Japanese

Ladies and Gentlemen,

Thank you for joining us today. It is a pleasure to share this report with you on our revised medium range management plan named "K" LINE Vision 2008+ that is replacing our original "K" LINE Vision 2008.

[Performance for Fiscal 2004 and 2005] (Supplementary data : Page 4)

As you know, in "K" LINE Vision 2008 that started in Fiscal 2004, we set numerical targets for Fiscal 2004 and 2005, with blanks for 2006 and 2007, as we could not be that certain as to how the world would be in such a distant future.

2008 forecasts were a reflection of what we had expected for that year at the start of the plan.

In Fiscal 2004 and 2005, partly because business environment unexpectedly turned more favorable for us, we can say that we have almost achieved P/L items among the final targets for Fiscal 2008 included in the original plan as of the end of Fiscal 2005, or actually even by 2004.

Regarding the blank period from Fiscal 2006 to 2007, when I took over the position of President in April last year, I promised to make a review within about one year after examining all circumstances, and so we have now developed "K" LINE Vision 2008+.

[General View of "K"LINE Vision 2008+] (PDF Files)

The theme of the new plan basically remains unchanged from the original "sustainable growth and establishment of a stable profitability structure" which we will continue to further pursue hereafter. Thanks to an upturn in the business environment, which I referred to earlier, together with the cost competitiveness that our seniors have built up, we have made good investments in ships that both upgrade our fleet and improve our overall service level.

Business environment has drastically changed, that is to say, a significant shift in the economic environment has happened, which we could never have anticipated around 3 years ago. I feel the biggest change has been the "China effect." Of course, not only China but all of the so-called BRICs, emerging countries including China, are also progressing amazingly well. The enormous level of production in China, together with purchase, then consumption or export, has inflated price of resources world-wide, with the result of making resource-producing countries wealthier. Now, every country in the world is aiming toward some degree of industrialization, and quality of life for people is improving.

As I suppose I have already mentioned here many times with regard to our business, shipping, as long as people in the world are enjoying a life of peace and economic activities continue to develop, cargo movement all over the world increases steadily and the need for transporting shipments is growing more and more. Demand for energy resources has especially been extremely strong and further expanding, as commented on in various media. With the background of such an age, or such market conditions, we would like to continuously grow and further improve our cost competitiveness, and so that explains the review of our management plan and setting the guidelines for our revised "K" LINE Vision 2008+.

Outline of the plan is introduced in this sheet of paper.

The figures for mid-2010’s are not just a mere accumulation of estimation by each division, as it would be rather difficult to create such a future image. What we asked each operating division when we were formulating this revised management plan, was to think about what we would be and how we should be proceeding 10 years ahead.

Though I have mentioned on various occasions that our corporate culture reflects our diligent efforts, we cannot hardly form future image with only "diligent efforts."

On the other hand, any management plan must be accompanied with solid numerical bases. So, for the first three years, in Fiscal 2006, 2007 and 2008, we have set the targets based on an accumulation of the ever so diligent efforts by each division.

Thereafter, towards mid-2010’s, about 10 years later, when no one knows exactly how the world is going to be, we are drawing up our own image in our mind integrating thoughts as to just how we would like this "K" LINE Vision 2008+ to go. For mid-2010’s, let’s try to achieve 1,500 billion yen of Operating Revenues, 150 billion yen of Ordinary Income with a total fleet of 700 ships. Although the present situation is, as is well known, that Operating Revenues for this Fiscal 2005 are expected to be about 930 billion yen, Ordinary Income 91 billion yen, thanks to our diligent efforts and some dreaming power, and so we are sure that we can also achieve these targets for about 10 years later, that is in the mid-2010’s.

Perhaps this picture looks fairly big, and you are wondering whether or not it is realistic!! As I mentioned before, these are not a precise accumulation of small targets by each business unit. So, apart from detailed examination, looking back on 10 years ago, in Fiscal 1995, our Operating Revenues were 400 billion yen, and Ordinary Income was just 10 billion yen. The word ’just’ might be mis-leading, as we had, of course, made our best efforts at that time too, but our business size was in quite a different level. No one knows precisely how we can change in the next decade.

