Ladies and Gentlemen,


It is a pleasure to share this report with you on "K" LINE's consolidated and non-consolidated financial results for 1st half-year Fiscal 2003, and my prospect for full-year financial position for Fiscal 2003. My talk will take about 30 minutes.


Slide A-1: Financial Highlights for 1st Half Fiscal 2003

In the first column of this table, you can see in red letters the results for 1st Half Fiscal 2003, which ended June 30, 2003.
For your guidance, the 2nd column from the right shows latest prospects announced on 7 August 2003 that included our 1st Quarter financial status and which showed the revised and improved prospects since the original prospects had been announced on 15 May 2003.


Moving to the comparison between 1st Half Fiscal 2003 and 1st Half Fiscal 2002, you can see a remarkable increase of the ratio in every item. For your guidance, each item for 1st Half Fiscal 2003 sets a new record for being the highest in our almost 85-year history.


As some of you may be aware, this favorable result was mainly because of improvement in Container Business, and positive Bulker and Tanker markets.


Before going to the next slide, let me touch on the balance between Income Before Income Taxes and Extra-ordinary Items and Net Income.
Comparing results shown in left-hand column to the latest prospects mentioned in the 2nd column from the right in this table, Income Before Income Taxes and Extra-ordinary Items improved much more than Net Income did. This was a result of increase in extra-ordinary losses caused by acceleration of asset disposal and change in premises related to elimination among our group companies, not from an increase in unrealised losses.


Slide A-2: Financial Indicators for 1st Half Fiscal 2003

As you can see, many of the financial indicators show a noticeable improvement over the previous year.


In comparison with numerical targets for Fiscal 2004 mentioned in blue letters in the last column, which were set in our 3-year management plan starting from Fiscal 2002 known as "KV-Plan," 1st Half Fiscal 2003 results are almost touching or even exceeding final targets, although the end of 1st Half Fiscal 2003 is just in the middle of the 3-year "KV-Plan."


Among these indicators, improvements in ROE & ROA are rather natural because Net Income increased. I feel the fact that Equity Ratio of 19.2% has become very close to target of 22% certifies how really smoothly the progress of the management plan is going.


Fiscal 2003 yearly expectations are expected to exceed the final figures in almost all of the numerical targets for "KV-Plan."I will return to this point a little later.


Slide B: Business Environment for 1st Half Fiscal 2003

Main factors affecting results of 1st Half Fiscal 2003 were as mentioned:


From the point of macro-economics, as you are aware, though the Iraq War situation was really a big concern at the beginning of this fiscal year, the U.S. economy has not been affected so seriously, or rather U.S., one of our main markets, has done fairly well.


Then, in Japan, there has been a slight picking up from the bottom, which is just our own view however. But playing a part in transportation of various kinds of raw materials, we sense there is a start toward bottoming out.


Though there is mention of 'rather weak economic tendency in Europe,' we have actually experienced quite positive cargo movement from Asia to Europe, with demand in Europe being strong. In this regard, I wonder if consuming activity in Europe has been structurally changing in a better direction for us, which reflects an eagerness on our part.


In other Asian regions, effect from spread of SARS to the shipping business has been limited considering the impact on other businesses such as airlines, and despite that temporary threat, China, as is well known, continues to enjoy rapid growth.


Business conditions for our own business are just as those shown.


Regarding Car Carrier services, as described, volume carried for Europe and Australia increased, but that was not the case for North America. The number of cars transported there in this half year was very close to that of last year when cargo movement to North America showed marvelously positive results.


Slide C-1: Trend of Division-wise Results 1st Half Fiscal 2003
(for Container Business)

Let us talk about division-wise results again. In Container Business, loaded cargo volume increased by 9% year-on-year basis, from 1.03 million TEU's to 1.13 million. This is one of the main factors that this division has improved so drastically.


The background is that we could enjoy positive cargo movement mainly from China. In trades from Asia to North America and to Europe, and inter-Asia trade, the number of containers carried exceeded our prospects as of the beginning of this Fiscal Year.


Another main factor for improvement was freight restoration, which I believe impacted most on our income.


Furthermore, we reinforced our Asia-Mediterranean Sea services.


In addition to those factors, though it is shown in another slide, the fruit from our cost curtailing efforts has considerably contributed to this Division, although not as much as it did in the previous year.


As some of you may remember, in the previous fiscal year, delivery of 13 new large-sized containerships enabled us to make drastic cost reductions in route renewal or rearranging ports of call, etc.
This year, we will only be able to reduce fees in various small items such as cargo handling charges. However, the accumulation of many small efforts has still contributed significantly to achieve this favorable result.


Slide C-2: Trend of Division-wise Results 1st Half Fiscal 2003
(for Bulker & Car Carrier Service)

Regarding car carriers, as you can see, the number of units carried this year was 773 thousand units versus 777 units in the previous fiscal year, and income level also was almost flat.


