body serving the Board of Directors to improve neutrality, objectivity, and accountability of the functions of the Board of Directors when making decisions on nominations and compensation for the directors. It comprises two internal directors, including its chair, the president and representative director, and three outside directors. Committee members are chosen by the president / representative director.

● Overview of the Results of the Evaluation of the Effectiveness of the Board of DirectorsContinuing on from fiscal year 2017, in fiscal year 2018, as well, a questionnaire was administered to all directors and Audit & Supervisory Board members in order to evaluate the effectiveness of the Board of Directors. The results of the study were shared with the Board of Directors. The study found that the composition, roles, and operation of the Board of Directors were functioning appropriately, and the Board of Directors was, as a whole, effective.

Measures such as the organizing of matters to be reported and the reviewing and revising of the discussion standards in our Regulations of Board of Directors, conducted by the Board of Directors in fiscal year 2018, were evaluated as successful in having report and deliberation matters selected appropriately. The Board of Directors will work even harder to improve its effectiveness, such as by deepening discussions that serve as the basis of considerations of future plans, the Medium-Term Business Plan in particular.

● Executive Compensation(1) Policy for Deciding Compensation(a) Basic composition of compensation, etc.Compensation for directors currently consists of fixed compensation, performance-based bonuses (executive bonuses) reflecting business performances for the fiscal year, and performance-based stock purchase compensation that reflects medium- and long-term increases in corporate value. Performance-based compensation, which consists of executive bonuses and stock purchase compensation, is designed to account for at most roughly 1/3 of total compensation, and the ratio is identical for all positions.(b) Fixed compensationFixed compensation is paid each month, and the standard amount is based on the director’s position, taking into consideration the capabilities and responsibilities required of directors in the shipping industry, as well as conformity with global standards and wage gaps with employees.


Risk Management SystemRisk management regulations have been established as fundamental requirements for risk management. By following these requirements, we meet our corporate social responsibility, even if substantial risks impacting management should emerge.

Based on these regulations, the relevant departments of the Company analyze risk and study assessments to such risk that could arise in the course of business activities. The Board of Executive Officers and Board of Directors discuss and determine these issues, in addition to performing a year-end review of risk items and report of management implementation status based on the Risk Item List.

In fiscal year 2018, we confirmed that risks were being properly managed as a whole; all risk items are managed in accordance with internal rules which are created and revised as necessary, and hedging was properly carried out against those risks.

In addition, the Investment Committee was set up in August 2016 to identify any possible impact on and risks to the Company associated with large and high-risk projects under consideration, before investment decisions are made by the Board of Executive Officers.

Appropriate Management of Personal DataTo safeguard personal data, NS United Kaiun has been appropriately controlling information that can identify individuals, such as data regarding employees. We have adopted a policy of not offering personal data to any third party unless required by law or when approval has been obtained from the individuals themselves. Data is only used for the intended purposes.

In conjunction with the enforcement of Japan’s revised Act on the Protection of Personal Information, the Company completely updated internal regulations on the management of personal data and made them known at all Group companies. Since that time, we have taken steps to ensure that all personal data is being managed appropriately.

In addition, following the introduction of the Social Security and Tax Number System, we promptly established internal regulations for handling specified personal information in January 2016, and have complied with the new rules since then.

Business Continuity Plan (BCP)NS United Kaiun Kaisha, Ltd. established a BCP following the Great East Japan Earthquake so that, in the event of a major disaster or other emergency, the Company can safeguard employees and their families as well as continue operations to fulfill the responsibility of delivering

Risk Management2

Note: The total amount of compensation for the Audit & Supervisory Board members indicated above includes the amount paid to one Audit & Supervisory Board member who retired on June 27, 2018 at the close of the 92nd Ordinary General Shareholders’ Meeting held on the same day.

DirectorsTotal fixed compensation (compensation for outside directors) ¥183 million (¥20 million) 10 persons (4 persons)

Total performance-based compensation ¥43 million 6 persons

Audit & Supervisory Board Members

Total fixed compensation (compensation for outside Audit & Supervisory Board members) ¥40 million (¥23 million) 4 persons (3 persons)

(c) Executive bonusesIn order to provide incentives for maintaining and improving revenues, bonuses are linked to dividends per share and are paid as compensation linked to short-term performance. This is on dividend policies and the assumption of payment of special allowances to a certain percentage or more of employees.(d) Share purchase compensationShare purchase compensation is paid as compensation linked to medium- and long-term performance. This compensation is linked to the degree of achievement of the current Medium-Term Business Plan and the amount of increase in corporate value (stock value). Specifically, stock purchase compensation is paid based on comprehensive evaluations which reflect the degree of achievement of Medium-Term Business Plan targets such as operating income, return on equity (ROE), and debt equity ratio (DER), the company’s stock price, and safe navigation results. It aligns directors’ interests with the interests of shareholders. Directors provide amounts equivalent to the stock purchase compensation they receive to the directors’ shareholding association, purchasing stocks through the association. Calculation methods are reviewed and revised when formulating new Medium-Term Business Plans.

