Kawasaki Kisen Kaisha : Corporate Governance Report

Corporate Governance

Last Updated: July 15, 2020

Kawasaki Kisen Kaisha, Ltd.

Yukikazu Myochin, Representative Director, President & CEO Contact: Naoki Mishuku, General Manager, General Affairs Group Tel: [phone] Securities Code: 9107

https://www.kline.co.jp/en/index.html

The corporate governance of Kawasaki Kisen Kaisha, Ltd. (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information

1. Basic Views

(Basic principle of corporate governance)

Solid corporate governance is essential for a company to fulfill its social responsibility, respond to the commitment bestowed by stakeholders and achieve sustainable growth.

The Company has been engaged in initiatives to strengthen its framework of corporate governance and to develop and enhance systems for risk management, and continuously strives to increase its corporate value by acting in total accordance with our business ethics while building an organic and effective mechanism of governance, in conjunction with the achievement of increasingly robust earnings and a stronger financial standing.

[Reasons for Non-compliance With the Principles of Japan's Corporate Governance Code] [Updated]

The Company complies with all principles of Japan's Corporate Governance Code.

[Disclosure Based on the Principles of Japan's Corporate Governance Code] [Updated]

Please refer to the Company's Corporate Governance Guidelines (hereinafter, the "Guidelines"), which have been posted to the Company's website in their entirety. https://www.kline.co.jp/en/csr/governance/corporate_governance/main/00/teaserItems1/01/linkList/0/link/guide line.pdf

Details of disclosure based on the principles of Japan's Corporate Governance code are as follows:

1. [Principle 3.1 (i) Management Principles, Business Strategies and Business Plans]
   and
2. [Principle 1.3 Basic Strategy for Capital Policy]

Corporate Principle and Vision

The "K" LINE Group has established the Corporate Principle and Vision as follows:

Corporate Principle

- "K" LINE: trust from all over the world -

As an integrated logistics company grown from shipping business, the "K" LINE Group contributes to society so that people live well and prosperously.

We always recognize this principle in our operations.

Vision

Our aim is to become an important infrastructure for global society, and to be the best partner with customers by providing the high-quality logistics services based on customer first policy.

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Values the "K" LINE Group prizes
 Providing reliable and excellent services	- Contributing to society
 A fair way of business	- Fostering trust from society
 Relentless efforts to achieve innovation	- Generating new values
 Respecting humanity	- Corporate culture that respects individuality and diversity

Business Strategies and Business Plans

The Group aims to maintain a valuable presence with respect to all of its stakeholders by providing safe and reliable marine transportation and logistics services, thereby serving as infrastructure for logistics and trade that helps enrich people's lives around the world. To such ends, the Group leverages various types of capital based on the driving force of its four strengths: High engineering skills, Excellent shipping services, Global network, and Human resource diversity. With its core businesses consisting of its Dry Bulk business, Energy Resource Transport business, and Product Logistics business, the Group is expanding its operations globally serving as an integrated logistics company underpinned by multi-modal marine transport services entailing operation of numerous types of vessels, leveraging its customer base built on strong relationships of trust across multiple industries. In April 2017, the "K" LINE Group has formulated its medium-term management plan, '"Revival for Greater Strides" - Value for our Next Century' with the following priority themes: (i) Rebuilding Portfolio Strategy; (ii) Advanced Management Strategy and enhancement of function-specific strategies; and

1. ESG initiatives. The Group has united in concerted efforts. In fiscal 2020, whereas the Group will continue to address priority themes, ramifications of the novel coronavirus disease (COVID-19) pandemic on its business environment remain uncertain. As such, the Group will thoroughly implement damage control with the aim of minimizing effects of the pandemic on its business performance for the fiscal year. Meanwhile, the Group will also maintain safe vessel operations and implement measures that make it possible to continuously provide stable logistics services, serving as an integral part of society's infrastructure with top priority placed on the safety of vessel crew as well as officers and employees of the entire Group. While making the task of minimizing effects of the pandemic on business performance a top priority, the Group will also diligently proceed with drawing up its new medium-term management plan whose initial year is fiscal 2020, with its sights set on addressing changes to the business environment brought about by the COVID-19 pandemic.

3) [Principle 3.1 (ii) Basic Principle and Basic Policies on Corporate Governance]

The Company deems that solid corporate governance is essential for a company to fulfill its social responsibility, respond to the commitment bestowed by stakeholders and achieve sustainable growth. The Company has stipulated in its Guidelines that it engages in initiatives to strengthen its framework of corporate governance and to develop and enhance systems for risk management, and continuously strives to increase its corporate value by acting in total accordance with our business ethics while building an organic and effective mechanism of governance, in conjunction with the achievement of increasingly robust earnings and a stronger financial standing.

Moreover, with respect to matters such as protection, proper management and disclosure of information, and communication with society, the items listed below have been stipulated in the Charter of Conduct for "K" Line Group Companies and the "K" Line Implementation Guideline for Charter of Conduct. Meanwhile the Company and companies of the Group have been striving to establish effective internal systems in order to achieve such aims.

1. 1. Human rights
   2. Compliance
   3. Trustworthy company group
   4. Proactive environmental efforts
   5. Protection, proper management and disclosure of information and communication with society
   6. Contribution to society
   7. Harmony in the international society
   8. No relations with anti-social forces
2. [Supplementary Principle 4.11.1 Principles on the Appropriate Balance Between Knowledge, Experience and Capabilities of the Board of Directors as a Whole, on Diversity and Appropriate Board Size, and Policies and Procedures for Appointing Directors]

and

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5) [Principle 3.1 (iv) Principles and Procedures in the Appointment/Dismissal of the Senior Management and the Nomination of Director and Audit & Supervisory Board Member Candidates]

To achieve the medium-term management plan, the Company's Board of Directors shall consist of a variety of individuals including those with experience in managing corporations and other large organizations and those with expertise in the operational, technical, financial and other aspects of the shipping industry. This is to ensure constructive discussions and supervision based on diverse backgrounds and knowledge. The Company shall give extra consideration to such diversity when selecting candidates for Directors and the Audit & Supervisory Board Members. In addition, with respect to the size of the Board of Directors, for the time being the number of Directors shall range from eight to 10, of which at least two shall be Independent Outside Directors who satisfy the Company's criteria. Both considerations have been stipulated in the Guidelines.

Article 14 of the Guidelines stipulates policies enlisted by the Board of Directors with respect to appointing and dismissing senior management, and also with respect to nominating Director and Audit & Supervisory Board Member candidates, as follows.

1. The Company shall appoint to its Directors and Audit & Supervisory Board Members individuals possessing such broad and deep experience and knowledge as to be able to contribute to the monitoring of business execution, superior in personal quality, and highly conscious of complying with laws and regulations and prescriptive social norms. Also, the Company shall appoint those with expertise in finance, accounting, and legal affairs as Audit & Supervisory Board Members, and of which at least one person shall possess appropriate expertise on corporate finance and accounting.
2. The Independent Outside Directors shall be persons capable of performing the following roles and responsibilities, in addition to the aforementioned.

1. Provide advice on business policies and business improvement based on their knowledge and experience with the aim to promote sustainable corporate growth and increase its corporate value over the medium- to long-term;
2. Evaluate management's performances as needed and express views, as members of the Nominating Advisory Committee and the Remuneration Advisory Committee, on management nominations and remunerations;
3. Monitor the management through important decision-making at the Board of Directors;
4. Monitor conflicts of interest between the Company and its management or controlling shareholders, etc.; and
5. Appropriately represent the views of stakeholders at the Board of Directors from a standpoint independent of the management and controlling shareholders.