Bulker market has sharply increased from the beginning of this fiscal year and is now staying at a historically high level.


How long and how this peak level continues will somewhat affect our Fiscal 2003 yearly result, and even Fiscal 2004 as well. However, our bulker business, especially larger-type vessels, has mainly consisted of longer-term stable contracts.


As we have previously explained, we have been seeking "stabilized transportation" first, in accordance with requests from our important customers, such as Japanese steel mills, and so most of our freight contracts are less affected by tentative market conditions.


Such a positive market is still a factor for our favorable results. 26% increase in operating tonnage also contributed.


Slide C-3: Trend of Division-wise Results 1st Half Fiscal 2003
(for Energy Transportation)

In our Energy Transportation Division for LNG Carriers, we only have long-term contracts for which we can earn a stable profit.


With regard to Thermal Coal Carriers, which is one of the areas we have tried to enhance, operating tonnage increased remarkably by 24%, including effect of newbuilding of an 88,000 deadweight ton-type vessel with wider hull and shallower draft, designed specifically for thermal coal transport. Here again, most of our freight contracts are longer term and quite stable, many of which allow our electric power company customers to have options that let us carry extra cargo with long contract basis freight. Considering the spot freight market level, they, of course, exercise their options, and in some trades we have even had to charter vessels with higher charterage than freight level for the extra carriage, which has not been unusual these days.


We could enjoy a rather preferable market in Oil Tanker Services overall compared to the previous year, although there has been considerable fluctuation, but cargo volume increased by 7%.


Slide C-4: Trend of Division-wise Results 1st Half Fiscal 2003
(for Consolidated Subsidiaries)

Among the "K"Line group, domestic shipping services in Japan are operated by Kawasaki Kinkai Kisen Kaisha, Ltd.. As Kawasaki Kinkai officially announced, they have secured a stable profit.


Apart from shipping, under the segment of 'Services Incidental to Transportation,' Port Terminals and Shipping Agencies, especially those located abroad, improved along with the increase in container handling volume. However, due to influence from rise in value of Yen against U.S. dollar, their revenues in U.S. dollars were somewhat decreased.


Results of Air Freight Forwarding services were affected by overall drop in airline cargo volume.


Slide D: Outline of upward/downward Profit Factors for 1st Half Fiscal 2003

In this slide, factors that affected 1st Half result are analyzed.


Making comparison with result for 1st Half Fiscal 2002, exchange rate rise of 4.53 Yen per One U.S. Dollar caused 1.8 Billion Yen loss; and bunker oil price hike of 18.85 U.S. dollars per ton increased cost by 2.3 Billion Yen.


On the other hand, 'plus' factors include 19.3 Billion Yen from favorable market; 2.4 Billion Yen from Business Expansion; and 5.0 Billion Yen from Cost reductions, etc. The end result of all these factors was 22.6 Billion Yen improvement.


Slide E: Prospect for Fiscal 2003 (Consolidated/Non-consolidated basis)

Now, let us start with explanation about yearly prospects for Fiscal 2003 that ended March 31, 2004, which is shown in the first column of this table. Average exchange rate of 115 Yen is expected for Fiscal 2003. Result for 1st Half was almost 120 Yen, so prospect for 2nd Half is set at 110 Yen. Bunker-oil price prediction for 2nd Half is 166 U.S. dollars per kilo ton; average price for Fiscal 2003 is 169 U.S. dollars.


Slide F: Trend of Division-wise Prospects for Fiscal 2003

In each of the Container Business trades, North America, Europe, and inter-Asia, we have always faced 'slack-season' in 2nd Half.
Because our accounting policy for Container Business is to count revenues at the time a vessel sails from a loading port, effect from the slack is reflected immediately within the result for 2nd Half.


In case a company takes the policy to count revenues after completion of round-trip, effect of the slack will appear slightly later. In our case, income from Container Business declined in 2nd Half compared to 1st Half. Even so, present prospect for 2nd Half becomes much better than that originally announced at the beginning of this Fiscal year. Meanwhile, please note that this cargo slack is almost the nature of Container Business. We have not yet seen any changes in the basic trend for positive cargo movement and favorable freight levels except for such seasonal volatility.


In case of this 2nd Half, we also see a slight decline even in every Division of non-Container Business, and in total, there will be an approximate 7 Billion Yen decrease in 2nd Half income compared to 1st Half.


The boom in Bulker market seems to have calmed down slightly although it still remains at a higher level. We expect the present, rather steady market level will continue during 2nd Half Fiscal 2003.


In Car Carrier service, the number of units to be transported is expected to increase mainly in trade from Asia to Europe. So, to be perfectly frank, I expect better results for 2nd Half than 1st Half for this Division, whereas present 2nd Half prospect is regarded as down from 1st Half.