One of the elements of the Company’s management philosophy is “safe navigation.” We recognize this as a critical element that


supports the foundation of marine transportation company management, so compensation is reduced only in the event of failure to meet targets for ship stoppage rates, which are an index of safe navigation. Compensation is not increased even if targets are achieved.(e) Compensation for outside directors and Audit &

Supervisory Board membersGiven that outside directors and Audit & Supervisory Board members are responsible for performing audits and providing advice regarding the Company and the entire Group’s management from a position independent of business operations, they are only paid fixed compensation. Outside director compensation is decided by resolution of the Board of Directors, and Audit & Supervisory Board member compensation is decided through deliberation by Audit & Supervisory Board members.

(2) Procedures for Determining CompensationCompensation for directors is determined by the Board of Directors based on inquiries to and advice from the Nomination and Compensation Advisory Committee, which comprises five directors, including the president / representative director (a majority of which are outside directors).

Corporate Governance


Guided by Japan’s Companies Act and our Enforcement Ordinance, the Board of Directors has established a basic internal controls policy, while also working to ensure the reliability of financial reports in accordance with the provisions of the Financial Instruments and Exchange Act.

In recent years, internal controls and compliance initiatives taken by corporations have been attracting an increasing amount of public attention. In that context, the Company merged the Internal Control Committee and the Compliance Committee into the Internal Control and Compliance Committee in April 2018 with a view to more effectively address these issues Company-wide. The committee membership was also reorganized to strengthen our own internal controls, with every executive officer in charge of a business division appointed as a member and the president / representative director appointed as the chairperson.

We find that internal control programs contribute to the improvement of management quality, and our highly reliable financial reporting heightens the credibility of NS United Kaiun among both society and corporate stakeholders. All the directors and employees of NS United Kaiun will work together to strengthen compliance, establish an appropriate internal control system, and put it into practice.

Compliance Promotion SystemEveryone in the Group understands that maintaining relationships of trust with stakeholders is the foundation of our sustainable growth together with the communities that we serve. To reinforce this concept, we created a Group Corporate Philosophy, along with a Corporate Code of Conduct, designed for putting the spirit of our philosophy into practice. Moreover, an Internal Control and Compliance Committee chaired by the president has been set up to promote full compliance throughout the Group. The committee strives to raise awareness of compliance so that all officers and employees obey all laws and regulations, as well as internal rules, social norms, and business ethics while performing their everyday work.

NS United Kaiun is committed to effectively communicating with shareholders and investors. After receiving an interview request, the Investor Relations Committee begins a process based on annual plans and investor relations (IR) standards. In general, executives in charge of IR meet with and respond to individual interviewers. Interviews are held year-round, excluding the time prior to periodic reporting of financial results.

At General Shareholders’ Meetings, we readily provide information and respond to individual questions in an appropriate way. At a later

Compliance Advisory Service Desks (Whistleblower Hotlines)NS United Kaiun established two Compliance Advisory Service Desks (whistleblower hotlines), one inside and one outside the Company, to accept direct reports from employees who become aware of contraventions of the law, misconduct, or similar acts committed by executives or other employees. Both hotlines accept anonymous reporting. Whistleblowers are guaranteed protection from unreasonable treatment as a result of making a report, with the goal of protecting individuals who report company information that is in the public interest.

Further, the Company has appointed a female in-house compliance adviser to field inquiries via the internal hotline, while the external whistleblowing hotline is handled by an outside lawyer.

Internal Controls and Compliance Awareness MonthNS United Kaiun Kaisha, Ltd. has designated October as the month for raising compliance awareness and is engaged in several activities across the Group. The campaign aims to remind all officers and employees of the importance of this theme, implementing a range of activities to further enhance their awareness as well as give them the knowledge and information needed to practice compliance. In fiscal year 2018, our president delivered a message about compliance to all officers and employees, and employees reaffirmed the Company’s internal rules regarding insider trading restrictions and seminars were held, where employees learned about key points to observe. Furthermore, the Company administered an employee attitude questionnaire regarding internal controls and fostered greater awareness of internal controls among employees by sharing the results with employees.

time on the same day, we hold a dialogue session in which shareholders are invited to speak directly with our executives.

For IR interviews, executives in charge of IR deal with the required tasks in accordance with internal rules on handling insider information (non-public material information about the business).

In response to Japan’s fair disclosure rules (FDR)* that went into effect from April 2018, we created a manual that includes these rules and distributed it to everyone responsible for disclosing IR-related information.

Promoting Internal Controls and Compliance3

Basic Policy on Communication with Shareholders and Investors4

* These rules ensure that information is supplied fairly to all investors when a listed company provides important information that could affect the Company’s stock price to a third party before disclosing it to the public.

marine transportation services to customers as contracted.In addition, the Emergency Response Manual was created to set

out initial actions to be taken in the event of an emergency. Among these actions, the highest priority is given to promptly confirming the safety of employees and their families and reporting the results according to the established reporting line. To familiarize employees with the related procedures, periodic emergency drills are conducted

using internal programs developed for employee safety.At the same time, an international communications network has been set

up to enable the Company’s headquarters and subsidiaries outside Japan to relay information in the event of an emergency. Guidelines have been drawn up for initial emergency response via the network, and similar emergency drills are carried out.



