Annual Report 2000 (For year ended March 31,2000)

Strategic Focus
Our Ongoing 5-year
Management Plan,
New “K” LINE Spirit for 21
(New K-21)

Two years have passed since the “New K-21” was launched April 1998. Its goals are forming the principles of the Company’s management and business operations. Reviewing the entire contents, we would like to mention that the “New K-21” has been advancing steadily throughout the Company on its scheduled course, and that our financial constitution is much improved towards our target even during the first two years as shown in the financial data.
       The Company will be further gearing up to accomplish the goals of the Plan earlier than March 2003 inasmuch as it is prospected that future circumstances surrounding the Company will continue to be fierce, taking into account the harder competition among businesses in the ocean-going shipping industry worldwide, and the series of changes in management practices incurred by deregulation in the fields of domestic port and logistics business especially in Japan.
 
sankaku.gif (951 bytes)     Assignments to which the Company Is Committed
The “K” LINE group has addressed itself to the following assignments in order to adapt to any business opportunities and/or changes:
akamaru.gif (1022 bytes) Improvement in profitability of container business which is the centerpiece for the Company and its group
kimaru.gif (1071 bytes) Enlargement of business in scale as to bulk carrier and car carrier services and tanker & energy transportation services of the Company
midorimaru.gif (914 bytes) Unification of management intentions and improvement in management efficiency on a consolidation basis by token of overall reorganization of the group companies by function
aomaru.gif (1048 bytes) Consolidated management practices coping with innovation of various Company and group systems in an “Accounting Big Bang” and encouragement to upgrade our credit ratings by third parties
muramaru.gif (1065 bytes) Positive encouragement in the introduction of Information Technology
 
b_akamaru.gif (950 bytes)     Container Business Beginning to Make Larger Strides
In terms of container business, profitability is improving through efforts for restoration of freight rates against the backdrop of a favorable change in supply and demand of space. We will continue our endeavors to further improve cost competitiveness and restore freight rates. The Company resolved to place twelve new large-sized containerships into service in order that we may strengthen our business base and thereby reinforce to provide the best transportation services possible to meet customer needs.

kuromaru.gif (837 bytes)
Twelve New 5,500-teu Type Containerships to be put into service from fiscal 2001 to fiscal 2002
Twelve new 5,500-teu containerships will be put into our trunk service between the middle of year 2001 and middle of 2002 in succession. They will increasingly respond to satisfy customers’ further requirements with reefer capacity for 500 FEU and service speed of 25 knots.
kuromaru.gif (837 bytes) Inauguration of New Container Services
In parallel with the above resolution on newbuildings, in April 2000 the Company inaugurated new weekly fixed-day services in several trades: Asia/U.S. East Coast via Panama; Asia/Mediterranean; and Mediterranean/U.S. East Coast.
       The new services are being provided in tie-ups with COSCO Container Lines (COSCON) and Yangming Marine Transport Corporation (Yang Ming Line), and are expected to provide our customers with benefits from a wider scope of services with highly-competitive transit times. From April 2000, “K” Line (Europe) Ltd. started Baltic Express Service adding a link with Finland to further strengthen its feeder services in addition to already existing services.
kuromaru.gif (837 bytes) Using IT for Improvement of Accounting Work in Container Business
One accounting principle is that the Container Business Department takes overall responsibility for accounting in business practices. Along this direction, all the overseas agents are responsible for timely settlement of all credits and debts accruing locally close to business, for which the computerized system is now operated on a client/server-model basis.
 
b_kimaru.gif (968 bytes)     Enlargement of Business for Bulk and Specialized Carriers
Efforts are to be poured into the enlargement of business scale in bulk carrier and car carrier services and tanker & energy transportation services in an attempt to develop a business base with stable profitability.
       For these sectors, the Company added the following newbuildings, either owned or long-chartered, to its fleet in fiscal 1999, maintaining a business scale sufficient for any demand requested:
Type No. DWT(K/T)
Bulk Carriers 4 vessels 437,092  
Pure Car Carriers    4 vessels 63,779  
Tankers 2 vessels 214,372  
LNG carriers 2 vessels 144,979  
Constant investment/arrangement for our fleet is going on to provide the best possible services to customers in each business field, guided by the importance that we attach to mutual benefit.
 