1. The Company shall appoint to its Executive Officers individuals who are familiar with the shipping industry, who have abundant international sensibility and business acumen, who are highly esteemed inside and outside of the Company, who are capable of contributing to the implementation of the medium-term management plan as managers, and who are highly conscious of complying with laws and regulations and prescriptive social norms. When re-appointing the Executive Officers, the Company shall take into account the performance, etc. of the business units and departments of which they are in charge.

The Guidelines stipulate procedures enlisted by the Board of Directors with respect to appointing and dismissing senior management, and also with respect to nominating Director and Audit & Supervisory Board Member candidates, as determined by the Board of Directors. Such procedures are based on the aforementioned nomination policy, and subject to the fair, transparent and rigorous deliberations and recommendations of the Nominating Advisory Committee, and also subject to the consent of the Audit & Supervisory Board with respect to the candidates for Audit & Supervisory Board Member. When making such decisions, the Board of Directors shall respect the recommendations of the Nominating Advisory Committee.

The Nominating Advisory Committee shall furnish recommendations and advice to the Board of Directors, upon having deliberated on the reasonableness of proposals for appointment or dismissal of the Company's officers, as well as any other matters subject to inquiry of the Board of Directors concerning appointment or dismissal of the Company's officers. The Nominating Advisory Committee shall comprise all Outside Directors, the Chairman, and the President & CEO, and its chairperson shall be appointed from among committee members who are Outside Directors.

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6) [Principle 3.1 (v) Explanations With Respect to Individual Appointments/Dismissals of the Senior Management and Nominations of Director and Audit & Supervisory Board Member Candidates]

The Company shall disclose reasons for appointment of its currently serving Directors and Audit & Supervisory Board Members in its Notice for the General Meeting of Shareholders. Moreover, reasons for appointment of the Outside Directors and Outside Audit & Supervisory Board Members are explained in this Corporate Governance Report, as well as in the Notice (Refer to section II-1 of this Report).

The Company has disclosed reasons for nomination of its Executive Officers appointed on April 1, 2020 on the Company's website. https://www.kline.co.jp/en/corporate/profile/board/main/01/teaserItems1/0/linkList/0/link/180401_board_r.pdf

7) [Supplementary Principle 4.1.1 Scope of Matters Delegated to the Senior Management]

The Company shall stipulate in the Guidelines the following duties, such that are to be carried out by the Board of Directors which is to consist of a diverse range of Directors who are to be accordingly appointed based on the aforementioned policy for nomination.

1. Set strategic direction by examining and deciding upon matters relating to the Company's business policy and strategy including business principles, corporate vision and medium-term management plan;
2. Conduct multifaceted and close examinations of, and decide upon the matters which are prescribed to be decided upon by the Board of Directors, from an independent and objective standpoint in light of the Company's business policy and business strategy, and receive reports on those matters which are required to be reported to the Board of Directors;
3. Conduct multifaceted and close examinations of proposals from the Executive Officers based on healthy entrepreneurship, from an independent and objective standpoint, in order to establish an environment that supports appropriate risk-taking by the Directors and the Executive Officers, and support the timely and bold decision-making by the Directors and the Executive Officers when approved plans are implemented;
4. (i) Oversee the execution by the Directors and the Executive Officers of their duties from an independent and objective standpoint, (ii) monitor the progress of the management plan and evaluate the status of achievement; (iii) analyze the causes if the management plan is not achieved and reflect such analysis on future plans; and (iv) disclose said causes of non-achievement and analysis to the shareholders;
5. Develop and improve the risk management system and the corporate governance structure including the internal control system in order to ensure the rationale of the Company's decision-making process; and
6. Secure its fiduciary accountability to the shareholders on the Company's management, and oversee the Directors in order to ensure that information will be disclosed in a timely and accurate manner.

As such, the Regulations on Decision-Making Standards shall limit matters to be determined by the Board of Directors to those listed under items 'i.' to 'vi.' as follows, and decisions on matters of business execution otherwise shall be entrusted to the Executive Officers.

1. 1. Matters to be decided upon by the Board of Directors under laws and regulations;
   2. Matters relating to the Company's business policy and strategy including business principles, corporate vision and medium-term management plan, strategic direction of the Company, and a single-year budget;
   3. Important internal rules including Regulations on Decision-Making Standards;
   4. Response guidelines to deal with any serious law violation committed by the Company;
   5. Matters relating to significant lawsuits; and
   6. Significant matters comparable to any of the matters set forth above.
2. [Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]

The Company formulates the "Criteria for the Independence of Outside Directors," and stipulates that none of the following criteria may apply to the respective Outside Director.

1. A person who has become an Executive Director or employee of the Company within the past 10 years.
2. A person who has been a business executor (meaning a business executor as provided for in Article 2, Paragraph (3), Item (6) of the Regulation for Enforcement of the Companies Act; the same shall apply hereinafter) of a corporate group for whom the Company is a major client within the past three years.
   "A corporate group for whom the "K" LINE Group is a major client" refers to a corporate group that has received payment from the Group in each of the years in this three-year period accounting for over 2% of consolidated sales in each such year for that corporate group.
3. A person who has been a business executor of a corporate group that is a major client of the "K" LINE Group within the past three years.

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"A corporate group that is a major client of the "K" LINE Group" refers to a corporate group who made payment to the Group in each of the years in the three-year period accounting for over 2% of the Group's consolidated sales in each such year.

1. A person who has, within the past three years, been a business executor of a financial institution or another principal creditor, or its parent company or important subsidiary that plays a critical role in the "K" LINE Group's financing to such a degree that it is irreplaceable for the Group.
2. A person who has been paid ¥10 million or more or has received other assets in an amount equivalent thereto other than officer's remuneration from the Group in the past three years; or a person who has, within the past three years, belonged to an audit firm, tax accounting firm, law firm, consulting firm or other professional advisory firm that has been paid ¥10 million or more or other assets in an amount equivalent thereto by the Group in each of the years in the three-year period accounting for over 2% of the total revenues of such juridical person, etc. However, this shall not apply to a person who belongs to such juridical person in outline but has substantially no conflict of interest with the Group (a person who does not receive any compensation from such juridical person, for example).
3. A shareholder holding over 10% of the voting rights of the Company. If the shareholder is a juridical person, a person who has been a business executor of the shareholder or its parent company or subsidiary within the past three years.
4. A person who is a relative of the second or less degree of a person falling under any of the above criteria.

The Guidelines stipulate that the Board of Directors shall endeavor to select the Independent Outside Director candidates who can contribute to the Company's sustainable growth and increase of corporate value over the medium- to long-term and can be expected to contribute to frank, active and constructive discussions at the Board of Directors.