Targets for the first three years are based on accumulated detailed calculations, so I can say that we cannot make any far deviation from the targets in the near future, but for the 10-year period, we can draw such figures. Once we set a policy or goal, in order to achieve it we will be conscious of what we should do now on the level of each business division-basis. As I will explain division-wise environment and strategies later, for the achievement of "Sustainable growth and establishment of a stable profitability structure," we have some ideas for the "measures to support systematic expansion of business scale."

[Fleet upgrading plan achieving maximum investment efficiency] (Supplementary data : Page 11)

Our assets to generate profits are human resources and ships.

I believe that how we concentrate management resources on these two factors and how we secure them are, in reality, our major task.

At present, shipyards in Japan, Korea and even China have been almost fully occupied with orders for new buildings until 2008 or 2009, and so we feel it is difficult to expand our business more than that which is scheduled in this plan. Therefore, what we should now work for is investment after year 2009. We are now examining and developing actual investment plan after 2009 or 2010. We intend to invest in more ships and upgrade our fleet aggressively by carefully watching market situations.

[Ship operation administration structure supporting safety in navigation] (Supplementary data : Page 12)

The relationships of mutual trust we have deepened with our customers are based on safe navigation at all times. I believe that our "K" Line-brand is supported by our excellent ship management system. Our fleet scale will be expanding to 500 ships as of the end of Fiscal 2008. That’s a jump from present fleet size of less than 400 ships to 500, and then further rise toward 700 in mid-2010’s, and dependsing on further improvement of our Ship Management System, for which we must make many continuing efforts.

[Developing into one of the best and strongest global management organizations] (Supplementary data : Page 13)

By utilizing human resources as efficiently as possible, we will develop into an organization with which we can at least seek for more wins than losses in the market of bare competition, in other words, here mentioned as ’best and strongest global management organization.’ To enable us to build such an organization, we are targeting to make further utilization of group entities not only in Japan, but including global bases located all over the world, and to construct a system for rapid decision-making and executing with check and balance. Last week, we have already made an announcement introducing an executive officer scheme that is separate from the Board.

Furthermore, we suppose ’enhancement of global personnel policy’ and ’development risk management system’ are inevitable in many ways. Trying to make sufficient risk management and estimate the risk exposure, we would like to make further investments or advance into any new approaches of somewhat risky businesses, as we have become more competent to afford risks up to a certain degree.

In some ways, business environment changes very fast, as it has done in the past ten years, and has been in the first two years of our original "K"LINE Vision 2008.

How we can respond to such change, as some people commented in many chances, especially taking phrase by Darwin, which I like and which indicates that survivor is not the strongest, not the wisest, but the fittest to changes. So, we would like to reinforce our structure to tackle change in conditions courageously and flexibly.

[CSR & Environmental measures] (Supplementary data : Page 14)

As I touched before, our primary assets are human resources and ships.

Though maybe our efforts to upgrade our fleet of ships are well known, we are also improving the environment where our staff are working to keep their motivation higher and to have them willingly work to find something to live for in the "K"Line Group. In that sense, we think we must be further concerned in CSR than ever. There are some themes we are pursuing: in 2009, which will mark the 90th anniversary of the foundation of our company, we would like to establish projects that contribute in a way to greater social responsibility

[Reform of Cost Structure] (Supplementary data : Page 15)

As to reform of cost structure, which has been called as "K"Line’s DNA, and which most reflects our diligent efforts, both in the headquarters of "K"Line and in our subsidiaries and affiliated companies throughout the world, major staff members, not only Japanese staff sent from headquarters, but also local staff personnel have been taking leading roles in struggling for reform. As we continue thinking about the future, our task will be how we can continuously promote further reform of our cost structure with staff that are more efficient at each local office; to do so, we would like to make structural changes during the period of this management plan. Of course, it is easy to say ’structural’ but rather difficult to exercise. The first thing we can do is so-called "leaf picking," in other words, starting with minor things and then in the future we would like to try to do what we have not been able to do up to now. For example, in the field of container terminal or equipment costs, we wonder if we can make a structural cost saving approach from some different point of view.

[Business Environments] (Supplementary data : Page 17)

I will touch on business environment now, even though you probably are better informed than us. As I said before, world seaborne trade is increasing steadily, with about 2 to 5% annual growth expected in the future, just as it has been. In such circumstances, this subject about the business field is one in which "K"Line will be focusing.

