noitcACorporate
Action Report
2015

MitsuiEngineering &Shipbuilding

Moving Ahead,With Greater Speed.
As we head toward 2017, the year of our 100th anniversary, MES
remains focused on implementing the Mid-Term Business Plan
we launched in 2013. Embracing the motto of “Creating Prosperity
for Our Next 100 Years”, we are challenging ourselves to innovationand creation based on the belief that creating a foundation for a
global environment and society to last the next 100 years will
provide MES a platform for new achievements.
We are beginning to see solid results. In the ports of the emerging
nations driving the global economy, our container cranes havebecome a vital necessity. In the field of ocean development, asegment expected to help resolve the world’s energy problems,
we are constructing the hull for a petroleum and gas production
platform. We are implementing this project with a great sense of
pride and purpose.
We believe that by providing the market with environment-friendly,
energy-saving ships and contributing to the formation of a sustainable
society, we are fulfilling our responsibility to future generations.
We are committed to the continued pursuit of this philosophy.
The innovation we achieve serves as a launching point for innovations
by our customers, in society, and in the global economy. We will
implement our strategies with a greater sense of speed and hope

n
o
i
t
c
A

you continue to expect great things from MES.

Corporate Action Report 2015

01

Action Report 01

Leading Innovationin Port and Harbor Distribution
Port Klang, the largest merchant port in Malaysia. Facing
the Strait of Malacca, one of the most important channels
for global ocean distribution, Port Klang is an Asian hubthat boasts some of the highest container volume in theworld. MES constructed all of the 36 quay cranes and 157
yard cranes operating in the Port Klang West Port. Whileaddressing the need for large-scale container cranes andhigher container volume, by achieving lighter weights andbetter energy efficiency, we are promoting
environment-friendly solutions and contributing thedevelopment of smart port and harbor loading.
After construction, we support customer terminal
operations by serving as a reliable partner. We provide
ideas and proposals that help our customers achieve
innovation.

Action for new
02

Corporate Action Report 2015

Global Logistics
Port Klang West Port, Malaysia

Corporate Action Report 201503

Action Report 02

Innovation for
Next-Generation Energy
From land to sea, and onward into the deep ocean.
Seeking to secure stable energy for future
generations, the world is turning its attention to thedevelopment of untapped ocean resources. We are
pouring our cumulative technology into this field.
On February 27, 2015, the second floatingproduction storage and offloading system (FPSO)
hull used in vessels for marine oil and gas
production produced by MES was launched from
our Chiba Works. We will continue producing FPSO
as a way to contribute to next-generation energy
development.

Action for new

Energyfloating production storage and offloading system (FPSO) for marine oil and gas ship hull / Chiba Works

04

Corporate Action Report 2015

Corporate Action Report 201505

Action for a new

Environment

Action Report 03

Creating
Environment-Friendly Engines
A large-scale, dual-fuel, two-cycle, low-speed diesel
engine that can use both natural gas (LNG), ethane,methanol, etc., and crude petroleum for fuel. Gaining
attention as a diesel engine that is environment-friendly
and providing superior economic performance. We havecontinued to strive for advancements in technology
during the manufacturing of our gas injection diesel
engine (ME-LGI), a methanol-fueled, electronicallycontrolled engine, at our Tamano Works. MES specializes
in the development of highly environment-friendly
diesel engines. We recreate vessels from the inside out
to create eco-ships that contribute to global
sustainability.

methanol-fueled, electronically controlled gas injection diesel engine (ME-LGI) / Tamano Works

06

Corporate Action Report 2015

Corporate Action Report 201507

Action for new

Craf tsmanship

Action Report 04

Skill Relay- From Person to Person
MES is committed to transferring skills. Working toaccelerate the relaying of skills is a group-wideorganization, the Skills Transfer Center. At the Chiba
Works, members of each work site with advanced skills
are certified as Skill Masters, who work one-on-one withyoung workers. In an age where the market demands
short turnaround times, the workplace prioritizes workover personnel development.
To address this, the Skills Transfer Center supports thepeople at each worksite by coordinating work schedules
and development programs, managing development
goal achievement, and providing advice to leaders tomanage the transfer of skills for the entire workplace.
Manufacturing begins with people. Using the system ofmaster and apprentice to relay vital skills, we willcontinue to ensure a strong manufacturing workplace.
Skills Transfer Center / Chiba Works

08

Corporate Action Report 2015

Corporate Action Report 201509

About Us

Contents

Mission Statement

Action Report
01:Global Logistics

02

02:Energy

04

03:Environment

06

04:Craftsmanship

08

P02

Action Report

Reports on the most recent developments
at MES.

About Us
Contents / Editing policy

10

Mission Statement

11

History

12

Business Fields

14

Financial / Non-financial Highlights

16

Message from the President

18

Feature:Mid-Term Business Plan 201422

Business Segment Overview

28

Ship & Ocean Project Headquarters

30

Machinery & Systems Headquarters

32

Engineering Headquarters

34

Research & Development Headquarters

36

Mission Statement

P18

Message from the President

Our company president provides an
overview of fiscal 2014 and outlines our
direction going forward.

Feature:Mid-term
Business Plan
2014
P22

To continue our role astrusted manufacturer,
and trusted member of society
The core of our Group is manufacturing.
Through our advanced technology,
we offer products and services that are environment-friendly
and contribute to society and people.
Our mission and raison d'etre is to gain the trust of society
and people by contributing to the development

Detailed explanation of the framework andprogress of our Mid-Term Business Plan.

of society through our manufacturing.
We believe that this trust is vital to our existence.

Social Responsibility
Environmental Preservation

40

Work Environment

46

Status of Corporate Governance

48

Financial Statements
Company Profile

Management Policy
Provide customers with a higher level of satisfaction

P28

50
80

Business Segment
Over view

Achieve a safe and fulﬁlling work environment

Overview of earnings from each divisionand forecasts.

Contribute to the development of society
Pursue proﬁt to ensure corporate sustainability
Editing Policy
Mitsui Engineering and Shipbuilding Co., LTD. upholds our corporate philosophy
as we strive to be a company that uses manufacturing to contribute to social
development and preserve the global environment. We view all actions related
to achieving this goal as an approach to creating corporate value. The Corporate
Action Report is a comprehensive summary of all activities, from management
strategies, vital strategies, and status of business to environment conservation
activities and workplace environment development activities, designed toprovide stakeholders with a better understanding of company operations.
This report covers the period from April 2014 to March 2015.
However, some sections include information for periods beyond April 2015.

10

Corporate Action Report 2015

Corporate Action Report 201511

About Us

History

As a leader of Japan's shipbuilding industry, MES quickly expanded operations to include land-based segments.
Constantly challenging ourselves to succeed in new domains, throughout our history MES has used this success toachieve further technological advances. The 100-year history of challenge, success, and innovation at MES continues.

1917

1945

1960

2005

Business expansion
and globalization

Becoming a trusted
global corporation

Leading Japan's shipbuilding
industry since our founding.

Post-war reconstruction.
Grows to become comprehensive
heavy machinery manufacturer.

The history of MES started on November 14, 1917 as

Following defeat in the Pacific War, the company

After the war, the company was operating with only

The company enters an age with significant focus on

the Shipbuilding Division of Mitsui & Co., Ltd. In addition

experienced numerous hardships but was able to

the Tamano Works but in 1960, MES constructed thecorporate social responsibility and transparent

to the construction of the company's own merchantrestart productions in October 1945 thanks to efforts

Chiba Works in Ichihara, Chiba. This enabled MES to

management. As the balance between industrial

ships, in 1923 the company completed Minesweeper

to restore order and through cooperation from employees.

vessels that could meet the rapidly growing demand

development and the global environment as well as

No. 2, the first warship built by the company. In 1924,

In 1948, the company received an order for the Norwegian

for large-scale ships. In 1971, the MES ship repair yard,

the creation of an energy efficient society become

the company built Akagisan Maru, the first ship in

whaling ship, the Knurr, which was the first ship exported

the Yura Dockyard, commenced construction. This

global issues, in 2005 MES established new company

Japan equipped with a diesel engine. Beginning in 1926,

by Japan following the end of the war. This marked

established the framework for meeting growing

philosophy, management policy and standards ofthe company concluded a shipbuilding and sales

the company’s gradual transition toward recovery.

demand for ship repair work.

conduct to outline the Group’s overall direction. The

agreement with Burnmeister & Wain A/S of Denmark.

From 1951, the company continued to make innovations

In 1980, as the world had overcome the effects of thecompany began its mission of achieving global

This resulted in the company building diesel engines

in technology and equipment as it supplied the world

Oil Shock, MES began construction of the Oita Works

recognition as a trusted corporate brand.

as well as numerous economical high-speed cargo ships.

with numerous superior ships, eventually securing its

as a dedicated site for large-scale steel construction

From 2012, MES initiated structural reforms to

In 1937, the company separated from Mitsui & Co., Ltd.

position as one of the world’s foremost shipbuilders.

projects. Operations at Oita Works began in 1981.

accelerate Group growth. In 2013, the company

to become Tama Shipyard Co., Ltd. Aggressively involved

In 1961, MES constructed Kinkasan Maru, the world’s

Looking to improve its international competitiveness,

established its Mid-term Business Plan. This launchedin land-based domains, in 1938 the company produced

first automated vessel. Beyond the shipbuilding industry,

MES acquired the container crane company PACECO

the company’s initiatives towards its next stage ofequipment for petroleum refinement. This marked

the company sought to expand its base as aCorp. in 1988 and the land-based power plant engineering

dynamic growth. The building of eco-ships andthe beginning of the company's transition to becoming

comprehensive heavy machinery manufacturer bycompany BWSC* in 1990. MES worked aggressively tostrengthening its presence in the ocean resources

a comprehensive manufacturer of heavy machinery.

advancing aggressively into segments such as industrial

establish its overseas presence in order to establish

segment have begun to reap benefits. MES’s

The company changed its name to Mitsui Shipbuilding &machinery (large-scale turbines, etc.) steel structures

an operating structure for the global age.

challenge towards the next 100 years continues.

Engineering Co., Ltd. in 1942.

(bridges, etc.), and construction machinery.

*Burmeister & Wain Scandinavian Contractor A/S

1917 – Founded as the Shipbuilding Division of Mitsui & Co., Ltd.

1948 – Company receives order for the Norwegian whaling ship, Knurr

1960 – MES constructs the Chiba Works in Ichihara, Chiba.

1924 – Builds Akagisan Maru, the first ship in Japan equipped with adiesel engine.

1961 – World's first automated vessel, Kinkasan Maru

1980 – MES constructs the Oita Works in Oita City, Oita.

2014 – MES receives order for electronically controlled gas injection
diesel engine (ME-GI) fueled by natural gas and ethane.

2015 – Constructs hull for floating production storage andoffloading (FPSO) vessels for marine oil and gas vessel

Major Products▶ Phosphoric acid manufacturing plants▶ Ships (building and repairs)▶ Ship boilers▶ Naval Ships▶ Acetate manufacturing plants▶ Diesel engines▶ Water gates, steel pipes, steel towers, etc.

▶ Meehanite casting▶ Terminal loading equipments▶ Fertilizer production plants▶ Rayon production plants▶ Artiﬁcial petroleum production plants▶ Gas turbines▶ PVC production plants▶ Boilers▶ Nylon production plants▶ Equipments for nuclear power▶ Steam turbines▶ Axial ﬂow compressors▶ Hovercrafts▶ Tetron production plants▶ Petrochemical plants▶ Flotation equipments▶ Ship steam turbines▶ High-speed catamaran▶ Electric shovels▶ Water production plants▶ Construction machineries / ▶ Steel reﬁnery cranes
mining machineries▶ Container cranes▶ Induction heaters▶ Urban trash incinerator facilities▶ MIDP▶ Hybrid container cranes▶ Biomass plants▶ Pipelines

▶ RTV

▶ FA

Corporate Action Report 2015

▶ Solar power stations▶ Oil reﬁnery plants ▶ Commercial boilers ▶ LNG carriers ▶ New materials ▶ Biogas plants ▶ Floating wind power generators▶ Computer usage systems▶ Housing▶ PC hybrid ﬂoating wave dissipating banks ▶ Functional membranes ▶ Eco-ships▶ Semi-submerged crane barges

12▶ Biomass feed facilities▶ Wind power stations▶ SSC▶ ME-GI▶ ME-LGI

Corporate Action Report 201513

About Us

Business Fields

Offering products and services that benefit society and people to become a trusted corporate citizen. In working to fulfill thisgoal, our technology led us towards resolving the various problems facing society. As a total heavy machinery manufacturer
expanding operations on a global scale, we have accepted the challenge of creating a foundation for future generations.

FPSO

Bulk carrier

floating production
storage andoffloading system

Oil tanker

Underwater
vehicleFloating
wind power
generation

LNG carrier

MarinedieselengineNaval ship /patrol ship

Research vessel /training vessel /fishery patrol vessel

Shipbuilding

High-speed
passenger
ship

Ocean
development

Crane

Compressor

MitsuiEngineShipbuChemicalplant

Engineering
Biomass
power
plant

ering &
ildingTurbineMachinery
Process
equipment

Bridge /offshorestructure

Biogas
power
plant

Wind
power
facilityIT

Induction
heaterServices

Construction /Maintenancecivil engineering

Inspections /analysis

Environmental
facility

Systemdevelopment

Real estate
ICT

14

Corporate Action Report 2015

O&M

Corporate Action Report 201515

About Us

Highlights
Thousands of
U.S.Dollars

Millions of Japanese Yen
Financial Results

FY2010FY2011FY2012FY2013

FY2014FY2014

New Orders Received

499,695

686,886

662,556

1,107,750

959,785

7,986,894

Net Sales

589,209571,852

577,093670,068

816,520

6,794,707

Net Sales( JPY 100 million)( JPY 100 million)

9,000

400

Ordinary Income

38,89636,21731,42032,34524,001
26,162

19,96926,18013,29914,899110,668
123,983

8,165

（％）

389

8

8,000
6.6

6,701

7,000
6,000

Operating Income

Operating Income
Operating Income per Net Sales

5,892

6
5.5

4,000

13,494

17,880△8,20742,855

9,463

78,747

Cash Flow
Operating Cash Flow

FY2010FY2011FY2012FY2013

FY2014

2010

2011

2012

2013 2014 (FY)

10

10.0

135

95

8.2

4.1

0

5
0

2
1.6

-100

1,000
0

15

179

100

133

100

2,000

20

300

4

3.0

25

21.6

200

200

4.2

3,000

Net Income

（％）

429

240

5,000
200

( JPY 100 million)

500
400

314

300

5,771
5,719

Net Income
ROE (Return of Equity)

0

0

2010

2011

2012

2013

2014 (FY)

-200

△ 4.6

-5

△ 82

-10

2010

2011

2012

2013 2014 (FY)FY201429,223

13,56447,182

14,49915,168126,221

Investing Cash Flow (Loss)△42,841

11,515△12,100△37,313△32,386△269,502

Free Cash Flow

△13,618

25,07935,082△22,813△17,218△143,281

Financing Cash Flow (Loss)△6,517△32,415△4,793

15,532△4,374△36,398

D/E Ratio

Net Assets per Share（％）( JPY )

150

300

Dividends per Share

293.04( JPY )

5

266.72

Cash and Cash Equivalents

79,79972,007106,192

111,926

94,665

787,759
105
100

Financial Position

FY2010FY2011FY2012FY2013

FY2014

84

85

200

198.4

4

219.17 212.06

4.0

4.0

3.0

3

80

80

FY2014

2

Net Assets

193,748

209,631207,313323,609347,305

2,890,114

Total Assets

686,325

655,929

660,397

932,896

1,074,563

8,942,023

Interest-bearing Debt

172,034

144,564

148,256

187,833

188,314

1,567,062

2.0

2.0

2013

2014 (FY)

100

50

1

Per Share Information

FY2010FY2011FY2012FY2013

FY2014FY2014

EPS (Net Income per Share)

16.29

21.59

△9.91

51.80

11.63

0.097

BPS (Net Assets per Share)

198.40219.17212.06266.72293.04

2.439

4.0

4.0

3.0

2.0

2.0

0.017

0

2010

2011

2012

2013

2014 (FY)

Employees (Consolidated)

199

144

166

218

205

1.706

2011

2012

2013

2014 (FY)

0

2010

2011

2012

CO2 Emission(10,000 t)（TJ) *

2,000

15,00010

12,055 12,291
10,326

Share Price at the year end

2010

Total Energy Consumption(persons)

Dividends per Share0

10,0008.14
1,500

10,025 9,881

1,445

1,360

1,290

1,175

6.66

1,265

1,000

6.38

6.70

6.90

2012

2013

5

5,000

Key Financial Indicator

FY2010FY2011FY2012FY2013

FY2014

Shareholders' Equity to Total Assets

23.9

27.7

26.6

23.6

22.0

ROE (Return of Equity)

8.2

10.0

△4.6

21.6

4.1

500

0

2010

2011

2012

2013

2014 (FY)

0

2010

2011

2012

2013

2014 (FY)

0

2010

2011

2014 (FY)* TJ: Tera Joule (=1012 J)

16

Corporate Action Report 2015

Corporate Action Report 201517

About Us

Messagefrom the President
A year that produced quantifiable results
towards sustainable growth.

In an Economic Environment Lacking SteamThe global economy in ﬁscal 2014 varied greatly
depending on the country and region. While the
US economy remained solid thanks to strong
consumer spending, the European economy wasvailed in uncertainty due to concerns of deﬂation
across the EU zone and the rekindling of ﬁnancial
problems in Greece. Meanwhile, China and otheremerging economies continued to show signs ofan economic slowdown. Overall, the global
markets lack the steam required to drive
economic expansion. In Japan, we saw signs of
economic downturn during the ﬁrst half of theyear due to the eﬀects of the consumption tax
rate hike but, entering the second half of the year,
government economic policies and monetaryeasing strategies implemented by the Bank ofJapan promoted continued yen depreciation andhigher stock prices. Proﬁts improved particularly
among exporters and we began seeing
improvements in hiring and consumer spending,as well as more positive attitudes towards capital
expenditures as the country transition towards a
mild recovery.

Now, we look to further accelerate innovation.
Record High Net Sales
Net Orders Near High Levels from Previous Year
Amid such an environment, full-year consolidated
earnings for the MES Group were net sales of
816.5 billion yen, operating income of 13.3 billion
yen, ordinary income 14.9 billion yen, and net
income of 9.5 billion yen. We outperform initial
forecasts and achieved a record high for net sales
thanks to a construction contract won by our
subsidiary MODEC, Inc. for ﬂoating production
storage and oﬄoading system (FPSO) vessels formarine oil and gas and other engineering
projects. On the other hand, operating income,ordinary income, and net income fell below initial
forecasts. Despite improved revenue and cost
reductions at MODEC, Inc. and other factors suchas yen depreciation, the company incurred losses
related to a chemical plant under construction in
the US.
In light of those losses, moving forward we will

promote sales activities that focus on
good-quality projects and strengthen each stageof the project evaluation process, including
project estimates, design, procurement, andconstruction, to prevent losses on future
construction projects.
Consolidated orders received were 959.8 billion
yen, which exceeded our initial forecast of 870
billion yen by 89.8 billion yen. This represents our
second highest mark for orders received andfollows up our record high from the previous
ﬁscal year.
We believe the strong status of orders received, apreliminary indicator of net sales, represents acertain level of success towards sustainablegrowth.

Floating Production Storage andOffloading System (FPSO) Vessels
for Marine Oil and Gas
An FPSO is an ocean-based facility
that produces oil and gas, storesproduced fuel in the facility’s
internal tanks, and then directly
supplies the fuel to oil tankers.
Representing over 60% of floating
vessels for marine oil and gas
production, the FPSO is the mostpopular type of production facility.

About Progress of Mid-Term Business Plan 2014
Based on the basic policies outlined in our
Mid-Term Business Plan 2014 (MBP14), we are
implementing various policies aimed at achieving
a well-balanced portfolio. By business domain,
we will focus on expanding chemical plants,
power plants, and ocean resources. In terms ofspeciﬁc business models, we will focus on theengineering business, business engagement, andPresident / Representative Director CEO

expanding our related-service business. Due inpart to the contributions to net sales by MODEC,
Inc. in ﬁscal 2014, our sales composition falls inline with these strategic directions. The basic
policies of MBP14 outline three key strategies.
The progress of each of those key strategies isoutlined below.

‘‘ Aiming for a business portfoliothat is not influenced by the shipping market ’’18

Corporate Action Report 2015

Corporate Action Report 201519

About Us

Key Strategy 3 - Expansion of Business Engagement
and Related-Service Businesses‘‘ Reflecting the half-way point of MBP14,
we will confirm progress andaccelerate our speed. ’’

Our third key strategy is the expansion ofbusiness engagement and related-service
business. Our previous business model was one
that which merely focused on selling ﬁnishedproducts and plants. However, we are
implementing reforms to adopt a complex
business model that includes after-sales services,
operation and maintenance, participation inbusiness operations, and total support for the
product life cycle.
Our Singapore subsidiary established in October
2013, Mitsui Engineering & Shipbuilding Asia Pte.
Ltd., is oﬀ to a solid start, having received orders
for after-sales services from an existing
petrochemical plant customer. By providing
repair and modiﬁcation services for existing
plants, we will be able to expand our life cycle
engineering services. We will extend ourafter-sales services to cover plants constructed byother companies as we work to expand ourbusiness scope.
The techno business, which oversees all aspectsof after-sales services, has opened sales oﬃces in
Turkey and Qatar. The business is aiming to
expand after-service sales for compressors, etc.,
installed in plants.
Also getting underway are projects in which MES
is involved in business activities. In Betsukai-cho,
Hokkaido, we partnered with the town toestablish a special purpose company to launch
the Japanʼs largest biogas power generation
business. Boasting Japanʼs largest dairy farming
town with nearly 110,000 dairy cows, a biogas
plant is under construction as the town aims toachieve gas generation using livestock waste. We
will work to respond to the growing energy
security needs of each region by aggressively
proposing technology solutions.

Further Collaborations with MODEC, Inc.
MODEC, Inc. has a major inﬂuence on Groupearnings, with the ratio of MODEC, Inc. sales andorders received represents 40% of Group totals. In
the current environment where the price of crude
oil is dropping, the level of interest in new marine
resource development projects will decline.
However, if the price of crude oil is maintained ata certain level, we will be able to secure proﬁts
from our FPSO charter business currently
underway and our O&M business (operations

Progress of Key Strategy 1 - Manufacturing Business Innovation
Our ﬁrst key strategy is manufacturing business
innovation. In our core businesses of shipbuilding
and marine engines, we are implementing
qualitative product innovations that will enable
us to increase product competitiveness andoperate from an advantageous position.
In our shipbuilding business, we developed thelarge-scale bulk carrier “neo-cape” as part of our“neo series” lineup of next-generation
environment-friendly ships. We already havereceived new orders for the ship. Not limiting
ourselves to general commercial ships, we areapplying technology cultivated through our
shipbuilding business towards the construction ofoﬀshore structures as well by focusing on theconstruction of FPSO vessels, which process andstore crude oil extracted from deep sea oil ﬁelds.
Our Chiba works is already constructing anddelivering FPSO facilities.
In the ﬁeld of marine engines, we haveestablished our position as a company that is
capable of constructing an electronically-controlled

gas injection diesel engine (ME-GI). We alreadyhave received orders for the ME-GI as Japanʼs ﬁrst
LNG carrier able to run on both natural gas andcrude petroleum and we are the ﬁrst company inthe world to receive new orders for the ME-GI
Ethane, which is capable of using ethane andcrude petroleum for fuel.
We will continue distinguishing ourselves in theﬁeld of environment-friendly technology andshift to a domestic development and production
system that ensures our ability to produce highvalue-added products.
Our process machinery business is beginning to
produce results in terms of creating a system of
optimal production sites from a global
perspective. To secure a greater share of the
expanding Southeast Asian market, weestablished the joint venture company MES UBI
Heavy Industries Co., Ltd. in Vietnam and havelaunched production. Moving forward, we intend
to continue developing overseas production sites
for our crane business.

Key Strategy 2 - Engineering Business Expansion
Our second key Strategy is engineering businessexpansion. MES is a specialist in plantengineering. We will apply our expertise to thechemical plant, power plant, and ocean resource
development ﬁelds, all of which are seen as
growth markets. This will help us achieve abusiness portfolio that is not inﬂuenced byshipping markets and stabilize revenues.
The chemical plants business is achieving result,including orders received for the design of alow-density polyethylene plant for Sasol North
America, Inc. in the US.
In Japan, the enactment of the renewable energy
Feed-in Tariﬀ is leading to increased demand.
Amid eﬀorts to expand power generation
business, our subsidiary Mitsui Zosen Environment

20

Corporate Action Report 2015

Engineering Corporation received an order for a
hybrid plant combining commercial raw waste
biogas facilities and feed production. Overseas,
our subsidiary in Denmark Burmeister & Wain
Scandinavian Contractor A/S received two orders
for biomass power facilities in England as EPC(engineering, procurement, and construction)
projects. We will continue eﬀorts to expand therenewable energy ﬁeld, including the wind
power business.
Our Group has progressed with mutual
partnerships between plant subsidiaries thathave led to personnel exchanges, businesscollaborations, and joint project orders. We willcontinue to work as a Group to elevate our total
engineering capabilities.