1. [Supplementary Principle 4.11.2 Status of Concurrent Positions of Directors and Audit & Supervisory Board Members with Other Listed Companies' Officers]

For details regarding Directors and Audit & Supervisory Board Members who are concurrently serving as officers of other listed companies, please refer to the Company's Notice of the 152nd Ordinary General Meeting of Shareholders, pages 8 to 23, and pages 41 to 42. https://www.kline.co.jp/en/ir/stock/meeting/main/012/teaserItems1/0/linkList/0/link/152GMS_Notice.pdf

In addition, as of the date on which this Report was submitted, the Company's Director Yasunari Sonobe serves as Outside Director of RINKO CORPORATION, the Company's Outside Director Seiichi Tanaka serves as Outside Audit & Supervisory Board Member of Meiji Shipping Co., Ltd., and the Company's Outside Audit & Supervisory Board Member Atsumi Harasawa serves as Outside Director of RICOH LEASING COMPANY, LTD., Kozue Shiga, Outside Director of the Company, has retired her position as Outside Director of RICOH LEASING COMPANY, LTD.

1. [Supplementary Principle 4.11.3 Overview of Analysis and Evaluation of Effectiveness of the Board of Directors as a Whole]

With the aim of improving functions of the Board of Directors, the Board of Directors analyzes and evaluates its effectiveness as a whole, which involves referring to self-evaluation conducted annually by each of the Directors. The Company has posted to its website summaries of findings derived from the analysis and evaluation. https://www.kline.co.jp/en/news/other/other6204323234990348946/main/0/link/200430EN3.pdf

1. [Principle 3.1 (iii) Board of Directors Policies and Procedures in Determining the Remuneration of the Senior Management and Directors]

The Guidelines provide for the Board of Directors' policies for determining the remuneration for senior management and Directors as follows:

1. The remuneration for the Executive Directors and the Executive Officers shall be appropriate, fair and balanced so as to reflect the Company's medium- to long-term business performance and the latent risks borne by said Executive Directors and Executive Officers and to further enhance their willingness and motivation to bring about the Company's sustainable growth and maximize its corporate value.
2. The remuneration for the Outside Directors shall reflect the amount of time devoted to the Company's business, and the responsibilities borne by them, and shall not include business performance-linked factors.

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1. The amount of remuneration for each individual Director shall be fair and adequate in consideration of the Company's business performance and in light of the levels of remuneration paid by other comparable companies.

The Board of Directors' procedures for determining remuneration for senior management and Directors are as follows.

1. The institutional design and level of remuneration for Directors shall be deliberated on, resolved, and recommended to the Board of Directors by the Remuneration Advisory Committee pursuant to the aforementioned policies.
2. The Board of Directors shall furnish its approval for the remuneration by position for members of senior management and Directors within the limit of the maximum yearly remuneration resolved at the General

Meeting of Shareholders, paying heed to recommendations. Meanwhile, the Representative Director and President shall ultimately determine amounts of payment for each member of senior management and each Director.

The Remuneration Advisory Committee shall comprise all Independent Outside Directors, the Chairman, and the President & CEO. The chairperson shall be appointed from among committee members who are Outside Directors.

The performance-based remuneration other than fixed remuneration consists of bonuses which serve as monetary remuneration that reflects short-term business performance, as well as performance-based share remuneration (Board Benefit Trust, BBT) which is linked to the Company's total shareholders return (TSR) to provide incentive toward the aim of increasing corporate value over the medium- to long-term.

Note: The Company's TSR = The rate of increase of the Company's shares over a fixed period + The dividend rate over the fixed period (Total dividend ÷ Initial share price)

1. 1. For the bonus, the fixed remuneration of an individual officer is multiplied by a coefficient that is determined according to a set formula based on consolidated performance in a single fiscal year (operating income and profit attributable to owners of the parent) and on business performance achieved by the individual.
   2. The coefficient for the BBT is to be calculated as follows.
   3. • The coefficient that acts as a fixed remuneration multiplier is determined by combining two elements: the ratio of the Company's TSR to the TOPIX growth rate (the "TSR Ratio"); in conjunction with the Company's TSR ranking relative to the TSR of other companies (the "TSR Ranking").
      • The Company shall perform assessment, and accordingly award points, each fiscal year over a three-year period for assessing the TSR Ratio and TSR Ranking.
      • If the TSR Ratio amounts to 50% or less, then the coefficient is assigned the minimum value of 0%. If the TSR Ratio amounts to 100%, then the coefficient is assigned the base value of 10%. If the TSR Ratio amounts to 150% or more, then the coefficient is assigned the maximum value of 40%. The coefficient is calculated using the set formula if the TSR Ratio amounts to more than 50% but less than 100%, or if the TSR Ratio amounts to more than 100% but less than 150%. The BBT plan is designed so that the coefficient used as a multiplier increases when the TSR Ratio exceeds 100%, thereby providing the Company's Officers with greater incentive to increase shareholder value.
      • The TSR Ranking compares TSR of the Company with that of two other Japanese integrated shipping companies: Nippon Yusen Kabushiki Kaisha (NYK Line) and Mitsui O.S.K. Lines, Ltd. The TSR of both companies is calculated in the same way as that of the Company.
      • The amount of BBT remuneration is calculated by multiplying the coefficient as calculated above by the fixed remuneration of an individual officer. That amount is then converted to points which are awarded to the individual officer.
2. [Supplementary Principle 4.14.2 Policy on Training of Directors and Audit & Supervisory Board Members] The Company's Guidelines stipulate training policy, as follows, with the aim of facilitating appropriate performance of the roles and responsibilities expected of Directors and Audit & Supervisory Board Members who constitute a critical element of the governance body.
   (1) Within three months from their appointment, the Company's newly-appointed Directors shall participate in an outside seminar primarily addressing the issues of legal liability under the Companies Act, the Financial Instruments and Exchange Act and other relevant acts. In addition, the Company shall provide the newly- appointed Directors with commentary books on directors' responsibilities.
   (2) Each year, the Company's Directors and Audit & Supervisory Board Members shall attend a training session on compliance matters including competition laws, insider trading regulations and anti-bribery.
   (3) When Outside Directors and Outside Audit & Supervisory Board Members take office, the Company shall
   ensure they gain a full understanding of the Group's business, corporate finance, organizational status,

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business environments and management issues by having its departments and officers in charge offer explanations about such subjects.

1. The Company's Directors and Audit & Supervisory Board Members including outside officers shall actively gather information at any and all times, and shall devote themselves to the studies of the Company's financial condition, status of compliance, corporate governance and other relevant matters.

13) [Principle 5.1 Policy for Constructive Dialogue With Shareholders]

From the perspective of achieving sustained growth and increasing corporate value over the medium- to long- term, the Company engages in constructive dialogue with its shareholders, and its Guidelines and IR Policy furthermore stipulate policy, as follows, on establishing frameworks and engaging in efforts to facilitate such dialogue.

1. To achieve sustained growth and increased corporate value over the medium- and long-term, "K" LINE considers and executes measures that promote constructive dialogue with shareholders.
2. The Executive Officer in charge of the Company's IR & PR activities shall be responsible for overseeing constructive dialogue with shareholders with IR & PR, Corporate Planning, General Affairs, Finance, Accounting, Taxation and Legal, and the relevant departments in corporate shall ensure positive cooperation with each other and endeavor to enhance measures to promote constructive dialogue.
3. "K" LINE seeks to enhance promoting our shareholders' understanding of our financial situation and having dialogue with them through proactive disclosure and polite questions and answers in General Meeting of Shareholders, sessions, facility tours, brochures issued for shareholders and investors. We also explain our business strategy, business description and financial results, etc. to institutional investors through quarterly financial results briefings, briefings on our medium-term management plan and sessions held by security companies, etc. In addition, we seek to enhance dialogue with them through small meetings for such investors, conferences and overseas investors' road show meetings, etc.
4. As for shareholders' views and concerns which "K" LINE has received through the above opportunities, we shall compile them according to their respective importance as appropriate and report them collectively to the Board of Directors, etc.
5. "K" LINE appropriately controls insider information in accordance with Financial Instruments and Exchange Act and relevant laws and regulations as well as internal rules.
6. The Company shall respect the intent and meaning of the Fair Disclosure Rules specified in the Financial Instruments and Exchange Act and other related laws, and shall furthermore strive to ensure fair information disclosure in accordance with the Fair Disclosure Policy stipulated in its IR Policy.