//RETURNING TO// Slide E: Prospect for Fiscal 2003 (Consolidated/Non-consolidated basis)

The yearly prospects for Fiscal 2003 in first column of this table show Operating Revenues 700 Billion Yen; Operating Profit 60 Billion Yen; Income Before Income Taxes and Extra-Ordinary Items 53 Billion Yen; and Net Income 30 Billion Yen. I feel confident that we can achieve those figures.


Considering these prospects, we are going to propose an annual dividend of 10 Yen per share including 5 Yen of interim dividend already declared. I truly believe that we can also achieve this yearly expectation.


Of course, we still have some concern about many factors of volatility. Largest factor at present, and also easier one to grasp, is exchange rate. As I mentioned, our precondition for 2nd Half is 110 Yen per one U.S. dollar, although it has recently come to 108 or even 107 Yen. We compute negative effect from rise of 1 Yen as 0.4 Billion Yen per half year, as shown in another slide. Assuming average rate in the rest of 2nd Half is 107 Yen, well, a loss of 1.2 to 1.3 Billion Yen will be incurred. Because some operational targets we are trying still remain, I believe we can achieve these yearly expectations despite loss in that range, and that we will be able to successfully achieve them by exerting all possible efforts.


Slide G-2: Factors of P & L Volatility

This sheet shows the influence from changes in preconditions based on Income before Income Taxes and Extra-ordinary Items. One Yen rise in exchange rate results in 0.8 Billion Yen loss annually for Consolidated, and 0.4 Billion Yen on half-year basis.


Slide H-1 : Updated Status of KV-Plan

Finally, let us return to our 3-year Management Plan, "KV-Plan."


In Fiscal 2001, especially in 2nd Half of Fiscal 2001, Container freight levels dropped sharply, and Operating Loss was caused in our group's final results for the 2nd Half. However, we could secure Net Income on yearly basis that enabled us to pay continuous dividend, although we could not help but decrease the dividend to 3 Yen per share on annual basis.


From these circumstances, and to make a V-shaped recovery, we included initial letter "V" in our management plan. In this table in the first column, results for Fiscal 2002 are mentioned, which was
1st year of the plan, and during which remarkable recovery was made from Fiscal 2001. Comparing the prospects for Fiscal 2003, which is 2nd year of the plan, to the final target set for Fiscal 2004, achievement ratio is mentioned in the last column. As you can readily see, we are positively achieving all P & L items. We would like to achieve all numerical targets including Balance Sheet items in order to bring "KV-Plan" to a satisfactory end in two years, then start with a new management plan for stepping up to another stage.


Slide H-3 : Updated Status of CS-300
(Cost Slash-300, a Cost Curtailing Plan in KV-Plan)

"Cost Slash-300" is a cost-curtailment campaign included in our "KV-Plan" that targeted total cost reduction of 30 Billion Yen in 3 years. We achieved 23.4 Billion Yen in the first year, and 9.1 Billion Yen is our revised target for this second year. So, we will have achieved more than 30.0 Billion Yen in total by the end of this year.


Slide I-1-3 : Updated Status of "KV-Plan" Fundamental Assignments

For the updated status for Fundamental Assignments, I would greatly appreciate if you will refer to details in these papers later. However, we are definitely proceeding step-by-step in achieving each and every target.


(Additional information sheet: Plan for Newbuildings)

Now I've taken almost 30 minutes, but let me end by briefly touching upon our investment plans.


This additional sheet is a listing of our fleet order plan, however, excluded are vessels still in negotiation, or not suitable for disclosure in consideration of some stakeholders' benefit.


Regarding containerships, after the 13 new 5,500TEU type vessels delivered by Fiscal 2002, we have ordered eight 4,000TEU type vessels to be delivered from Fiscal 2004 to 2005 that will replace existing ships in US-East coast service via Panama Canal. Then, four 8,000TEU type vessels and 5 more 5,500TEU type containerships for delivery in Fiscal 2006. The four 8,000TEU containerships are being made together with another four 8,000TEU ordered by Yang Ming Line, our alliance partner, and jointly operated with them. The other five 5,500TEU type are to replace existing tonnage and to minimize cost.


Of course, the four 8000TEU and eight 4000 TEU type vessels are basically planned to replace existing short-chartered vessels; therefore, when all these containerships become operational, we will have achieved further significant cost reductions.


As to Bulkers, you see that we are preparing to add a considerable number to our fleet, mainly cape-size to expand business with customers in Japan, China, Korea or in Europe.


PCC's are also being built for additional business. In case circumstances should change to a negative trend, we will take flexible counter-measures, including disposal of some older vessels.


LNG Carriers are all jointly operated with Nippon Yusen Kaisha and Mitsui OSK Lines, except for the vessels in the Snohvit Project.


The Thermal Coal Carrier to be delivered is a wider hull vessel with shallower draft, specified for thermal coal transport, which we have developed by ourselves and have an intention for further expansion.


We ordered another two VLCC's for additional contracts. The Aframax type tanker is one of our specified operating areas, and we are trying for further expansion in this business.


Thank you so much for joining us today.