The business image in our New K-21is pictured as:

1. Holding on to the fundamental direction of profitability as being the priority in pursuit of development of our overall business scale
2. Maintaining stability in payment of dividends
3. Being a customer-oriented and globalized business group recognized for our steadiness and with an enterprising spirit, centering on multi-modal logistics as the core business of shipping

Here are also articulated the four pillars of our new management direction.

1. globalization of management
2. importance given to consolidated management
3. revitalization of organizations
4. safety in navigation

  With respect to the targets of the "K" LINE Group in five years, operational revenues are set at Y600,000 million and ordinary profit at Y18,000 million on a consolidated basis. Meanwhile through a large-scale revamp of financial structure, we have set ratio of shareholders' equity at 18% and ROE at 8%. We are serially making a three-year management plan on both non-consolidated and consolidated bases by accumulating collected data and information from parties concerned. There may be a significant gap between the 3-year-ahead outcome of the medium-range management plan and goals of 2002, the final year of New K-21. Putting any potential gap aside, we should keep in mind that New K-21 addresses the Company's highest possible goals which we have to attain without fail. We must surely accomplish them in absolute terms. The Business Sector made detailed plans to enlarge their business scale maintaining profitability while the Administration Sector (including Marine Department) mapped out in detail how to manage realization of the goals under the above four pillars of the new management direction. The chiefs of the major Group Companies within and outside Japan were required to set targets for five years to come, thereby positioning and directing themselves in New K-21.
  With financial indices on target, we are putting forward the ratio of shareholders' equity and ROE. It may be extremely difficult to improve the two goals simultaneously, but upgrading both of them to a certain level should be regarded as a key point for gaining higher estimation in the eyes of the public and in the capital markets which have recently increased in importance to a significant extent. When and if the Company's credit rating goes further upward, it will enable us to avail ourselves of wider choices for raising funds, thereby serving us greatly in our determination to save costs. For this purpose, the Group Companies altogether will likewise have to gear up their efforts for upgrading profitability, contraction of balance sheets and recapitalization.
   New K-21 substantially shows us a grand design for the 21^st Century and also works as a detailed plan with a time table participated in by all Group Companies. I'd like each of you to promote this plan, positioning yourselves as a pivot for getting fully involved therein.
   Turning an eye to surrounding circumstances overseas, last year we were faced with an Asian economy in turmoil, the U.S. economy leading the world economy but indicating signs of a stall and the European economy showing its toughness with introduction of the Euro as a launch pad. Meanwhile and domestically, we saw many businesses including financial entities falling into worsening bottom lines, plus worries over deflation. It impresses me so sharply and deeply how times are changing so drastically. This year it is again expected that the situation in Japan and overseas will also have other quick and drastic changes. In particular, it is perceived domestically that additional businesses are likely to be washed out in many other industries besides the already troubled financial sector. This should be viewed as a precaution, alerting us to prepare ourselves for whatever difficulty we may come across in view of the likelihood of drastic changes in any or all aspects. Even under such a troubled economic situation as this, the most imminent task we have to work out this year centers on improvement of profitability of our container business.
 In the USA, the Ocean Shipping Reform Act of 1998 (OSRA) is going to take effect in May 1999, which is anticipated to cause a new wave to roll in on us in the North American trade. It is expected to eliminate various differences in position, and also in competitive conditions between conference and non-conference members. More equal competition should be realized. Freight rates will be determined in relationship between supply and demand. Still this year, demand for space on the outward voyages from Asia is likely to be significantly strong as in the case of last year. We have to endeavor to turn freight rates back to a level of normalcy to come out of the red, making certain our customers are well informed and comprehend the severity of the situation where we have been. At the same time, it goes without saying that we have to double up in our continuous efforts for cutting costs down.
   In the domestic shipping circles, Nippon Yusen Kabushiki Kaisha merged with Showa Line, Ltd. in October 1998. It was announced that Mitsui O.S.K. Lines is going to merge with Navix Line, Ltd. in April this year. These mergers are raising public concern in view of the prevailing series of reshuffling in the shipping industry. These particular mergers, however, should reinforce the fundamental structures of the major enterprises one way or another, leading to an overall lifting in the level of the shipping industry on the whole. In this way of thinking, I regard the above-mentioned mergers as something desirable.
  Our Company has been consistently holding on to the fundamental principle of independent management under its own responsibility insofar as international competition driven by market principles. From now on we will steadfastly keep the same fundamental principle itself in an effort for further development and strengthening of the Company's foundation. It is so important and indispensable to build up our competitive power so that it is more effective in international markets than that of any other competitor. With such power in hand, we will secure customer confidence and support by providing them with competent services which satisfy each of their exact needs. I am firmly convinced that this is of utmost importance to maximize our future success. Let's each and every one of us make up our mind anew to accomplish the above without fail.
  In terms of safety in navigation as one of the four pillars, how best we cope with situations right after an accident arises is as important as how best we prevent it from occurring. A simulated drill for coping with post-accident situations was exercised last November on the assumption that a tanker under the Company's operation had caused an oil spill accident. It was estimated so highly by our customers but many aspects were found where improvement is still needed. All of us must be committed to make unending efforts day and night for safety in navigation and preservation of the environment.
  On the occasion of this being the beginning of a New Year, I would like to heartily pray that all employees----on sea and land, their families, those celebrating the new year inside or outside Japan, everyone from all our Group Companies within and outside Japan----may be blessed with good health, abundant happiness and increased prosperity in this New Year 1999.

Isao Shintani, President
Kawasaki Kisen Kaisha, Ltd.