Please refer to the Company's website via the link below to access its entire IR Policy. https://www.kline.co.jp/en/ir/management/policy.html

14) [Principle 1.4 Cross-Shareholdings]

The Company owns and operates numerous high-cost assets in the form of marine vessels over extended durations of time. The Company furthermore operates against a backdrop of a business environment epitomized by business performance that is highly volatile due to foreign exchange, market conditions and other such factors that are beyond corporate efforts of individual companies. To achieve long-term and sustainable growth given such a scenario, the Company maintains cross-shareholdings of partner companies deemed necessary in order to sustain and strengthen the Company's transactional and business relationships. Meanwhile, the Board of Directors assesses whether or not the Company should maintain individual holdings and shall take steps to reduce the Company's Cross-Shareholdings, to which ends it is to meet no less than once per year and take an objective standpoint with respect to specifically scrutinizing the purposes of maintaining the individual holdings and the medium- to long-term economic rationale of maintaining such holdings. Consequently, the Company decreased the number of stock listings in its portfolio of cross-shareholdings to four stock listings as of March 31, 2020, from 23 corporate listings on March 31, 2015. Upon assessing the economic rationale of such holdings, the Company considers the notion of selling holdings in cases where returns fall below 10%, as calculated by adding actual dividends to the difference between the year-end market price and the initial market price, and then dividing the product of that calculation by the initial market price: (actual dividends + (year-end market price - initial market price)) ÷ initial market price. The 10% figure is relative to the Company's 10% ROE target cited under its medium-term management plan.

The Guidelines stipulate that, when exercising the voting rights as to the Cross-Shareholdings, the Board of Directors shall fully examine whether or not the relevant propositions would contribute to the enhancement of

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the Company's corporate value and the shareholders' common interests, hold dialogues with issuing entities as needed, and shall determine whether it would vote for or against the said propositions.

15) [Principle 1.7 Related Party Transactions]

The Company has established the following procedures with respect to related party transactions, and finds that management is capable of supervising such transactions based on such procedures.

1. The Regulations on Decision-Making Standards stipulate that the Company is to refer matters to be addressed by and seek prior approval from the Board of Directors with respect to certain matters irrespective of monetary amount, such that include: transactions with major shareholders whose holdings account for more than 10% of the Company's voting rights or transactions between the Company and its Directors; transactions conducted by a Director with the Company for a third party; transactions involving conflict of interest; and, debt guarantees of Directors made by the Company. The Regulations on Decision- Making Standards also stipulate that key developments must be reported to the Board of Directors subsequent to having carried out a transaction. As such, the Board of Directors supervises appropriateness of transactions.
2. The Company shall treat all of its shareholders impartially, and accordingly must not make special considerations for specific shareholders.
3. The Company shall determine the presence or absence of related party transactions upon submission of confirmation documents for all of the Company's officers each fiscal term, and shall furthermore verify transaction details in the event that related party transactions have taken place.

16) [Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

The Company has adopted a defined-benefit corporate pension plan, and accordingly strives to ensure safe and efficient management of the plan. To such ends, the Company has established the Pension Asset Management Committee which is chaired by the General Manager of Finance Group who serves as the pension fund manager, and whose membership consists of individuals in charge of pension fund duties in Finance and Human Resources divisions. The Company has established fundamental policies and asset management guidelines particularly with respect to safely and efficiently managing pension funds. The Company accordingly engages in efforts involving human resources and administration serving as the parent entity of the pension plan, with the aim of ensuring that the Pension Asset Management Committee implements the function of monitoring the entity entrusted with asset management.

Moreover, managing the pension plan involves ensuring that the utmost respect is devoted to interests of those enrolled in the corporate pension plan.

2. Capital Structure

	Foreign Shareholding Ratio		30% or more

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[Status of Major Shareholders] [Updated]

		Name			Number of Shares Owned			Shareholding Ratio
				(Shares)			(%)
		ECM MF	12,716,400		13.56
		GOLDMAN SACHS INTERNATIONAL	10,516,142		11.21
		MLI FOR CLIENT GENERAL OMNI NON	5,651,400		6.02
		COLLATERAL NON TREATY-PB
		J.P. MORGAN SECURITIES PLC FOR
		AND ON BEHALF OF ITS CLIENTS	4,330,400		4.61
		JPMSP RE CLIENT ASSETS-SEGR ACCT
		CGML PB CLIENT	3,708,400		3.95
		ACCOUNT/COLLATERAL
		Trust & Custody Services Bank, Ltd.
		(Kawasaki Heavy Industries, Ltd. retirement	3,392,307		3.61
		benefit trust account re-entrusted by Mizuho
		Trust & Banking Co., Ltd.)
		IMABARI SHIPBUILDING CO., LTD.	3,283,500		3.50
		The Master Trust Bank of Japan, Ltd. (trust	2,811,100		2.99
		account)
		Japan Trustee Services Bank, Ltd. (trust	2,417,400		2.57
		account)
		Sompo Japan Insurance Inc.	1,910,700		2.03
		Controlling Shareholder (except for Parent)		―――
		Parent (Listed Stock Market)		N/A
		Supplementary Explanation
―――
3. Corporate Attributes
					Tokyo Stock Exchange First Section, Nagoya Stock
		Listed Stock Market and Market Section		Exchange First Section, Fukuoka Stock Exchange existing
					market
		Fiscal Year-End		March
		Type of Business		Marine transportation
		Number of Employees (Consolidated) at End		1,000 or more
		of the Previous Fiscal Year
		Net Sales (Consolidated) for the Previous		From ¥100 billion to less than ¥1 trillion
		Fiscal Year
		Number of Consolidated Subsidiaries at End		From 100 to less than 300
		of the Previous Fiscal Year

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4. Policy for Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder

―――

5. Special Circumstances Which May Have Material Impact on Corporate Governance

KAWASAKI KINKAI KISEN KAISHA, LTD. (hereinafter "KAWASAKI KINKAI"), the Company's subsidiary, is listed on the Second Section of the Tokyo Stock Exchange. Its mainstay business is that of coastal, ferry, and international short-sea routes, and engages in business that leverages their customer base in their unique business areas. It plays an important role in the Group with respect to its Corporate Principle in serving "as an integrated logistics company grown from shipping business." The notion that it is a listed company is significant in terms of it being subject to objective evaluations in the stock market while ensuring that it has access to diverse means of financing.

The Company's policy regarding corporate governance in light of its relationship with KAWASAKI KINKAI is as follows.

• The Company extends its Charter of Conduct and environmental management systems to KAWASAKI KINKAI, and accordingly does not exclude it from the notion that it is part of the Group as a whole.
• KAWASAKI KINKAI manages internal information in a manner that adheres to the Financial Instruments and Exchange Act, securities listing regulations of stock exchanges, and other market-related laws and regulations. It also maintains management policy that takes account of its relationships with its respective stakeholders, which is also respected by the Company.