Directors, Audit & Supervisory Board Members and Executive Officers (As of June 26, 2019)

Directors (outside*)

Kazuo TanimizuPresident / Representative Director /President Executive Officer

Apr. 1981 Joined Sumitomo Metal Industries, Ltd. (currently Nippon Steel Corporation)

Jun. 2005 General Manager of Raw Materials Dept., Steel Sheet, Plate & Structural Steel Company

Oct. 2012 Executive Counselor, General Manager, Head of Div., Raw Materials Div.-Ⅰ Nippon Steel & Sumitomo Metal Corporation (currently Nippon Steel Corporation)

Apr. 2014 Executive Officer, Head of Div., Raw Materials Div.-ⅡApr. 2015 Executive OfficerJun. 2015 Director (outside), NS United Kaiun Kaisha, Ltd.Apr. 2016 Managing Executive Officer, Nippon Steel & Sumitomo

Metal CorporationApr. 2018 Executive OfficerJun. 2018 President, Representative Director, NS United Kaiun

Kaisha, Ltd. (incumbent)

Profile

Masahiro SamitsuDirector Senior Managing Executive Officer

Apr. 1980 Joined Nippon Yusen Kabushiki KaishaSep. 2003 General Manager of Bulk/Energy Atlantic GroupNov. 2006 General Manager of Fleet Management GroupApr. 2007 General Manager of Tramp Co-ordination GroupApr. 2008 General Manager of Corporate Planning GroupApr. 2009 Corporate OfficerApr. 2013 Managing Corporate OfficerJun. 2013 Director, Managing Corporate OfficerApr. 2015 Director, Senior Managing Corporate OfficerApr. 2017 DirectorJun. 2017 Director, Senior Managing Executive Officer,

NS United Kaiun Kaisha, Ltd. (incumbent)

Profile

Kanji IshikawaDirector Managing Executive Officer

Oct. 1981 Joined Shinwa Kaiun Kaisha, Ltd.Oct. 2010 General Manager of Ship Management Group,

NS United Kaiun Kaisha, Ltd.Jan. 2014 Senior Counselor, General Manager of Ship

Management GroupJun. 2015 Executive OfficerJun. 2017 Director, Executive OfficerJun. 2018 Director, Managing Executive Officer (incumbent)

Profile

Mitsuhiro OyamadaDirector Managing Executive Officer

Apr. 1982 Joined Shinwa Kaiun Kaisha, Ltd.Jun. 2007 General Manager of Ore/Bulk Carrier GroupOct. 2010 General Manager of Capesize Group, NS United Kaiun

Kaisha, Ltd.Jun. 2011 General Manager of Project GroupJun. 2012 Executive Officer, General Manager of Project GroupJun. 2016 Managing Executive OfficerJun. 2017 Director, Managing Executive Officer (incumbent)

Profile

Shin YaguchiDirector Managing Executive Officer

Oct. 1998 Joined Shinwa Kaiun Kaisha, Ltd.Jun. 2007 General Manager of Oil/Gas GroupOct. 2010 General Manager of Oil/Gas Group, NS United

Kaiun Kaisha, Ltd.Jun. 2011 Executive OfficerJun. 2015 Director, Managing Executive Officer

(incumbent)

Profile

Yasushi AokiDirector*

Apr. 1983 Joined Nippon Steel Corporation (currently Nippon Steel Corporation)

Apr. 2003 Group Manager, Hot-rolled Sheet Export Dept., Export Div.

Apr. 2005 Group Manager, Plate, Rail and Shape Dept., Global Marketing Div.

Apr. 2007 General Manager, Bangkok Representative OfficeJun. 2009 General Manager, Human Resources Div.Sent to

Nippon Steel (Thailand) Co., Ltd.Apr. 2011 General Manager, Raw Materials Div.-ⅠOct. 2012 General Manager, Raw Materials Div.-Ⅰ, Nippon

Steel & Sumitomo Metal Corporation (currently Nippon Steel Corporation)

Apr. 2015 Executive Officer, Head of Div., Raw Materials Div.-ⅡApr. 2018 Managing Executive Officer, Head of Div., Raw

Materials Div.-Ⅱ (incumbent)Jun. 2018 Director (outside), NS United Kaiun Kaisha, Ltd.

