I am proud to see that we sustained Kyokuyo Shipyard Corporation's profitable stability in 2005, with 4 units of 12,000tdw type multi-purpose general cargo vessels and 1 unit of 180,000cft type ultra-low temperature reefer carrier being delivered during the year. We have also secured a strong order backlog of 4 x 13,400tdw MPC's and some 14 units of container carriers to be built by 2009. The year's major achievements include the successful implementation of business investment plan set out in 2004 aiming at further quality improvement and better emergency risk management.

1. Establishment of an even higher level of quality management system. Kyokuyo will spend whole this year to overhaul and reset our own internal standard for quality controlling, so that we will be able to build the ships on order under strict compliance to our new standard on top of ISO9001. This will also help us to realize product capacity expansion to 6 ships per year.
2. Development of high-performance and value-added products. We will invest available resources in creating brand-new ship designs which will serve as base models in years. While I do not disclose the details for now, they will be niche-oriented and very specialized types of vessel unique to us.
3. Repair business with more challenging spirit. Taking full advantage of our experienced ship-repair engineers and our big and excellent design team, we will try, this year, to pursue such more challenging projects like life extension or extensive modification of vessels as our competitors may be unwilling to take up.

Tomokazu Okamoto
President

[2006/01/01]