Next-generation
Environment-Friendly Ships – The
Neo Series
The neo series is a lineup of
eco-ship bulk carriers that maintainthe broad applicability andreliability of our best-selling bulk
carrier, the 56,000 ton Handy-max(Mitsui 56BC), while employing anelectrically-controlled engine andan optimized hull shape. We havedeveloped three ship sizes: 56,000
tons, 60,000 tons, and 66,000 tons.

management and maintenance). In thelong-term, we believe our technology can beapplied to the development of rare earth metals
and methane hydrate in Japan. Already we areprogressing with topside engineering projects,
including FPSO vessel hull construction andon-board crude oil production plants. We willcontinue to promote partnerships with thecompany, including personnel exchanges.

Life Cycle Engineering Service
Through not only EPC (engineering,procurement, and construction) but
also maintenance and after-sales
service, we offer total engineering
services for the entire product life
cycle, from product planning todismantling.

TopsideOil and gas production facility
installed on an FPSO vessel. Placedon the vessel’s topside, the facility
separates crude oil produced fromdeep sea fields into oil, gas, andwater.

We Will Work to Build The Foundations of Society for the Next 100 Years.
All the domains in which we are focused,
including energy, resources, and environment, all
are related to vital issues that the world is facing.
Our slogan for MBP14 is Creating Prosperity for
Our Next 100 Years. This slogan reﬂects not only
our aim to establish our own businessfoundation, but also to build the foundations ofsociety for the next 100 years. This is our

responsibility, our mission to future generations.
Through our business, we hope to work with ourcustomers to contribute to the development ofsociety for future generations. The role of MES is
more important than ever. Every member of the
MES Group is united in accelerating eﬀorts toachieve our goals.

Electrically-controlled Gas Injection
Diesel Engine (ME-GI)
A highly heat efficient, large-scale
two-stroke low-speed diesel
engine that is also a dual fuelengine capable of running on both
LNG and crude petroleum.

‘‘ Group united towards
the same goals ’’Corporate Action Report 201521

Feature: Mid-Term Business Plan 2014

FeatureMid-Term Business Plan 2014

Our Ideal Situation and Basic Policies

Creating Prosperity for our Next 100 Years

Aiming to achieve our Ideal Situation, MES has outlined three key strategies.
We are work to redefine our business domains and innovate our business model.

The Mid-Term Business Plan 2014 (MBP14) was launched with the goal of ensuring the ability of
our Group to achieve sustainable growth and solid profit stability. Simultaneously, we areprogressing with multi-faceted measures that enable us to adapt to changing times.

Key Strategy

Enhance Business
Foundation

Business Environment Affecting our BusinessTo secure overseas demand, shift a portion of
products to the optimal production location inorder to gain a global perspective.
Shift domestic development structure
focusing on the high-added-value products.

Manufacturing
BusinessInnovation● Concentrate funding in investment andEconomic growth in emerging countries and transitions to
new energies are resulting in new business opportunities.

1

Shift domestic production into a flexible andcompetitive system in line with demand.

loan for business innovation.
● Enhance group management.
● Optimize personnel placements and enhance

Point 01

Point 02

Economic Growth of Emerging Countries in Asia
Continues to Lead World Economic Growth

Acceleration of Energy Shift toNatural Gas and Renewable Energy

For the emerging countries in Asia to achieve further growth in theFears about global warming and the rising prices of fossil fuel havefuture, these countries require the development of industrial

led to a global focus on renewable energy. In both domestic andinfrastructure such as electric power and logistics networks, whichinternational markets, the markets for renewable energy, including

are the foundation for corporate operations, as well as core social

solar power, wind power, and bio fuel, are expected to grow.

infrastructure.

MES will increase our eﬀorts in technology development related to

MES possesses the technology to support the backbone ofwind power, solar energy, biogas, and biomass.

personnel strategy for global expansion.

Our Ideal Situation

infrastructure development, including civil engineering and plantengineering technology for port and power plant construction. We
will oﬀer our technology to emerging countries and companies
Key Strategy

targeting emerging markets as we aim for mutual growth.

Well-balanced
Portfolio

2- Sustainable GrowthandSolid Profit Stability -Key Strategy

Expansion ofBusinessEngagement andRelated Service
BusinessEngineering
Business
Expansion

Point 03

Point 04

Change in Industrial Structure Caused by
Shale Gas Revolution

Drafting a Basic Plan on Ocean Policy in JapanThe global development of shale gas has resulted in increased

drafted the ﬁve-year Basic Plan on Ocean Policy. From fostering

demand for liqueﬁed natural gas (LNG) carriers. Moving forward, we

industries related to ocean resource development and ﬂoating wind

expect the diversiﬁcation of ocean shipping of energy, including

power generation, this outlines policies promoting the use of ocean

ethane and ethylene gas (LEG), a byproduct of shale gas.

energy, including wave power, tidal currents, ocean currents, andWe also are seeing increased investments in the construction of new

ocean temperature diﬀerences. Moving forward, the country ispetro-chemical plants in North America, where shale gas oﬀers raw

expected to take a proactive role in accelerating the growth of thematerial merits. MES will aggressively respond to the changes inocean engineering market.

industrial structure caused by the shale revolution.

From shipbuilding technology to ﬂoating production storage andIn May 2013, the Japanese Cabinet Headquarters for Ocean Policy

Enhance and expand petro-chemical andgas-chemical fields, and renewable energy fields
such as biomass power generation.

Net Sales

JPY

850 billion

signiﬁcant contributions to this ﬁeld.

Operating Income

JPY

Interest-bearing Debt

30 billion

JPY

200 billion* ROIC (Return on Invested Capital) = (Operating Income + Interest andDividend Income) / (Shareholders’ equity + Interest-bearing Debt)* Assumptions: Current exchange rate ¥95/US$, ¥125/€

Corporate Action Report 2015

Consolidated net sales ratio
by business domain
JPY
JPY
577.1billion 850billion

Consolidated net sales ratio
by business model
JPY
JPY
577.1billion 850billion

5%

8%

ROIC *

22

Multifaceted expansion of business engagement
and related services to enhance synergy withexisting business.

Business domain and business model innovationoﬄoading System (FPSO) vessels for marine oil and gas and oﬀshore
structure construction, MES possesses the technology to makeEnhance business engagement and related services
that revolve around our manufacturing business.

Strategically expand the ocean development field asa medium to long-term core revenue business.

Quantitative targets (FY2016)

3

5%
25%

30%

Machinery

20%

Manufacturingbusiness

45%

Engineeringbusiness

45%

30%

Businessengagement
and related
service business

FY2016FY2012FY2016(Target)(Estimates)(Target)25%

Plants30%

25%

Ocean resource
development

25%

15%

FY2012(Estimates)

15%

25%

Ship

Others35%

Corporate Action Report 201523

Feature: Mid-Term Business Plan 2014

1
2

1

1

Key Strategy

Key Strategy

Manufacturing Business Innovation
3

We will transition to a streamlined system of domestic production that is aligned with demand. This willentail shifting a portion of products to optimal production sites in order to gain a global perspective. Our
domestic development structure will shift to the development of high value added products.

Restructuring ofDomestic Development
and Production System

Engineering Business Expansion

2● Shift into a production system corresponding to the business environment (shipbuilding, marine engines).

Vital
Strategy● Diﬀerentiation by low-fuel-consumption / eco-friendly technology(shipbuilding, marine engines, industrial machinery and cranes).
● Diﬀerentiation by systems; software-hardware combined (crane and port logistics).
● Expand and enhance ocean development ﬁeld (FPSO, FLNG*). *ﬂoating liqueﬁed natural gas facility

1

3

In the engineering business, we will work to stabilize our revenue base and we are strategically expanding
the ocean development field as a medium and long-term driver of revenue.

Enhance and Expand Competitiveness in
Chemical, Power Generation and Ocean
Resources Development EPC Fields

Action
Ocean

Building a Production
System for Ocean Projects
At our Chiba Works, weconstruct FPSO vessel hulls thatare handed over to MODEC, Inc.
In addition to general commercial
ships, we also are progressing
with initiatives related to ocean
projects and the engineeringbusiness.

EngineStrengthening
Low-fuel-consumption /Eco-friendly Products

Plant

We construct and supply the ME-GI,
a highly heat-efficient, large-scale,
two-stroke, low-speed duel fuel diesel
engine that is capable of using
natural gas and crude petroleum.

2□ South-eastern Asia [chemical, infrastructure] □ North America [chemical]□ CIS and emerging countries [power generation (BWSC), chemical]□ West Africa, Brazil [ocean resources development]

Crane

Producing a
Fully-Automated Crane● Establishment of optimal production location in crane and process machinery.
● Urgent expansion by alliance.

Order received for
low-density polyethylene
plant

MODEC, Inc. received orderfor floating production storageand offloading system (FPSO)
project in Brazil.

Ocean

Sasol received an order for thedetailed design, parts procurement,
and construction support work
related to the high-pressurecomponents of a 420,000
ton/year low-density polyethylene
production facility in Lake Charles,
Louisiana. Through this project,
this will solidify our company’s
position as a leading partner inthe field of LDPE manufacturing
facility construction.

● Strengthening of sales network in crane and industrial machinery (South-eastern Asia, India, Middle East).

Vital
Strategy● Exploitation and expand markets.

ActionWe build a cable reel transtainerthat is equally efficient in emergency
situations. Eliminating the diesel
power generator set achieves zero
emissions and contributes greatly
to CO2 reductions.

Development of
Global Business Structure● Enhance cost competitiveness, ability to accomplish projects.

Vital
Strategy

2

Expand Environmental
Energy EPC Field

Vital
Strategy

MODEC, Inc. received new orderfor FPSO Charter Project for
Tartaruga Verde & Tartaruga
Mestiça Oil Fields in offshore
Brazil.
This FPSO will achieve daily
production equivalent to150,000 barrels of crude oil and
176 million cubic feet of gas,with a storage capacity of
approximately 1.6 million
barrels of crude oil.

● Expand renewable energy ﬁelds (biomass/biogas power, wind power, etc.).

● Promotion of global and multifaceted procurement in MES group.

ActionSingapore

Establishment of MES Asia

ActionEstablished
MES UBI Heavy Industries
Co., Ltd.

Vietnam

Accelerating and expanding
global business development,
we established ourwholly-owned subsidiary Mitsui
Engineering & Shipbuilding Asia
Pte. Ltd. (“MES Asia”) in
Singapore. Identifying the
rapidly growing ASEAN nations
as a vital market, we will offer
after-sales services, life cycle
solutions services, and local
construction of chemical plants
to existing local customers.

3

Development andExpansion of
Key Components Business

Vital
Strategy

Biomass power plant3and highly-functional components.

Enhance Group Internal
Partnerships and Global
Operations Structure

ActionReciprocating Compressor

High-pressure compressors for hydrogen stations by KAJI TECHNOLOGY CORPORATION

24

Corporate Action Report 2015

Capital Investment in
KAJI TECHNOLOGYCORPORATION
We executed a capital investment
agreement with KAJI TECHNOLOGYCORPORATION, a specialist incompact reciprocating processors(RC). Combined with our specialtyof large-scale RC, we will expand
business through technology
exchanges and expanding
compressors sales targeting hydrogenstations and RC for ocean projects,
both areas that are expected to see
increased demand.

Biogas Power plant

Burmeister & Wain Scandinavian
Contractor A/S (BWSC) establishedthe joint venture company BWSCPower Corporation Limited inEngland to conduct electricity
sales based on biomass-based
electricity sales. Providing total
services from engineering toequipment procurement, installationand construction, and test operation,
the company will oversee operations
and maintenance for a 15-year period.

We established the joint venturecompany MES UBI Heavy
Industries Co., Ltd. as a
production center for processmachinery (pressurized
containers) in Southeast Asia.
We have received numerous
inquiries from within Vietnam
and neighboring countries inSoutheast Asia.

● Strengthening of middle mass production in energy-saving machinery

Biomass electricity
sales business in BWSC
in England

Vital
Strategy

Order received for
multi-function plant forfood waste feed production
and biogas power
Mitsui Zosen Environment
Engineering Corporation
received an order from Alfo E
Corporation for the Jonanjima
No. 2 Feed Center (provisionalname) food waste recycling
plant. Moving forward, we willcontribute to the formation of arecycling-based society throughthe construction of food waste
recycling plants.

● Strengthen internal partnership with subsidiary companies (MODEC, BWSC, overseas subsidiaries).
● Expand overseas bases (North America, Singapore), enhance common business process.

ActionCompressor

Involvement in Compressor
Segment for Ship andMarine Equipment
We developed and began sales of ahigh-pressure compressor for fuelgas supply systems used in LNG
carriers. We now are able to offer thiscompressor as a set with the ME-GI.

Binary Power Generation

First New Orders Received for
Binary Power Generation Facilities
The binary generator segment is
expected to grow in the future inlight of revisions to the Electric Utility
Industry Law. Our VPC binary generator
is able to recover power from mid to lowheat energy ranging from 70 to 250ºC.

Plant

Contract with EPC
for Chemical Plants
ExxonMobil Chemical Asia Pacific(EMC AP) placed an order for a
production facility for halobutyl
rubber and special resins foradhesives. This facility planned forconstruction on the Jurong island in
Singapore and would be one of thelargest such facilities in the world.
The contract is a total outsourcing
agreement for engineering,procurement, and construction(EPC) that will be executed by MES
and Group companies.

Plant

Personnel Exchanges
between Subsidiaries andBusiness Partnerships
We conduct engineering
personnel exchanges between
overseas plant subsidiaries.

CranesEstablished Crane Sales
Division in MES Asia
We provide customers inSoutheast Asia with proposals
for port cranes.

Corporate Action Report 201525

Feature: Mid-Term Business Plan 2014

Key Strategy

1

3

2

1

1

Expansion of Business Engagement andRelated Service BusinessWe are implementing reforms to shift from a business model of merely selling products and plants to acomplex business model that offers after-sales services, operations and maintenance, and emergence inbusiness operations as well as the total support for the life-cycles of products.

Enhance Related Services
that Revolve aroundOur Manufacturing Business● Enhance and expand overseas bases of techno service business (South-eastern Asia, India, Middle East).

Vital
Strategy● Expand services of techno service (package maintenance, engineering service).

Enhance Business Foundation
2

3

1

Investment Plan

● Expand crane service and enter into business of terminal facility.

Vital Strategy● Enter into business of marine engineering ﬁelds in overseas.

Fiscal 2014 Progress● Decision to increase MBP14 capital expenditures budget

ActionBusiness
Investments

to adapt to business environment changes.
● Concentrate funding in high strategic fields.

● Nonconsolidated: 15 billion yen > 30 billion yen(upgrades to Tamano Works, Oita Works, and Chiba Works)● Subsidiary: 8 billion yen > 40 billion yen

Establishment of
MES-KHI YURA DOCK

Ship Repair

We established and operate the
MES-KHI YURA DOCK CO., LTD,in partnership with Kawasaki
Heavy Industries, Ltd.
The goal of this collaboration is
to capture demand for repairs of
LNG carriers in North America
shale gas transport market,
which is expected to grow in the
future. Fusing the technology
and personnel of both companies
will increase competitiveness,
improve profits, and secure thefuture sustainability of ourbusiness.

Qatar

MTME：
MES Technoservice Middle East
W.L.L

TurkeyMTA：MES Technoservice Machinery
Construction Logistics Industry
and Trade Corporation(overseas crane production subsidiary)

Established industrial
machinery after service
office in Qatar and Turkey.
We established offices in Doha,
Qatar and Ankara, Turkey for the
purpose of providing after-sales
services (regular repairs,
maintenance, and parts sales)
for industrial machinery(compressors, steam turbines,etc.) constructed and delivered
by MES.
Previously, after-sales services
for industrial machinery
delivered overseas was limited
to the provision of parts but
moving forward we will be
involved in on-site construction(regular repairs, maintenance).

● Funding in high growth / strategic projects.
● Shift from generating new large-scale projects

R&D
Investments

FinancingandInvestments

2that diverge from core business to a strategy
of business expansion in the related-service
business.
● Create the foundation of expansion andpromotion for ocean development business(Gather comprehensive ability of MES group).

The Research & Development Headquarters conducts
development based on a Group-wide structure of cooperation
to make visible contributions to improving revenues from coreproducts.
(1) Next-generation promotions plant (2) Vessel noise evaluation technology(3) Development of environment-friendly diesel engines(4) Development of fuel gas supply systems (FGSS)(5) Crane vibration prevention and reduction technology(6) Biogas plant performance improvements● Create priorities of investment through theposition of corporate management (M&A, etc.),
speed up business innovation.
● Tighten assessment of investments forfinancial strength.

● Project list for MBP14 period and prioritization of projects● Capital investment in KAJI TECHNOLOGY CORPORATION

Enhance Group Management
Vital Strategy

2

Enhance Upstream andDownstream Services
that Center on EPC

Fiscal 2014 Progress● Sale of semiconductor manufacturing business and withdrawal from lithium● Improve earning through the life cycle of ocean resources development ﬁeld.

Vital
Strategy● Enhance upstream and downstream services of renewable energy ﬁelds.

(Technical integration, project development, O&M, business operation)● Develop the life cycle engineering service in cooperation with global bases of chemical plant ﬁelds(North America, Singapore).

ion cell positive electrode material manufacturing business.
● Enhance involvement and support to MES

group alliance projects.
● Enhance management practices by concentration
to core business.

ActionBiogas Plant

Participation in Japan’s
Largest Biogas Energy
Generation BusinessWe established the special purpose
company BETSUKAI Biogas Power
Generation in collaboration with
Betsukai-cho in Hokkaido. We
became involved in the construction
and management of Japan’s largest
biogas energy generation facility.
This will promote industries using
regional biomass and renewableenergy based on local recycling,which will tie into local job creationand stimulate the local economy.
This BETSUKAI Biogas Power
Generation business uses livestock
waste supplied by local dairy
farmers to create methane gas
produced via fermentation as fuelto produce electricity. We willconduct a business sellingelectricity over the 20-year period
based on the electricity Feed-in
Tariff (FIT).

26

Corporate Action Report 2015

Oita Works

Solar Energy Business:
Launching EPC BusinessWe constructed a mega solar
plant (large-scale photovoltaic
power generation facility)
inside the Oita Works to start anenergy generation business.
Generated electricity will besold to KYUSHU ELECTRIC POWER
CO., INC. over a 20-year period.

Plant LSS

High-Performance
Hybrid Retrofitting
for Transtainers
In August 2014, we completed
hybrid retrofitting for fivetranstainers in Thailand. This
project improves energy
conservation performance andupdates electricity storage
system to maximize the energy
distribution of generators andbatteries.
We received the Green EnergyAward for this project.

3● Consolidated the newly established Infrastructure Business Department with

the Mitsui Zosen Steel Structures Engineering Co., Ltd., DPS Bridge Works Co.,
Ltd., MES Testing & Research Center Co., Ltd., and Mitsui Thanglong Steel
Construction Co., Ltd. to strengthen our social infrastructure business.
● Consolidated MES Tokki Co., Ltd., Tamano Engineering Co., Ltd., and Uno-kogyo,
into MES Tokki Co., Ltd. to serve as a uniform entity for ship engineering andcontribute to machinery plants.

Optimize Personnel Placements and Enhance Personnel Strategy for Global Expansion
Vital Strategy

Fiscal 2014 Progress● Flexible personal placement in MES group.
● Secure, develop, and utilize human resourcesand enhance personnel management affairs for
global expansion.

4● Reorganized and strengthened personnel at Machinery & Systems Hq. andEngineering Hq.
● Enhanced overseas personnel development.

Enhancing Corporate GovernanceFiscal 2014 Progress● Incorporation of executive director system.

–Separated and clarified roles by establishing Board of Directors as a management
decision-making and supervisory function and the executive directors to serve as a business
management function–Business management is assigned to executive directors to speed up processes● Increase in outside directors.

Corporate Action Report 201527

Business Segment Overview

Business Segment Overview
Fiscal 2014 (JPY 100 million)

Main Products

Net Sales Composition

Net Sales

Operating Income

60.2 %

4,917

102

18 %

1,465

98

15.9 %

1,299

△106

● Bulk carrier● Oil tanker

Ship & Ocean

Ship & Ocean Project

Project
Headquarters● LNG carrier● Floating production storage andoffloading system (FPSO)● Research vessel / Training vessel● Fishery patrol vessel● High-speed vessel● Submersible● Naval ship / Patrol ship

● Marine diesel engine● Gas turbine and gas engine
co-generation system● Process compressor● Top pressure recovery turbine (TRT)
generating system● Reactor / Heat exchanger

Machinery & Systems

Machinery & Systems
Headquarters● Rotary dryer /Coal moisture controller● Quayside container crane● Transfer crane in container yard
● Container terminal
management system● Bridge● Floating piers and pontoon● Radar scanner● Manipulator● Petro-chemical plant● Inorganic chemical plant● Biomass power plant

Engineering

Engineering
Headquarters● Biogas power plant● Wind power facility● Overseas power plantengineering & construction● Environmental facility● Diesel engine generating plant

Other 5.9%28

Corporate Action Report 2015

Corporate Action Report 201529

Business Segment Overview

Ship & Ocean Project
We are using the shipbuilding

Action Plan for Medium and Long-Term Growthtechnology and our collective
01.Differentiation by Low-fuel-consumption / Eco-friendly Technology

group capabilities cultivated①Expanding our eco-ship lineup (neo66BC, neo56BC, neo60BC, cape-size BC, and VLCC)

at MES to pioneer the new②Developing the mid-scale multi-gas carrier neo82GC for liquefied natural gas (LNG) and ethane transportbusiness field of ocean

02. Expansion in Ocean Development Field

operations.

①Orders received and construction of ﬂoating production storage and oﬄoading system (FPSO)
for marine oil and gas hulls and ocean support vessels②Strengthening collaborations with MODEC, Inc.

03.Aggressive Capital Expenditures Aimed at Enhancing Production Capacity
Director and Managing Executive Officer
General Manager of Ship & Ocean Project Headquarters①Improving cost competitiveness by promoting optimization at Tamano Shipyard②Constructed cranes in Chiba Shipyard to improve capacity for ocean projects

Norihisa Fukuda

ActionFutureBusiness Environment and Performance

Taking Advantage of Strengths of Environment-Friendly Ships
to Secure Base Load With General Merchant Ships

General Merchant Ships

Combining High Reliability and Environment-friendly
Performance to Build an Unwavering Position.

Financial Highlights

The shipping market continues to face a state of excess capacity due to the start of numerous

New Orders

MES eco-ships successfully combine the high reliability of the 56,000 ton Handy-max Bulk

constructions on new shipbuilding projects. In particular, charter freight has been low in the(JPY 100 million / FY)

Carrier (Mitsui 56BC), of which MES has delivered over 160 vessels, with vastly improved

dry bulk division. The new shipbuilding market has seen a decline in new orders due to the

8,000

decline in charter freight. In particular, the number of negotiations that lead to actual
proposals have been slim. In the ocean development field, the drop in the price of crude oil has
led a downturn in new oil well and gas development projects. In addition to the scandal with
the Brazilian state-owned oil companies, the decline in ocean projects at major Korean
companies and other factors have resulted in an increased lack of transparency.
Amid the above conditions, MES has already developed and released four types of new bulk

4,000

propulsion and energy efficiency through the use of an electronically-controlled gas

6,794
5,479 5,200

6,000

3,797

4,137

markets, (2) the neo56BC, which fulfills the needs of existing markets, and(3) the neo60BC, which targets growth markets. Orders received for each ship type are2011

carriers incorporating environment-friendly technology. Thus far, the cumulative number of

2012
2013
(Actual)

2014

2015
(Forecast)

new orders received for environment-friendly ships reached 58 vessels, resulting in an orderincreasing. Centered on the superior energy-saving performance and reliability of the neo
series, we offer a vast lineup that includes cape-size bulk carriers and very large crude
International interest in clean energy also continues to grow. We have completed

November of two years ago, we have gradually constructed and delivered 16 66,000 ton and

Net Salesdevelopment of the neo82GC prototype, a new medium-sized multi-gas carrier that is

56,000 ton bulk carriers. Moving forward, we will continue to apply our competitive(JPY 100 million / FY)

designed with a focus on the ocean transport of liquefied natural gas (LNG) and ethane, aadvantages as the pioneer shipyard for environment-friendly ships as we work toward

6,000

4,917

securing our base load with general merchant ships.
As for ocean projects, in February of this year we delivered two floating production storage

4,000

3,186 3,214

shale gas derivative. We also are anticipating the enactment of new regulations that will
4,400

3,773

gained practical experience, we have developed a technology and observations knowledge
base in the ocean development field.

into the development of new ships that comply with new regulations.
2,000

0

Ocean Development Field
2011

2012
2013
(Actual)

2014

2015
(Forecast)In addition to 21 orders received for environment-friendly bulk carriers, we received orders forprices. However, the sector remains on a trend for medium to long-term growth.

Operating Income

MODEC, Inc. is applying its past experience towards securing new orders received and(JPY 100 million / FY)

improving profitability. MES will accelerate strategic business alliances with MODEC, Inc. to200large-scale FPSO projects. As a result, orders received decreased by 131.557 billion yen (-19.4%)

provide full-scale support for this initiative as we aim for Group-wide growth in the ocean

158

compared to the previous fiscal year to 547.853 billion yen. Net sales increased thanks tofavorable progress of FPSO as well as the benefits of yen depreciation. As a result, net sales

105

100

development field.
99

102

In February 2015, we delivered a new FPSO hull to MODEC, Inc. The typical approach toincreased by 114.471 billion yen (+30.3%) to 491.739 billion yen. Operating income increased30

by 268 million yen (+2.7%) to 10.177 billion yen thanks to the increase in net sales and aconcentration of construction for low-priced vessels.