(incumbent)

Profile


Audit & Supervisory Board Members (outside*) Executive Officers

Keizo ChiharaCorporate Auditor*

Yasuhito MitaniIndependent Corporate Auditor*

Naoki YodaCorporate Auditor (full-time) *

Yoshifumi NakataManaging Executive Officer

Kazushi FukudaManaging Executive Officer

Naruhiko MiyaiExecutive Officer

Toru FujitaExecutive Officer

Naoki AsuwaExecutive Officer

Shinichi KitazatoExecutive Officer

Kiyoshi KanemitsuExecutive Officer

Yuji FukudaExecutive Officer

Toru KihiraExecutive Officer

Masato KimuraDirector*

Apr. 1985 Joined Nippon Steel Corporation (currently Nippon Steel Corporation)

Oct. 2001 Senior Manager, Head of Cold Strip Mill, Sheet & Coil Div., Kimitsu Works

Jul. 2003 Leader, Production Planning Group, Production & Business Planning Div., Kimitsu Works

Nov. 2004 Leader, Production Planning Group, Technical Administration & Planning Div.

Apr. 2009 General Manager, Head of Sheet & Coil Div., Kimitsu Works

Apr. 2011 General Manager, Head of Production & Technical Control Div., Kimitsu Works

Oct. 2012 General Manager, Head of Production & Technical Control Div., Kimitsu Works, Nippon Steel & Sumitomo Metal Corporation (currently Nippon Steel Corporation)

Apr. 2014 General Manager, Head of Production & Technical Control Div., Kashima Works

Apr. 2016 General Manager, Vice Head of Kashima WorksApr. 2017 Executive Counselor, General Manager, Head of

Transportation & Logistics Div. (incumbent)Apr. 2017 Director (outside), Nippon Steel & Sumikin Logistics

Co., Ltd. (currently Nippon Steel Logistics Co., Ltd) (incumbent)

Jun. 2017 Director (outside), NS United Kaiun Kaisha, Ltd. (incumbent)

Profile

Masayuki KinoshitaIndependent Corporate Director*

Apr. 1978 Joined Mitsui & Co., Ltd.Apr. 2004 General Manager, Corporate Planning & Strategy Div.Apr. 2007 Deputy Chief Operating Officer, Mineral & Metal

Resources Business UnitApr. 2008 Managing Officer, Chief Operating Officer, Mineral &

Metal Resources Business UnitApr. 2010 Executive Managing Officer, Chief Operating Officer,

Mineral & Metal Resources Business UnitApr. 2011 Executive Managing Officer, Chief Information Officer,

Chief Privacy OfficerJun. 2011 Representative Director, Executive Managing Officer,

Chief Information Officer, Chief Privacy OfficerApr. 2012 Representative Director, Senior Executive Managing

Officer, Chief Information Officer, Chief Privacy OfficerApr. 2014 Representative Director, Executive Vice President,

Chief Information Officer, Chief Privacy OfficerApr. 2016 DirectorJun. 2016 CounselorJun. 2016 Director (outside), NS United Kaiun Kaisha, Ltd.

(incumbent)Apr. 2019 Counselor, Kakaku.com, Inc. (incumbent)

Profile

Setsu OnishiIndependent Corporate Director*

Apr. 1978 Joined The Industrial Bank of Japan, LimitedApr. 2002 General Manager of Corporate Banking Division No. 8,

Mizuho Corporate Bank Ltd. (currently Mizuho Bank, Ltd.)

Apr. 2004 General Manager of Corporate Banking Division No. 8 and No. 4

Jun. 2004 General Manager of Corporate Banking Division No. 14Apr. 2005 Executive Officer, General Manager of Corporate

Banking Division No. 14Apr. 2007 Managing Executive Officer, Head of Global Syndicated

Finance Unit, Head of Global Financial Products UnitApr. 2010 Deputy President & Executive Officer Head of Internal

Audit Group, Mizuho Financial Group, Inc.Jun. 2010 Deputy President (Representative Director) Head of

Internal Audit GroupApr. 2011 DirectorJun. 2011 Adviser, IBJ Leasing Co., Ltd.Jun. 2011 Director, Vice PresidentApr. 2013 Director, PresidentJun. 2016 Councilor, Mizuho Financial Group, Ltd.Apr. 2017 Senior Counselor, Nippon Commercial Development

Co., Ltd. (incumbent)Jun. 2017 Director (outside), NS United Kaiun Kaisha, Ltd.

(incumbent)Mar. 2018 Audit and Supervisory Board Member (outside), Showa

Denko K.K. (incumbent)

Profile

Yasuhiro MinemuraCorporate Auditor (full-time)


As of March 31 2018 2019

ASSETS

Current assets 54,688 57,261

Fixed assets 173,541 166,267

Tangible fixed assets 159,790 153,849

Intangible fixed assets 2,593 2,594

Investments and other assets 11,158 9,823

Total assets 228,229 223,528

LIABILITIES

Current liabilities 41,623 32,140

Long-term liabilities 105,915 102,350

Total liabilities 147,538 134,490

NET ASSETS

Shareholders’ equity

Common stock 10,300 10,300

Capital surplus 17,181 17,181

Retained earnings 56,209 62,394

Treasury stock, at cost (993) (994)

Total shareholders’ equity 82,697 88,881

Accumulated other comprehensive income

Unrealized gains (losses) on securities 406 (17)

Gains (losses) on deferred hedge (2,751) (9)