b_midorimaru.gif (951 bytes)     Forming Consistent Group Organization
Regarding reorganization of the group companies by function, the Company has proceeded to restructure the group companies in charge of ship management and administration that share an important part with “K” LINE in the core business of ocean-going shipping. During fiscal 1999 Share Exchange and Take Over Bid (TOB) were implemented to restructure Taiyo Kaiun Kabushiki Kaisha (Taiyo) and Kobe Nippon Kisen Kaisha, Ltd. (Kobe), respectively. As a result, the Company has come to hold 100% stake in Taiyo and 99.5% in Kobe, with both these mergers effective on July 1, 2000. A series of actions are aimed at strengthening competitiveness through upgrading quality in ship management and administration, and improvement in efficiency and cost reductions brought forth by unification of ship management and administration systems including methods and purchasing. In pursuit of better business achievements on a consolidation basis, we are going to proceed to grapple positively with a variety of assignments related to personnel management practices, business composition and capital/profitability/finance of all members in the whole company group.
 
b_aomaru.gif (965 bytes)     Forward Strengthening of Financial Structure
To cope with the prevailing trend of the “Accounting Big Bang” in Japan and an improvement in credit ratings, we reviewed the Company’s system of Tekikaku Nenkin (tax-justified pension), a non-governmental Retirement Pension under the approval of the Ministry of Finance and the National Tax Administration. Back in October 1999, amortization of the liabilities for employees’ past services was accelerated to 35% from 20% on the basis of the straight-line method. We also reviewed the total assets the Company held, resolving to make a sale of land located in the hinterland of  Tokyo “K” LINE Container Terminal, and this review is currently ongoing.
       We plan to take the earliest step so that at the time of a change in the standards of retirement benefit accounting in Japan, a differential of Yen 13.8 billion on consolidated basis can be depreciated in lump sum in the next fiscal year.
 
b_muramaru.gif (967 bytes)     Enhancement of IT for Practical Use
Regarding encouragement of introduction of Information Technology (IT), the Company will exert its utmost efforts toward the joint use of data/information with its group companies in synergy with the globally expanding intra-network. Making the most of the Internet, we will continue with effective investment in IT for e-commerce such as improvement and expansion of our present homepage, e-business dealings and e-settlement of foreign trade activity that will lead to further adoption of e-commerce utilization.
 
sankaku.gif (951 bytes)     Ensuring a Mindset that Prepares Us for the Worst
Safety in all workplaces as well as in navigation is a top-priority concern for the Company and its entire Group inside and out.
       During the term under review we continuously tried gaining simulated experiences of a state of emergency incurred by natural disaster and accidents, including the following drills:
(1) In August 1999 a drill took place involving an LNG carrier under “K” LINE operation in which the simulation assumed the carrier could no longer continue to navigate due to engine trouble.
(2) In October 1999, a drill was held in which the simulation assumed that an earthquake hit the Tokyo area that morning. Study was made on how our communication vulnerabilities must be reinforced from viewpoint of humans and technology.
(3) In December 1999 an exercise was held simulating a large-scale oil spill accident. The scenario was that a VLCC time-chartered from a third party had spilled a large amount of oil in the bay.
In an attempt to further ensure navigational safety, this year the Company installed considerably sophisticated simulators for specialized carriers of dangerous liquid shipments. The simulators, so significant from the standpoint of educational purposes, will help train crews to individually control and cope with any extraordinary/urgent state of emergency.
 
sankaku.gif (951 bytes)     The Environment
The Company formed its own Working Group to tackle environmental issues and perform its task of protection of the environment. Against sea and air pollution we would like to poise ourselves to positively follow not only international conventions/regulations but also regional ones. We would also take possible measures ahead of regulatory rules now under discussion, such as adopting marine engines well equipped to cope with minimization of NOx emission and non-TBT paints for vessel bottoms.

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