NIPPON YUSEN KABUSHIKI KAISHA 3-2, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-0005, Japan Telephone: +81-3-3284-5151 http://www.nyk.com ANNUAL REPORT 2011 More Than Shipping This report is printed using environmentally friendly printing methods. Waterless printing, which releases no hazardous liquids, has been adopted as a NIPPON YUSEN KABUSHIKI KAISHA means of safeguarding the environment. The report was printed using vegetable oil ink on FSC-certified paper, which includes ingredients from carefully managed forests. ANNUAL REPORT 2011 Printed in Japan Contents About us 2 Our Vision 6 Our Business 10 Our Sustainability MAnAgeMent 14 Message from NYK’s Executive Officers 16 Consolidated Financial Highlights 18 Special Feature: Grow with Asia, Expand across the Globe 20 A Review of Recent Medium-Term Management Plans 22 “More Than Shipping 2013 — Grow with Asia, Expand across the Globe” — Plan Overview 24 NYK Group president Yasumi Kudo shows the new medium-term management plan — “More Than Shipping 2013” “ We will pursue value-added strategies exploiting our strengths in order to escape competitive conditions that are becoming commoditized.” 36 The Strategic Pillars of “More Than Shipping 2013” 44 An On-Site Report from Asia Performance 45 Review of Operations 46 Market Data 48 Highlights by Segment 50 Global Logistics Business 56 Bulk Shipping Business 63 Other Business 64 Efforts to Support the Area Devastated by the Japan Earthquake and Tsunami sustAinAbility 65 Sustainability 66 Environment 68 Safety 70 Human Resources 72 Social Contribution Activities governAnce 73 Corporate Governance 74 Interviews with Outside Directors Cautionary Statement with Regard to Forward-looking Statements 78 Corporate Governance Some statements made in this annual re- 84 Directors, Auditors & Corporate Officers port are forward-looking statements, which involve certain risks and uncertainties that 86 Independent Directors could cause actual results to differ materi- Fact dAtA ally from those projected. Readers are cau- tioned not to place undue reliance on these 87 forward-looking statements, which are val- Company Information id only as of the date thereof. NYK under- finAnciAl DatA takes no obligation to republish revised forward-looking statements to reflect 93 events or circumstances after the date Financial Section thereof or to reflect the occurrence of un- anticipated events. NIPPON YUSEN KABUSHIKI KAISHA Although essentially a shipping company, we cannot differentiate ourselves through shipping alone. This is why we intend to grow further by combining traditional shipping with value-added strategies. In March 2011, the NYK Group prepared a new medium-term management plan — “More Than Shipping 2013” — which focuses on our commitment to building a new growth model that reaches beyond shipping and on strategies for putting that model into practice. How will we evolve going forward? Focusing on the new medium-term management plan, this annual report explains our path to further growth. ANNUAL REPORT 2011 1 Our Vision NYK Group Mission Statement Through safe and dependable monohakobi (transport), we contribute to the betterment of societies throughout the world as a comprehensive global-logistics enterprise offering ocean, land, and air transportation. Together with Our Customers Through the use of our extensive skill and expertise and by considering each business site to be of utmost importance, we always work to create new value so that our customers will consider us a trusted and reliable partner. Together with Our Shareholders and Investors We aim to enhance our corporate value by being financially responsible and by con- ducting business activities in an open, honest, and transparent fashion. Together with Society As a good corporate citizen, we positively take on the tough issues that challenge our society, such as concerns involving the preservation of our natural environment, as we work for the betterment of the world that we inhabit. Together with All Staff Members in the NYK Group As a global enterprise that has the utmost respect for diversity in the workplace and the spirit of challenge, we emphasize the development of employee talents so that all staff members can take pride in their work and eventually fulfill their dreams. NYK Group Values: integrity, innovation, and intensity Principles for Achieving NYK Group Mission Statement integrity Be respectful and considerate to your customers and colleagues. Stay warm, cordial, courteous, and caring. innovation Continually think of new ideas for improvement, even when conditions appear satisfactory. Remain open to betterment. intensity Carry through with and accomplish your tasks. Never give up. Overcome challenges. Remain motivated. 