Foreign currency translation adjustment (41) (124)

Remeasurements of defined benefit plans 365 307

Total Accumulated other comprehensive income (2,020) 157

Non-controlling interests 14 —

Total net assets 80,691 89,038

Total liabilities and net assets 228,229 223,528

Shareholders’ equity Accumulated other comprehensive incomeNon-controlling

interests Total net assetsCommon stock Capital surplus Retained

earningsTreasury stock,

at costTotal shareholders’

equityUnrealized gains

(losses) on securitiesGains (losses) on deferred hedge

Foreign currency translation

adjustments

Remeasurements of defined benefit

plans

Total accumulated other comprehensive

income

Balance at April 1 2018 10,300 17,181 56,209 (993) 82,697 406 (2,751) (41) 365 (2,020) 14 80,691

Changes of items during the term

Dividends of surplus (3,182) (3,182) (3,182)

Profit attributable to owners of parent 9,343 9,343 9,343

Acquisition of treasury stock (1) (1) (1)

Change of scope of consolidation 24 24 24

Net changes of items other than shareholders' equity (423) 2,741 (83) (58) 2,177 (14) 2,163

Total changes of items during the term — — 6,185 (1) 6,184 (423) 2,741 (83) (58) 2,177 (14) 8,347

Balance at March 31, 2019 10,300 17,181 62,394 (994) 88,881 (17) (9) (124) 307 157 — 89,038

Consolidated Financial Statements (Summary)

Financial Data

Consolidated Balance Sheet

Consolidated Statement of Shareholders’ Equity

Million yen


Fiscal years referred to in this report cover the period from April 1 to March 31.2019 refers to the fiscal year ended March 31, 2019. 2018 2019

Revenues 139,000 151,068

Operating expenses 125,896 136,382

Gross profit 13,105 14,687

General and administrative expenses 5,744 5,776

Operating income 7,361 8,911

Non-operating income 341 568

Non-operating expenses 2,147 1,694

Ordinary income 5,555 7,784

Extraordinary profits 2,778 3,254

Extraordinary losses 1,915 536

Profit before income taxes 6,419 10,502

Income taxes—current 560 823

Income taxes—deferred (751) 337

Profit 6,610 9,342

Profit (Loss) attributable to non-controlling interests (3) (0)

Profit attributable to owners of parent 6,613 9,343

Shareholders’ equity Accumulated other comprehensive incomeNon-controlling

interests Total net assetsCommon stock Capital surplus Retained

earningsTreasury stock,

at costTotal shareholders’

equityUnrealized gains

(losses) on securitiesGains (losses) on deferred hedge

Foreign currency translation

adjustments

Remeasurements of defined benefit

plans

Total accumulated other comprehensive

income

Balance at April 1 2018 10,300 17,181 56,209 (993) 82,697 406 (2,751) (41) 365 (2,020) 14 80,691

Changes of items during the term

Dividends of surplus (3,182) (3,182) (3,182)

Profit attributable to owners of parent 9,343 9,343 9,343

Acquisition of treasury stock (1) (1) (1)

Change of scope of consolidation 24 24 24

Net changes of items other than shareholders' equity (423) 2,741 (83) (58) 2,177 (14) 2,163

Total changes of items during the term — — 6,185 (1) 6,184 (423) 2,741 (83) (58) 2,177 (14) 8,347

Balance at March 31, 2019 10,300 17,181 62,394 (994) 88,881 (17) (9) (124) 307 157 — 89,038

Consolidated Statement of Income

Million yen

Fiscal years referred to in this report cover the period from April 1 to March 31.2019 refers to the fiscal year ended March 31, 2019. 2018 2019

Cash flow from operating activities 15,783 19,957

Cash flow from investing activities (6,514) (5,031)

Cash flow from financing activities (8,383) (15,491)

Effect of exchange rate changes on cash and cash equivalents (94) 11

Net increase (decrease) in cash and cash equivalents 791 (554)

Cash and cash equivalents at the beginning of the year 26,485 27,276

Cash and cash equivalents at year-end 27,276 26,738

Consolidated Statement of Cash Flows Million yen

Million yen


Corporate Data

Fleet List (As of March 31, 2019)

Supramax & Handy-Size Bulk Carriers

Vessel name DWT(kt)

1 SHINWA-MARU 297,541

2 NSU JUSTICE 250,835

3 NSU PRIDE 250,821

4 NSU INSPIRE 250,813

5 NSU MILESTONE 250,675

6 NSU XANADU 250,362

7 NSS DYNAMIC 233,584

8 NSS HONESTY 229,548

9 NSU ULTIMATE 208,788

10 NSU TRUST 208,747

11 NSU VOYAGER 208,745

12 NSU WELFARE 208,699

13 CSK ENTERPRISE 208,662

14 CSK UNITED 208,662

15 SHIN-EI 207,933

16 NSU OBELISK 207,819

17 NSU KATSURA 207,791

18 NSU KEYSTONE 207,684

19 NSU QUEST 207,362

20 UNITED FUTURE 183,230

21 UNITED ETERNITY 183,026

22 NSU SIRIUS 182,981

23 NEW FUTURE 182,598

24 GOOD HORIZON 182,342

25 SG UNITED 181,415

26 UNITED CROWN 181,381

27 NSU NEWSTAR 181,380

28 UNITED BREEZE 181,325

29 NEW DELIGHT 181,279

30 NSU RESPONSIBILITY 181,126

31 NEW ADMIRE 181,050

32 UNITED DIGNITY 180,818

33 UNITED ADVENTURE 180,745

34 NSU LODESTAR 180,690

35 STAR JANNI 178,978

36 NEW STAGE 176,877

37 NEW EXPEDITION 176,387

TOTAL 7,562,699

Vessel name DWT(kt)