Corporate Action Report 2015

Enhancing the Competitiveness of The MES GroupThe ocean development sector has become less transparent due to the decline in crude oil

Fiscal 2014 Earnings

Yen Depreciation Drives Increase in Sales

have a major impact on future designs. While working proactively to complying with these
new regulations, we will accurately ascertain market needs and incorporate these elements

and offloading system (FPSO) for marine oil and gas vessel hulls constructed at Chiba Worksfor Brazil and delivered them to MODEC, Inc. We struggled with vessel construction but as we

66,000 ton bulk carriers「CLIPPER EXCALIBUR」

carrier (VLCC).

backlog for approximately two years. Since handing over our first environment-friendly ship in30

To meet the needs of a wide range of customers, since fiscal 2013 the Handy-max Bulk
Carrier lineup has featured three ship types: (1) the neo66BC, which aims to pioneer new

2,000
0

injection diesel engine (ME-GI) and an optimized hull shape.

0

2011

2012
2013
(Actual)

2014

2015
(Forecast)FPSO hull is to retrofit old tankers but we provide MODEC, Inc.’s business with an option for
new construction, which involves delivering highly durable new hulls in a short turnaroundperiod. Using this valuable engineering and construction experience, we will aim to secure
new orders for FPSO projects.

floating production storage and offloading system (FPSO)
for marine oil and gas

Corporate Action Report 201531

Business Segment Overview

Machinery & Systems
Combining our strong productAction Plan for Medium and Long-Term Growth

lineup with a system forsupporting the total product01.Differentiation by Low-fuel-consumption / Eco-friendly Technology

life cycle to respond to the①Marine diesel engine fuel diversity (natural gas, ethane, methanol, etc.)②Foster and expand key component business (parts) such as exhaust heat recovery system
for ship engines (THS)

diverse needs of the global

02.Development of Global Business Structure

market.

①Established process machinery manufacturing JV with local company in Vietnam②Established crane sales functions in MES Asia (Singapore)

03.Expansion of Business Engagement and Related Service BusinessDirector and Managing Executive Officer
General Manager of Machinery & Systems Headquarters①Enhance and expand overseas bases of techno service business②Expand crane service and enter into business of terminal facility

Shinsuke Minoda

ActionFutureBusiness Environment and Performance

Policy Implementation Progressing Smoothly

Marine Diesel Engine

Expanding Environment Policy-Compliant Product Business

Financial Highlights

Our marine diesel engines business has seen an increase in inquiries concerning gas-burning
engines, which are highly environment-friendly. During the fiscal year, we received orders for
six LNG and three ethane-burning engines, resulting in orders received that increased
significantly year on year. Production volume was on par with the previous fiscal year at

The key to the marine engine market in the future will be fuel efficiency andenvironment policy-compliant engines, thus the key will be our ability to offer high

(JPY 100 million / FY)

1,831 1,800

2,000

3,540,000 horse power, which represents sustained construction volume.

1,507

Industrial machinery had a favorable environment for new orders received thanks to yen
depreciation. Orders received were propelled mainly by reciprocating compressors to foreign

environment regulation compliance. There is significant interest in energy-conserving,

New Orders

1,159

electronically-controlled gas injection diesel engine (ME-GI) that burns LNG and ethane

1,307

and the ME-LGI, which uses methanol for fuel. We will continue to gain more experience

1,000

by being first-to-market with engines incorporating new technology.

oil refineries in Turkey and other countries. In addition to establishing a JV in Vietnam to serve

Moving forward, the measurement of engine efficiency (performance) will focus notas the manufacturing center for process machinery (pressurized containers), we execute a
capital investment alliance with K AJI TECHNOLOGY CORPORATION, which specializes in

performance engines at fair prices. We were ahead of our competitors in offering an

only on the engine, but on the entire propulsion system, at which the engine is at the0

compact reciprocating compressors. Promoting this alliance will accelerate business

2011

2012
2013
(Actual)

2014

2015
(Forecast)

expansion and contribute to establishing a system of optimal production sites.

center. In addition to engine sales, we will aim to provide attractive propulsion systems

Electronically-controlled gas injection diesel engine「ME-GI」

that combine engines with energy conservation systems and offer packages that include
the fuel gas supply system (FGSS) for the ME-GI.

Interest in large cranes is exceptionally strong in both Japan and overseas. New orders
received grew and we achieve a record high for orders received, including new orders for 14

Net Sales

portainers and 15 transtainers in the Westports of Malaysia. Currently, we are conducting(JPY 100 million / FY)

large-scale capital expenditures at our Oita Works aimed at increasing production capacity.

2,000

1,553

The Life-cycle Solution Service (LSS Service), and Customer Oriented Service which centered

Crane
1,800

1,450 1,478 1,465

on after-sales services, is strengthening sales activities by focusing on proposal-based sales
and expanding overseas offices. Due in part to the influence of yen depreciation, we achieved

Southeast Asia continues to have strong demand as we have received numerous
1,000

inquiries. This is due to the new construction of container terminals and the fact that werecord highs for both orders received and net sales. We also established offices in Qatar andhave entered a period of replacing the large number of old container cranes that wereTurkey to provide after-sales services for industrial machinery.

constructed during a boom in container transport in the 1980s and 1990s. For the next
0

2011

2012
2013
(Actual)

2014

2015
(Forecast)

Industrial Machinery

Participation in the Hydrogen Station Field149

was due to increased orders for container cranes, marine diesel engines, various industrial

111
100

82

98

110

Due to these products and businesses, net sales declined 1.301 billion yen (-0.9%) year on year

32

Corporate Action Report 2015

The capital investment alliance with KAJI TECHNOLOGY CORPORATION, which
specializes in compact reciprocating compressors, enables us to break into the compact

to 146.501 billion yen. Operating income increased 1.632 billion yen (+20.0%) year on year tomachinery businesses.

Quay gantry crane「PORTAINER」(JPY 100 million / FY)
200

9.814 billion yen due to favorable performance in the after-sales services and industrial

transtainers. As for the domestic market, port construction is expected to accelerate as
demand on the domestic market is expected to see strong demand.

Operating Income

Orders received grew by 52.378 billion yen (+40.1%) year on year to 183.107 billion yen. Thismachinery, and after-sales services.

10 years, we forecast annual replacement demand of 200 portainers and 300
we head toward the 2020 Olympics. Much like the international market, replacement

Fiscal 2014 Earnings

Orders Received Increased Significantly
and Operating Income Also Grew

Improving Production Capacity, Expanding Sales Routes

compressor field. Aiming for synergy between the two companies, we will expand sales
0

2011

2012
2013
(Actual)

2014

2015
(Forecast)regions for compact compressors used in petroleum refineries and petro-chemicalplants and expand sales of compressors to hydrogen stations.

Reciprocating compressors

Corporate Action Report 201533

Business Segment Overview

Engineering
Action Plan for Medium and Long-Term Growth

Using our diverse technology
and experience to ascertain

01.Enhance and Expand Competitiveness in Chemical, Power Generation andOcean Resources Development EPC (Engineering, Procurement, and Construction) Fields

market trends and expand our①Enhance cost competitiveness and ability to accomplish projects②Cultivating and pioneering the North American and Southeast Asian markets

global engineering business.

02.Expand Environmental Energy EPC Field①BWSC* received two orders for biomass power plants in England (including business engagement)②The Mitsui Zosen Environment Engineering Corporation received an order for a hybrid plant combining
a commercial waste biogas power plant and a feed production facility③Received order for Hiyoshibaru solar power plant construction (including business engagement)

03.Enhance Group Internal Partnerships and Global Operations Structure

Director and Managing Executive Officer
General Manager of Engineering Headquarters①Expanding joint orders with overseas subsidiaries to enhance capabilities②Expand business alliances between subsidiaries

Hiroyuki Komine*Burmeister & Wain Scandinavian Contractor A/S

ActionFutureBusiness Environment and PerformanceYear of Engagement in New Markets and Business Models

PlantsRebuilding the Plant Business

Financial Highlights

Demand for petroleum products in Asia is expected to grow in the future and inquiries
concerning production facilities are strong. However, the falling price of crude oil, whichbegan last fall, has resulted in the extension of investment decisions on new projects.
In the environmental energy field, purchase prices based on the Feed-in Tariff have beenstable with the exception of solar energy. The demand for energy generation based on
renewable energy remains as strong as ever. At the same time, a market that was pioneered bysolar energy is gradually headed towards energy generation based on biomass, biogas, andIn North America and Southeast Asia, which are outlined as vital regions in the Mid-Term
New Orders

Business Plan 2014, new orders received gradually increased last year and we will

(JPY 100 million / FY)

continue develop these markets. On the other hand, the sudden decline in the price of

3,000

crude oil has caused a cool down in shale gas and the oil boom, resulting in a lack of

2,664

transparency in global plant construction plans. As we already have secured numerous
1,824 1,800

2,000

1,327
1,000

aided by the conclusion of low-profit construction projects received during unfavorable

w in d p ower. O ur G r oup s t ar te d a s o l ar ener g y b u sine s s a t t he O i t a Wor k s an d iscommercializing biogas energy generation projects in Hokkaido. We are planning to startmarket conditions and by faithfully fulfilling our vast backlog of orders received.
0

full-scale operations in fiscal 2015.

2011

2012
2013
(Actual)2014

Environment Energy

generate a significant increase in electricity demand for the foreseeable future. We will focus

Net Saleson winning new civil works projects for thermal power generation plants.

(JPY 100 million / FY)

Amid such conditions, in over sea s market s we received an order for a low densit y

2,000

1,700

polyethylene (LDPE) plant for Sasol North America, Inc., a general civil works contract for the
1,167

expansion (600MW) of a thermal power generation facility in the Duyen Hai region of
1,000

722

Synthetic resign manufacturing plant

2015(Forecast)

In relation to social infrastructure overseas, economic growth in Southeast Asia is expected toVietnam. In Japan, we received an order for the construction of the Hiyoshibaru solar power

construction contracts underway, for new projects we will outline basic policies that
promote sales activities focusing on profitability. The transition to profitability will be

1,087

1,299

Enhance Upstream and Downstream Service Businesses
that Center on EPC
In the renewable energy field, we are proceeding with not only EPC (engineering,procurement, and construction), but also with our engagement in energy generation

854

using the Feed-in Tariff system. Construction of the Hiyoshibaru mega-solar power plant

plant.

and the Hokkaido Betsukai-cho biogas energy generation business are progressing
0

2011

Fiscal 2014 Earnings

2012
2013
(Actual)

2014

2015
(Forecast)smoothly and operations are to begin in fiscal 2015. Overseas, our subsidiary BWSC
(Denmark) is expanding its EPC business model, which includes project development in

Biomass power plant

the biomass power generation segment, as it works to secure new orders.

While we have gradually increased new orders received
Operating Income

There also was the delay of the petro-chemical project in Southeast Asia, which was expected
to result in operating losses due to declining profitability projections. However, we did receive
multiple new orders for biomass power plant projects in the UK. Overall, orders received
decreased in 83.926 billion yen (-31.5%) year on year to 182.436 billion yen, still a relatively
high level. Net sales increased by 13.207 billion yen (+11.3%) year on year to 129.929 billion(JPY 100 million / FY)
200

Power Plants / Civil Engineering and Construction
100
0yen. This was due to petro-chemical plant construction projects in Singapore and North
America and renewable energy (wind, solar, and biomass) power plant construction projects.
On the other hand, operating losses increased by 10.412 billion yen year on year to 10.593
billion yen due to partial delays in construction, which resulted in a decline in profitability.

34

Corporate Action Report 2015

50

13
-1

-2

-100
-200

In Vietnam, which is one of the vital regions outlined in our Mid-Term Business Plan
-106

2011

2012
2013
(Actual)Increasing Presence in Vietnam

2014

2014, we received one new order in fiscal 2014. Previously delayed projects are
2015(Forecast)

expected to move forward and this order received will become a platform for success.
Through repeated success, we will continue to increase our presence in the region.

Indonesia Tanjung Jati B coal-ﬁred thermal
power station

Corporate Action Report 201535

Business Segment Overview

Research & Development
Materials Technology Field

Developing the technology

To improve product reliability, we apply our core technology for evaluating material damage,that enhances our business

improved durability. We also are working to develop technology that will contribute to innovations inincluding wear, fatigue, and erosion, towards R&D that contributes to damage prevention andproduction and machining processes, including welding and functional surface treatment, in hopes ofcompetitiveness in collaboration

increasing productivity and reducing manufacturing costs.

Actionwith operational headquarters.

Developing Laser-Arc Hybrid Welding Technology

Applying to Shipbuilding

We used a laser-arc hybrid welding method during part of the deck panel welding process for alarge-scale patrol vessel delivered to the Japan Coast Guard. This laser-arc hybrid welding method
combines the advantages of both laser welding and arc welding while compensating for the
shortcomings of the respective methods. We are continuing R&D into this technology due to its
potential to improve both productivity and quality during the shipbuilding process.
We received approval for this welding method from relevant supervisory authorities to apply this tech
to mild steel and high-tensile steel, and used this method in our panel welding process. Welded panels

Managing Executive Officer
General Manager of Research & Development Headquarters

have a superior external finish and welding resulted in only minor deformations, confirming that thismethod delivers a more-than-sufficient level of quality.

Nobuo Doi

Welding Conditions and View of Weld Joint

Control Technology Field
The Research & Development Headquarters uses close partnerships with each

Our products must meet a diverse range of customer needs, including requirements concerning

headquarters to develop the technology that will enhance productbudget, automation, and environment-friendliness. This had led to the growing complexity of systemcompetitiveness and serve as the foundation for future business expansion.

to achieve desired performance parameters. To ensure the accurate design of such complex systems,
we are developing technology that uses simulations to predict transient response and other factors. At

Supercharger

THS

Compressor

Hydraulicpump(motor)TurbineSupercharger rotor

MES, we are advancing the development of technology that will increase the performance of our
products (container cranes, marine engine systems, plants, etc.) and enable system automation.

Analysis
Technology
Field

Predicting the Responsiveness of
Gas Engine Equipped with THS

design and development in terms of evaluating performance and reliability

Amid a growing international awareness of environment conservation, the development of CO2, NOx,

improvements, cost reductions, and trouble prevention. Equally, product environment

and SOx reduction technology is progressing and the need for energy conservation technology has

and safety requirements are increasing. To meet these requirements, MES is working togrown as companies become more budget conscious. MES is developing environment-friendly

enhance the analysis technologies related to structure, vibration, noise, thermo-fluid, etc.

fuel efficiency and improve load responsiveness, we are developing engines equipped with THS
complex system that combined an engine with THS. To address this issue, we constructed a total

Actionengine system simulation model that assumed an engine equipped with THS to predict system

In the process technology field, we are applying technology developed and improved over many years

level. MES is conducting R&D aimed at increasing the accuracy of ship

toward achieving further product improvements. From environment-related technology (water

noise prediction technology that will enable us to comply with suchdrainage and exhaust gas processing, catalytic incineration, coal treatment technology, and biomass

noise regulations from the ship development and design phase.

utilization technology) to our more recent work in combustion and thermo-fluid analysis technology,

Analyzing noise on a vessel requires the technology to analyze thewe collaborate with the headquarters to create technology for the next generation of productvibrations that pass through the ship’s internal structure and data

development. Recently, we are applying R&D related to hydrates towards a collaboration with theFuel injection
valve

Settings output

Gas fuel
CylinderHydraulicmotor(pump)

Compressed air
Applied
Crank axle

Exhaust gas

Generator

Recovered

Overview of THS engine system model

Ocean Business Promotion Department on developing technology for recovering methane hydrate asan ocean resource.

that emit sound. We conducted vibration analysis using the statisticalenergy analysis (SEA) method. Data related to vibration sources, noise

Actionsources, and noise-emitting inner materials was based on actual shipmeasurement data and inner material acoustic property data
accumulated through our vast years of shipbuilding experience. The
result of these R&D efforts was, using the Handy-max bulk carrier as
Handy-max bulk carrier noise analysis model

Developing Biogas Plant Performance Improvement Technology

Creating a Process Applicable to a Diverse Rangeof Raw Materials

Japanʼs largest biogas plant

Biogas plants (BGP) are recycling plants that ferment various organic waste and use the resulting
biogases to recover heat and electricity. The BGP operated by BETSUKAI Biogas Power Generation isJapan’s largest gas power generation facility fueled by waste from livestock. MES has conductedsuccess resulted in the development of a noise prediction system forlong-term fermentation testing to confirm plant operation stability and validate the efficacy ofcommercial use. R&D was conducted in collaboration with Akishimarecycled litter produced at this facility. We will continue working to optimize all BGP processes as weLaboratories (Mitsui Zosen) Inc.

seek to improve profitability.

Corporate Action Report 2015

Flux
commandValve
openingcommandthe supercharger and that we could expect improvements responsiveness during load variation.

regulation code that limits the crew noise exposure to below a certain

related to vibration sources, noise sources, and the inner materials

36

Controller

Process Technology Field

The International Maritime Organization (IMO) has instituted a noise

measurement results over nearly all sections of the carrier. This

Exhaustpipe

Pressure

behavior during times of load variation. This gave us prior indication that THS would favorably assist

Applying to the Development and Design ofShips Compliant with Noise Regulations

an example, prediction accuracy that is comparable to actual ship

Operation command

technology in the areas of high-efficiency gas engines and related equipment. To improve gas engine(Turbo Hydraulic System) exhaust heat recovery systems. One issue was predicting the behavior of aEnhancing Noise Prediction Technology

Hydraulic power transfer

The importance of analysis technology is growing due to its invaluable role in productActionDevelopment of Transient Response Prediction Simulation Technology

Air supply bypass
Intercooler
Air supply pipe

Corporate Action Report 201537

Social Responsibility

Action forSocialResponsibility
Through our product performance, through our R&D,
the daily efforts of each MES employee all tie into ourGroup-wide effort to promote the conservation of a
global environment that will serve as a platform for all
our business divisions.
We diligently evaluate both our successes and areas
where we have room for improvement as we strive
forward towards our dream of resolving issues on a
global scale.

All of our operations are conducted by people. Healthand safety management, the creation of a lively
workplace, support for a meaningful and fulfilling
lifestyle. One of the vital roles of management isproviding an environment that allows our employees tofulfill their potential.

Below we introduce the actions for social responsibility
we undertake as part of our commitment to fulfilling
our responsibilities to people, society, and to the earth.

38

Corporate Action Report 2015

Corporate Action Report 201539

Social Responsibility

Environmental Preservation
Efforts to Reduce the Environmental Impactof Our Products

ActionConsecutive Conclusionof Neo Series Bulk Carrier

ActionVery Large Crude
Carriers (VLCC)
Development & Design

ActionEnvironment-friendly
Engine System

ActionApplying the Latest in
Performance Development
Techniques

Now that CO2 emissions volume restrictions have been

We will use the neo series technology cultivated during

In June 2014, we received our first order for the ME-GI, an

For the neo series, we combined experimental fluid

placed on international marine shipping, reducing theour development of bulk carriers to develop and launch

electronically-controlled gas injection diesel engine

dynamics (EFD) and computational fluid dynamics (CFD)

volume of greenhouse gases (GHG) emitted by vessels

an environment-friendly VLCC supertanker.

fueled by liquefied natural gas (LNG). The ME-GI is ato create a new performance development technique forlarge-scale two-stroke, low-speed diesel engine thatuse during design and manufacturing. Our goal was toimprove not only propulsion performance and fuelhas become a pressing issue. Amid such conditions, MES
developed and launched the neo series of environment-friendly,

While applying the elemental technology in development

achieves high heat efficiency. It is also a dual-fuel engine

fuel efficient bulk carriers. The first ship in the series, thesince 2008 to build a carrier that achieves large-volume

capable of running on both LNG and heavy oil. The gas

economy in order to reduce CO2 emissions and other

66,000 ton class CLIPPER EXCALIBUR (neo66BC), was completed

CO2 emission reductions, we implemented a full-scale

combustion systems used in small to medium-sizedenvironment impact factors, but also to achieve highly

in November 2013. Our second ship in the series, thereevaluation of the conventional VLCC vessels, including

engines present problems such as knocking and misfiringvalue-added product development by reducing vibration

56,000 ton LOCH SHUNA (neo56BC), was completed in

specifications, types of ships, propellers,due to output limitations and load variations during

and noise.

January 2014. Since then, we have continued to roll ships

energy-conserving equipment, and main engines. These

operation. For these reasons, the use of gas combustionout of our shipyard, completing 7 neo66BC class and 9 neo56BC

efforts will ensure compliance with CO2 emissions volume

engines in propeller-driven systems, which are used

Using a 3D particle image velocimetry (PIV) system,

class carriers as of the end of March 2015. A 60,000 ton classrestrictions.

primarily in international carriers and most efficiently use

which represents the latest in EFD technology, we

engine output, has proven difficult. The ME-GI engine ismeasured complex stern flow field during propeller

the solution to this problem.

operation and conducted comparative analyses using CFD

carrier (neo60BC) is scheduled for completion in fiscal 2015.
The designs we are developing will comply not only with
We completed development and received orders for ouremissions restrictions on CO2, but also with emissions

latest vessel, an 182,000 ton class carrier (neo182BC),

restrictions on toxic substances such as nitrogen oxide

The use of LNG represents a significant reduction in SOX

designs for the vessel, propellers, and energy-saving

which is scheduled to be completed in 2017. We will

(NOX) and sulfur oxide (SOX). We are aiming for

and CO2 emissions and it is expected that NOX andcomponents, and improve overall performance.

continue taking and fulfilling orders for our neo series ofcomprehensive improvements to ourparticulate matter (PM) emissions will also be reduced.

vessels as we look to contribute to limiting GHG emissions

environment-friendly and fuel economy performance.

This makes LNG an environment-friendly fuel that also has

We also applied CFD technology toward improving

become an economically superior option due to shale gas

performance in open water. We use performancedevelopment. These factors have turned the world’s

development techniques during the engineering andattention to LNG as a ship fuel to replace heavy oil as thedesign phase to improve overall environmental

mainstay fuel in the shipping industry.

performance in operating conditions such as high winds

in the international marine shipping industry.

data. This enabled our engineers to optimize shapeand high seas.
In December, we received the world’s first order for anelectronically-controlled gas injection diesel engine
fueled using ethane (ME-GI Ethane). The ME-GI Ethane isan engine capable of running on both ethane and heavyoil. Similar to LNG, ethane is gaining much attention as anenvironment-friendly ship fuel.

neo56BC

VLCC

Measurement using PIV system at Akishima Laboratories (Mitsui Zosen) Inc.

neo66BC

40

Corporate Action Report 2015

Water tank tests using a model at Akishima Laboratories (Mitsui Zosen) Inc.

Electronically-controlled gas injection diesel engine (ME-GI)

CFD analysis results for area surrounding vessel operating in 6m-high waves

Corporate Action Report 201541

Social Responsibility

Environmental Preservation
Our Approach for
Promoting Environmental Preservation

Contributing Environmental Preservation
through Technology, Products and Business1

As a manufacturer, MES places a particularly great importance on activities related to environmental preservation

Blast Furnace Blower, Top Pressure Recovery Turbine

such as conserving resources and energy, reducing waste and properly managing chemical substances.

Japan’s steel mills boast the lowest environmental footprints in the world. MES contributes to theseachievements by providing highly efficient, highly reliable blast furnace blowers and top pressure

Our Efforts to Conserve Energy and Reduce CO2 Emission

recovery turbines (TRT). A blast furnace blower is a device that feeds large volumes of compressed airnecessary for the blast furnace reaction. The TRT is an energy conservation device that uses the large
volumes of gas produced as a result of the blast furnace reaction to generate electricity. Typically, a blast
furnace producing three million tons/year of rough steel uses approximately 40MW of electricity(equivalent to power for 8,000 residential homes) for the blast furnace blower. A TRT can recover nearly
half of that electricity, approximately 20MW. Recent efficiency improvements have led to efficiency levels
near 90%, the world’s highest efficiency for both blast furnace blowers and TRT. We also haveparticipated in a project to spread TRT to India, a project sponsored by the Ministry of Economy, Tradeand Industry and are proactively involved in overseas projects as we continue to contribute to reducing

Blast furnace blower

the environmental footprint of the world’s steel mills.

MES continues to promote a reduction in CO2 emission through activities

are our major products, total energy consumption for the 2014 fiscal year

such as switching from heavy oil to natural gas in order to fuel ofhas increased by approximately 8% when compared to the previous year.

in-house power generation. The graph below shows MES total energy

The shutdown of nuclear power plants has caused the CO2 emission

consumption, CO2 emission, and purchased electricity from the past fivecoefficient of each power company to rise, causing CO2 emission levels toyears. Corresponding with an increase in the production of ships, which

increase by 18% since fiscal 2013.

Total Energy Consumption

CO 2 Emission *2

Purchased Electricity（TJ)(10,000 t)(1,000 kWh)

*1

1,600
1,400
1,200

2

Development of Robot to Measure Ocean Floor Radiation

1,445 1,360
Fuel

1,290

1,000
800
600

The accident at Tokyo Electric Power Company's Fukushima Daiichi Nuclear Power Plant released400

radioactive materials into the ocean. Identifying the distribution of those radioactive materials and their

200

chronological movement is extremely important to prevent the spread of environmental pollution and0

to assist the recovery of the fishery industry.