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1. Business Management Organization and Other Corporate Governance Systems Regarding Decision-making, Execution of Business, and Supervision in Management

1. Organizational Composition and Operation

Organization Form

Company with Audit & Supervisory Board

[Directors]

Maximum Number of Directors Stipulated in

15

Articles of Incorporation

Term of Office Stipulated in Articles of

1 year

Incorporation

Chairperson of the Board [Updated]

President

Number of Directors

10

Appointment of Outside Directors

Appointed

Number of Outside Directors

4

Number of Independent Officers Designated

3

From Among Outside Directors

Outside Directors' Relationship With the Company (1) [Updated]

Name

Attribute

Relationship with the Company*

a

b

c

d

e

f

g

h

i

j

k

Seiichi Tanaka

From another company



Keiji Yamada

Other

Ryuhei Uchida

From another company



Kozue Shiga

Attorney at law

• Categories for "Relationship with the Company"
• "" when the director presently falls or has recently fallen under the category; "" when the director fell under the category in the past;
• "" when a close relative of the director presently falls or has recently fallen under the category; and "" when a close relative of the director fell under the category in the past
• 1. Executive (a person who executes business; hereinafter, the same) of the Company or its subsidiary
  2. Non-executivedirector or executive of the parent of the Company
  3. Executive of a fellow subsidiary of the Company
  4. Party whose major client or supplier is the Company or an executive thereof
  5. Major client or supplier of the Company or an executive thereof
  6. Consultant, accounting professional or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director
  7. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation)
  8. Executive of a client or supplier of the Company (which does not correspond to any of d., e., or f.) (the director himself/herself only)
  9. Executive of a corporation to which outside officers are mutually appointed (the director himself/herself only)
  10. Executive of a corporation that receives a donation from the Company (the director himself/herself only)
  11. Other

- 11 -

Outside Directors' Relationship With the Company (2) [Updated]

			Designation as			Supplementary
	Name		Independent			Explanation of the			Reasons for Appointment
			Officer			Relationship
									Mr. Seiichi Tanaka joined Mitsui & Co.,
									Ltd. after completing a Master's Degree
									in marine engineering at the university.
									After a long service in the Ship and
						The Company has a		Marine Project Division he left the
						business relationship		division in 2006 and from 2008 to 2014,
						with Mitsui & Co., Ltd,		he gained experience in corporate
						which Mr. Seiichi		management, serving as a representative
	Seiichi Tanaka				Tanaka served, but the		director of Mitsui & Co., Ltd. He has
						transaction amount		been Outside Director of the Company
						accounts for less than		so his experience and insight may be
						1% of total consolidated		utilized in the Company's management.
						sales.		As there is no possibility that conflict of
									interest may occur between Mr. Tanaka
									and general shareholders, the Company
									designates him as an independent
									director.
									Mr. Keiji Yamada has experience in
									prominent positions with central/local
									governmental offices such as former
									Ministry of Home Affairs, and also
									served 4 terms (16 years) as Governor
									of Kyoto Prefecture. Mr. Yamada does
									not have prior experience of direct
									involvement in corporate management,
									however, the Company judges that his
									wide range of experience/personal
									network and insight from his long-term
	Keiji Yamada				-		experience as head of administrative
				organs, will contribute in promoting the
									Group's corporate governance and
									making precise suggestions to the
									Company's management and
									supervising the execution of business.
									Accordingly, the Company has
									appointed him as Outside Director. As
									there is no possibility that conflict of
									interest may occur between Mr. Yamada
									and general shareholders, the Company
									designates him as an independent
									director.

- 12 -

			Designation as			Supplementary
	Name		Independent			Explanation of the			Reasons for Appointment
			Officer			Relationship
									Mr. Ryuhei Uchida first joined
									Mitsubishi Corporation, mainly served
									for supporting investments for Japanese
									and foreign non-listed companies, then
									joined Innovation Network Corporation
						Mr. Ryuhei Uchida		of Japan, being in charge of investments
						satisfies the requisite for		for foreign non-listed companies and
						Outside Director in the		supporting business start-ups for
						Companies Act;		Japanese non-listed companies, as well
						however, due to		as also serving as an Outside Director
						conflicts with the		for both British and Chilean companies.
						shareholder requisite in		Currently he is in charge of managing
						the criteria for		investments of Japanese-listed
						independence of Outside		companies as a Director of Effissimo
	Ryuhei Uchida					Directors provided by		Capital Management Pte Ltd, a
						the Company since he		shareholder of the Company, and has
						serves as a Director of		abundant experience and insight in
						Effissimo Capital		corporate value enhancement. The
						Management Pte Ltd., a		Company judges that his precise
						shareholder of the		suggestions and supervision on its
						Company, the Company		management and the execution of
						designates him as a non-		business, with the sight as our
						independent Outside		shareholder, will promote the
						Director.		Company's corporate value over the
									medium- to long-term, and will meet
									expectation of all its stakeholders,
									including general shareholders.
									Accordingly, the Company has
									appointed him as Outside Director.
									Ms. Kozue Shiga has expert knowledge
									and experience as a lawyer, and she
									assumed Outside Audit & Supervisory
									Board Member of the Company in June
									2016 after having served as an outside
									director and auditor of several listed
									companies. Though she does not have
									prior experience of direct involvement
									in corporate management by methods
									other than serving as an outside board
									member, the Company judges, based on
	Kozue Shiga				-		her achievements in the improvement of
				audit and supervisory functions of the
									Company group, that she has expertise
									and personality appropriate to take a
									part of the Board and also will
									contribute to improvement in its
									diversity. Accordingly, the Company has
									appointed her as Outside Director. As
									there is no possibility that conflict of
									interest may occur between Ms. Shiga
									and general shareholders, the Company
									designates her as an independent
									director.

- 13 -

[Voluntary Committees]

Voluntary Establishment of Committee(s)

Equivalent to Nominating Committee or Established

Remuneration Committee

Committee's Name, Composition, and Chairperson's Attributes [Updated]

				Committee Equivalent to			Committee Equivalent to
				Nominating Committee			Remuneration Committee
	Committee's Name		Nominating Advisory Committee		Remuneration Advisory Committee
	Total Committee Members		4		4
	Full-Time Members		0		0
	Inside Directors		1		1
	Outside Directors		3		3
	Outside Experts		0		0
	Other		0		0
	Chairperson		Outside Director		Outside Director

Supplementary Explanation [Updated]

Article 21 of the Guidelines stipulates details regarding the Nominating Advisory Committee and the Remuneration Advisory Committee.