1 NIKOLAS III 58,081

2 PACIFIC INFINITY 56,104

3 NEW BEGINNING 56,098

4 NEW DIRECTION 56,097

5 ANDES QUEEN 52,256

6 INCA QUEEN 52,199

7 ATACAMA QUEEN 51,213

8 ANCASH QUEEN 51,068

9 SPRING QUEEN 51,063

10 SUMAQ QUEEN 51,052

11 AREQUIPA QUEEN 51,024

12 LESEDI QUEEN 50,412

13 GREAT BEAUTY 38,645

14 YOU & ISLAND 38,309

15 SAKURA OCEAN 38,239

16 SAKURA DREAM 38,213

17 IYO SEA 37,537

18 ATLANTIC STAR 37,065

19 ATLANTIC BUENAVISTA 37,025

20 FW ADVENTURER 34,487

21 ATLANTIC GRACE 33,709

22 ATLANTIC RUBY 33,680

23 ATLANTIC VENUS 33,677

24 ATLANTIC GLORY 33,472

25 ATLANTIC OASIS 33,457

26 EOS VICTORY 33,451

27 ATLANTIC BRAVE 33,407

28 K&A SP 33,170

29 IVS KESTREL 32,768

30 ATLANTIC RAINBOW 28,368

31 LAKE DANY 28,358

32 ATLANTIC EAGLE 28,339

33 ATLANTIC FAIRY 27,935

34 ATLANTIC TRAMP 27,930

35 PACIFIC SPIKE 24,041

TOTAL 1,401,948

Post-Panamax & Panamax Bulk Carriers

Vessel name DWT(kt)

1 YUGAWASAN 302,481

2 AQUARIUS WING 299,990

3 KODAIJISAN 58,591

4 NS FRONTIER 54,312

TOTAL 715,374

VLCC / VLGC

Near Sea Going Vessels

Vessel name DWT(kt)

1 ASIAN EXPLORER 16,656

2 NEW AUDACITY 13,559

3 KERRISDALE 13,559

4 HAYATE 13,121

5 HELIOS TRIUMPH 13,060

6 MERCURY TRIUMPH 13,060

7 VENUS TRIUMPH 12,075

8 WINDS 3 11,759

9 TOYO ENERGY 11,530

10 GINGA 11,439

11 HAYABUSA 11,415

12 PACIFIC HORSE 11,401

13 ASAKAZE 11,382

14 TOYO HOPE 10,262

15 MIGHTY CHAMP 10,084

16 MIGHTY DANDY 10,072

17 BUNGO PRINCESS 10,034

18 TAMAKI PRINCESS 10,024

19 ALISHAN BLOSSOM 8,767

20 OCEAN SYMPHONY 8,313

21 OCEAN HARMONY 8,285

22 AZALEA 5,727

23 FIRST CLARITY 5,465

TOTAL 251,050


Note: The above list includes vesselschartered for a short period.

Capesize Bulk Carriers

Vessel name DWT(kt)

1 DYNA GLOBE 99,347

2 AZALEA WAVE 95,584

3 TW JIANGSU 93,225

4 CENTURY WAVE 91,686

5 DYNA CAMELLIA 91,569

6 SAKURA WAVE 88,299

7 DOUBLE HARMONY 88,270

8 JP VERDURE 88,269

9 KAGUYA 85,001

10 GLORIOUS WIND 83,410

11 IBIS WIND 82,937

12 SEAGULL WIND 82,908

13 NAVIOS PROSPERITY 82,535

14 STAR MARIELLA 82,266

15 NEW ASCENT 82,179

16 RISING WIND 82,151

17 BRIGHT WIND 82,119

18 NORD BELUGA 81,841

19 ARGO WIND 81,761

20 ROBIN WIND 78,228

21 DIAMOND WIND 76,536

22 CRYSTAL WIND 76,523

TOTAL 1,876,644


Glossary

BRM (Bridge Resource Management) training .... p.25, 26

BRM training aims to develop maritime management competence by encouraging mariners’ attitudes and behavior to enable effective use of people and any other resources available on bridges, in turn to achieve safe, efficient navigation throughout an entire operation.

Debt Equity Ratio ................................... p.9, 10, 14, 15, 36

The debt equity ratio is an indicator of a company’s financial soundness. It shows the ratio of a company’s interest-bearing debt to its own capital (equity). The lower the number, the more financially sound the company.

