Message to Our Shareholders

Dear Shareholders

Results for Fiscal 2012 (1 April 2012 – 31 March 2013)

Unit: Billion Yen

	FY12 results	(FY11 results)
Operating Revenues	1,134.8	(972.3)
Operating Income	14.9	(-40.6)
Ordinary Income	28.6	(-49.0)
Net Income	10.7	(-41.4)

* Ordinary Income is Income before income taxes and extraordinary items
(FY2012 Yen/U.S. Dollar average exchange rate ¥82.33; bunker oil price U.S. $671 per MT)

Guidance for Fiscal 2013 (1 April 2013 – 31 March 2014)

In containership business we expect robust cargo movements in Asian-North American routes in view of a mild recovery of the U.S. economy and signs of its housing market hitting bottom, while on Asian-European routes we will see only limited improvement in cargo movements given persisting uncertainties over the European economy. Thus, we expect it will be some time before the supply-demand environment surrounding containership business as a whole improves in a full-fledged manner. The “K” Line Group will continue careful business operations; the group will continue to further streamline shipping routes, following the principle of “selection and concentration” while maximizing efforts for slow steaming and cost reduction on a worldwide basis, as well as for freight rate restoration.

In logistics business we anticipate sluggish demand for Japan outbound air cargo while expecting robust operations in international logistics service in and around Asia and intra-Asia logistics service.

In dry bulk business, despite a favorable factor ― an improvement in tonnage supply and demand because of the massive delivery of newly-built vessels passing its peak and of advances in ship scrapping ― the large-size vessel market will continue to go through a tough situation as slower cargo movements are expected due to uncertainties over financial markets in Europe and elsewhere and the slowing Chinese economy. The medium- and small-size vessel markets are also expected to face a tough situation as the excessive tonnage supply will continue to be felt despite increases in transport needs—transportation of grain shipped from South America and exports of U.S.-originating coal spurred by the progress underway in the development of shale gas/oil. The entire “K” Line Group will continue to make efforts for improving profitability through efficient vessel allotment and reduction of ship operating costs.

In car carrier business, while world car sales continue strong in North America and Southeast Asian countries, stagnant sales in European markets and a slowdown in China, India, Russia and other emerging markets remain major concerns. Demand for marine transportation of automobiles are expected to continue to be strong on a global basis. Regarding Japan’s exports of automobiles, which have been on a decreasing trend because Japanese car makers have raised the ratio of their overseas production as a result of the yen having been excessively appreciated during recent years, we are now closely watching how the progressive correction of the high yen will affect the above trend.

In LNG carrier business, we have our fleet operating under medium- to long-term charter contracts and we expect stable operations. In the oil tanker business it will take some more time for the market to recover in a full-fledged manner. So we will have VLCCs and LPG carriers operating under medium- to long-term contracts for stable revenues while seeking to improve profitability of AFRAMAX tankers and product tankers by more efficient vessel allocation.

In the offshore energy E&P support and heavy lifter business we expect contribution to earnings to be made by stable operations of offshore support vessels and drill ships.

In heavy lifter business we will continue working to further our enter into the area of promising offshore cargo transportation and installation as well as our participation in large-scale projects related to resources, energy and/or petrochemical plants. We also expect an improvement in profitability as there will be a decrease in the depreciation expenses relating to the goodwill that we previosly incurred in our participation in this business.

As of today, we expect our 2013 yearly forecasts as follows:

Unit: Billion Yen

	FY13 forecasts	(FY12 results)
Operating Revenues	1,160.0	(1134.8)
Operating Income	31.0	(14.9)
Ordinary Income	25.0	(28.6)
Net Income	13.0	(10.7)

* Ordinary Income is income before income taxes and extraordinary items

(Premises for FY2013: Yen/U.S Dollar exchange rate ¥95/US; fuel oil price U.S. $620 per MT)

Preconditions for foreign exchange rate and fuel oil price are as mentioned above, and sensitivity on our yearly Ordinary Income for this Fiscal 2013 is estimated as follows:
Fiscal 2013 is estimated as follows:
Exchange rate: 1 yen/US$ => Ordinary Income change approx 1.3 billion yen*
Fuel oil price: US$10/MT => Ordinary Income change approx 1.5 billion yen
* Yen depreciation is preferable for us.

The Company’s highest priority is maximizing returns to shareholders while taking into consideration the need for securing our internal reserves necessary for reinforcing the Company’s financial standing and capital investment to achieve sustainable growth, both key issues of the Company’s management plan. Our policy is to steadily increase the dividend payout as a percentage of consolidated net income, with a target of reaching 30% by the mid-2010’s.

As to payment of term-end dividend, we had advised that it was not yet determined because we were afraid of consolidated net profit possibly fluctuating to a large degree according to uncertain factors such as exchange rate trends, share price level, etc. during 4th Quarter.

The "K" LINE Group has been taking comprehensive measures to drastically cut costs and streamline service routes and have successfully returned to profitability, posting consolidated net income of 10.7 billion yen. Therefore, we have decided to pay annual dividend of 2.50 yen per share.

In fiscal 2013 (the fiscal year ended March 2014), an annual dividend of 3.50 yen per share is planned in line with above policy.

Although we can see signs of improvement in our business environment, market conditions for marine freight rates and trends for exchange rate and fuel oil price, etc. will still not allow optimism. All directors and employees of "K" LINE and the "K" Line Group are vigilantly dedicated to profit availability for payment of dividends to the maximum extent possible to meet your expectations through further cost curtailing and streamlining of service routes.

We express our appreciation for your support and look forward to your continued cooperation to our "K"Line Group.

Thank you very much for your kind attention.

April 30, 2013
Jiro Asakura
President & CEO
Kawasaki Kisen Kaisha, Ltd

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