(Start of excerpt) Article 21

1. The Company shall put and keep in place the Nominating Advisory Committee and the Remuneration Advisory Committee as advisory committees to the Board of Directors in the manner described below.
2. The Nominating Advisory Committee and the Remuneration Advisory Committee shall be comprised of all of the Outside Directors, the Director and Chairman, and the President & CEO. (The Outside Directors shall appoint the chairperson of each Committee from among themselves.)
3. In response to inquiries from the Board of Directors, the Nominating Advisory Committee shall deliberate on:
4. 1. Reasonableness of proposals for appointment or dismissal of the Company's officers; and
   2. Any other matters inquired from the Board of Directors concerning appointment or dismissal of the Company's officers.
5. In response to inquiries from the Board of Directors, the Remuneration Advisory Committee shall deliberate on:
6. 1. Institutional design of officers' remunerations;
   2. Level of officers' remuneration; and
   3. Any other matters inquired from the Board of Directors concerning officers' remunerations.
7. Each set of rules on operation of the Nominating Advisory Committee and the Remuneration Advisory

Committee shall be separately prescribed. (End of excerpt)

The attendance in the fiscal year ended March 31, 2020 is as follows:

Nominating Advisory Committee

Akira Okabe	(Attended 13/13 meetings) *Chairperson
Seiichi Tanaka	(Attended 12/13 meetings)
	- 14 -

Kiyoshi Hosomizo	(Attended 4/5 meetings) (Retired from office on June 18, 2019)
Keiji Yamada	(Attended 8/8 meetings) (Assumed office on June 21, 2019)
Eizo Murakami	(Attended 13/13 meetings)
Yukikazu Myochin	(Attended 13/13 meetings)
Remuneration Advisory Committee
Seiichi Tanaka	(Attended 5/6 meetings) *Chairperson
Akira Okabe	(Attended 6/6 meetings)
Kiyoshi Hosomizo	(Attended 2/3 meetings) (Retired from office on June 18, 2019)
Keiji Yamada	(Attended 3/3 meetings) (Assumed office on June 21, 2019)
Eizo Murakami	(Attended 6/6 meetings)
Yukikazu Myochin	(Attended 6/6 meetings)

Status of establishment of secretariats, etc.

The Executive Officer in charge of General Affairs is in charge of secretariats which have been established with respect to each of the committees.

[Audit & Supervisory Board Members]

Establishment of Audit & Supervisory Board	Established
Maximum Number of Audit & Supervisory
Board Members Stipulated in Articles of	5
Incorporation
Number of Audit & Supervisory Board Members	4

Cooperation Among Audit & Supervisory Board Members, Financial Auditor and Internal Audit Department

The Audit & Supervisory Board Members receive reports from the Accounting Auditor regarding audit plans and audit results on a regular basis, and otherwise maintains close cooperation with the Accounting Auditor by exchanging information and opinions as necessary.

The Audit & Supervisory Board Members hold meetings with the Internal Audit Group on a regular basis, and also receive explanations from the Internal Audit Group regarding audit plans and progress thereof. Monthly reports of matters that the Internal Audit Group reports to the Representative Directors are also circulated to the Audit & Supervisory Board Members. Meanwhile, the Company strives to ensure information sharing which also involves distributing reports on operational audits conducted by the Audit & Supervisory Board Members to the Internal Audit Group. In addition, when the Audit & Supervisory Board Members conduct on-site audits of subsidiaries and affiliated companies, they engage in mutual coordination and cooperation in a manner that involves cooperating with the Accounting Auditor and the Internal Audit Group as necessary.

	Appointment of Outside Audit & Supervisory			Appointed
	Board Member
	Number of Outside Audit & Supervisory Board		2
	Members

Number of Independent Officers Designated

From Among Outside Audit & Supervisory 2

Board Members

Outside Audit & Supervisory Board Members' Relationship With the Company (1) [Updated]

Name	Attribute			Relationship with the Company*
b	c	d	e	f	g	h	i	j	k	l	m
	a

Atsumi Harasawa

Attorney at law

- 15 -

Name	Attribute			Relationship with the Company*
b	c	d	e	f	g	h	i	j	k	l	m
	a

Shinsuke Kubo	Certified Public
	Accountant

• Categories for "Relationship with the Company"
• "" when the Audit & Supervisory Board Member presently falls or has recently fallen under the category; "" when the Audit & Supervisory Board Member fell under the category in the past;
• "" when a close relative of the Audit & Supervisory Board Member presently falls or has recently fallen under the category; and
  "" when a close relative of the Audit & Supervisory Board Member fell under the category in the past
• 1. Executive (a person who executes business; hereinafter, the same) of the Company or its subsidiary
  2. Non-executivedirector or accounting advisor of the Company or its subsidiary
  3. Non-executivedirector or executive of the parent of the Company
  4. Audit & Supervisory Board Member of the parent of the Company
  5. Executive of a fellow subsidiary of the Company
  6. Party whose major client or supplier is the Company or an executive thereof
  7. Major client or supplier of the Company or an executive thereof
  8. Consultant, accounting professional or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an Audit & Supervisory Board Member
  9. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a corporation)
  10. Executive of a client or supplier of the Company (which does not correspond to any of f., g., or h.) (the Audit & Supervisory Board Member himself/herself only)
  11. Executive of a corporation to which outside officers are mutually appointed (the Audit & Supervisory Board Member himself/herself only)
  12. Executive of a corporation that receives a donation from the Company (the Audit & Supervisory Board Member himself/herself only)
  13. Other

- 16 -

Outside Audit & Supervisory Board Members' Relationship With the Company (2) [Updated]

			Designation as			Supplementary
	Name		Independent			Explanation of the			Reasons for Appointment
			Officer			Relationship
									Ms. Atsumi Harasawa possesses
									extensive expert knowledge and
									experience as attorney at law and also
									has knowledge and experience in the
									transportation sector by contributing on
									safety from the technical side being
									certified as a first class aircraft
									maintenance technician at Japan Airlines
									Co., Ltd. Ms. Harasawa does not have
									prior experience of direct involvement in
									corporate management apart from being
									an Outside Auditor, however, the
	Atsumi Harasawa				-		Company judges that her presence will
				enhance the diversity of its Board
									member structure, and she will perform
									effective auditing from an outside
									independent standpoint as an Outside
									Audit & Supervisory Board Member.
									Accordingly, the Company has
									appointed her as Outside Audit &
									Supervisory Board Member. As there is
									no possibility that conflict of interest
									may occur between Ms. Harasawa and
									general shareholders, the Company
									designates her as an independent
									director.
									Mr. Shinsuke Kubo, a CPA in Japan, has
									a variety of achievements and
									experiences through his work with both
									Japanese and foreign audit firms, in the
									fields of auditing, taxation business, IPO
									support, corporate revitalization and
									M&A. Mr. Kubo also has abundant
									experience in founding and managing
									venture businesses and companies that
									support reactivation of other businesses,
	Shinsuke Kubo				-		the Company judges that he will perform
				effective auditing from an outside
									independent standpoint as an Outside
									Audit & Supervisory Board Member.
									Accordingly, the Company has
									appointed him as Outside Audit &
									Supervisory Board Member.
									As there is no possibility that conflict of
									interest may occur between Mr. Kubo
									and general shareholders, the Company
									designates him as an independent
									director.

- 17 -

[Independent Officers]

Number of Independent Officers	5

Matters Relating to Independent Officers

Please refer to subsection I. 1. 8) [Principle 4.9 Independence Standards and Qualification for Independent Outside Directors], previously in this document, for details on the "Criteria for the Independence of Outside Directors."