D/E ratio = interest-bearing debt ÷ own capital

ERM (Engine Resource Management) training ... p.25, 26

ERM training aims to develop maritime management competence by encouraging mariners’ attitudes and behavior to enable effective use of people and any other resources available on engine rooms, in turn to achieve safe, efficient operation of equipment in vessel engine rooms, including the main engines, or to minimize any damage or disruption in the event of a malfunction or other problem.

GHG (Greenhouse Gas) .......................... p.3, 9, 30, 31, 32

Greenhouse gas is the collective term for the gasses considered to be the primary cause of global warming. In this report, GHG mainly refers to carbon dioxide, which is produced when vessels burn fuel. Carbon dioxide from any source, not just vessels, is the human-induced GHG with the greatest environmental impact and believed to contribute the most to climate change, so carbon dioxide emissions must be reduced.

ISO 14001 ....................................................................... p.22

This is the international standard for environmental management system established by the International Organization for Standardization (ISO) to guide companies performing environmentally responsible business operations. The standard sets out the required environmental management policies, organizational structures, operation, internal audits, and other initiatives, which are continually improved based on a PDCA cycle.

ISO 9001 .................................................................. p.22, 24

This is the international standard for quality control and quality assurance established by the ISO. It sets out the requirements for a quality management system that extends to organizational control to achieve customer satisfaction and operational improvements. The pursuit of customer satisfaction and improvement through ISO 9001 allows a company to maintain the trust of the public and to improve competitiveness. Both the ISO 14001 and ISO 9001 standards were revised in 2015 in response to changes in the social environment.

MARPOL Convention ....................................... p.29, 30, 33

The International Convention for the Prevention of Pollution from Ships, 1973, as Modified by the 1978 and 1997 Protocols. This convention stipulates initiatives for preventing air pollution as well as contamination through mishandling of oil, water, and waste.

ROE (Return On Equity) ............................... p.9, 10, 14, 36

Return on equity is an indicator of how effectively a company uses own

capital (equity) to generate profit. It is the ratio of profit to own capital. The higher the number, the more efficiently a company is being operated.

ROE = profit ÷ own capital

SOx (sulfur oxide), NOx (nitrogen oxide) ............................................. p.3, 6, 9, 10, 29, 30, 31, 32, 33

Exhaust gas from engines and boilers used in vessels contains SOx (sulfur oxides) and NOx (nitrogen oxides) generated in the course of combustion. SOx and NOx react with water vapor or oxygen in the air to become nitric acid and sulfuric acid, respectively. These substances return to the earth in the form of acid precipitate (acid rain) after being absorbed by raindrops. The acid precipitate often causes severe environmental damage such as damage to forests or killing lake and river organisms.

UNFCCC (United Nations Framework Convention on Climate Change) ................................................................................. p.31, 32

Increasing GHGs in the atmosphere (carbon dioxide, methane, nitrogen monoxide, nitrogen dioxide, fluorocarbons, etc.) are considered to be causes of global warming. Due to the dangers of their adverse effects on the environment, this framework was created in order to protect the current and future climate and prevent adverse effects.

(IMO) International Maritime Organization..................................................................... p.17, 24, 31, 32

IMO is a specialized organization of the UN that researches and establishes international maritime treaties and conventions. The IMO promotes cooperation among the governments of every nation with regard to technological and legal issues bearing on marine transport, including maritime safety, improvement in marine transport technology, prevention of ocean pollution by vessels, and the abolition of discriminatory treatment between countries.

Work-life balance ......................................................... p.18

This is a concept, originally begun by the UK’s Department of Trade and Industry, which promotes harmony between professional and personal lives. Work-life balance means maintaining health and happiness without sacrificing either the workplace or the family. In Japan, the Ministry of Health, Labor and Welfare established a study group in 2003, and is working to achieve the acceptance of this concept through regional governments across Japan.


Shinwa Kaiun Kaisha, Ltd. Nippon Steel Shipping Co., Ltd.

Apr. 1950Established Nittetsu Steamship Co., Ltd.

Opened a liaison office in London

Merged with Toho Kaiun Kaisha and changed registered name to

Shinwa Kaiun Kaisha, Ltd.

Joined the Nippon Yusen Group in response to the Marine Transportation

Restructuring Act

Opened a liaison office in New York

Established Shinwa (U.K.) Ltd., as a subsidiary

Spun off the domestic transportation section into Shinwa Naiko Kaiun Kaisha, Ltd.

Established Shinwa (U.S.A.) Inc

Opened a liaison office in Singapore

Opened a liaison office in Hong Kong

Established Shinwa Shipping (H.K.) Co., Ltd.

Opened a liaison office in Shanghai

Established Shinwa (Singapore) Pte. Ltd.

Dec. 1957

May 1964

Sep. 1969

Jan. 1970

Jun. 1974

May 1975

Apr. 1992

Jan. 1995

Jun. 1996

Jul. 2004

Apr. 2007

Feb. 1962

Jan. 1957 Established Nippo Kisen K.K.