[Medium Range Business Strategy - Containership Business] (Supplementary data : Page 18)

Over 50% of our operating revenues have been earned from Containership Business. For a while, this ratio will not be amended. When we are asked, our comment is that the higher portion of Containership Business is both a strong point and weak point for "K"Line. To strengthen our presence among international top players, business expansion for a certain level of share will always be required. We see trade volume for Containership Business continuing to grow constantly in the future, both in trunk lines and also in North-South trades. In this situation, considering advantage of scale and global partnerships with our customers, we must extend our service network along with growth of world trade or ship capacity. And in this regard, we are enhancing our Containership Business the same as always.

However, market freight rate for this segment has fluctuated greatly, and we cannot guarantee just what the case will be for the future. We would like to change such volatile business to one that is rather more stable along with our own efforts and also with measures by the entire industry.

[General View of "K"LINE Vision 2008+] (PDF Files)

In this "K" LINE Vision 2008+, one of the targets for mid-2010’s is that operating revenues from non-Containership Business will exceed Containership Business in the overall total of 1,500 billion yen. For that goal, telling what we are doing or how we see circumstances, let me first say that there is a huge pie in total bulk business. Volume for international seaborne trade is approximately 6 billion tons in total and continuing to grow steadily, so it is significantly increasing year-after-year. Among the 6 billion tons, say one-third would be crude oil or oil products. Of the other two-thirds, except for container cargo or so, cargo for bulk carriers is counted as roughly 2 to 2.5 billion tons. The cargo volume we are carrying is just a small part of that at present, but we believe we can extend much further into this segment.

Now, our division for Bulk Carrier Business consists of the Coal & Iron Ore Carrier Group and the General Bulk Carrier Group. In addition, there is a Thermal Coal Carrier Group category in Energy Transportation Business at present in which customers are just as common as with Oil Tankers or LNG Carriers, and which is for coal in bulk for electric companies with ordinary Panamax-type bulk carriers or wider-breadth Corona-type bulk carriers. We will re-categorize this group in Bulk Carrier Business Division in this July to aim for greater synergy effects, while of course we will maintain or further strengthen existing partnerships with each customer in the future.

Unifying these groups into one, we are pursuing synergy effects to squeeze out the forging of business expansion to overseas markets, because we must admit that cargo volume in bulk trades for industry in Japan is starting to peak now, partly because of the declining birthrate, and so we must expand abroad. Of course, we will continue to value our deep relationships with Japanese customers that have been continuously cultivated over the years, but we will lose velocity if we continue to concentrate only on cargoes involving Japan

As you know well, we have two business bases to extend our business to overseas markets: one is "K" Line Bulk in Europe and the other is so-called KLPL, our shipping company in Singapore. We are targeting the broad market of ’trans-Atlantic in Europe, and the magnificent market of Asia that surrounds Singapore, both of which we are intending to further strengthen. So, Energy Transportation Business is, as a matter of fact, one of our most important tasks. I could say our Containership Business is performing decently; also our `Car Carrier Business too; as well as a part of Bulk Carrier Business, especially cape-size that has a certain level of presence. Among all of our business sectors, Energy Transportation Business still has much room for further expansion

In this segment, LNG Division has already achieved quite a decent scale. We will further reinforce this segment because a very positive increase in demand is expected, especially considering energy conditions in the U.S. We also have intentions to strengthen business areas in which we have not yet developed, or our presence is relatively small; for example, regarding clean-type, or chemical tankers, we would like to keep thinking about ideas to double or triple the size for these in about 10 years.

Now, I feel I am coming close to the end of my presentation, but I have found I jumped over remarking about Car Carrier Business. For Car Carrier Business, as there is a graph in the power point slides showing international car movements by sea and ship capacity, the answer to whether car sales in the world is growing or not is definitely ’yes’, it will be growing further in the future, but we have been aware that there are different views about seaborne car transportation. As I suppose I may have said before, horizontal international division of production sites will definitely accelerate demand for marine transportation in the future. We believe this business is, as only a very limited number of customers and carriers exist, comparably stable and growing in demand. We will continue to focus on this business as a high priority area.

I will conclude my presentation now, although I actually have not talked about everything as fully as I had wanted. So your kind attention to this power point material is also appreciated in order to better understand our intentions more deeply.

Thank you very much for joining us today.

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