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Message from an Outside Director (2016)

Regarding Fiscal 2015 Business Structural Reforms

In fi scal 2012, my second year as one of MOL’s outside directors, the Company carried out the first Business Structural Reforms, shifting operations of free vessels in dry bulkers to Singapore and recording around \100.0 billion in business structural reform costs. At the time, we believed that if we booked this loss, the Company’s operational structure would improve, and we would eventually be able to make a remarkable recovery. However, market conditions worsened more severely than expected and, as a result, the Company was again forced to implement Business Structural Reforms, which led to the loss of around \180.0 billion. In regard to this, I truly regret my actions as an outside director.
   At this point, I believe that we must ensure the success of the fiscal 2015 Business Structural Reforms and that this is truly the last round of reforms. Implementing these will be painful, but each employee and each executive must share this sense of crisis as we come together to face this challenge head on with indomitable determination. We say that corporations are, at their hearts, people. Well, MOL has excellent human resources. I fi rmly believe that if everyone focuses their efforts toward one objective, we will see clear results.

Participating in the Deliberation on Corporate Strategy and Vision

While we have discussed various themes at the Deliberation on Corporate Strategy and Vision, we have also had repeated discussions on containerships, and these are connected to the current round of Business Structural Reforms. The containerships business is in the red even if you sum up the results throughout the past decade. We have repeatedly discussed ways to fundamentally strengthen the earnings structure for containerships, as opposed to merely tweaking existing measures to improve profi tability. With each round of discussion, we delved further into the details, going from an objective analysis of circumstances to proposals of specifi c strategies. At the deliberations, I asked how big the containership fleet should be and if the current portfolio of routes was suffi cient. It took some time, but after some debate at the Deliberation on Corporate Strategy and Vision, the resulting ideas were incorporated into the Business Structural Reforms. I’m now eagerly awaiting the results of these ideas.

Customer-centric Perspective, Global Perspective: These I Expect of MOL

I have been saying that I would like business activities to be conducted from both a customer-centric perspective and a global perspective. Recently, I strongly feel that MOL has moved to a position where customer perspectives are valued. MOL has broken away from the past where the soaring marine transport market allowed less focus on customers. Take, for example, an electric power company. As a customer they might want to import coal or they might want to import LNG. In April 2016, MOL established the Energy Transport Business Unit, which bridges various segments, including tankers, LNG carriers and steaming coal carriers. I believe this was the result of the kind of debate I mentioned earlier. Moreover, I hope MOL becomes a company with high levels of customer satisfaction, a company that provides fi nely turned solutions by leveraging the latest, highly innovative technology, including artifi cial intelligence.
   Global perspectives refer to leveraging MOL’s expansive global network and enhancing partnerships between regions or within countries to more effectively capture cargo demand or otherwise leverage MOL’s collective strengths. This also refl ects our debates, and in June 2015, MOL established chief executive representatives for the three major regions of the Americas; Europe and Africa; and Asia, the Middle East and Oceania. Moreover, in April 2016, MOL established country representatives for key countries under the chief executive representatives. Each representative can broadly conduct sales activities throughout their region or country, as well as across business fi elds. In addition, there are more opportunities to meet global customer needs through cooperation between representatives. Because we have established the necessary framework, going forward I would like MOL to really invigorate this and actually rack up some accomplishments.

Regarding My Role as Outside Director and the Establishment of the Nomination Advisory Committee and the Remuneration Advisory Committee

Outside directors are not omnipotent. While I do think that having outside directors is a good idea and increases transparency, it is delusional to expect them to be a magic wand that makes everything go smoothly.
   The issue is not about how many outside directors you have got. Rather, it’s about how the Board of Directors is functioning as a whole, including outside directors. I believe that the duty of outside directors is to do what inside offi cers cannot do?in other words, using their outside perspective to provide frank, objective comments.
   On the other hand, looking at MOL, I would assess the functioning of the Board of Directors as exceeding expectations. Suffi cient documents and data are provided before meetings, allowing both the inside and outside directors to engage in earnest discussion. This increases management transparency, activating checks and balances. Moreover, in September 2015, MOL established the Nomination Advisory Committee and the Remuneration Advisory Committee, enabling even deeper communication. I think both these committees are major assets for the Company. Going forward, I would like to continue frankly expressing my opinions with the aim of supporting the successful implementation of the Business Structural Reforms and improving corporate value.

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