8

1,265
1,064

1,175

8.14
6.66

6.38

6.70

140,000
120,000

6.90

6

2012

2013

114,216
100,789

60,00040,0002

2011

112,02480,0004Electricity

2010

123,685 121,293

100,000

02014 (FY)20,000
2010

2011

2012

2013

2014

0

(FY)

2010

2011

2012

2013

2014 (FY)*1 TJ: Tera Joule (=1012 J)* 2 CO2 Emission calculations have been done in accordance with the Ministry of the Environment issued ʻʻGuidelines for Calculating Corporate Greenhouse Gases Emissionsʼʼ.
Electric power CO2 emission calculations use the adjusted CO2 emission coeﬃcient for designated electric enterprises published by the Ministry of the Environment.

MES contracted the research and development of a remotely operated vehicle as part of theDevelopment of Systems and Technology for Advanced Measurement and Analysis, which is a project ofJapan Science and Technology Agency (JST). This was a joint project with the National Maritime Research

Water Consumption

Institute, University of Tokyo and Kyushu Institute of Technology. The research and development

Effective Use of Aquatic Resources

activities aim to identify the distribution, deposition, and movement of radioactive materials and toclarify the mechanisms of how hot spots are created. Development is being conducted over the two anda half year period between October 2013 and March 2016. Robots will include such features as
ocean-floor deposit collection capabilities, radiation measurement function using radiation detectors.

1,400

Radiation measurement system mounted on
a company unit for testing

1,283

1,283

1,200

The graph on the right shows the MES five-year usage history of water.

1,000
800

MES uses both service water (clean water) and industrial water

We will conduct open water testing in 2015 with commercialization scheduled for 2016.

(intermediate water). We worked to reserve water during fiscal 2014 but
the amount of service and industrial water used increased by

1,167

1,168

1,089

Industrial
Water

600

488

400
200

approximately 7% in comparison with the previous year.

3(1,000 cubic meter)

Service
Water

0
2010

Tainai Wind Power Generator Construction

2011

2012

2013

2014

(FY)

We delivered a 20,000 kW wind power system consisting of 10 2 MW wind power generators to Tainai,
Niigata. Every aspect of this construction, from design to the transport and installation of large-scale

Our Approach for Reducing Waste

parts for the wind power generators was approached with a focus on environment conservation. The
installation location faces Sea of Japan, which is susceptible to particularly strong winds during thewinter. Electricity produced by this facility is projected to be enough to power 14,000 residential homes.

Unlawful dumping of industrial waste has become a major social problem.

amount over the past five years, recycle rates and breakdown of waste

MES has been involved in the construction of eight wind power facilities throughout Japan. Looking

As a producer of industrial waste, MES is making every effort to fulfill ouramount for the 2014 fiscal year. We worked to restrain waste but fiscal

ahead to increasing demand for environment-friendly renewable energy, we are expanding our

responsibilities in this area. One of these efforts involves our strict2014 saw a 6% increase of wastes in comparison with 2013. Meanwhile,

management of manifest. This is executed through periodical on-site

the recycle rate increased by approximately 3% and became 87% because

inspections of disposal companies. Even more important is our effort toof the increased amount of metallic waste produced. We will continue

reduce the amount of waste itself. To realize this goal, MES works hard to

our efforts to reduce waste and improve our recycle rate. In addition, we

recycle and thoroughly classify our wastes. Graphs below show the waste

will continue to properly dispose of our waste through strict management.

involvement in wind power projects beyond land projects to include ocean-based projects as well.

4

Tainai wind power plant (at completion)

Floating Wind Power Facility Project

Total Waste Amount and Recycle Rate

The 2 MW wind power facility off the coast of Fukushima completed in summer 2013 continues to

Quantity (t)operate solidly today. In December 2015, the facility recorded an operating rate above 40%,

50,000confirming the high efficiency of floating wind power facilities. Following the validation project
conducted in Fukushima last fiscal year, we were selected by the New Energy and Industrial

40,000Technology Development Organization (NEDO) to participate in a new large-scale floating power

30,00020,000planning a validation project combining a new model light-weight floating base with a large-scale
windmill.

Disposed
Amount100

86.7

42,80034,60030,032

Recycled
Amount80
60

Scrap Metal
Slag
Waste Wood
Waste Oil
Waste Plastic

40

10,0002 MW down-wind ﬂoating ocean-based power
facility ‒ Fukushima Mirai

Corporate Action Report 2015

Recycle Rate (%)

45,10037,600 32,600

facility validation project. This project is aiming to achieve a high rate of economic viability. MES is42

FY2014 Breakdown of Waste Amount

20

Waste Paper and Rag
RubbleSludge

0

2010

2011

2012

2013

2014

(FY)

0

Others

（％）
67.6
11.2
5.7
3.3
3.1
2.5
1.9
1.4
3.3

Corporate Action Report 201543

Social Responsibility

Environmental Preservation
Proper Management of SpecificChemical Substances (PRTR Substances)

Effective Use of Aquatic Resources

Water Consumption(1,000 cubic meter)
600

The majority of chemical substances used by MES are solvents andused by MES for the 2014 fiscal year. In May of 2004, a partial revision of

The water consumption started to increase in fiscal 2010. The water

pigments used in paint. Changes in output and travel amount of specific

the Air Pollution Control Law was announced. By maintaining strict

consumption went up by approximately 4% from last year.

chemical substances over the past five years are shown in the graphcontrol of usage levels and by using low-emission airtight containers,

200

below. The other chart describes the breakdown of chemical substances

MES will continue our efforts to conform to the objectives of this law.

0

356

400

(t)

（t)

199

Service Water

1,200

1,092

1,014

900

800

300

600

203

200

400

184

100

200

2010

2011

2012

2013

27

0

2014 (FY)

XyleneToluenePromoting Environment-friendly
Transportation

Ethylbenzenesuch, the breakdown of waste amount by our subsidiaries also differedfrom MES. Approximately 54% of the waste produced by domestic

subsidiaries involved in iron casting, steel casting manufacturing, andsubsidiaries consisted of slag (fiscal 2014). Due to the insufficient

ship repair operations that differ from operations conducted by MES. As

recycling of this slag, the recycle rate was 67%.

12

Total Waste Amount and Recycle Rate

Manganese Othersand
Its Compound

CO2 Emission in Relation to Transportation Amountthe field of transportation as well. Specifically, we try to increase transportation

CO 2
Emission(t)

Domestic
Transportation(10,000 ton-kilometers)

5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500

11,00010,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

loading rates while reducing the number of shipments by aggregating things suchas shipping dates and destinations. We also are attempting to reduce the numberof dedicated ships and expand the usage of consolidated shipments. All of these
activities aim to reduce both CO2 emission and energy consumption. The graph on
the right shows MES CO2 emission over the past five years as well as domestictransportation (ten thousand tons-kilo) and unit consumption (= amount ofenergy consumed for transportation per amount transported). When comparing
2013 and 2014 fiscal years, domestic transportation increased by approximately

060% while energy use per transportation increased by approximately 9%.

FY2014 Breakdown of Waste Amount

Unit Consumption(㎘/10,000 ton-kilo meters)

CO2 Emission
Domestic Transportation
Unit Consumption

2,110

2,140

2,150

2,880 5,090

2010

2011

2012

2013

200

2011

2012

2013

2014 (FY)

4.36

2010

4.86

5.04

Corporate Action Report 2015

2014

(FY)

$

Environmental Accounting

MES spent a total of 2,780 million yen on investment and cost related todevelopment, and 20 million yen spent on pollution prevention such asenvironmental preservation. A detailed breakdown of these expenditures

exhaust gas measures. In addition, total non-investment costs came tois shown below. Categories of environmental preservation costs are

2,570 million yen. This includes 2,160 million yen spent on the researchbased on the ‘‘Environmental Conservation Cost Categories’’ within theand development of environment-friendly energy-saving products, 200‘‘Environmental Accounting Guidelines 2005’’.

million yen allocated to resource circulation cost such as waste treatment,

Among the above expenditures, a total amount of 200 million yen was

80 million yen spent on global environmental conservation, and 70

spent on investment. This includes 150 million yen spent on global

million yen for administration cost.

2.50

2011

2012

2013

2014

(FY)

(JPY million)

Investment

Cost

Major Efforts and Effects(1) Pollution Prevention Cost

15.7

63.9

Exhaust gas measures, wastewater treatment, dust control and other pollution control(2) Global Environmental Conservation Cost

1. Business Area Cost

81.9

Energy saving

—

198.4

Waste treatment

2. Upstream / Downstream Cost—

0.4

Use of recycled paper as copy paper

3. Administration Cost

—

67.0

Environmental management system implementation, environmental
reports and environmental education

40,000

4. Research & Development Cost

41.5

2,158.3

20,0005. Social Activity Cost—

2.4

Road cleaning, seminar sponsorship—

2.2

Environmental Damage Countermeasure

202.5

2,574.5

60,000CO2 Emission calculations have been done in accordance with the Ministry of theEnvironment issued ʻʻGuidelines for Calculating Corporate Greenhouse Gases Emissionsʼʼ.
Electric power CO2 emission calculations use the adjusted CO2 emission coeﬃcientfor designated Electric Enterprises published by the Ministry of the Environment.

44

2013

145.3

(1,000 kWh)

0
2010

2012

(3) Resource Circulation Cost

(10,000 t)
6

2

0

2011

Categories Corresponding toBusiness Activities

Purchased Electricity

2.51

Others0

Environmental Preservation Cost (= Sum of Investment and Cost : 2,777.0 million yen)

CO2 Emission

420

environmental conservation, 40 million yen spent on research andprevious year.

Electricity

Waste Oil

Recycled amount(FY)

purchased by subsidiaries increased approximately 4%. Energy

619

Rubble40

14,40010,00002014

fiscal 2014 CO2 emission increased by approximately 4% from the

Fuel19,200 18,100

Waste Wood

0.1

year numbers. During the same timeframe, the amount of electricity

600

Scrap Metal
60

21,7000.2

plants resulted in an increase in the emissions coefficient. As a result, the400

21,900

（％）
53.8
23.9
4.9
4.9
2.3
10.1

0.175

consumption decreased but the closure of numerous nuclear power

640

18,2002010

year decreased approximately 2% when compared with the 2013 fiscal

626

66.5

Slag

0.3

The total amount of subsidiary energy consumption for the 2014 fiscal

822

80

10,710Conserved Energy and CO2 Emission

843

40,0000

for domestic factories of MES subsidiaries within Japan.

815

100

Disposed amountThe below chart shows environmental management data covering the past five years

Total Energy Consumption

Recycle rate (%)

50,00020,000Subsidiary Environmental Management Data

800

(FY)

2014

in comparison with fiscal 2013. Domestic subsidiaries include

30,000

MES, as a cargo owner, is actively tackling the issue of energy conservation within

（TJ)

2013

The amount of wastes for fiscal 2014 has increased by approximately 20%

Quantity (t)

1

2012

500
400

688

0

2011

Waste-related Information

588

600

1,264

1,000

441

423

Breakdown of Specified Chemical Substances(amount of emissions + travel amount) in FY2014(amount of emissions + travel amount)

1,400

392

Industrial Water

2010

Specified Chemical Substances

359

50,052 50,877

57,468 59,799

62,110

6. Environmental Remediation Cost

0
2010

2011

2012

2013

2014 (FY)

Total

Development of various environment-friendly products

Note: Classification of environmental preservation costs is based on the Ministry of the Environment issued "Environmental Accounting Guidelines 2005"

Corporate Action Report 201545

Social Responsibility

Work Environment
Safety and Health in the Workplace

Creation of Lively Workplace
Employee is a valuable asset to the company. We aim to create a lively workplace through personal development andEnsuring Safety and Health is the Foundation of Our Corporate Management

provision of comfortable work environment.

MES acknowledges that, "based on our belief in human dignity, ensuring safety and health is the foundation of our

Human Resource Development

corporate management." With this always in mind, we promote activities involving that ensure safety and health throughour 2-pronged Safety and Health Management Plan.

We recognize that improving a worker's employability is a company's responsibility. With this in mind, MES is striving to perform total
human resource development for a wide range of employees.

1. Safety first — establish a manufacturing process that places safety as the highest priority.

1

2. Realize a comfortable workplace by proactively dealing with both mental and physical health management.

MES believes in the slogan, "becoming full-ﬂedged in ﬁve
years." In order to help young employees quickly masterbasic techniques and professional skills applicable totheir work, we hold both freshmen and third-year
seminars. We also conduct follow-up on a regular basis toensure that OJT is implemented in a planned andeﬀective manner.

Efforts to Prevent Labor Accidents
01

4

Early Training for Young Employees

Nurturing People Who Can Workon The Global Stage

Initiated in 2003, our Team Safety Exercises continue to promote safety andhealth-related activities. Promoted through Workplace Teams, this initiative
is based on the spirit of "joint promotion, joint responsibility." Since 2010,

Creating First-Class Mid-level Staff

safety and health-related activity. Its slogan is, "avoiding workplace labor

Succession of Skills and Techniques

Within our business activities, we view each and every employee as anaccidents." With the active participation and guidance of managers andirreplaceable person. Creating a workplace where human rights is valued

supervisors, the Team Safety Exercises encourage further development of

increases workers' motivation and sense of value. Moreover, this

our ability to sense danger and assess risks. Moreover, these exercises calldedication to people enhances each employee's capabilities and as aon employees — particularly those who are young or inexperienced — to

The MES Basic Policy Concerning Human Rights
As a member of corporate society, MES holds much social responsibility.
Part of this involves tackling human rights and inequality issues such as
racial and gender discrimination within our daily activities. In order tocreate a truly discrimination-free workplace, MES has made respect forhuman rights as a basis for all of our business operations.

result, maximizes productivity.

Team Safety II Exercises promotion activity results presentation

master work safety through person-to-person training and other means.

Manager Workshops

Through their eﬀorts to oversee what goes on in theoﬃce, managers and directors are the key to successful
human resource development. In order to improve their
management and human resource training capabilities,
we oﬀer a variety of managerial workshops.

It is essential for business operation of the company totransfer professional skills and techniques owned byveterans of 50's to mid-level staﬀs and young staﬀs. We
have established Skills Transfer Center in our works
where the skilled workers transfer their high level skills
and techniques to their juniors.

Human Rights Education

we have also operated our Team Safety II Exercises as a comprehensive

3

As experts at their jobs while still being in the prime of
their lives, we believe mid-level staﬀ members are
extremely important to MES. In order to continue thegrowth of these mid-level staﬀ members, we hold avariety of workshops for section chiefs and assistantmanagers. These events allow them to acquire the skills
and perspectives required to move ahead.

5

Society is facing an urgent task to globalize humanresources with the globalization of the businessenvironment. MES is making eﬀorts to strengthen the
English skills of its staﬀ and providing training on
multicultural understanding and communication tonurture people who can work on the global stage.

Promotion of Team Safety II Exercises

2

Efforts to Promote a Work-Life Balance
02

Reducing Labor Accident Risks through Risk Assessment

Based on our Work Safety and Health Management System, we examine
potential accident risks that may be hidden in workplace. Moreover, weestimate and evaluate the degree and frequency of labor accidents
through risk assessment. This allows us to take action in relation to issues
that present a greater risk. By continuously taking part in such risk
reduction activities, we strive to prevent labor accidents and reach astage where safety is an intrinsic part of our organization.

Occurrence of Labor Accidents (Frequency Rate of Accidents resulting in Absence from Work)We endeavor to establish work shifts and vacation systems that allow each and every employee to feel a sense of joy and purpose while
fulfilling their business responsibilities. This involves allowing employees to choose a work-life style that best fits their responsibilities andstage of life. These include things such as raising children, enjoying middle-to-old age, spending time with family or even being active in
one's community. With this in mind, MES promotes the use of vacation time.

1.4● Various Working Hours, Holidays and Paid Leave System

1.2

Systems to use limited time eﬀectively and realize well-disciplines working hours

1
0.8
0.6
0.4
0.2
0

Our Company
Manufacturing Industry
Shipbuilders' Association of Japan

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Notes: 1. Frequency rate of accidents resulting in absence from work indicates death and injury number per total 1 million
actual working hours. Frequency rate of accidents resulting in absence from work = Number of death and injuries
requiring absence of one day or more in labor accidents ÷ Total actual working hours) x 1,000,000 2. Accident frequency
rate of manufacturing industries is extracted from Japan Industrial Safety and Health Association. (FY2013 data of
frequency rate of absence from work is not yet disclosed and therefore not available)

Administrative staﬀ

Technical staﬀ

Head Oﬃce

Flexible Working Hours System

Employees determine working hours by themselves to perform their work eﬃciently

Leave for Refreshment

Employee is eligible for the consecutive leave of maximum 2 weeks and allowance every 10 years of employment

Annual Leave

All employees are eligible for 22 days of annual leave per year from the ﬁrst year of employment.

Memorial Leave

At the beginning of the year, all employees are encouraged to plan 4 to 6 days of annual leave as memorial leave.

Promotion of Taking Annual Leave

Employees are encouraged to take one day of annual leave every month and consecutive leave in the autumn.

Half-day Leave

Employee can take half-day leave instead of full one day in using annual leave.

Accumulated Annual Leave

The forfeited unused annual leave is accumulated and can be used in case of sickness, childcare, nursing care and some activities such as volunteer activity.

My Holiday Plan

Employees determine consecutive summertime holidays personally during July to September.

Designated No Overtime Days

Employees are encouraged to leave the oﬃce on time at least once a week.

● Support for Balancing of Work Life and Personal Life
Systems to support balancing of childcare or nursing care and work

03

Childcare

・Childcare leave (Male employees also are encouraged to take Childcare Leave.)
・Short-time working hours for childcare (application of ﬂex-time system also allowed)
・Expectant and nursing mothers provided half-pay during hospitalization

Family care

・Care Leave (In case a Care Leave is not taken, short-time working hours or other systems may be made available.)
・Care day-oﬀ

Implementation of Danger Sensibility Improvement Training

・Maternity leave (for marital partners at childbirth)・Nursing leave (to take care a child)

In April of 2007, MES opened the Safety Training Center at our Tamano
Works. One of the factors that led to its establishment was our growing

Initiatives Promoting Women’s Engagement in The Workplacenumber of MES retirees who were being replaced with young employees
and workers from associated companies. To reinforce safety measures,
employees experience twenty-one different dangerous situations as partof danger experience training at this facility. In 2008, similar facilities
were built at both our Oita and Chiba Works. This now gives all of ourworks the capability of promoting and implementing improved danger
sensibility and safety through danger experience training.

46

Corporate Action Report 2015

Danger experience training

We are promoting women’s engagement in the workplace with the goal

returning to the workplace after having children. We also encourageof fostering an environment where all employees, regardless of gender,

female employees in near-management level positions to participate in

can utilize their skills through the various stages of life events andexternal seminars. Moving forward, we will continue our focus on

maintain the desire to work towards long-term career goals. We offer

female hiring, accelerated training, career path support and awarenessmaternity leave before and after childbirth and training support during

development for mid-career females as we aim for a rate of females inchildcare leave to ensure the engagement of female employees

management positions that is equivalent to the ratio of female hires.

Corporate Action Report 201547

Social Responsibility

Corporate Governance
Flow Chart of Corporate Governance and Internal Control

Corporate GovernanceInternal Control System

Shareholders' Meeting
Election/dismissal

Election/dismissal

Election/dismissal[Monitoring andoverseeing function]"Assuring eﬃciency and work performance (achieving objectives)," "Assuring
the reliability of ﬁnancial reports," and "Complying with the law

Audit

Directors

We recognize the objectives of our Internal Control System as following:(Board of Directors)

Corporate Auditors

Decision on contents ofagendas concerning
election or dismissal Accounting
ReportReportElection/dismissal,
oversight

Discussion of important matters,
reports on business executions(compliance)" and we are making eﬀorts to reinforce and improve our

Auditors(Board of Corporate Auditors)

internal control more than ever. In our Internal Control System, Total Risk

Audit

Audit

[Business execution function]

Management and Internal Control Committee bears deliberation of basic

Executive oﬃcers

policy regarding internal control which the Companies Act and the Financial

Instruction/report

Chief Executive Oﬃcer (CEO)Instruments and Exchange Act require. It also bears company-wide
promotion of measures based on policy decided by management
committees.

Deliberation

Deliberation/
reportInstruction/
reportTo achieve our internal control objectives, a business operation system,

Management
Strategy
Committee

Management
Committee

compliance system, a risk management system, and an internal control

Instruction

Instruction

Instruction/
reportInstruction/report

Auditing
Department

promotion system for ﬁnancial reports have been established and theinternal auditing section (Auditing Department) conﬁrms eﬃcacy.

[Permanent Committee]
Total Risk Management andInternal Control Committee

Compliance Committee
Monitoring/
ReportAntimonopoly Act
Observance Monitoring
Committee
Monitoring/
Report(Help line)

Special Crisis Control Committee *1

Investigation

Intra-oﬃce Risk Management
Review Sessions

Divisions/Departments of MES
and Subsidiaries
Consultation/Reporting

Audit*1 : To act in case of contingency

Audit

Employees of the Company Groupconsisting of MES and Subsidiaries, and Clients

Lawyer

5

15

13

9

11

10

8

12

14
7

7

5

3

1

2

4

6

9

Director and Managing Executive Oﬃcer

Chairman and Representative Director

2

Yasuhiko Katoh
3

Vice President and Representative Director

4

Shinsuke Minoda(General Manager of Machinery & Systems Hq.)

Director and Managing Executive Oﬃcer(General Manager of Ship & Ocean Project Hq.)

(In charge of Corporate Planning Dept.,
and Research & Development Hq.)

Director(In charge of Audit Dept., personnel &general aﬀairs, procurement, andenvironmental & safety control, and CCO*2)*1 CEO：Chief Executive Oﬃcer

Director

Toru Tokuhisa(In charge of ﬁnance & accounting, and IR Dept.)(Outside director)(Outside director)(Assistant to President, in charge of sales,
and Marketing Promotion Dept., andGeneral Manager of Export Control Dept.)

10

Kiyoshi Nakamura

Takao Tanaka

Takaki Yamamoto

Director

Akira Nishihata

Toshikazu Tanaka

Masafumi Okada

8

Norihisa Fukuda

President, Representative Director, and CEO *1

Managing Director and Representative Director

Director and Managing Executive Oﬃcer(General Manager of Engineering Hq.)

11 Director
1

6

Hiroyuki Komine

13 Corporate Auditor (Full-time)

Yoshihisa Kitajima

12

1.Business Execution System

3. Risk Management System

To execute business operations in accordance with basic policy decided by

MES is promoting Total Risk Management System that systematically grasps

the Board of Directors, we have established the "Management Strategy

and evaluates various risks related to all aspects of business activities to

Committee" and "Management Committee" as management committees.

ensure we conduct business activities within a proper limit in which we canDeliberations are held based on the functions of each organization totake risks. The Total Risk Management and Internal Control Committee works

promote rapid and ﬂexible decision-making. As for Business Execution

based on total risk management policy determined at the Management

System, we transferred the authority to execute business from Directors toStrategy Conference to promote group-wide risk management.

Executive Oﬃcers elected by the Board of Directors. This streamlines the

As for risks related to business operations, each headquarter holds

execution of duties performed by directors.

"Intra-oﬃce Risk Management Review Sessions", and executes risk analysis

Corporate Auditor (Full-time)

2. Compliance Systems

Yasuo Irie

"Corporate Code of Conduct" is distributed to all oﬃcers and employees ofon their own. Moreover, in cases of contingency, "Special Crisis Control
Committee", in which the Representative Director serves as Chairman,
quickly copes with the problem.

the Company Group comprised of MES and our domestic subsidiaries to
14

Corporate Auditor

promote awareness. Moreover, for overseas subsidiaries, we work with the

Kazuya Imai

presidents of each of them in a timely manner for each areaʼs situation to
conﬁrm compliance systems and their states of implementation.

15 Corporate Auditor

Mitsuaki Yahagi

We have established the "Compliance Committee" as an entity for promoting
awareness of compliance policy and reporting results of surveys. Moreover,
we have instituted "Help-line" in order to detect compliance problems in their*2 CCO：Chief Compliance Oﬃcerearly stages. Either the Secretary General of the Compliance Committee or a

1．Basic Philosophy

2.Structure

lawyer can provide consultations or receive reports directly from employees.

MES is a manufacturing company oﬀering products and services

By law, MES is required to establish a Board of Corporate Auditors. The function

public projects, each division and department conducts checks byrepresenting the culmination of our global business experience and years of

fulﬁlled by the Board of Corporate Auditors together with the appointment ofthemselves and we have established the "Antimonopoly Act Observanceadvanced technology development. One of management policies is to fulﬁll

an auditing ﬁrm form the structure for corporate governance at MES. As of June 26,

Monitoring Committee" to conduct monitoring.

expectations and to foster trust in people and society. We use this2015, the MES Board of Directors consists of eleven members. Two of thesemanagement policy as the basis for initiatives aimed at being recognized bymembers are outside directors. Moreover, our Board of Corporate Auditors

stakeholders as a company worth supporting.

consists of four members, two of which are part-time corporate auditors.

Part of our eﬀorts includes the creation and maintenance of a highly

We also adopted an executive oﬃcer system to improve decision-making ontransparent decision-making structure that enables us to adapt quickly tovital matters by the Board of Directors, improve supervisory functions, andchanges in our business environment and the establishment of a fairstreamline business operations. Executive oﬃcers elected by the Board ofmanagement system that places emphasis on our shareholders. We

Directors are allocated executive authority related to business operations

recognize these to be extremely important initiatives for the company.

and execute their assigned duties under the supervision of the chief

To ensure legal compliance during activities aimed at winning new orders forSpeciﬁc Initiatives in Fiscal 2014
In order for each Director executing business to appropriately review risks
corresponding to changes in the internal and external business environments,
and to conﬁrm and share respective policy, we reviewed important risks andbasic policy of internal control in business each Director is taking charge of,and then thoroughly notiﬁed the division they supervise about the risks andpolicy.