[Incentives]

	Implementation of Measures to Provide		Performance-linked remuneration
	Incentives to Directors
	Supplementary Explanation [Updated]

Pursuant to resolution of its Ordinary General Meeting of Shareholders held on June 24, 2016, the Company has adopted its Board Benefit Trust (BBT) performance-based share remuneration plan with the aim of raising awareness of contributions made with respect to increasing business performance and corporate value over the medium- to long-term by more explicitly clarifying the connection between remuneration for Directors (Executive Directors only) and share value. Under the BBT plan, the Company's shares, etc. are to be delivered through the trust pursuant to the Regulations for Delivery of Shares to Officers as approved by the Board of Directors. The amount of remuneration for Directors who contribute to the trust over four consecutive fiscal years based on the BBT plan shall be a maximum of ¥480 million and Directors shall, in principle, receive shares of the Company upon their retirement.

Moreover, per the meeting of the Board of Directors held on April 26, 2019, the Company has revised its schemes for bonuses and the BBT plan. Accordingly, bonuses which had previously been determined on a per occasion basis shall mainly be linked to business performance targets in single fiscal years, and BBT shall be linked to the Company's total shareholders return (TSR). Through such revisions involving both the bonuses and the BBT plan, the Company aims to strike an optimal balance between short-term performance and increasing corporate value over the medium- to long-term, while providing the Company's officers with sound incentive to facilitate sustainable growth.

Please refer to pages 51 to 53 of the Company's 152nd Annual Securities Report (Japanese only) for details on the Company's policy for determining proportions of remuneration in the form of performance-based remuneration and remuneration other than performance-based remuneration, benchmarks pertaining to performance-based remuneration, methods of determining amounts of such performance-based remuneration, and reasons for having selected such benchmarks. https://www.kline.co.jp/ja/news/ir/auto_20200623161800_S100IRQK/pdfFile.pdf (Japanese only)

Recipients of Share Options

Supplementary Explanation

―――

[Director Remuneration]

Disclosure of Individual Directors' RemunerationNo individual disclosure

Supplementary Explanation [Updated]

The Company paid ¥312 million to 12 Directors and ¥73 million to six Audit & Supervisory Board Members as officer's remuneration pertaining to the fiscal year ended March 31, 2020. The above includes remuneration for

- 18 -

one Director who retired from his position, and two Directors and two Audit & Supervisory Board Members who retired from their positions due to the expiration of their terms of office upon the conclusion of the 151st Ordinary General Meeting of Shareholders held on June 21, 2019.

The above table includes ¥0 million of expenses relating to the performance-based share remuneration plan for one Director.

	Policy for Determining Remuneration Amounts		Established
	or Calculation Methods Thereof

Disclosure of Policy for Determining Remuneration Amounts or Calculation Methods Thereof

For Board of Directors policies in determining the remuneration of Directors, please refer to above I 1. 11) [Principle 3.1 (iii) Board of Directors Policies and Procedures in Determining the Remuneration of the Senior Management and Directors].

The remuneration, etc. for Audit & Supervisory Board Members shall solely comprise monthly remuneration. Monthly remuneration for each Audit & Supervisory Board Member is determined after deliberations by Audit & Supervisory Board Members, within the limit of the maximum amount of monthly remuneration for Audit & Supervisory Board Members resolved at the General Meeting of Shareholders.

The retirement benefits plan for Directors and Audit & Supervisory Board Members was terminated in June 2006.

[Supporting System for Outside Directors and/or Audit & Supervisory Board Members]

The Company shall support the smooth execution of duties of its Outside Directors by having the Corporate Planning Group provide them with briefings and information necessary prior to meetings of the Board of Directors and by furnishing them with reports on important matters of business execution.

Moreover, the Company shall establish a framework for assisting the Audit & Supervisory Board Members by appointing employees to assist them and by establishing regulations regarding such appointments. The Company shall ensure that the employees assisting Audit & Supervisory Board Members maintain independence from the Directors by prohibiting such employees from concurrently performing other duties related to business execution, and having the Audit & Supervisory Board Members themselves subject the employees assisting Audit & Supervisory Board Members to examinations.

[Status of Persons Who Have Retired From a Position Such as Representative Director and President]

Retired Representative Director and Presidents, etc. Holding Advisory or Any Other Position in the Company [Updated]

Date of

Title/

Working Form and Conditions

Retirement

Term of

Name

Responsibilities

(Full-time/Part-time,

from Position

Position

Office

Paid/Unpaid, etc.)

Such as

President

Furnishes advice

based on requests

from management

Isao

Honorary

and engages in

March 31,

activities of

Part-time/Unpaid

N/A

Shintani

Advisor

2000

industry

associations and

economic

organizations

- 19 -

Date of

Title/

Working Form and Conditions

Retirement

Term of

Name

Responsibilities

(Full-time/Part-time,

from Position

Position

Office

Paid/Unpaid, etc.)

Such as

President

Furnishes advice

based on requests

from management

Subject to

Jiro

Special

and engages in

March 31,

upper age

Executive

activities of

Part-time/Paid

limit of

Asakura

2015

Advisor

industry

internal

associations and

rules

economic

organizations

Furnishes advice

based on requests

from management

Subject to

Eizo

Special

and engages in

March 31,

upper age

Executive

activities of

Part-time/Paid

limit of

Murakami

2019

Advisor

industry

internal

associations and

rules

economic

organizations

Total Number of Retired Representative Director and Presidents, etc. Holding

3

Advisory or Any Other Position in the Company [Updated]

Other Matters

There is no senior advisor position at the Company because it was terminated in November 2017.

Whereas the Company maintains advisory positions other than that of Honorary Advisor, there are currently no persons serving as advisors upon retirement of those including Representative Director and President.

The Company's advisors take part in activities of industry associations and other such organizations drawing on their personal connections in the shipping industry. They furthermore furnish appropriate advice upon request based on their deep experience and knowledge related to the shipping industry.

The Company's advisors are not involved in management and do not attend meetings of the Board of Directors, Nominating Advisory Committee, or Remuneration Advisory Committee.

2. Matters on Functions of Business Execution, Audit and Supervision, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System) [Updated]

(Status of business execution)

The Company's Board of Directors is comprised of ten Directors, including four Outside Directors. It determines the fundamental management policies, matters required by laws and regulations, and other important matters regarding the management of businesses, while supervising the execution of duties by the Directors. A meeting of the Board of Directors should be held at least once a month. The Company also adopts a system of making resolutions in writing for the Board of Directors, which enables the flexible operation of the board.

Apart from the Board of Directors, the Company hosts a Management Conference that requires the attendance of the Director and Chairman, Vice President Executive Officer, Executive Officers equivalent to or higher than Senior Executive Officer, Executive Officers responsible for business units, Executive Officers in charge of Corporate Planning, Finance and Accounting as well as Audit & Supervisory Board Members once a week in principle. By doing so, the Company establishes a system that contributes to decision-making by the President & CEO or the delegate based on open discussions.