Apr. 1964 Joined the Showa Shipping Group in response to the Marine Transportation Reconstruction Act

Sep. 1983 Nippon Steel Corporation became the largest shareholder

Sep. 1985 Opened a liaison office in London

Dec. 1990 Merged with Nippon Steel Shipping Co., Ltd. and changed registered name to Nippon Steel Shipping Co., Ltd.

Sep. 1997 Began stationing employees in Hai Phong, Vietnam

Nov. 2003 Concluded a business alliance contract with Hsin Chien Marine Co., Ltd. in Taiwan

Apr. 2008 Opened a liaison office in Manila

Oct. 2010 The two companies merged and changed the registered name to

Aug. 2015 NS United Naiko Kaiun Kaisha, Ltd. became a wholly owned subsidiary for further increasing the corporate value of the NS United Kaiun Group

History

Corporate Data


Financial institutions

Other corporations

Individuals, others

Overseas investors

Financial instruments companies

●●●●●

19.78%

56.37%

10.33%

10.87%

0.97%

Outline of the Company

Major Consolidated Group Companies Principal Overseas Subsidiaries & Representative OfficesCompany

NS United Naiko Kaiun Kaisha, Ltd.

NS United Coastal Tanker Kaisha, Ltd.

NS United Marine Service Corporation

NS United Business Co., Ltd.

NS United Systems Co., Ltd.

Overseas Subsidiaries

United Kingdom

United States

Hong Kong

Singapore

Philippines

Representative Offices

Shanghai, China

Hai Phong, Vietnam

Main Businesses

Coastal shipping business

Coastal shipping business

Seamen dispatching business, safety supervising and supervising construction of new vessels

General affairs and accounting agents, real estate management

Development/maintenance of information systems business

Company Outline (As of March 31, 2019)

Stock Information (As of March 31, 2019)

Number of shares held(thousands)

Percentage of shares held

(%)

Nippon Steel & Sumitomo Metal Corporation (currently Nippon Steel Corporation) 7,861 33.36

Nippon Yusen Kabushiki Kaisha (NYK Line) 4,324 18.35

Mizuho Bank, Ltd. 798 3.39

Tokio Marine & Nichido Fire Insurance Co., Ltd. 606 2.58

Mitsubishi Heavy Industries, Ltd. 540 2.29

Hsin Chien Marine Co., Ltd. 504 2.14

Sompo Japan Nipponkoa Insurance Inc. 489 2.08

The Master Trust Bank of Japan, Ltd. (Trust account) 466 1.98

Mitsui Sumitomo Insurance Co., Ltd. 383 1.63

DFA INTL SMALL CAP VALUE PORTFOLIO 334 1.42

Notes: 1. The above list of major shareholders excludes NS United Kaiun Kaisha, Ltd., which holds 403,000 shares of treasury stock.

2. Percentage of shares held has been calculated excluding the treasury stock.

(Yen)

(Year/month)

5,000

4,000

3,000

2,000

1,000

04 5 6 7 8 9 1011 12 1 2 35 6 7 8 9 1011 12 1 2 3 4 5 6 7 8 9 101112 1 2 34

2016 2017 2018 2019

Share Price Trend

Company nameHead office

EstablishedPrincipal lines of businessCapitalStock Exchange ListingNumber of employeesFleet


Otemachi 1st Square West Tower, 5-1, Otemachi 1-Chome, Chiyoda-ku,Tokyo 100-8108, Japan

April 1, 1950

International marine transportation services and related businesses

¥10,300,000,000

Tokyo Stock Exchange (First Section)

227 (nonconsolidated)

121 vessels (11,807,000 DWT)

Shares Authorized 60,000,000

Shares Issued 23,970,679

Number of Shareholders 6,025

Major Shareholders

Notes: The opening price refers to the opening price on the first trading day of the month, and the closing price refers to the closing price on the last trading day of the month. The difference between the amounts is shown in white if the closing price was higher than the opening price, and in blue if the closing price was lower than the opening price. Effective from October 1, 2017, the Company changed the trading unit for shares from 1,000 to 100 shares, and conducted a reverse stock split at a ratio of one to ten shares. Accordingly, the Company’s trading units on the Tokyo Stock Exchange have been changed from 1,000 to 100 shares from September 27. For convenience, share prices shown above up to September 2017 have been adjusted to reflect the reverse stock split.

Shareholder Composition

NS United REPORT

http://www.nsuship.co.jp/en/

2019

NS United REPORT 2019For the fiscal year ended March 31, 2019

CSR Committee Secretariat, General Affairs GroupOtemachi 1st Square West Tower, 5-1, Otemachi 1-Chome, Chiyoda-ku, Tokyo 100-8108, JapanTEL: +81-3-6895-6404 FAX: +81-3-6388-2366E-mail: [email protected]

FAX: +81-3-6388-2366 NS United Kaiun Kaisha, Ltd. CSR Committee Secretariat

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