4.Internal Control Promotion System
for Financial Reports
To assure the credibility of ﬁnancial reports, basic policy concerning
evaluation of internal control for ﬁnancial reports is established at annual

Speciﬁc Initiatives in Fiscal 2014
In addition to compliance workshops for new employees of MES and new
executives of our subsidiaries to deepen their understanding of relevant laws
and our "Corporate Code of Conduct", we also held 13 training sessions during
the year for our sales departments, branch managers, and subsidiaries.
In October, which is deﬁned as Business Ethics Enhancement Month, MES
executives, general managers, and presidents of subsidiaries are required topresent a written pledge of their legal compliance.

management committees and the Total Risk Management and Internal
Control Committee evaluates the preparation and operation status of saidinternal control, and make corrections if necessary.

executive oﬃcer (CEO).

48

Corporate Action Report 2015

Corporate Action Report 201549

Financial Statements

Financial Statements
Mitsui Engineering & Shipbuilding Co.,Ltd. and Consolidated Subsidiaries
As of March 31,2015 and 2014

Consolidated Balance Sheets

Consolidated Balance Sheets

AssetsLiabilities and Net Assets
Japanese Yen(millions)

Current Assets
Cash and time deposits (Note1(r))

2015¥

U.S.Dollars(thousands) (Note 1(a))

2014
85,353¥Current Liabilities

2015
89,239$Japanese Yen(millions)710,269

Receivables

Short-term borrowings (Notes 4 and 5)

2015¥

Current portion of long-term indebtedness (Note6)

U.S.Dollars(thousands) (Note 1(a))

2014
17,468¥

2015
21,877$33,96942,834145,360
356,445Trade

310,973

211,4632,587,776

Lease obligations

2,662

3,604

22,152Others13,311

7,170

110,768

Trade payables

247,657

178,2362,060,889

Less allowance for doubtful accounts(1,738)(3,212)(14,463)

Advances from customers

77,15958,744642,082

Merchandise and finished goods

3,306

2,602

27,511

Accrued expenses

25,29925,544

210,527

Raw materials and supplies

9,845

6,929

81,926

Accrued income taxes (Note11)

9,942

5,447

82,733Work in progress

28,242

27,279235,017

Deferred tax liabilities (Note11)

488

822

4,061

Deferred tax assets (Note11)

18,542

14,406

154,298

Provision for losses on construction contracts

17,123

12,194142,490

Short-term loans

55,02730,012457,910

Provision for product warranty

8,926

6,436

74,278Others (Notes 1(r) and 16)

19,69021,098

163,850

Asset retirement obligations

4

-

33

542,551

406,986

4,514,862

33,287

21,596276,999482,849

368,469

4,018,049

128,012

131,987

1,065,257

8,630

10,44871,815

Total current assets

OthersTotal current liabilities

Property, Plant and Equipment (Note4)Long-term Liabilities

Land (Note1(p))

271,356

271,034

Buildings and structures

198,584

195,800

1,652,526

Long-term indebtedness (Notes 4 and 6)

Machinery, equipment and vehicles

196,587

197,185

1,635,908

Lease obligations

Lease assets

20,82924,944

173,329

Construction in progress

2,258,101

Liability for severance and retirement benefits
For directors and corporate auditors

404

369

3,362

11,277

10,276

93,842

4,165

1,955

34,659691,521690,918

5,754,523(313,795)(311,235)(2,611,259)

On reevaluation reserve for land (Notes 1(p) and 11)

21,312

23,847

177,349

377,726

379,683

3,143,264

Others (Note11)

49,37150,450410,843

Net defined benefit liabilities
Deferred tax liabilities

Less accumulated depreciation
Net property, plant and equipment

Asset retirement obligations

1,302

1,113

10,835

Others24,101

12,328200,557

244,409240,818

2,033,860

369,352

Total long-term liabilities

Intangible Assets
Intangible Assets

11,713

11,824

97,469Contingent Liabilities (Note13)
Net Assets (Note8)
Investments, Long-term Loans and Other Assets

Common stock

Investment securities (Notes 2, 3, and 4)

85,83064,580714,238

Long-term loans

22,287

39,634

185,463

44,38544,385Net defined benefit assets

8,684

3,528

72,264

Capital surplus

18,24818,178151,852

Deferred tax assets (Note11)

15,056

15,691

125,289

Retained earnings

142,677

136,289

1,187,293

Others (Note3)

13,22013,452110,011

Treasury stock(4,761)(855)(39,619)

Less allowance for doubtful accounts(2,504)(2,482)(20,837)

Net unrealized holding gains(losses) on securities (Note2)

14,0587,360

116,984

142,573

134,4031,186,428

Unrealized gains(losses) on hedging derivatives, net of tax(9,719)(2,649)(80,877)

Reevaluation reserve for land, net of tax (Notes 1(p) and 11)

24,77722,516

206,183

Foreign currency translation adjustments

12,705

4,252

105,725

Remeasurements of defined benefit plans(5,646)(9,036)(46,984)

146

67

1,215

110,435

103,102

918,990347,305

323,6092,890,114

Total investments,long-term loans and other assets
Total assets¥

1,074,563¥

The accompanying notes to the consolidated financial statements are an integral part of these balance sheets.

932,896$

8,942,023

Authorized - 1,500,000,000 shares
Issued - 830,987,176 shares

Subscription rights to shares
Minority interests
Total net assets
Total liabilities and net assets¥

1,074,563¥

932,896$

8,942,023

The accompanying notes to the consolidated financial statements are an integral part of these balance sheets.

50

Corporate Action Report 2015

Corporate Action Report 201551

Financial Statements

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Income
Japanese Yen(millions)

2015
Net Sales2014
816,520¥

U.S.Dollars(thousands) (Note 1(a))

2015
670,068¥

6,794,707$

Cost of Sales (Note1(q))

757,034

606,750

6,299,692

Gross profit

59,48663,318495,015

Selling, General and Administrative Expenses (Note1(q))
Operating income

46,18743,349384,347

13,29919,969110,668

Other Income (Expenses)

Beginning balance as of April 1, 2013

Amortization of net transition obligation (Note 9)(1,929)(1,964)(16,052)

Loss on valuation of derivatives(2,823)(725)(23,492)

Equity in earnings of unconsolidated subsidiaries and affiliates

4,022

3,545

33,469Beginning balance as of April 1, 2014

-

3,039

-

1,029

1,208

8,563

Cumulative effects of changes inaccounting policies

137

246

1,140

-

800

-

Gain on sales of subsidiaries and affiliates' stocks

1,137

-

9,462

Gain on bargain purchase

4,768

29,622

39,677

Gain on step acquisitions

-

5,706

-

(736)

(17,276)

Loss on impairment of non-current assets (Note 14)(22,377)

-

(61)

-

(0)

(13)

(0)

Provision of allowance for doubtful accounts-(1,594)-

Provision for loss on business of subsidiaries and affiliates

-

(32)

-

Loss on liquidation of business

(984)

-

(8,188)Loss on liquidation of subsidiaries and affiliates

(215)

-

(1,789)Loss on reduction of non-current assets

-

(800)

-

Loss on disaster

-

(158)

-

Settlement package

-

(752)

-

Provision for environmental preservation cost-

(3,230)-Loss on sales of investment securities (Note 2)
Loss on valuation of investment securities

Others, net
Total

971

926

8,080

2,707

28,22922,526

16,006

Income before income taxes and minority interests

48,198133,194

830,987

18,17844,385

18,178Net income
Sales of treasury stock

830,987

44,385

18,248108,055

Change of scope of consolidation(57,286)

Net income

6,101

3,697

50,769Purchases of treasury stock

Income before minority interests

9,905

44,50182,425

Sales of treasury stock

3,678

Transfer from reevaluation reserve forland, net of tax

442
9,463

¥

1,646
42,855¥$78,747

Net income

¥

11.63

¥

51.80

$

0.097

Dividends, applicable to the year

¥

2.00

¥

2.00

$

0.017

2
451

136,289

1,096

1,909

(451)

10,602(8,967)67

71,411

(855)

7,360

(2,649)22,516

4,252(9,036)

67

103,102 323,609

134,696(55)(1,648)

(855)

7,360

(2,649)22,516

4,252(9,036)

67

103,047

321,961(1,656)
(2)

9,463

9,463
(4,025)(4,025)

119

189
176

142,677(4,761)

Number ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

830,987369,352

151,269 1,134,134

6,698(7,070)

2,261

8,453

3,390

79

7,388

21,19914,058(9,719)24,777

12,705(5,646)

146

110,435

347,305

UnrealizedNet
RemeasureForeign
Reevaluation
unrealized gains(losses)
Subscriptionments
currency
reserveon hedging
holdingrightsof definedtranslation
for land ,gains(losses) derivatives,to shares
adjustments benefit plansnet of tax
net of tax
on securities

Minority
interests

Total(7,115)61,246 (22,044)

187,368

35,383(75,194)558(13,256)
369,352

151,269 1,120,878

857,968 2,692,925(458)(7,115)61,246 (22,044)

187,368

35,383(75,194)558(13,780)

857,510 2,679,211(13,780)

(17)

(17)
78,747(33,494)(33,494)

990

1,573

1,465

369,352(13,714)78,747583

830,987

75,667(2)

Net changes of items other than thosein Shareholders’ equity
Balance as of March 31, 2015

Amounts Per Share of Common Stock (Notes 1(a) and 8)

(113)

2

U.S.Dollars (thousands) (Note 1(a))

Cash dividends paid

Minority Interests

(113)

176

Cumulative effects of changes inaccounting policies

7,040

31,691 207,314(83)

Thousands(3,343)-(2,484)

Net changes of items other than thosein Shareholders’ equity(6,884)(69)

42,85570

Transfer from reevaluation reserve forland, net of tax

12,985(6,350)Total

42,855Purchases of treasury stock

Deferred

22,967(1,656)

Change of scope of consolidation

Current

Net Income

44,385

Cash dividends paid

Beginning balance as of April 1, 2014

(4,558)(1,593)

Restated balance

Balance as of March 31, 2015

6,264

Minority
interests(83)

Net changes of items other thanthose in Shareholders’ equity

Restated balance
Income Taxes (Note 11)

(744)

451

34,351(8,187)

95,550

UnrealizedNet
RemeasureForeign
Reevaluation
unrealized gains(losses)
Subscriptionments
currency
reserveon hedging
holdingrightsof definedtranslation
for land ,gains(losses) derivatives,to shares
adjustments benefit plansnet of tax
net of tax
on securities(2,484)

Transfer from reevaluation reserve
for land, net of tax(23,042)(2,076)

18,178(0)

3,869(2,689)44,385

Treasurystock

Sales of treasury stock(2,480)Loss on disposal of non-current assets

830,987

Retainedearnings

Purchases of treasury stock

4,128

State subsidy

Capitalsurplus

Net income(2,769)Gain on sales of investment securities (Note 2)

Commonstock

Change of scope of consolidation

Interest expense

Gain on disposal of non-current assets

Number ofshares ofcommon stock

Cash dividends paid

Interest and dividend income

Foreign currency exchange gain

Japanese Yen (millions)Thousands

151,852 1,187,293 (39,619)

1,465
55,738 (58,833)

18,81570,342

28,210657

116,984 (80,877)

206,183

105,725 (46,984)

1,215

61,480176,409918,990 2,890,114

Consolidated Statements of Comprehensive Income

2015
Income before minority interests

U.S.Dollars(thousands) (Note 1(a))

Japanese Yen(millions)

Statements of comprehensive income：¥2014¥ 9,905¥2015¥ 44,501$$ 82,425

Other comprehensive income(Note 15)
Net unrealized holding gains on securities

7,722

1,425

64,259Unrealized gains (losses) on hedging derivatives, net of tax(2,904)345(24,165)

Reevaluation reserve for land, net of tax

2,438

-

20,288Foreign currency translation adjustments

7,145

9,088

59,457

Remeasurements of Defined Benefit Plans

3,337

(37)

27,769

349

5,391

2,904

18,087

16,212

150,512

Share of other comprehensive income of affiliates accounted
for using equity method
Total

52

Comprehensive income¥

27,992¥60,713$232,937

Comprehensive income attributable to owners of the parent¥

23,365¥56,458$

194,433

Comprehensive income attributable to minority interests

¥

4,627

¥

4,255

$

38,504

Corporate Action Report 2015

Corporate Action Report 201553

Financial Statements

Consolidated Statements of Cash Flows
Japanese Yen(millions)

Cash Flows from Operating Activities :Income before income taxes and minority interests

2015
¥

2014
16,006¥

Japanese Yen(millions)

U.S.Dollars(thousands) (Note 1(a))

Cash Flows from Investing Activities :2015
48,198$133,195

2015

Net decrease in time deposits
Capital expenditure

U.S.Dollars(thousands) (Note 1(a))

2014

2015

2,630

3,284

21,886(16,603)(22,485)(138,163)
11,750Adjustments to reconcile income before income taxes andProceeds from sales of non-current assets

1,412

1,766

minority interests to net cash provided by (used in) operating activities

Purchases of investment securities

(4)

(343)

(33)

Proceeds from sales of investment securities

340

1,697

2,829

-

(9,307)-(8,040)(7,190)(66,905)

Depreciation and amortization

17,457

15,140145,269

Loss on impariment of non-current assets

2,689

8,187

22,377

Amortization of goodwill

495

453

4,119

Gain on bargain purchase(4,768)(29,622)(39,677)

Gain on step acquisitions-(5,706)-

Share-based compensation expenses
Increase (Decrease) of allowance for doubtful accounts
Decrease of liability for severance and retirement benefits
Increase in net defined benefit liablity

Payments for the purchase of investment in subsidiaries resulting
in change in scope of consolidation (Note 1(r))
Purchase of shares of subsidiaries and affiliates
Proceeds from sales of shares of subsidiaries and affiliates
Disbursements of loans receivable

1,519

-

12,640(38,800)(51,470)(322,876)
203,428

79

67

657

Collection of loans receivable

24,44645,784(1,473)

1,321(12,257)

Proceeds from subsidy income

-

800

-

-

(5,948)

-

714

151

5,942

247

5,519

2,055

Others, net
Net cash provided by (used in) investing activities¥(32,386)¥(37,313)$(269,502)-

13,981-

Increase in net defined benefit asset(3,563)(17,407)(29,650)

Interest and dividend income(4,128)(3,869)(34,351)

Interest expense

2,769

2,480

23,042Equity in earnings of unconsolidated subsidiaries and affiliates(4,022)(3,545)(33,469)

Foreign currency exchange gain, net

2,082(3,465)

17,325

Net increase (decrease) in short-term borrowings(6,322)

4,310

Gain on sales of investment securities

(137)

(185)

(1,140)

Proceeds from long-term indebtedness

29,15643,358242,623(1,137)-(9,462)

Repayments of long-term indebtedness(37,079)(34,334)(308,554)

0

13

0

Repayments of lease obligations(3,428)(2,754)(28,526)

984

-

8,188

Proceeds from sales and leasebacks

-

3,302

-

10,0005,000

83,215Decrease in prepaid pension costs

Gain on sales of subsidiaries and affiliates' stocks
Loss on valuation of investment securities
Loss on liquidation of business

Cash Flows from Financing Activities :(52,609)

Loss on liquidation of subsidiaries and affiliates

215

-

1,789

Proceeds from issuance of bonds

Loss (Gain) on disposal of non-current assets, net

1,047

(472)

8,713

Purchases of treasury stock(4,026)(26)(33,503)(1,653)(2,491)(13,755)

Loss on reduction of non-current assets

-

800

-

Cash dividends

State subsidy

-

(800)

-

Cash dividends paid to minority interests(1,215)(835)(10,111)

9,769-

81,293424

2Loss on disaster

-

158

-

Proceeds from share issuance to minority shareholders

Provision for environmental preservation cost

-

3,230

-

Others, net

Settlement package

-

752

-

Increase in provision for loss on business of subsidiaries and affiliates

-

32

-

(74,521)(39,890)(620,130)

Net cash provided by (used in) financing activities¥(4,374)¥

15,532

3,529$(36,398)

Changes in assets and liabilities :Effect of Exchange Rate Changes on Cash and Cash Equivalents

Decrease (increase) in
Trade receivables
Inventories(4,204)

7,735(34,984)

Other assets(2,440)(2,314)(20,304)

Trade payables

57,48529,635478,364

Other liabilities

9,803(1,779)81,576

Others, net

8,725

(498)

72,606Sub-total

19,69022,201

163,851

5,517

6,345

45,910(2,895)(2,449)(24,091)

Payments for loss on disaster

-

(108)

-

Payments for adjustment fee by alteration of contract for feed-in tariffs

-

(75)

-

(7,144)(11,415)(59,449)

Interest and dividend received
Interest paid

Income taxes paid

54

Corporate Action Report 2015

Increase (decrease) due to changes in scope of consolidation
Cash and Cash Equivalents at Beginning of Year

Increase (decrease) in

Net cash provided by (used in) operating activities

Net increase (decrease) in Cash and Cash Equivalents¥

15,168¥14,499$Cash and Cash Equivalents at End of Year (Note1(r))

¥

3,904

13,26032,488(17,688)5,978(147,191)

427

(245)

3,553

111,926

106,193

931,397

94,665¥111,926$

787,759

126,221

Corporate Action Report 201555

Financial Statements

Notes to Consolidated Financial Statements
1. Significant Accounting and Reporting Policies

1) If forward foreign exchange contracts are entered into to hedge existing foreign currency receivables or payables,

The following is a summary of the significant accounting and reporting policies adopted by the Mitsui Engineering & Shipbuilding Group (the “Group”),

foreign exchange rate and the book value of the receivables or payables is recognized in the statement of income of the fiscal year in which such

which consists of Mitsui Engineering & Shipbuilding Co., Ltd. (“MES”) and its consolidated subsidiaries (“Subsidiaries”) in the preparation of thecontracts are entered into, andi) the difference, if any, between the Japanese yen amount of the hedged foreign currency receivables or payables converted by the contracted forward

accompanying consolidated financial statements.

ii) the difference between the Japanese yen amount converted by the contracted forward foreign exchange rate and the Japanese yen amount by spot
rate at the trade date of the contract is allocated to every fiscal period over the term of the contract.

(a) Basis of Presenting Consolidated Financial Statements2) If forward foreign exchange contracts are entered into to hedge a future transaction (be contracted but not stated in financial statements)

The accompanying consolidated financial statements of the Group have been prepared in accordance with the provisions set forth in the “Japanese

denominated in foreign currency, recognition of gains and losses resulting from fair value of the forward foreign exchange contracts are deferred until

Financial Instruments and Exchange Act” and its related accounting regulations, and in conformity with accounting principles generally accepted in Japanthe contracts are applied to the hedged item.

(“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements from International Financial Reporting

Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under the interest rate

Standards.

swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was allocated.

The accounts of the overseas Subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles
prevailing in the respective countries of domicile (“Local GAAP”) and significant differences between Japanese GAAP and Local GAAP are adjusted inconsolidation. The accompanying consolidated financial statements have been restructured and translated into English from the consolidated financial(f) Allowance for Doubtful Accounts

statements of the Group prepared in accordance with Japanese GAAP and filed with the appropriate Finance Bureau of the Ministry of Finance as required

In order to provide for credit losses, non recoverable amount is recorded based on write-off ratio for general accounts. For doubtful accounts,

by the “Financial Instruments and Exchange Act”. Certain supplementary information included in the statutory Japanese language consolidated financial

collectability is examined and recoverable amount is estimated individually.

statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements.
The translation of Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan, using the prevailing exchange
rate at March 31, 2015, which was ¥120.17 to U.S. $1. The convenience translations should not be construed as representations that the Japanese yen(g) Inventories

amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

Merchandise, finished goods, raw materials and supplies are stated at cost determined mainly by the moving-average method (except steels for new
shipbuilding, which are by identified cost method) (Balance sheet value reflects downturn in profitability). Work in progress is stated using identified cost(b) Principles of Consolidation

method (Balance sheet value reflects downturn in profitability). Construction costs, which are accumulated in inventory, consist of direct materials, labor,other items directly attributable to each contract and an allocable portion of general manufacturing and construction overheads.

The accompanying consolidated financial statements include the accounts of the Group, over which MES has power of control through majority voting
rights or existence of certain conditions requiring control by MES.
Material inter-company balances, transactions and profits have been eliminated in consolidation.

(h) Property, Plant and Equipment and Depreciation

The assets and liabilities of the Subsidiaries, including the portion attributable to minority shareholders, were evaluated using the fair value at the time

Depreciation of plant and equipment is mainly computed using the declining-balance method over their estimated useful lives. Buildings, acquired on

MES acquired control of the respective subsidiaries.

and after April 1, 1998, are depreciated using the straight-line method. Ordinary maintenance and repairs are charged to the profit and loss account as

Investments in all significant unconsolidated subsidiaries and affiliates are accounted for by the equity method.

incurred.

Goodwill is generally amortized using the straight-line method over 5 years; however, reasonable assessment may determine a certain period oftime.Fiscal years of some Subsidiaries end on the 31st of December. MES consolidates these subsidiaries’ financial statements as of each subsidiary’s
latest fiscal year and significant transactions occurred between each subsidiary’s fiscal year-end and MES’s fiscal year-end are adjusted on consolidation.

(i) Software Costs
Software costs included in intangible assets are depreciated using the straight-line method over the estimated useful life (5 years).

(c) Revenue Recognition
Revenue and costs associated with construction contracts(j) Employees’ Severance and Retirement Benefits

1) Construction of its certainty of achievement on the progressed portion until the fiscal year end can be recognized:

In calculating retirement benefit obligations, the standard of equal allocation to each year is used to allocate projected retirement benefits over the

The percentage-of-completion method

period to the end of the consolidated fiscal year. The net transition obligation (¥28,905 million) has been recognized in expenses, primarily in equal(The progress of work is mainly measured by the percentage of cost method）

amounts over 15 years commencing with the year ended March 31, 2001. Actuarial gains and losses are recognized in the consolidated statements of2) Construction other than above:
The completed-contract method
Revenues and costs of sales on finance lease transactions are recognized when lease payments are received.

income using the straight-line method within the estimated remaining service lives (five years or ten years) commencing with the following fiscal year.
Prior service costs are recognized in the consolidated statements of income using the straight-line method within the estimated remaining service lives(one year or five years).
After being adjusted for tax effect, unrecognized actuarial gains and losses, unrecognized prior service costs are added to “Remeasurements of defined(d) Securities
MES and its domestic Subsidiaries examined the intent of holding each security and classified those securities as (a) securities held for trading purposes (benefit plans”, an item within “Accumulated other comprehensive income(net assets)”.

“trading securities”), (b) debt securities intended to be held to maturity ( “held-to-maturity debt securities”), (c) equity securities issued by subsidiaries and(k) Liabilities for Severance and Retirement Benefits for Directors and Corporate Auditors

affiliated companies, and (d) all other securities that are not classified in any of the above categories ( “available-for-sale securities”). MES and its domestic

Amount is recorded based on internal regulations in order to prepare for payment of retirement benefit of directors and corporate auditors.

Subsidiaries did not have trading securities or held-to-maturity debt securities.
Equity securities issued by Subsidiaries and affiliated companies, which are not accounted for by the equity method, are stated at moving-average cost.
Available-for-sale securities with available fair market values are stated at fair market value. Fair market value is calculated using mainly the average price(l) Translation of Foreign Currency Accountsof securities over one month before the consolidated balance sheet date. Unrealized gains and losses on these securities are reported, net of applicable

Under Japanese accounting standard for foreign currency translation, monetary assets and liabilities denominated in foreign currencies are translated

income taxes, as a separate component of net assets. Realized gains and losses on sale of such securities are computed using moving-average cost.

into Japanese yen at the exchange rates prevailing at each balance sheet date with the resulting gain or loss included in the current statements of income.

If the market value of held-to-maturity debt securities, equity securities issued by unconsolidated subsidiaries and affiliated companies which are not

Assets and liabilities of foreign subsidiaries and affiliates are translated into Japanese yen at the exchange rates in effect at each balance sheet date,accounted for by the equity method, and available-for-sale securities decline significantly, such securities are stated at fair market value and theexcept for common stock and capital surplus, which are translated at historical rates. Revenue and expense accounts are also translated at the exchange

difference between fair market value and the carrying amount is recognized as loss in the period of the decline. If the fair market values of these

rates in effect at each balance sheet date.

securities are not readily available, they should be written down to net asset value with a corresponding charge in the statements of income in the event
net asset value declines significantly. In these cases, such fair market value or the net asset value will be the carrying amount of the securities at the
beginning of the next year.

(m) Provision for Losses on Construction Contracts
Provision for losses on construction contracts is provided based on an estimate of the total losses which can probably occur for the next fiscal year and(e) Derivative Transaction and Hedge Accounting
Japanese accounting standard for financial instruments requires MES and domestic Subsidiaries to measure derivative financial instruments at fair value

beyond with respect to construction projects on which eventual losses are deemed inevitable and amounts thereof can reasonably be estimated.

and to recognize changes in the fair value as gains or losses unless derivative financial instruments are used for hedging purposes.

(n) Provision for Product Warranty

If derivative financial instruments are used as hedges and meet certain hedging criteria, the Group defers recognition of gains or losses resulting from

Provision for product warranty for ships and other products is provided based on the estimated amounts calculated by using mainly the averagechanges in fair value of derivative financial instruments until the instruments are applied to hedged items.

proportion of product warranties against sales amounts for past two years.