2 NIPPON YUSEN KABUSHIKI KAISHA Our Business For more than 125 years, the NYK Group has anticipated the needs of the times consistently. This impressive track record testifies to the ingenuity Business Portfolio and dedication that enabled our predecessors to Net Sales Breakdown* pioneer shipping routes. * Before consolidation elimination Global Logistics Business Such boldness continues to characterize our mindset today. Liner Trade Business 22.3% Logistics Business 18.9% Fiscal 2010 Terminal and Harbor 5.9% Transport Business Air Cargo Transportation Business 4.2% Bulk Shipping Business Bulk Shipping Business 38.5% Car Transport Dry Bulk Transport Other Business Energy Transport Cruise Business 1.7% Real Estate Business 0.6% Other Business Service 7.9% Key figures Fleet Size (Consolidated) Logistics Centers 827 vessels 36 countries 60.2 million Kt (DWT) 412 centers (As of September 2010) Cruise ships 3 Others 47 LNG carriers 29 Containerships 143 Terminals (including semi-container Tankers 86 ships) Fiscal 2010 (vessels) Bulk Car carriers 118 carriers 109 (capsize) 43 Wood chip Bulk carriers 235 bases worldwide carriers 57 (panama & handysize) Air Cargo Transportation 2,375 million ton km (Fiscal 2010 shipping data) ANNUAL REPORT 2011 3 6 NIPPON YUSEN KABUSHIKI KAISHA NYK Group — Trailblazing through the Ages For more than a century, the NYK Group has repeatedly been first to identify emerging trends and respond to them boldly and creatively. The steady expansion of the NYK Group’s fleet of vessels reflects the success 2010 of these initiatives. Taking inspiration from this pioneering legacy, we will Celebrates 125th anniversary. tirelessly tackle challenges to ensure growth not only in the next several decades but throughout the next century. 1,000 2007 • Sets out integrity, innovation, and intensity as the NYK Group Values. 1929 • Establishes NYK-TDG Maritime Lifts curtain on age of luxury Academy in the Philippines. 750 passenger liners by introducing to North American and European 1950s: Due to rapid growth of Japan’s economy, routes series of passenger liners, international ocean cargo movements shift 1997 eventually including Asama significantly from general cargo toward crude oil Large tanker Diamond Grace spills Begins to develop as overseas shipping company Maru, Chichibu Maru, and and other energy and natural resources. The NYK crude oil in Tokyo Bay. centered on international liner services by Hikawa Maru. Group quickly decides to introduce a series of establishing liner services to Shanghai, Manila, dedicated vessels, including tankers, iron-ore Vladivostok, and other ports. carriers, and wood-chip carriers. 1885 1893 1896 1914 1968 Yubin Kisen Mitsubishi Kaisha and Launches Japan’s first Establishes liner services to Tokushima Maru becomes first Takes delivery of Kyodo Unyu Kaisha merge to long-distance liner service on the Europe, North America, and Japanese ship to pass through Japan’s first fully establish Nippon Yusen Kaisha (NYK). Bombay (Mumbai) route. Australia; ranks alongside the Panama Canal. containerized ship. 500 Western shipping companies. Photo provided by Mitsubishi Archives Hakone Maru 2009 1978 Enters offshore Heian Maru Establishes Nippon Cargo business by Airlines Co. Ltd. (NCA). participating in 1959 drilling-ship project. Takes delivery of NYK Group’s first oil tanker. Hiroshima Maru The senior management team of Yubin Kisen Mitsubishi Kaisha Shipping mandates 250 1873 Mitsukawa Shokai, formerly Tokushima Maru Tsukumo Shokai,* reorganizes and Tobata Maru becomes Mitsubishi Shokai, under owner Yataro Iwasaki, who subsequently founds the Mitsubishi Drilling ship Group. Changes name to Mitsubishi Jokisen Kaisha in the following year. Tanba Maru * A company that the Tosa Clan establishes Faces rapid yen appreciation due in 1870 with three steamships. Yataro Iwasaki oversees the business. to Plaza Accord. In response, the NYK Group undertakes decisive 1960 1985 restructuring and steps up hiring of non-Japanese crew members Takes delivery of NYK Group’s Celebrates centennial. through manning companies. first specialized ore carrier. 0 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Operating Fleet Size (vessels) 4 NIPPON YUSEN KABUSHIKI KAISHA ANNUAL REPORT 2011 5 Our Business For more than 125 years, the NYK Group has anticipated the needs of the times consistently. This impressive track record testifies to the ingenuity Business Portfolio and dedication that enabled our predecessors to Net Sales Breakdown* pioneer shipping routes. * Before consolidation elimination Global Logistics Business Such boldness continues to characterize our mindset today. Liner Trade Business 22.3% Logistics Business 18.9% Fiscal 2010 Terminal and