In cases where forward foreign exchange contracts are used as hedges and meet certain hedging criteria, the forward foreign exchange contracts andhedging items are accounted for in the following manner.

(o) Income Taxes
Deferred income tax is recognized from temporary differences between the carrying amounts of assets and liabilities for tax and financial reporting. The
asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences.

56

Corporate Action Report 2015

Corporate Action Report 201557

Financial Statements(p) Reevaluation Reserve for Land(w) Changes in accounting and reporting policies

The land used for business operations is reevaluated based on real estate tax value on March 31, 2000 and March 31, 2002 respectively, in accordance

Effective from the consolidated fiscal year 2014, the main clause of Section 35 of the “Accounting Standard for Retirement Benefits” (ASBJ Statement No.

with Enforcement Ordinance for the Law Concerning Reevaluation Reserve for Land (the “Law”) effective March 31, 1998. The related unrealized gain, net

26, May 17, 2012; hereinafter, the “Retirement Benefits Accounting Standard”) and the main clause of Section 67 of the “Guidance on Accounting Standardof income taxes was recorded as “Reevaluation reserve for land, net of tax” in Net assets and the deferred income tax effects were recorded as Deferred

for Retirement Benefits” (ASBJ Guidance No. 25, March 26, 2015; hereinafter, the “Retirement Benefits Guidance”) are adopted. With this application, thetax liabilities on “Reevaluation reserve for land” in Long-term liabilities.

methods of calculating retirement benefit obligations and service costs are revised. The method of allocating projected retirement benefits by service

According to the Law, reevaluation of the land is not permitted at any time after the above reevaluation even in cases where the fair value of the land

period was changed from a straight line basis to a benefit formula basis. The method of determining the discount rates was also changed from using adeclines. Such unrecorded reevaluation losses are ¥38,778 million ($322,693 thousand) and ¥37,881 million as of March 31, 2015 and 2014, respectively.

single weighted-average discount rate that reflects the average remaining years of service to using multiple discount rates.
The Accounting Standard is being implemented in accordance with the transitional handling as stated in Section 37 of the Accounting Standard, and at(q) Research and Development

the beginning of the consolidated fiscal year 2014, the amounts influenced by the relevant changes of calculating retirement benefit obligations andCosts relating to research and development activities are charged to the profit and loss account as incurred. The amounts for the years ended March 31,

service costs were subtracted from retained earnings.

2015 was ¥3,508 million ($29,192 thousands) and for 2014 was ¥4,035 million.
As a result, at the beginning of the consolidated fiscal year 2014, net defined benefit assets decreased by ¥2,273 million ($18,915 thousand) , net defined
benefit liabilities related to retirement benefits increased by ¥300 million ($2,496 thousand) , and retained earnings decreased by ¥1,593 million(r) Cash Flow Statement($13,256 thousand) . The impact on consolidated statements of income was immaterial.

In preparing the consolidated statements of cash flows, cash on hand, readily available deposits including short-term loans and short-term highly liquid
investments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.

The effect on per-share information is recorded in the relevant place.

Reconciliation of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents in the consolidated statements of cash
flows as of March 31, 2015 and 2014 were as follows:

Japanese Yen (millions)2015
Cash and time deposits¥

U.S.Dollars (thousands)

2014
85,353¥

2015
89,239Time deposits with maturities exceeding 3 months(4,686)(7,307)

Cash equivalents included in short-term loans

13,99829,994

Cash and cash equivalents¥

94,665¥111,926

710,269$(38,995)

2. Marketable Securities and Investment Securities(a) The following tables summarize acquisition costs, book values and fair values of securities
with available fair values as of March 31, 2015 and 2014:

116,485$

787,759

Japanese Yen (millions)

2015:(s) Finance Lease Transactions without Transfer of Ownership
Lessee：The method of amortization of the lease assets related to finance lease transactions without transfer of ownership is by the straight-line method

Acquisition cost

Book value

Differences

Available-for-sale securities:
Securities with book values exceeding acquisition costs:
Equity securities¥

Sub Total

22,088¥45,404¥

23,31622,08845,404

23,316(749)

corresponding to lease period. The residual value is the guaranteed residual value in case such value is set forth in the lease contract but otherwise is zero
value.
Lessor：

Securities with book values not exceeding acquisition costs:
Equity securities

4,032

3,283

Revenues and costs of sales on finance lease transactions, other than those that transfer ownership of the leased property to the lessee, are recognized

Sub Total

4,032

3,283

when lease payments are received.

Total

¥

26,120¥48,687(749)¥

22,567(t) Reclassifications
Certain reclassifications have been made to the previously reported fiscal year 2014 amounts to conform to fiscal year 2015 presentation. These
reclassifications had no effect on previously reported net income or net assets.

Japanese Yen (millions)

2014:(u) Unapplied accounting standards
Effective from the consolidated fiscal year beginning from April 1, 2015, MES and its domestic Subsidiaries will apply the following standards andguidance. The effects of applying these accounting standards are currently under consideration.

Acquisition cost

Book value

Differences

Available-for-sale securities:
Securities with book values exceeding acquisition costs:
Equity securities¥

Sub Total

15,478¥28,096¥

12,61815,47828,096

12,618(815)"Accounting Standard for Business Combinations" (ASBJ Statement No. 21, revised on September 13, 2013)"Accounting Standard for Consolidated Financial Statements" (ASBJ Statement No. 22, revised on September 13, 2013)

Securities with book values not exceeding acquisition costs:"Accounting Standard for Business Divestitures" (ASBJ Statement No. 7, revised on September 13, 2013)

Equity securities

10,2799,464"Accounting Standard for Earnings Per Share" (ASBJ Statement No. 2, revised on September 13, 2013)

Sub Total

10,2799,464"Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures" (ASBJ Guidance No. 10, revised on

Total

¥

25,757¥37,560(815)¥

11,803September 13, 2013)"Guidance on Accounting Standard for Earnings Per Share" (ASBJ Guidance No. 4, revised on September 13, 2013)
These accounting standards and guidance have been mainly revised for accounting treatments in regard to following matters:
U. S. Dollars (thousands)i) Change in interest in controlled subsidiary in which a parent keeps continued control such as in a case of acquiring addtional interest of the subsidiary.

2015:

Acquisition costii) Accounting treatment of acquisition related cost.
iii) Change in presentation of net income, and change in terminology from minority interest to net income attribute to owners of parents andnon-controlling interestiv) Change in accounting for transitional accounting in business combination

Effective from the consolidated fiscal year 2014, MES applies a consolidated tax payment system.

Equity securities$

Corporate Action Report 2015

183,806$

377,831$

194,025

183,806

377,831

194,025

Equity securities

33,552

27,320(6,232)

Sub Total

33,552

27,320

Securities with book values not exceeding acquisition costs:

Total

58

Differences

Securities with book values exceeding acquisition costs:
Sub Total(v) Application of Consolidated Taxation System

Book value

Available-for-sale securities:$

217,358$

405,151(6,232)$

187,793

Corporate Action Report 201559

Financial Statements(b) Proceeds from sales of available-for-sale securities and realized gains and losses on sales ofavailable-for-sale securities for the years ended March 31, 2015 and 2014 were as follows:

The aggregate annual maturities of long-term indebtedness are summarized below:

Japanese Yen (millions)

2015
Proceeds from sales of available-for-sale securities

2014
340

¥

Year ended March 31,

U.S.Dollars (thousands)

2015
1,697

¥

Japanese Yen (millions)

2016

$

U.S.Dollars (thousands)

42,834

¥

2,829

2017

29,033

356,445$

241,599

Realized gains on sales of available-for-sale securities

137

246

1,140

2018

37,869315,129

Realized losses on sales of available-for-sale securities

-

61

-

2019

30,702

255,488

30,4082020 and thereafter¥

253,041$

170,846

1,421,702

3. Investments in Unconsolidated Subsidiaries and Affiliates
Investments in unconsolidated subsidiaries and affiliates included in investment securities as of March 31, 2015 and 2014 were ¥33,492 million ($278,705

7. Unexecuted Balance of Overdraft Facilities and Lending Commitments

thousand) and ¥23,528 million, respectively. Investments in unconsolidated subsidiaries and affiliates included in other assets as of March 31, 2015 and2014 were ¥5,978 million ($49,746 thousand) and ¥5,383 million, respectively.

The unexecuted balance of overdraft facilities and lending commitments at the Group as of March 31, 2015 was as follows:

Japanese Yen (millions)

4. Pledged Assets

Total overdraft facilities and lending commitments

2015
Land

5,123

¥

Machinery, equipment and vehicles
Investment securities¥$

434,20212,482

52,178

2015
26,953¥

42,631

$

325

1,401

2,705

16,674

15,392

138,753

151

1

1,257

22,273¥446,684

U.S.Dollars (thousands)

2014

Buildings and structures

$

1,500

Unexecuted balance
Japanese Yen (millions)

53,678¥Less amounts currently executed

Assets pledged as collateral for short-term borrowings and long-term indebtedness as of March 31, 2015 and 2014 were as follows:

U.S.Dollars (thousands)$

43,747¥

185,346

8. Net Assets and Per Share Data
Under the Japanese Corporate Law (“the Law”) and regulations, the entire amount paid for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half the price of the new shares asadditional paid-in capital, which is included in capital surplus.
In cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common

Short-term borrowings and long-term indebtedness secured by the above pledged assets as of March 31, 2015 and 2014 were as follows:
Japanese Yen (millions)2015
Short-term borrowings

1,100

¥

18,341Long-term loan payable

U.S.Dollars (thousands)

2014

¥

stock over the total of additional paid-in-capital and legal earnings reserve must be set aside as additional paid-in-capital or legal earnings reserve. Legal

1,120

$

9,154

$

152,625

16,03917,241

143,471

17,159¥Legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit by a resolution in the shareholders' meeting or could
be capitalized by a resolution in the shareholders' meeting.

2015

¥

earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in-capital and all legal
earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that MES can distribute as dividends is calculated based on the non-consolidated financial statements of MES in accordance withJapanese laws and regulations.
At the annual shareholders’ meeting held on June 26, 2015, the shareholders approved cash dividends amounting to ¥1,617 million ($13,456 thousand).
Such appropriations have not been accrued in the consolidated financial statements as of March 31, 2015. This type of appropriations is recognized in the
period in which they are approved by the shareholders.

5. Short-Term Borrowings

Net income per share is based on the weighted average number of shares of common stock outstanding during each period. Cash dividends per sharerepresent the cash dividends declared applicable to the respective year.

Short-term borrowings represent notes payable to banks due within twelve months. The average interest rate for each term is summarized below :Average interest rate for each term

9. Liability for Severance and Retirement Benefits

2015

2014

1.10%

0.95%

(a) Overview of adopting severance and retirement benefits plans
The Group provides two types of employees’ severance and retirement benefit plans: Unfunded termination and retirement allowance plans and funded
non-contributory pension plans. Under the plans, employees whose employment is terminated or who retire are entitled to benefits which are, in

6. Long-Term Indebtedness

general, determined on the basis of length of service and current basic salary at the time of termination or retirement.
Part of funded non-contributory pension plan is set up based on pension benefit trust.

Long-term indebtedness as of March 31, 2015 and 2014 is summarized below:

Some domestic Subsidiaries have adopted a “simpler method” to calculate liability for severance and retirement benefits for employees and a number ofJapanese Yen (millions)

2015

U.S.Dollars (thousands)

2014

2015

Secured by mortgages on plant and equipment0.45% to 2.40% loans from Japanese banks, due on various dates through 2021¥

17,241¥

16,039$143,471

Unsecured or non-guaranteed0.92% bonds, due January 28, 2016

10,00010,0001.08% bonds, due June 15, 2017

10,00010,00083,215

1.47% bonds, due January 26, 2018

5,000

5,000

41,608

1.14% bonds, due December 12, 2019

5,000

5,000

41,608

0.63% bonds, due December 12, 2019

5,000

-

41,608

1.03% bonds, due December 10, 2021

5,000

-

41,608

0.44% to 4.96% loans from banks, insurance companies and trading companies
due on various dates through 2023
Less: Current portion included in current liabilities¥

60

Corporate Action Report 2015

83,215overseas Subsidiaries also adopt defined contribution pension plans.

(b) Breakdown of information concerning severance and retirement benefits

Balance at beginning of year¥

45,840$389,606
21,420

Restated balance at beginning of year

49,39345,840411,026

Current service costs

2,306

2,258

19,189

566

774

4,710

2,106

2,074

17,525(6,306)(8,048)(52,476)

-

4,566

-

(254)

(645)

(2,113)

Interest costs
Actuarial differences on pension plan obligation

119,917945,369
1,421,702

Change of scope of consolidation(42,834)(33,969)(356,445)

Others

1,065,257

Balance at end of year$

46,8192015-

165,956
131,987

¥

2014
2,574

113,605¥

2015

U.S.Dollars (thousands)

Cumulative effect of change in accounting policy

170,846
128,012

Japanese Yen (millions)i) Movements of severance andretirement benefit obligation:

Benefits paid¥

47,811¥

46,819$397,861

Corporate Action Report 201561

Financial Statementsii) Movements of pension assets:

Japanese Yen (millions)

2015
Balance at beginning of year2014
40,071¥

Expected return on pension assets
Actuarial differences on pension assets

10. Stock options

U.S.Dollars (thousands)

2015
35,558¥333,453

$

11

11

92

5,070

5,076

42,190Contribution to pension plans

187

193

1,556

Benefits paid

(152)

(136)

(1,265)

31

(631)

258

OthersBalance at end of year

2015
¥

¥

¥

39,353

8,180

7,466

68,071

2,593

¥

6,748

$

6,748

Interest costs

2015
2,258
774

11

11

92

Amortization of actuarial differences

627

(211)

5,218

Amortization of prior service costs

(61)

(66)

(508)

Common stock 366,000 shares

Common stock 624,000 shares

Grant dateAugust 22, 2014

August 23, 2013

Vesting conditions

It continues in the position of Director or Deputy
director until (June 30, 2015 or March 31, 2015) on dataof vested after (August 22, 2014) on date of grant.

It continues in the position of Director or Deputy
director until (June 30, 2014) on data of vested after(August 23, 2013) on data of grant.

Service period(Directors of MES)
From July 1, 2014 to June 30, 2015
(Deputy directors of MES)
(continuously - appointed)
From July 1, 2014 to March 31, 2015
(Deputy directors of MES)(newly - appointed)
From April 1, 2014 to March 31, 2015

From July 1, 2013 to June 30, 2014

Exercise period

From August 23, 2014 to August 22, 2044

From August 24, 2013 to August 23, 2043

4,710

1,964

1,929
5,378

¥

Class and number of shares

19,189$566

Amortization of net transition obligation

Persons granted

U.S.Dollars (thousands)

¥

4,730

¥

FY2013 Stock option
Directors of MES: 14
Deputy directors of MES: 19

21,578

Expected return on pension assets(c) The numbers of and changes in stock options during the year ended March 31, 2015 are as follows:

16,052$44,753

FY2014 Stock optionv) Remeasurements of defined benefit plans(before deducted tax effects):

Japanese Yen (millions)

2015
4

¥

U.S.Dollars (thousands)

2014

2015
-

¥

33

$

-

Forfeited

2,000

-

Vested114,000

596,000

Outstanding of non-vested at March 31, 2015

250,000-

Vested:Net transition obligation

1,929

-

16,052Others

(156)

(122)

(1,298)Vested46,376

Exercised

5,573

(122)

¥

$

Outstanding at March 31, 2014

Outstanding of non-vested at March 31, 2015

Unrecognized prior service costs

Japanese Yen (millions)

2015

(25)

20,000596,000--

114,000

616,0001(0.008)¥1(0.010)¥144(1.339)-

Fair value price at grant date -Yen (U.S. Dollars)¥

191(1.589)-

67,912

1,936
13,894¥¥

Average share price at exercise -Yen (U.S. Dollars)$

11,958

8,158¥

Exercise price - Yen (U.S. Dollars)

2015
0

¥

8,161

Unrecognized net transition obligation
Total

2014
(3)

¥

Unrecognized actuarial differences

U.S.Dollars (thousands)

114,000-

Forfeitedvi) Unrecognized actuarial differences(before deducted tax effects):-

366,000

3,796

31,589596,000

GrantedActuarial differences¥-

FY2013 Stock option

Non-vested:
Outstanding at March 31, 2014

Total

657

$

(72,264)
$

2014
2,306

¥

21,578(3,528)¥2015

Prior service costs

2015
67

¥

Directors of MES: 14
Deputy directors of MES: 21

93,842

10,276

Japanese Yen (millions)iv) Severance and retirement benefit expenses:

329,791(376,284)(8,684)¥$(40,071)

11,277

Defined benefit assets

Severance and retirement benefit expenses

79

FY2014 Stock option

2015(45,218)

2,593

Defined benefit liabilities

Current service costs

2014

¥

U.S.Dollars (thousands)

2014
39,631Retirement benefit obligation(Unfunded termination and retirement allowance plan)

Net defined benefit assets/liabilities recordedin the consolidated balance sheets

2015
Selling, general and administrative expenses

U.S.Dollars (thousands)

376,284$

Japanese Yen (millions)Less fair value of pension assets

Net defined benefit assets/liabilities recordedin the consolidated balance sheets

40,071¥

Japanese Yen (millions)(b) The stock options outstanding at March 31, 2015 are as follows:iii) Reconciliation of projected retirement benefit
obligation and net defined benefit assets/
liabilities recorded in the consolidated balance sheets:
Retirement benefit obligation (funded non-contributory)

45,218¥(a) Expenses for stock options and account titles at March 31, 2015 and 2014 are as follows:$

67,887(d) Estimation method for stock options issued during the year ended March 31, 2015 is as follows:
The fair value of stock options granted is estimated by using Black-Scholes option pricing model with the following assumptions:vii) The major categories of pension assets:

Percentage of composition

2015

FY2014 Stock option

2014

Bonds

3%

3%

Volatility of stock price (note: i)

Securities

84%

84%

Estimated remaining outstanding period (note: ii)

Cash and deposits

10%

10%

Estimated dividend (note: iii)
Interest rate with risk free (note: iv)

Others

3%

3%

Total

100%

100%

48.387%15 years¥2 per share
0.952%

notes:
i. Annual volatility rate estimated based on daily stock prices in the past 15 years (closing prices on each day from August 22, 1999 to August 22, 2014).
ii. Remaining outstanding period was estimated in the middle of exercisable period, since it is difficult to make reasonable estimate.

viii) The principal actuarial assumptions at reporting date are summarized below:
2015
Discount rate
Expected rate of return on pension plan assets

iii. Based on actual year-end dividend for the preceding year (March 31, 2014 year-end dividend).

2014
0.1% - 1.7%

1.0% - 1.6%

Not applicableNot applicable

iv. The yield on national government bonds with the period corresponding to the expected residual period.

(e) Calculation method for the number of rights vested

62

To determine the expected rate of return on pension plan assets, allocation of pension assets expected in present and future, and long-term rate of

Only actual forfeited number of the vested stock option is used for calculation for the number of rights vested, since it is difficult to reasonably estimate

return on portfolio assets expected in present and future are considered.

the number of options that will forfeited in the future.

Corporate Action Report 2015

Corporate Action Report 201563

Financial Statements

11. Income Taxes

12. Business Combination

MES and domestic Subsidiaries are subject to a number of income taxes, which, in the aggregate, indicate a statutory rate in Japan of approximately

Common control transaction etc.

38.0% for the year ended March 31, 2014 and 36.0% for the year ended March 31, 2015.

(a) Outline of the transaction

The following table summarizes the significant differences between the statutory tax rate and the Group’s effective tax rate for financial statementi) Name and business of the combined entity

purposes for the years ended March 31,2015 and 2014:−

Name: Showa Aircraft Industry Co., Ltd.
Business: Production and sales of transportation equipment, real estate business and service

2015ii) Date of the transaction:

2014

Statutory tax rate

36.0%

38.0%

Valuation allowance

49.6

(0.8)

Reevaluation of land

(0.5)

(0.6)

Non-deductible expenses for tax purposes

1.1

0.4

Amortization of consolidated difference

1.1

0.4

Taxation on per capita basis
Equity in earning of unconsolidated subsidiaries and affiliates

0.7

0.2

(8.9)

(2.5)

Income of foreign subsidiaries taxed at lower than Japanese normal rate

(7.2)

(1.0)

Non-taxable dividend income

(1.8)

(0.6)

Gain on bargain purchase(10.7)(23.4)

Increase of deferred tax assets, net of liabilities at fiscal year-end by the change of tax rate

(24.3)−

Others
Effective tax rate

3.0

(2.4)

38.1％

7.7％

December 2, 2014(The deemed acquisition date: December 31, 2014)iii) Legal Form of the Business Combination:
Purchase of the stocks from minority shareholdersiv) Name of the combined entity after the transaction
There is no change.
v) Other matters with regard to the transaction
To execute the further reinforcement of the group management and the maximization of synergy within the range where maintaining theindependence of Showa Aircraft Industry is possible, MES acquired the stocks which minority stockholders held.
(b) Outline of the accounting treatment
The transaction was treated as a transaction with minority shareholders under common control in accordance with the “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21, December 26, 2008) and the “Implementation Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10, December 26, 2008).
(c) Consideration transferred for the acquisitioni) Acquisition cost and details
Consideration for the acquisition: ¥1,223 million ($ 10,177 thousand)Direct payments required for the acquisition: ¥2 million ($ 17 thousand)Acquisition Cost: ¥1,225 million ($ 10,194 thousand)Significant components of deferred tax assets and liabilities as of March 31, 2015 and 2014 were as follows:ii) Amount of the recognized gain on the negative goodwill and its cause

Japanese Yen (millions)2015
Deferred tax assets:

U.S.Dollars (thousands)

2014

¥

Cause: The acquisition cost was less than the decrease of minority interest in earnings resulting from the additional acquisition.

2015

¥

13. Contingent Liabilities$

Net defined benefit liabilities

10,263

14,179Unrealized inter-company profit

10,934

10,02890,988Tax loss carry forward

14,031

5,710

116,760

269

727

2,238

Accrued expenses

3,479

4,105

28,951

Provision for product warranty

1,917

1,600

15,952Losses on reevaluation of inventories

Amount: ¥4,759 million ($ 39,602 thousand)

85,404

Allowance for doubtful accounts

1,420

1,116

11,817

Provision for losses on construction contracts

6,068

4,372

50,495

Loss on impairment of non-current assets

10,50011,44487,376

Contingent Liabilities of the Group as of March 31, 2015 and 2014 were as follows:
Japanese Yen (millions)

2015

Guarantees of bank loans and other indebtedness¥

175,226

U.S.Dollars (thousands)

2014
¥

2015
70,541The Group adopted the accounting standard for impairment of non-current assets. The non-current assets are grouped by each segment. Idle

576

1,107

4,793

13,767137,247

non-current assets are grouped individually. The book value of the non-current assets is reduced to the collectable amount.

75,95068,155632,021

The loss on impairment of non-current assets for the years ended March 31, 2015 and 2014 were comprised of the following.

Valuation allowance(22,848)(18,304)(190,130)2015

Net deferred tax assets

53,10249,851

441,891

Net unrealized holding gains on securities(8,680)(5,868)(72,231)

Accelerated depreciation on non-current assets(2,093)(4,031)(17,417)

Reserve for advanced depreciation of noncurrent assets(3,722)(1,697)(30,973)

Gains on contribution of securities to trust for employees' retirement benefit(1,728)(1,926)(14,380)

OthersTotal deferred tax assets

Deferred tax liabilities:

Losses on progress basis contract(2,282)(603)(18,990)

Unrealized gain on assets and liabilities(48,141)(52,791)(400,607)

Unrealized gain on foreign currency assets and liabilities(1,726)(1,634)(14,363)(991)(2,475)(8,247)(69,363)(71,025)(577,208)

OthersTotal deferred tax liabilities
Net deferred tax assets¥(16,261)¥(21,174)$(135,317)

1,458,151

14. Loss on Impairment on non-current assets

16,493Losses on reevaluation of marketable and investment securities$

Location
Major use
Asset category
AmountReasonSaga Prefecture
Floating wind & Current Hybrid Power Generation
Construction in progress¥605 million ($ 5,035 thousand)
Decline in use value

Location
Major use
Asset category
AmountReasonOita City, Oita Prefecture, Tamano City, Okayama Prefecture, Akishima City, Tokyo Metropolis etc.
Idle assets
Land etc.
¥809 million ($ 6,732 thousand)
Decline in market value

Location
Major use
Asset category
AmountReasonIchihara City, Chiba Prefecture, Tamano City, Okayama Prefecture etc.
Business assets
Land, Building, Machinery and Equipment etc.
¥1,276 million ($ 10,618 thousand)
Deterioration of shipbuilding and subsidiaries’ business environment

2014
Correction of amounts of Deferred tax assets and Deferred tax liabilities due to changes in Corporation Tax Rates, Etc.
The “Act for Partial Revision of the Income Tax Act, etc.” (Law No.9 of 2015) and “Act for Partial Revision of the Local Tax Act, etc.” (Law No.2 of 2015) were
promulgated on March 31, 2015, as a result of which MES is subject to the reduction such as corporate tax rates from the fiscal year beginning on or after
April 1, 2015. The corporation income tax in Japan consists of a corporation tax, an enterprise tax, resident tax. In conjunction with this promulgation, theeffective statutory tax rate used to measure deferred tax assets and deferred tax liabilities with respect to the temporary difference expected to beeliminated in the fiscal year beginning on April 1, 2015 is changed from the previous 36.0% to 33.1% and 32.3% from the fiscal year beginning April 1, 2016.
As a result of this change, deferred tax assets (after deduction of deferred tax liabilities) increased by ¥5,014 million ($41,724 thousands), deferred tax
liabilities among them has decreased by ¥7,772 million ($64,675 thousands). Income taxes (deferred) decreased by ¥3,892 million ($32,387 thousands)

Location
Major use
Asset category
AmountReasonSaga Prefecture
Floating wind & Current Hybrid Power Generation
Construction in progress¥2,311 million
Decline in use value

Location
Major use
Asset category
AmountReasonOita City, Oita Prefecture, Tamano City, Okayama Prefecture etc.
Idle assets
Land etc.
¥863 million
Decline in market value

Location
Major use
Asset category
AmountReasonIchihara City, Chiba Prefecture, Tamano City, Okayama Prefecture etc.
Business assets
Land, Building, Machinery and Equipment etc.
¥5,013 million
Deterioration of shipbuilding and subsidiaries’ business environment

and unrealized gain or loss on hedging derivatives decreased by ¥106 million ($882 thousands), and net unrealized holding gains on securities increasedby ¥956 million ($7,955 thousands) and remeasurements of defined benefit plans increased by ¥271 million ($2,255 thousands).
Also deferred tax liabilities on reevaluation reserve for land decreased ¥2,437 million ($20,280 thousands), and reevaluation reserve for land, net of tax
increased same amounts.

64

Corporate Action Report 2015

Corporate Action Report 201565

Financial Statements

15. Comprehensive Income

17. Financial Instruments

Each component of other comprehensive income for the years ended of March 31, 2015 and 2014 was the following:(a) Articles concerning status of financial instruments

Japanese Yen (millions)

2015

U.S.Dollars (thousands)

20141) Policies for financial instruments
The Group restricts the fund management to short-term financial instruments. The Group transfers funds to each other through an inter-company cash
management systems (CMS).

2015

Short-term working capital is financed through bank loans and issuance of commercial paper (CP). Long term equipment fund and working capital is

Net unrealized holding gains on securities：

financed through bank loans and issuance of bonds. Derivative financial instruments are utilized to hedge the risks described hereinafter and not for

Amount of generation at this fiscal term

11,0662,131

92,086

Amount of rearrangement adjustment

(531)

(6)

(4,419)Before adjusting the tax effect

10,5352,125

87,667

Tax effect(2,813)(700)(23,408)

exposed to currency fluctuation risks. Forward foreign exchange contracts are applied to these hedged items in principle. Investments securities,

7,722

1,425

64,259mainly of companies with business relationships, are exposed to market fluctuation risks. Short-term and long-term loans for operating funds andAmount of generation at this fiscal term

(4,100)719(34,118)

Almost all of the trade payables are due within one year. Foreign currency trade payables for overseas procurement are exposed to currency

Amount of rearrangement adjustment

(207)

(86)

(1,722)fluctuation risks, but those trade payables are controlled not to exceed the balance of trade receivables in the same foreign currencies.

(4,307)633(35,840)

1,403

(288)

11,675(2,904)345(24,165)

2,438-

20,288

7,615

9,024

63,368Net unrealized holding gains on securities
Unrealized gains (losses) on hedging derivatives, net of tax：

speculative transactions as a matter of policy.
2) Substances and risks of financial instruments
Trade and other receivables are exposed to credit risks of customers. Foreign currency trade and other receivables of MES and certain Subsidiaries arecapital expenditures of SPC’s, which are established for charter project of FPSO or for generating electricity, are exposed to credit risks of customers.

Before adjusting the tax effectTax effectUnrealized gains (losses) on hedging derivatives, net of tax
Reevaluation reserve for land, net of tax:
Tax effectForeign currency translation adjustments：

Short-term borrowings are mainly for the purpose of funding commercial transactions. Long-term borrowings, bonds, and lease obligations are mainly
for the purpose of funding investment in plant and equipment. Although the portion of that debt with floating interest rates is exposed to interest rate
fluctuation risks, interest rate swap contracts are applied to hedge the risks.
Derivative transactions are the above mentioned forward foreign exchange contracts as well as interest rate swap contracts. They are for the purposeof hedging currency fluctuation risks and rising interest rate risks.
As to details on hedging instruments, hedging items, hedging policy and method of evaluating the effectiveness of hedging, please refer to “1.
Significant Accounting and Reporting policies (e) Derivative Transaction and Hedge Accounting. ”

Amount of generation at this fiscal term

3) Managing of financial instrumentsⅰ) Management of credit risks ( Breach of contracts risks )

(215)

64

(1,789)Before adjusting the tax effect

7,400

9,088

61,579The Group monitors due dates and balances of trade receivables and regularly investigate the credit standings of main customers for early detection

Tax effect

(255)

-

(2,122)and reduction of default risks according to internal regulation. Certain Subsidiaries reduce their balance of loan receivables by arranging project

Foreign currency translation adjustments

7,145

9,088

59,457

finance or through cooperation with business partners such as general trading companies.

Amount of generation at this fiscal term

3,245

(137)

27,003

Amount of rearrangement adjustment

2,328

15

19,373

5,573

(122)

46,376(2,236)85(18,607)

3,337

(37)

27,769Amount of generation at this fiscal term

670

4,153

5,575

Amount of rearrangement adjustment

(321)

1,238

(2,671)

Amount of rearrangement adjustment

As to derivative transactions, credit risks are minimized by dealing solely with top-ranked financial institutions.

Remeasurements of defined benefit plans：

Before adjusting the tax effectTax effectRemeasurements of defined benefit plans
Share of other comprehensive income of affiliates accounted for using equity method：ⅱ) Management of market risks ( Exchange rate or interest rate fluctuation risks )MES and certain Subsidiaries utilize forward foreign exchange contracts for the purpose of hedging currency fluctuation risks arising from foreign
currency receivables and payables in principle, and utilize interest rate swap contracts for the purpose of hedging interest rate risks arising fromshort-term borrowings, long-term borrowings and bonds.
Holding position of investment securities are continuously reviewed by researching fair market value and financial status of important customers
regularly and taking into account of market condition and relationship with customers.
Execution and management of derivative transactions are based on each company’s internal regulation restricting scope of authority.

349

Share of other comprehensive income of affiliates accounted for using equity method
Total

¥

18,087

2,904

5,391
16,212¥$

150,512

As to derivative transactions, the Group utilize them to offset risks within the range of trade demand.
ⅲ) Management of liquidity risks of raising funds ( Default risks )The Finance & Accounting department of the Group makes and updates finance plans, and maintains a certain level of liquidity on hand to minimize
liquidity risks.
4) Supplementary explanation about fair value of financial instruments
Fair value of financial instruments includes not only fair market value based on market price but also reasonably estimated value if market price is not

16. Leases

available. Reasonably estimated fair value may fluctuate because it depends on an estimation process which is based on certain preconditions.
The contract amounts for derivatives stated in the following “(b) Articles concerning fair value of financial instruments,” do not indicate the market risks(a) Lesseeof derivatives.

i) Unexpired lease payments of operating lease transactions as of March 31, 2015 and 2014 were as follows:
Japanese Yen (millions)2015
Due within one year

¥

1,289

Due after one year
Total

¥

3,227

$

10,7281,649¥

Consolidated balance sheet amounts, fair value of financial instruments and the differences between them for the fiscal years ended March 31, 2015 and

2015
1,164

1,938
¥

(b) Articles concerning fair value of financial instruments

U.S.Dollars (thousands)

2014

2,813

16,127$

26,855

Japanese Yen (millions)

3,871

¥

15,813

2015

¥

3,820

¥

16,363

11,942¥$

32,212$

131,590

12,543

99,378Japanese Yen (millions)

2015(3)Short-term loans

Lease payments receivable

¥

82

136

-

The residual value
¥

82

$

-

-

The amount of receipt interest equivalency
Lease investment assets¥

Available-for-sale securities

¥

136

¥

2016

Japanese Yen (millions)
¥

$

34

286

2018

6

47

2019

0

2

2020 and thereafter--

Corporate Action Report 2015

82

$

686

48,687

48,687-

520,936

23,225¥522,067

1,135
¥

1,131

686

247,656

247,656(2)Short-term borrowings

17,46817,468-(3)Current portion of long-term loan payable

32,83432,934100(4)Current portion of bonds

10,00010,061

61

9,942

9,942

-

30,00030,514514

Liabilities total¥

445,913-

98,71898,013(7)Long-term loan payable

351

2017

¥

66

U.S.Dollars (thousands)

42-(1)Trade payables(6)Bonds
Year ended March 31,(4)55,027(197)(5)Accrued income taxesiii) The aggregate annual collection of lease investment assets are summarized below:

309,776

55,027

686
-

$

-

22,287(5)Long-term loans

Assets total
-

(0)

¥

309,780

22,0902015

Differences

85,352(4)Investments securities

U.S.Dollars (thousands)

2014

Fair value¥(1,193)

Less allowance for doubtful accounts *1ii) Breakdown of lease investment assets:

85,352
310,973

Less allowance for doubtful accounts *1

U.S.Dollars (thousands)

2014

¥

Due after one year
Total

Book value(2)Trade receivablesi) Unexpired lease receivables of operating lease transactions as of March 31, 2015 and 2014 were as follows:

2015

Japanese Yen (millions)

2015(1)Cash and time deposits(b) Lessor

Due within one year

2014 are as follows. Financial instruments in which the fair value is considered to be extremely difficult to recognize are not included in the list below.

¥

447,293

705
¥

1,380

Derivative transactions * 2
ⅰDerivative transactions for which hedge accounting has not been applied
ⅱDerivative transactions for which hedge accounting has been applied
Derivative transactions total¥(2,868)(2,868)(10,447)(10,447)(13,315)¥(13,315)¥-

Corporate Action Report 201567

Financial Statements

2014(1)Cash and time deposits

Liabilities

Japanese Yen (millions)Book value¥(2)Trade receivables

89,239Fair value¥

Differences

89,239-¥211,463(3)Short-term loans

208,735

208,728(7)

30,01230,012-

37,56037,560-(4)Investments securities
Available-for-sale securities

39,634(5)Long-term loans

39,27839,976

698

Assets total¥

404,824¥

405,515¥691(1)Trade payables¥

178,236¥

178,236¥-(2)Short-term borrowings

21,877

21,877-(3)Current portion of long-term loan payable

33,96934,03061(4)Accrued income taxes

5,447

5,447

-

(5)Bonds

30,00030,332

332(6)Long-term loan payable

101,987

102,242

255

Liabilities total¥

371,516(2) Short-term borrowings, (3)Current portion of long-term loan payable,(7) Long-term loan payable
Fair value of borrowings at fixed interest rates is calculated using the total amount of the principal and interest discounted by the interest rate on
condition that the borrowing is newly executed at the date of fair value evaluation.
Fair value of long-term borrowings at variable interest rates is stated at balance sheet amounts because variable interest rates reflects the latest
market conditions and MES’s credit standings
is considered to be almost same as when funds were borrowed, so fair value is considered to be close to the balance sheet amounts.

(356)

Less allowance for doubtful accounts *1

Fair value of these accounts is stated at book value because these accounts are settled in the short term, so they are considered to be close to thebalance sheet amounts.

(2,728)Less allowance for doubtful accounts *1(1) Trade payables, (5) Accrued income taxes¥

372,164

648¥

Some borrowings at variable interest rates are subjected to exceptional treatment using interest swaps. The total of principal and interest obtained
from the interest swaps is discounted at a reasonable interest rate that would rationally be applied to the same amount of borrowings.
(4) Current portion of bonds, (6) Bonds
These fair values consist of both the fair value based on fair market value and the present value using the total of the principal and interest discounted
by a risk-free interest rate over the remaining term of each bond.

Derivative transactions
Please refer to “ 18. Derivative Transactions ”(note 2) Financial instruments in which the fair value is considered to be extremely difficult to recognize are as follows.
Japanese Yen (millions)

U.S.Dollars (thousands)

Book value

Book value

Derivative transactions * 2
ⅰDerivative transactions for which hedge accounting has not been applied¥

ⅱDerivative transactions for which hedge accounting has been applied
Derivative transactions total

(303)

¥

(873)

-

¥

(570)
(873)

¥

¥

-

Book value$(2)Trade receivables

710,260(3)Trust property

Fair value$

710,260

Differences

Total

2015
26,969304,260

500

500

4,161

81

50

37,144¥27,519674$

309,095

As to these financial instruments, there’s no available fair market price and it is considered to cost a great deal to estimate future cash flows. So thesefinancial instruments are not included in investment securities because it is considered to be extremely difficult to recognize fair value.

(9,928)(3)Short-term loans¥

2014
36,563-$

2,587,776

Less allowance for doubtful accounts *1

2015(1)Unlisted equity securities(2)Bonds

U.S. Dollars (thousands)

2015(1)Cash and time deposits

(303)

¥

(570)

2,577,848

2,577,815(33)

457,910

457,910-405,151

405,151-(note 3) The expected redemption amount of monetary credit and securities with maturity after the fiscal years ended March 31, 2015 and 2014 are as
follows.

(4)Investments securities
Available-for-sale securities

185,463(5)Long-term loans

193,268

183,823(1)Trade payables$$

4,334,992
2,060,880$$

4,344,404
2,060,880

$

9,412

Trade receivables

310,588

374

10

-

Short-term loans

55,027

-

-

-

-

$

145,361-

273,230

274,062832

Long-term loans(4)Current portion of bonds

83,21583,723508

Total(5)Accrued income taxes

82,73382,733-(6)Bonds

249,646

253,9244,278(7)Long-term loan payable

815,620

821,486

5,866$

3,722,169$

11,484

Derivative transactions * 2
ⅰDerivative transactions for which hedge accounting has not been applied$

ⅱDerivative transactions for which hedge accounting has been applied
Derivative transactions total(23,866)$(110,801)$(86,935)(86,935)$(23,866)$(110,801)-$-*1 Allowance for doubtful accounts is deducted from each account.
* 2 Net credit or debt arising from derivative transactions is indicated by the offset amount and which is indicated as ( ) in case of the offset amount is debt.
(note 1) Articles concerning calculation method of fair value, marketable securities and derivative transactions.

¥85,218Available-for-sale securities*1

Fair value of these accounts is stated at the book value because these accounts are settled in the short term, so they are considered to be close to thebalance sheet amounts.
(2) Trade receivables
Fair value of these accounts is stated at the present value discounted over the maturity term of each receivable divided into certain classified term(4) Investment securities
Fair value of these accounts is based on available market price.
(Please see 2. Marketable Securities and Investment Securities)(5) Long-term loans

-

¥

-

¥

¥

-

500

-

-

-

7,845

4,134

10,309450,833

¥

8,719

4,144

¥

¥

10,309Japanese Yen (millions)2014

Over one yearbut
within five years

Within one year

Cash and time deposits¥

82,229Over five years but
within ten years
-

¥

-

¥

Over ten years-¥

Trade receivables

210,501

962--

Short-term loans

30,012---

Investments securities
Available-for-sale securities

500

-

-

-

-

27,360

3,570

8,704

Long-term loans
Total

¥

323,242¥

Assets(1) Cash and time deposits、(3) Short-term loans-¥

Investments securities

145,361

3,710,685

Over ten years

Cash and time deposits(3)Current portion of long-term loan payable$

Over five years but
within ten years

9,445(2)Short-term borrowings

Liabilities total

Over one yearbut
within five years

Within one year

(1,640)Less allowance for doubtful accounts *1
Assets total

Japanese Yen (millions)2015

28,322

3,570

¥

¥

8,704

U.S. Dollars (thousands)

2015

Over one year but
within five years

Within one year

Cash and time deposits$

709,145$

Over five years but
within ten years-$-

Over ten years-$

Trade receivables

2,584,572

3,112

83

-

Short-term loans

457,910---Investments securities
Available-for-sale securities
Long-term loans
Total

$

-

4,161

-

-

-

65,28334,40185,787

3,751,627$

72,556$34,484$85,787

Fair value of these accounts is stated at the present value using future cash flows discounted by the premium added rate on the appropriate index likeyield on government bonds.nd long-term loan payable after the fiscal years ended March 31, 2015 and 2014 are as follows.

68

Corporate Action Report 2015

(note 4) The expected redemption amount of bonds and long-term loan payable after the fiscal years ended March 31, 2015 and 2014 are as follows.

Corporate Action Report 201569

Financial Statements(b) Derivative transactions for which hedge accounting has been applied

Japanese Yen (millions)2015
Short-term borrowings

Over one year but Over two years but Over three years but Over four years but
within five years
within two years
within three years within four years

Within one year
17,469

¥

-

¥

-

¥

-

¥

-

¥

Over five years-¥

Bonds payable

10,000-15,000-10,0005,000

Long-term borrowings

32,83429,033

22,86930,702

6,312

9,096

Lease obligations

2,662

1,912

1,756

1,154

725

3,083

609

134

127

97

90

321

Other interest-bearing debt
Total

63,574¥31,079¥39,752¥

31,953¥

17,127¥¥

17,500

Short-term borrowings

Over one year but Over two years but Over three years but Over four years but
within five years
within two years
within three years within four years

Within one year
21,877

¥

-

¥

-

¥

-

¥

-

¥

Currency related derivatives
Forward contracts
(450)
(8)

Thai Baht

239

-

2

Singapore Dollars

194

-

(1)

Norwegian Krone

(237)

1,359

-

Japanese Yen

455

-

(67)

Swiss Franc

1,012

-

(68)

101,506

15,475(9,826)

16,895

2,581

(677)

Buying: Put option

523

-

-

Selling: Call option

1,045

-

(156)

208

-

-

282

-

-

33,96926,551

26,32816,23024,887

7,990

3,604

2,284

1,864

1,770

1,122

3,407

To sell U.S.Dollars

122

121

144

135

102

378

STG Pounds

16,775Currency option cotract

28,336¥33,135¥

26,111

¥

5,000

¥

U.S. Dollars (thousands)

2015
Short-term borrowings

Within one year$

145,369

-

-

$

-

$

-

$

Currency related derivatives

Over five years$

Forward contracts-

83,215-

124,823-

83,21541,607273,230

241,599

190,306

255,488

52,52675,693

Lease obligations

22,152

15,911

14,613

9,603

6,033

25,655

Other interest-bearing debt

5,068

1,115

1,056

807

749

2,671

Bonds payable
Long-term borrowings

Total

$

529,034

258,625$$

330,798

265,898$

Trade receivables

Alternative method *1

Over one year but Over two years but Over three years but Over four years but
within five years
within two years
within three years within four years
$

1,506

310

Lease obligations

38,956¥

1,917

Long-term borrowings

¥

2,462

STG Pounds-

59,572¥47

15,000¥12,320
8,632

-

Total

¥

Euro

10,000

Other interest-bearing debt

Trade payables

To buy U.S.Dollars-

Bonds payable

Fair value

Due after one year

Total

Deferral hedge accounting

Over five years¥

Contract amount

Hedged items

Japanese Yen (millions)

2014

Japanese Yen (millions)2015

142,523$$

145,626

To sell U.S.Dollars

Trade receivables

Euro

-

¥

146,587¥

20,875¥(9,982)

¥

4,806

¥

3,800

¥

(465)

Interest swap
Basic treatment：
To receive float,pay fix

Short-term borrowing ,Long-term loan payable

Exceptional treatment * 2：
To receive float,pay fix

Long-term loan payable

39,564¥44,37031,594¥35,394¥(465)

18. Derivative Transactions
Derivative transactions of the Group for market value information as of March 31, 2015 and 2014 were as follows:

2014

Japanese Yen (millions)Contract amount

Hedged items(a) Derivative transactions for which hedge accounting has not been applied

Deferral hedge accounting
Currency related derivatives

Japanese Yen (millions)2015

Contract amount

Forward contracts

Fair value

Due after one year

Total

Unrealized gain(loss)

Trade payables

To buy U.S.Dollars

¥

Euro

Currency related derivatives

STG Pounds

Forward contracts
To buy Euro

5,247

¥

-

¥

25,095

¥

3,430

¥

¥

(617)
(2,867)

¥

(378)
(617)

(1,872)-

14,052To sell U.S.Dollars

(378)

¥

3,430

5,796

Norwegian krone(1,872)¥(2,867)

Norwegian Krone
Japanese Yen
Trade receivables

To sell U.S.Dollars
STG Pounds

Japanese Yen (millions)Contract amount

Unrealized gain(loss)

Basic treatment：
To receive float,pay fix

Short-term borrowing ,Long-term loan payable

Exceptional treatment * ：To receive float,pay fix

Long-term loan payable

2

Currency related derivatives
Forward contracts
To sell U.S.Dollars

¥

-

¥

677

1,551

-

520

-

6

2,559

1,188

(41)

110

-

1

38

17,763-(261)

12,998

5,095

(343)

208

-

(3)

39,081

6,283

74

¥

6,951

4,317

(644)

31,42425,434-38,37529,751(644)

Interest swap

Fair value

Due after one year

Total

3,372

¥

Euro

2014

Fair value

Due after one year

Total

¥

5,833

¥

38

¥

(303)

¥

(303)

¥

5,833

¥

38

¥

(303)

¥

(303)

¥

U.S. Dollars (thousands)

2015

Contract amount

Fair value

Due after one year

Total

Unrealized gain(loss)

Currency related derivatives
Forward contracts
To buy Euro$

Norwegian krone
To sell U.S.Dollars$

70

Corporate Action Report 2015

43,663$-$(3,146)$(3,146)48,23228,543(5,134)(5,134)

116,934-(15,578)(15,578)

208,829$

28,543$(23,858)$(23,858)

Corporate Action Report 201571

Financial Statements

U.S. Dollars (thousands)

2015

Contract amount

Hedged items

Total(c) Information about Sales, Operating income and loss, Assets,
Liabilities and other items for each Reportable Segment.

Fair value

Due after one year

Reportable Segment information for the years ended March 31, 2015 and 2014 were as follows:

Deferral hedge accounting
Currency related derivatives

Japanese Yen (millions)

Forward contracts
To buy U.S.Dollars

Trade payables$

102,522$

20,48812,532$

Euro

71,832391(3,745)

STG Pounds

15,952

2,580

(67)

Thai Baht

1,989

-

17

Singapore Dollars

1,615

-

(8)

Norwegian Krone

11,309-(1,972)

Japanese Yen

3,786

-

(558)

Swiss Franc

8,421

-

(566)

To sell U.S.Dollars

Trade receivables

844,687

128,775(81,767)

140,592

21,478(5,634)

Buying: Put option

4,352

-

-

Selling: Call option

8,696

-

(1,298)

STG Pounds
Currency option cotract

2015

Ship & Ocean

MachineryEngineering

Sub total

Others

Total

Adjustments

816,520¥

Consolidated

Net Sales:
Outside customers

491,739¥

Total

146,502¥¥

129,930¥

768,171¥

48,349¥-¥816,520

572

7,346

308

8,226

1,759

9,985

(9,985)-492,311

153,848130,238

776,397

50,108

826,505(9,985)816,520

Inter segment
Operating income (loss)¥

10,177

¥

9,815

¥

(10,593)

¥

9,399

¥

3,900

¥

13,299¥-¥13,299Assets¥451,837¥

142,534¥

101,403¥695,774¥

247,202¥

942,976¥

131,587¥

1,074,563

Depreciation

¥

8,134

¥

4,081

¥

1,780

¥

13,995

¥

2,942

¥

16,937¥519¥

17,456

Increase (Decrease) inproperty, plant andequipment andintangible assets¥(2,795)

¥

933

¥

4,414

¥

2,552

¥

(12,962)¥(10,410)

¥

8,342

¥

(2,068)(note 1) “Others” is the segment which is not included in Reportable Segment and includes Transport equipment related business, Systems development,
Real estate lease business and others.
(note 2) Adjustments are as follows:

Alternative method *1(1) Adjustments of ¥131,587 million recorded for assets include primarily comprised of surplus funds (cash and time deposits), long-term

Currency related derivatives

investment (investment securities) and assets related to the administration divisions of MES of ¥136,350 million that are not allocated to any

Forward contracts
To sell U.S.Dollars
Euro

Trade receivables
$

1,731

-

-

2,346

-

-

1,219,830$

173,712$

Reportable Segment.
(2) Adjustments of ¥519 million recorded for depreciation include depreciation for property, plant and equipment and intangible assets related
to the administration divisions of ¥583 million.

(83,066)(3) Adjustments of ¥8,342 million recorded for increase (decrease) in property, plant and equipment and intangible assets include assets relatedInterest swap
Basic treatment：
To receive float,pay fix

Short-term borrowing ,Long-term loan payable

Exceptional treatment * 2：
To receive float,pay fix

Long-term loan payable$

39,993$31,622$

294,533

329,234$

369,227$(3,870)$(3,870)262,911to the administration divisions of ¥7,866 million.
(note 3) Operating income (loss) is adjusted with operating income in Consolidated Statements of Income.

Japanese Yen (millions)2014*1 When certain conditions are met, translation of foreign currency receivables is based on yen amount fixed by forward contract. The fair value isincluded in that of the trade receivables, which is shown in 17 Financial Instruments.
*2 As interest swap subject to exceptional treatment of interest swap are accounted for as a single item with underlying long-term loan payable, which
are hedged items, their fair value is included in that of long-term loan payable.

19. Segment Information

Ship & Ocean

MachineryEngineering

Sub total

Others

Total

Adjustments

670,068¥

Consolidated

Net Sales:
Outside customers

377,268¥¥

231

Inter segment
Total

147,803¥

116,7226,477

377,499¥¥

43

154,280¥

641,793¥

6,751

116,765¥

28,275¥

1,392

648,544¥

29,667¥-¥670,068(8,143)¥670,068(8,143)

8,143
678,211¥-

Operating income (loss)

¥

9,909

¥

8,182

¥

(181)

¥

17,910

¥

2,059

¥

19,969¥-¥19,969Assets¥332,491¥

124,442¥

83,644¥

540,577¥

255,556¥

796,133¥

136,763¥

932,896

Depreciation

¥

6,905

¥

5,459

¥

1,585

¥

13,949¥668¥

14,617¥523¥

15,140

Increase (Decrease) inproperty, plant andequipment andintangible assets

¥

8,900

¥

(6,468)

¥

6,271

¥

8,703

¥

185,300¥

194,003¥(6,285)¥

187,718(a) Overview of Reportable Segment
Reportable Segment is composed of the segment by products and services belonging to headquarter and subject to be reviewed periodically by the(note 1) “Others” is the segment which is not included in Reportable Segment and includes Systems development, Real estate lease business and others.

Board of Directors to decide the allocation of management resources and to evaluate the performance.

(note 2) Adjustments are as follows:(1) Adjustments of ¥136,763 million recorded for assets include primarily comprised of surplus funds (cash and time deposits), long-term

MES organizes headquarters by products and services in Head office. Each headquarter makes strategies of its products and services in both Japan andinvestment (investment securities) and assets related to the administration divisions of MES of ¥141,647 million that are not allocated to any

abroad comprehensively and develops the operation.

Reportable Segment.

Reportable Segment is classified into three segments: Ship & Ocean, Machinery and Engineering. Main products and services of each Reportable(2) Adjustments of ¥523 million recorded for depreciation include depreciation for property, plant and equipment and intangible assets related

Segment are as follows.

to the administration divisions of ¥609 million.
(3) Adjustments of ¥(6,285) million recorded for increase (decrease) in property, plant and equipment and intangible assets include assets

Ship & Ocean: commercial ships, naval ships, high speed passenger/vehicle ferries, FPSOs (floating production storage offloading vessels), offshore
structures, underwater TV vehicles, domestic bridge business, port structures

related to the administration divisions of ¥(6,341) million.
(note 3) Operating income (loss) is adjusted with operating income in Consolidated Statements of Income.

Machinery: marine and stationary diesel engines, marine equipment, gas engines, steam turbines, blowers, process compressors, gas turbines,
cogeneration system, regulating system, container cranes, industrial cranes, container terminal management systems, induction heaters, material for

U.S. Dollars (thousands)

2015

semiconductors

Ship & Ocean

MachineryEngineering

Sub total

Others

Total

Adjustments

Consolidated

6,794,707$$

6,794,707(83,091)$

6,794,707

Net Sales:
Engineering: chemical plants, overseas civil works, power generation plants, renewable energy business, waste treatment plants, water treatment

Outside customers

plants, resources recycling plants, PCB disposal plants

Inter segment(b) Calculation method used for Sales, Operating income and loss, Assets,
Liabilities and other items for each Reportable Segment.
The accounting method used for Reportable Segment is almost same as the method stated in “Significant Accounting and Reporting Policies”
Operating income and loss in Reportable Segment is based on the one in Consolidated Statements of Income.

$ 4,092,028

$

4,760

1,219,123$

61,130Total$ 4,096,788$

Operating income (loss)$

84,688Assets$ 3,759,982

Depreciation$

Increase (Decrease) inproperty, plant andequipment andintangible assets$

1,081,218

$

2,563

1,280,253$$

81,676$

1,186,103

67,687$(23,259)$

6,392,369$

68,453

1,083,781$$(88,150)$

843,830

33,960

$

7,764

$

402,338$

14,6386,460,822$$

78,214$

5,789,915

14,812$

36,731$

416,976$$

32,454$

2,057,102

116,459$

21,236$(83,091)

83,091-

6,877,798$$

110,668$-$

110,668$

7,847,017$

1,095,007$

8,942,024

24,482$140,941

$

4,320

$

145,261(107,864)$(86,628)$

69,419$(17,209)

Inter segment profit and transfer are based on the market price.

72

Corporate Action Report 2015

Corporate Action Report 201573

Financial Statements(note 1) “Others” is the segment which is not included in Reportable Segment and includes Systems development, Real estate lease business and others.
(note 2) Adjustments are as follows:(1) Adjustments of $1,095,007 thousand recorded for assets include primarily comprised of surplus funds (cash and time deposits), long-term[Information about goodwill amortization amount and year-end balance for each Reportable Segment]
Goodwill

investment (investment securities) and assets related to the administration divisions of MES of $1,134,643 thousand that are not allocated to
any Reportable Segment.
(2) Adjustments of $4,320 thousand recorded for depreciation include depreciation for property, plant and equipment and intangible assets
related to the administration divisions of $4,851 thousand.
(3) Adjustments of $69,419 thousand recorded for increase (decrease) in property, plant and equipment and intangible assets include assets

Japanese Yen (millions)2015

Ship & Ocean

Amortization

¥

495 ¥

- ¥

- ¥

- ¥

-

¥

495

Goodwill¥

4,959 ¥

- ¥

- ¥

- ¥

-

¥

4,959

2014

Ship & Ocean

Amortization

¥

445 ¥

(1) ¥

- ¥

- ¥

-

¥

444

Goodwill¥

4,923 ¥

- ¥

- ¥

- ¥

-

¥

4,923

2015

Ship & Ocean

Amortization$

4,119 $

- $

- $

- $

-

$

4,119

Goodwill$

41,267 $

- $

- $

- $

-

$

41,267

MachineryEngineering

related to the administration divisions of $65,457 thousand.

Corporate and Elimination

Others

Total

Japanese Yen (millions)(note 3) Operating income (loss) is adjusted with operating income in Consolidated Statements of Income.

[Related information]

MachineryEngineering(d) Information by products and services

Corporate and Elimination

OthersTotal

U.S. Dollars (thousands)

Information by products and services is the same as Reportable Segment and the description is omitted.

(e) Information by geographical area

MachineryEngineering

OthersCorporate and Elimination

Total1) SalesJapanese Yen (millions)2015
Net salesJapan¥

Brazil240,429¥

Ghana

243,792¥

Asia

91,377¥

Other
78,767¥[Information about gains on negative goodwill for each Reportable Segment]

Total

162,155¥

816,520

2015
Gain on bargain purchase of ¥4,768 million ($39,677 thousand) is recorded due to additional acquirement of the shares of the subsidiary, Showa Aircraft
Industry Co. Ltd.

Japanese Yen (millions)2014
Net sales

Japan
¥

Asia

Brazil225,835¥

188,484¥

Other
83,446¥

Total

172,303¥

2014

670,068

Effective from fiscal year ended March 31 2014, MES acquired the shares of Showa Aircraft Industry Co. Ltd., and its subsidiaries by take over bid, andShowa Aircraft Industry Co. Ltd. is reclassified to subsidiary of the Others segment on March 24, 2014. According to the acquisition of shares, the gain on

U.S. Dollars (thousands)

2015
Net sales

Japan
$

Ghana

Brazil2,000,741$

2,028,726$

Asia

760,398$

Other

655,463$

bargain purchase of ¥29,622 million is recorded.

Total

1,349,379$

6,794,707*Sales amount is based on the place of customer and classified by country or geographical area.

20. Investment and Rental Property

2) Property, plant and equipment
Japanese Yen (millions)

2015
Property, plant and equipment

Japan
¥

341,470¥(a) Articles concerning situation of investment and rental property

Total

Others341,470¥

MES and certain Subsidiaries own rental office building, commercial facilities, and houses (including land) in Tokyo, Osaka, Okayama and other areas. Idle

377,726

land is also owned in Tokyo, Kanagawa, Oita and other areas.
Japanese Yen (millions)2014
Property, plant and equipment

Japan
¥

Others
340,458¥(b) Articles concerning fair value of investment and rental property

Total
39,225¥

379,683

The book value of investment and rental properties stated in the consolidated balance sheets, the increase or decrease in this fiscal year, and fair value
are shown below.

U.S. Dollars (thousands)

2015
Property, plant and equipment

Japan
$

Others2,841,558

$

2015

Total
301,706$

Japanese Yen (millions)

3,143,264

Book value
Beginning balance asof April 1, 2014

Usage(f) Information by major customer¥

Japanese Yen (millions)¥96,317

U.S. Dollars (thousands)$

Reportable Segment

801,506¥

Total

105,729

Increase (Decrease)(1,252)¥

114,375

104,477¥

16,5698,646

Idle assets (Land)

2015
CARIOCA MV27 B.V.

Facilities for lease

Fair value
Ending balance asof March 31, 2015

15,317¥

As of March 31, 2015¥

100,651¥

127,938

25,215
129,692¥

27,287

Ship & Ocean
U.S. Dollars (thousands)

2014
CERNAMBI NORTE MV26 B.V.

Japanese Yen (millions)¥Book value

Reportable Segment

70,528

Beginning balance asof April 1, 2014

Usage

Ship & Ocean

Facilities for lease

$
$

Total

$

951,777(10,419)$

137,880

71,948

Idle assets (Land)[Information about losses on impairment of non-current assets for each Reportable Segment]

879,829

Fair value
Ending balance asof March 31, 2015

Increase (Decrease)$

127,461

869,410

As of March 31, 2015
837,572$

209,828$

1,079,238

227,070
1,064,642$

Losses on impairment on non-current assets
Japanese Yen (millions)2015

Ship & Ocean

MachineryEngineering

Losses on impairment on non-current assets

¥

¥

¥

1,977

219

(note 1) Book value stated in the consolidated balance sheets is net of accumulated depreciation and accumulated impairment losses.

Others-¥Corporate and Elimination

329

¥

164

Total
¥

2,689

(note 2) The increase in rental properties in this fiscal year is mainly due to diversion of land (¥16,379 million/ $136,299 thousand) and new acquisitions(¥1,309 million/ $10,893 thousand), and the decrease in rental properties is mainly due to depreciation (¥1,473 million / $12,258 thousand),
impairment losses (¥480 million/ $3,994 thousand), and termination of contracts (¥423 million/ $3,520 thousand).
(note 3) Fair value at the end of this fiscal year is mainly estimated based on the "Real estate appraising standard" with an adjustment using a certain

Japanese Yen (millions)2014

Ship & Ocean

MachineryEngineering

Losses on impairment on non-current assets

¥

¥

¥

2015

Ship & Ocean

MachineryEngineering

Losses on impairment on non-current assets

$

$

$

4,095

3,229

Others-¥Corporate and Elimination
8

¥

855

Total
¥

indicator.

8,187

U.S. Dollars (thousands)

74

Corporate Action Report 2015

16,452

1,822

Others-$2,738

Corporate and Elimination
$

1,365

Total
$

22,377

Corporate Action Report 201575

Financial Statements

The profit and loss from investment and rental properties in this fiscal year are shown below.

1. Guarantee Obligation is deliberately determined in consideration by each project plan.
Transactions between Subsidiaries and related parties for the fiscal years ended March 31, 2015 and 2014 were as follows:

Japanese Yen (millions)
Usage

Rental expenses

Rental income

Facilities for lease

8,406

¥

8,406

¥

Total

5,356

¥

(Profit or Loss on sales of assets, etc)

3,050

¥

-

-

Idle assets (Land)

5,356

¥

Unconsolidated subsidiaries and affiliates of MES

OthersDifference

(80)

¥

-

(480)

3,050

¥

(560)

¥

2015
Category

Japanese Yen (millions)
Name ofcompany

CERNAMBISUL MV24
B.V.

Address

Capital(thousands)

Amsterdam,
The Netherlands

EURO
100

Transaction
amountAccount
title

Outstandingbalance at
the year end

The working
capital lending

12,349

Short-term
loans

31,049

Guarantee
Obligation

23,925--Construction of
FPSO

81,439Receivables

41,257

Guarantee
Obligation

18,518--Construction of
FPSO

58,007

Receivables

22,117

Guarantee
Obligation

55,504--

Construction of
FPSO

105,040

Receivables

23,678The equipment
capital lending

21,011--The equipment
capital collection

20,891--

Guarantee
Obligation

57,869--Purchase

91,077Trade
payables

6,256

Transaction
amountAccount
title

Outstandingbalance at
the year end

The equipment
capital lending

34,957--The equipment
capital collection

39,762--

Constructionof FPSO

54,379Receivables

10,621Time Charter The equipment
capital lendingof FPSO

7,895

Long-term
loans

15,156

Guarantee
Obligation

20,910--Constructionof FPSO

18,370Receivables

12,790Constructionof FPSO

70,640Receivables

11,810

Guarantee
Obligation

29,032--Business

VotingsharesBusiness
Contents ofrelationship transaction

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

U.S.Dollars (thousands)
Usage

Rental expenses

Rental income

Facilities for lease

69,951$

69,951$(Profit or Loss on sales of assets, etc)

25,381$--

Idle assets (Land)
Total

44,570$

OthersDifference

44,570

$

(666)

$

-

(3,994)25,381$(4,660)$(note 1) Rental expenses include depreciation, repair, insurance and taxes-and-dues. Rental income is recognized as revenue from operations, and rental
expenses are recognized as operating expenses.

T.E.N. GHANA
Amsterdam,
MV25
The Netherlands
B.V.

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

CERNAMBI
Amsterdam,NORTE MV26 The Netherlands
B.V.

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO(note 2) Others include impairment losses and taxes-and-dues. Impairment losses and taxes-and-dues are recognized as other income (expenses).

2014

Japanese Yen (millions)Book value
Beginning balance asof April 1, 2013

Usage
Facilities for lease
Total

Ending balance asof March 31, 2014

Increase (Decrease)¥13,430¥24,84592,299¥89,530¥Affiliate

As of March 31,
2014¥

105,729¥

114,375(2,769)11,415

Idle assets (Land)

Fair value¥

108,742¥

118,701

8,646

9,959

CARIOCA
MV27 B.V.

Amsterdam,
The Netherlands

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO(note 1) Book value stated in the consolidated balance sheets is net of accumulated depreciation and accumulated impairment losses.
(note 2) The increase in rental properties in this fiscal year is mainly due to newly consolidated subsidiaries (¥92,610 million), new acquisitions(¥57 million) and alteration of contracts (¥20 million), and the decrease in rental properties is mainly due to diversion of idle land(¥2,514 million), impairment losses (¥254 million), and depreciation (¥247 million).

MODEC ANDTOYOOFFSHORE
PRODUCTIONSYSTEMS
PTE.LTD(note 3) Fair value at the end of this fiscal year is mainly estimated based on the "Real estate appraising standard" with an adjustment using a certain
indicator.
The profit and loss from investment and rental properties in this fiscal year are shown below.

Singapore

USD
100

Name ofcompany

GUARA
MV23 B.V.

Constructionof FPSO

Constructionof FPSO

Indirect
25.0%

Address

Capital(thousands)

Business

VotingsharesBusiness
Contents ofrelationship transaction

Amsterdam,
The Netherlands

EURO
124,050

Charter of
FPSO

Indirect17.0%Time Charterof FPSO

Interlocking
directors

Japanese Yen (millions)
Usage

Rental expenses

Rental income

Facilities for lease

1,931

¥

1,931

¥

Total

1,253

¥

1,253

¥

(Profit or Loss on sales of assets, etc)

678

¥

-

-

Idle assets (Land)

OthersDifference

-

¥

678

¥

(253)
(253)

¥

2014
Category

Japanese Yen (millions)(note 1) Rental expenses include depreciation, repair, insurance and taxes-and-dues. Rental income is recognized as revenue from operations, and rental
expenses are recognized as operating expenses.
(note 2) Others include impairment losses. Impairment losses are recognized as other income(expenses).

21. Related Party Transactions
Transactions between the Group and related parties for the fiscal years ended March 31, 2015 and 2014 were as follows:
Unconsolidated subsidiaries and affiliates of MES

Affiliate

2015
Category

Affiliate

Affiliate

Name ofcompany
CERNAMBISUL MV24 B.V.

Business

VotingsharesBusiness
Contents ofrelationship transaction

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

Guarantee
Obligation

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

Guarantee
Obligation

Address

Capital(thousands)

Amsterdam,
The Netherlands

CERNAMBI
Amsterdam,NORTE MV26 B.V. The Netherlands

Affiliate

76

EURO
100

Charter of
FPSO

Indirect
12.5%

Transaction
amountAccount
title

Outstandingbalance at
the year end

23,848--24,802--

T.E.N. GHANA
Amsterdam,
MV25 B.V.
The Netherlands

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

CERNAMBINORTE
MV26 B.V.

EURO
124,050

Charter of
FPSO

Indirect17.0%Time Charterof FPSO

Amsterdam,
The Netherlands

Japanese Yen (millions)
Name ofcompany
CERNAMBISUL MV24 B.V.

Transaction
amountAccount
title

Outstandingbalance at
the year end

Guarantee
Obligation

20,424--

Guarantee
Obligation

11,724--

Transaction
amountAccount
title

Outstandingbalance at
the year end

Business

VotingsharesBusiness
Contents ofrelationship transaction

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

Business

VotingsharesBusiness
Contents ofrelationship transaction

Address

Capital(thousands)

Amsterdam,
The Netherlands

CERNAMBI
Amsterdam,NORTE MV26 B.V. The Netherlands

2015
Category

Amsterdam,
The Netherlands

Japanese Yen (millions)2014
Category

CERNAMBISUL MV24
B.V.

U.S.Dollars (thousands)
Name ofcompany

Address

Capital(thousands)

CERNAMBISUL MV24 B.V.

Amsterdam,
The Netherlands

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

Guarantee
Obligation

198,452--

CERNAMBI
Amsterdam,NORTE MV26 B.V. The Netherlands

EURO
100

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

Guarantee
Obligation

206,391--

Corporate Action Report 2015

Corporate Action Report 201577

Financial Statements

2015
Category

U.S.Dollars (thousands)
Name ofcompany
CERNAMBISUL MV24
B.V.

Address

Capital(thousands)

Amsterdam,
The Netherlands

EURO
100

T.E.N. GHANA
Amsterdam,
MV25
The Netherlands
B.V.

EURO
100

CERNAMBI
Amsterdam,NORTE MV26 The Netherlands
B.V.

EURO
100

MODEC ANDTOYOOFFSHORE
PRODUCTIONSYSTEMS
PTE.LTD

Amsterdam,
The Netherlands

Singapore

EURO
100

USD
100

Account
title

Outstandingbalance at
the year end

The working
capital lending

102,763

Short-term
loans

258,376

Guarantee
Obligation

199,093--

Construction of
FPSO

677,698

Receivables

343,322

Guarantee
Obligation

154,098--

Construction of
FPSO

482,708

Receivables

184,048

Guarantee
Obligation

461,879--

Construction of
FPSO

874,095

Receivables

197,038

The equipment
capital lending

174,844--

The equipment
capital collection

173,845--

Guarantee
Obligation

481,559--

Purchase

757,901Trade
payables

52,060Business
Contents ofrelationship transaction

Charter of
FPSO

Indirect12.5%

Time Charterof FPSO

Charter of
FPSO

Charter of
FPSO

Indirect
12.5%

Indirect12.5%

Time Charterof FPSOTime Charterof FPSO

Affiliate

CARIOCA
MV27 B.V.

Transaction
amountBusiness

VotingsharesCharter of
FPSO

Constructionof FPSO

Indirect
12.5%

Indirect25.0%Time Charterof FPSO

Constructionof FPSO
Interlocking
directors

1.The transaction amount does not include an exchange gains and losses, outstanding balance at the year end includes an exchange gains and losses.
The transaction amount does not include sales tax, outstanding balance at the year end includes sales tax.
2.Policies for determining terms and conditions are as follows:(1) FPSO construction and operation trade are deliberately determined in consideration by each project plan.
(2)The equipment capital lending is deliberately determined in consideration by each project plan.
(3)The working capital lending is deliberately determined in consideration by each project plan.
(4)Guarantee Obligation is deliberately determined in consideration by each project plan.

78

Corporate Action Report 2015

Corporate Action Report 2015

79

Company Profile
Company Proﬁle (As of March 31, 2015)

Oﬃces and Works

Company Name

Mitsui Engineering & Shipbuilding Co., Ltd.

Head Office
Location

6-4, Tsukiji 5-Chome, Chuo-ku,
Tokyo 104-8439, JapanFounded in

November 14, 1917

Established inJuly 31, 1937

Capital44,385 million Yen

Number of sharesauthorized to be issued

1,500,000,000 Shares

Number of outstanding shares

Common Shares 830,987,176 Shares

Number of shareholders

71,523

Employees

12,291 (Consolidated)
3,623 (MES Only)

Hokkaido Oﬃce

● Head Oﬃce / Works

Major Group Companies● Oﬃce / Branch Oﬃce

Ship & Ocean Project Headquarters

Machinery & Systems Headquarters

Engineering Headquarters

Corporate Management Divisions etc.

MODEC, Inc.

Mitsui Zosen Machinery & Service, Inc.

Mitsui Zosen Plant Engineering Inc.

Showa Aircraft Industry Co., Ltd.

Niigata Shipbuilding & Repair, Inc.

MES Technoservice Co.,Ltd.

Mitsui Zosen System Research Inc.

Shikoku Dockyard Co., Ltd.

Mitsui Meehanite Metal Co., Ltd.

Mitsui Zosen Environment
Engineering Corporation

Akishima Laboratories (Mitsui Zosen) Inc.

Sanzo Manufacturing & Construction Co., Ltd.

M.E.S Tokki Co., Ltd.

MES Power - Electronics Industry Co., Ltd.

MES Shipping Co., Ltd.

Mitsui Zosen Steel Structures
Engineering Co., Ltd.

MES-KHI Yura Dock Co., Ltd.
Mitsui Zosen Chiba Kiko Engineering Inc.

Tohoku Oﬃce
Chubu Oﬃce

Sanzo Kosan Co., Ltd.

Sanzo Yuki Recycle K.K.

Kansai Oﬃce

Sanko Logistics Corporation

Hamamatsu Green Wave Co., Ltd.
Green Power Ichihara Co., Ltd.

Sanzo Business Creative Co., Ltd.

Head Oﬃce

Kure Branch Oﬃce

Sanyu Real Estate Co., Ltd.

Makuhari Center Oﬃce

Betsukai Biogas Power Co., Ltd

Chugoku Oﬃce

MES Testing & Research Center Co., Ltd.
DPS Bridge Works Co., Ltd.

Kyushu Oﬃce

Kaji Technology Corporation

Chiba Works

Azuma Machinery Co., Ltd.

Higashi Kyushu Oﬃce
Yura Ship Repair Dept

Oita Works

Shareholding situation by each category of shareholders (As of March 31, 2015)

Corporations otherthan financial
institutions or
stock companies
10.8％

Stock companies 2.6％

Foreignnationals
17.3％

Individuals, etc.
31.6％

Okinawa Oﬃce

The total number of shareholders 71,523
Category

Financial
institutions
37.7％

Tamano Works

Number ofshareholders

Financial institutions

Number of
Shares Held

Shareholding
Ratio (%)

71

313,206,453

37.7

Individuals, etc.

70,529262,376,658

31.6

Foreign nationals

321

143,858,318

17.3

Corporations other than ﬁnancial
institutions or stock companies

520

89,642,293

10.8

Stock companies

82

21,903,454

2.6

Oversea Network

Mitsui Zosen Europe Limited
Burmeister & Wain Scandinavian Contractor A/S
MES Technoservice Machinery Construction
Logistics, Industry and Trade Corporation

Major 10 shareholders (As of March 31, 2015)
Name

80

Beijing Representative Oﬃce

Number of Shares Held(Thousand Shares)

Shareholding
Ratio (%)

MES UBI Heavy Industries Co., Ltd.

The Master Trust Bank of Japan, Ltd. (Trust Account)

41,345

5.11

Japan Trustee Services Bank, Ltd. (Trust Account)

35,0544.33

Mitsui & Co., Ltd.

25,500

3.15

The 114th Bank

25,460

3.14

Japan Trustee Services Bank, Ltd. (Trust Account for the retirement allowance for Sumitomo Mitsui Trust Bank, Limited)

23,3162.88

Mitsui Life Insurance Company, Limited

16,002

1.97

Sumitomo Mitsui Banking Corporation

13,647

1.68

Mitsui Sumitomo Insurance Company, Limited

13,035

1.61

Japan Trustee Services Bank, Ltd. (Trust Account 4)

11,149

1.37

Imabari Shipbuilding Co., Ltd.

10,5251.30

Corporate Action Report 2015

Shanghai Hudong Sanzo Marine Machinery Co., Ltd.
Hanoi Representative Oﬃce

Mitsui Zosen(Shanghai)Co., LTD.
CSSC-MES Diesel Co., Ltd.
MES Ferrotec China Co.,Ltd.

Mitsui Thanglong Steel Construction Co.,Ltd.
MES Technoservice Middle East WLL.

Mitsuizosen Technoservice Taiwan Co.,Ltd.
Mitsuizosen Technoservice HongKong Ltd.

MES Mitr Project Service Co.,Ltd.

Engineers and Constructors
International,Inc.

DASH Engineering Philippines Inc.
Mitsui Engineering & Shipbuilding Asia Pte. Ltd.

Colombo Power (Private) Ltd.

PACECO Corp.

MES Technoservice (Shanghai) Co., Ltd.

AZUMA Engineering (s) Pte Ltd.

Jakarta Representative Oﬃce

MODEC International, Inc.

Prosperity for Our Next 100 Years, With You

http://www.mes.co.jp/
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