The attendance at the Board meetings in the fiscal year ended March 31, 2020 is as follows:

- 20 -

Eizo Murakami, Director	(Attended 14/14 meetings) *Chairperson
Yukikazu Myochin, Director	(Attended 14/14 meetings)
Harusato Nihei, Director	(Attended 14/14 meetings)
Atsuo Asano, Director	(Attended 14/14 meetings)
Yukio Toriyama, Director	(Attended 10/10 meetings) *Assumed office on June 21, 2019
Kazuhiko Harigai, Director	(Attended 10/10 meetings) *Assumed office on June 21, 2019
Jiro Asakura, Director	(Attended 4/4 meetings) *Retired from office on June 21, 2019
Hiromichi Aoki, Director	(Attended 4/4 meetings) *Retired from office on June 21, 2019
Akira Okabe, Director	(Attended 13/14 meetings)
Seiichi Tanaka, Director	(Attended 14/14 meetings)
Kiyoshi Hosomizo, Director	(Attended 3/4 meetings)
	*Retired from office due to resignation on June 18, 2019
Keiji Yamada, Director	(Attended 10/10 meetings) *Assumed office on June 21, 2019
Ryuhei Uchida, Director	(Attended 10/10 meetings) *Assumed office on June 21, 2019
Keisuke Yoshida, Audit & Supervisory Board Member	(Attended 4/4 meetings)
		*Retired from office on June 21, 2019
Tsuyoshi Yamauchi, Audit & Supervisory Board Member	(Attended 10/10 meetings)
		*Assumed office on June 21, 2019
Kunihiko Arai, Audit & Supervisory Board Member	(Attended 10/10 meetings)
		*Assumed office on June 21, 2019
Toshikazu Hayashi, Audit & Supervisory Board Member	(Attended 4/4 meetings)
		*Retired from office on June 21, 2019
Kozue Shiga, Audit & Supervisory Board Member	(Attended 13/14 meetings)
Atsumi Harasawa, Audit & Supervisory Board Member	(Attended 10/10 meetings)
		*Assumed office on June 21, 2019

(Reasons for adopting the system of a company with Audit & Supervisory Board)

The Company has four Audit & Supervisory Board Members as of June 23, 2020. The Company has adopted this system upon having deemed it to be effective with respect to corporate governance amid a scenario where legal revisions in recent years have strengthened the authority and independence of Audit & Supervisory Board Members. Meanwhile, the Company recognizes that its corporate governance is functioning appropriately under the system which encompasses the Board of Directors, Audit & Supervisory Board, Management Conference and other such bodies, given that procedures being carried out in a manner sufficiently aligned with legal code.

(Status of audit)

The Company has entered into an audit contract with an auditing firm (Ernst & Young ShinNihon LLC) which performs audits from a standpoint of fairness and impartiality.

Name of the certified public accountants who executed the audit duties

Kazuya Kitazumi

Satoshi Uchida Masashi Kobayashi

/	Affiliated auditing firm	/	Number of consecutive
years performing audits
/ Ernst & Young ShinNihon LLC	/	- (Note)
/ Ernst & Young ShinNihon LLC	/	- (Note)
/ Ernst & Young ShinNihon LLC	/	- (Note)

Note: These details have been omitted because the number of consecutive years performing audits does not exceed seven years.

Audit operations assistants
Certified Public Accountant	17
Other assistants	33

(Status of nomination)

The Board of Directors shall select candidates for the Audit & Supervisory Board Members subject to the consent of the Audit & Supervisory Board and subject to the fair, transparent and rigorous deliberations and recommendations of the Nominating Advisory Committee, which was established in November 2015.

(Status of remuneration)

The Company shall decide the remuneration subject to the fair deliberations and recommendations of the Remuneration Advisory Committee, which was established in November 2015.

- 21 -

3. Reasons for Adoption of Current Corporate Governance System [Updated]

The Company strives to streamline business execution by strengthening the supervisory function and delegating authority to Unit Supervising Executive Officers, which has involved adopting a Board of Directors and a Unit Supervisory System encompassing multiple Outside Directors. The Company has adopted its current system under which it strives to maintain and improve the effectiveness of its audits by coordinating efforts of the Audit & Supervisory Board Members and the Internal Audit Group, premised on the notion that such a system enables the Company to respond to its commitment bestowed on it by its shareholders and other stakeholders. The Company adopted the Unit Supervisory System in April 2016 with the aim of taking appropriate risk and identifying business execution responsibility upon having appointed Unit Supervising Executive Officers to oversee multiple divisions positioned under the President & CEO who spearheads execution. For details, please refer to the Company's website. https://www.kline.co.jp/en/csr/governance/corporate_governance.html

Moreover, the Company's Outside Directors ask questions and express opinions from a neutral standpoint during meetings of the Board of Directors, drawing on their longstanding experience and knowledge acting as managers and in other capacities.

- 22 -

III. Implementation of Measures for Shareholders and Other Stakeholders

1. Measures to Energize General Meeting of Shareholders and Smooth Exercise of Voting Rights [Updated]

					Supplementary Explanations
		Early Notification of General			The Company sends the notification out approximately three weeks before
		Meeting of Shareholders			the General Meeting of Shareholders.
		Scheduling AGMs Avoiding			The General Meetings of Shareholders have been scheduled on non-peak
		the Peak Day			days.
		Allowing Electronic or			In 2006, the Company adopted a system that enables shareholders to
		Magnetic Exercise of Voting			exercise their voting rights online via the Internet and through other such
		Rights			means.
		Participation in Electronic
		Voting Platform and Other			The Company participates in the Electronic Voting Platform and otherwise
		Efforts to Enhance the Voting			considers options for offering greater convenience to institutional investors
		Environment for Institutional			with respect to exercising their voting rights.
		Investors
		Providing Convocation Notice			The Company prepares full English-language versions of its Convocation
		in English (Translated Fully or			Notices and Business Reports and posts them to the Tokyo Stock Exchange
		Partially)			and to its corporate website.
					The Company posts its Convocation Notices (containing the Business
					Report) and notifications of resolutions of its General Meetings of
		Other			Shareholders to the Tokyo Stock Exchange and to its corporate website.
					The Convocation Notices are posted six days prior to sending out such
					notices.
2. IR Activities [Updated]
					Supplementary Explanations			Explanation by
							Representative
					Specifics of the Disclosure Policy are disclosed in
					the Guidelines
					(https://www.kline.co.jp/en/csr/governance/corporate
					_governance/main/00/teaserItems1/01/linkList/0/link
					/corporategovernanceguidelines.pdf) and the IR
		Preparation and Publication of			Policy
				(https://www.kline.co.jp/en/ir/management/policy.ht
		Disclosure Policy
				ml) via the corporate website. Furthermore, by
					adding the Fair Disclosure Policy to the IR Policy,
					the Company has clearly stated its response to the
					Fair Disclosure Rules specified in the Financial
					Instruments and Exchange Act and other related laws
					that came into force on April 1, 2018.
					The Company participates in briefing sessions
		Regular Investor Briefings for			organized by securities companies and other such
				entities, holds online investor briefings via the		Established
		Individual Investors
				Internet, and otherwise conveys information through
					its corporate website.

- 23 -

				Supplementary Explanations			Explanation by
						Representative
	Regular Investor Briefings for			The Company holds financial results briefings on a
			quarterly basis and organizes individual interviews
	Analysts and Institutional			on a regular basis for institutional investors in Japan.	Established
	Investors			In addition, the Company holds small meetings,
				business briefings, and facility tours.
	Regular Investor Briefings for			The Company's dialogue with overseas institutional
	Overseas Investors			investors involves individual interviews in Europe,
				the U.S., and Asia, and participation in conferences
				organized by securities companies. In addition, the
				Company holds individual interviews and small
				meetings with overseas institutional investors. The		Established
				Company distributes investor briefing session
				materials, audio content and other such information
				in English upon release of its quarterly financial
				results.
				(https://www.kline.co.jp/en/ir/library/presentation.ht
				ml)
	Posting of IR Materials on			The Investor Relations page of the Company's
	Website			website (https://www.kline.co.jp/en/ir.html) contains
				Financial Highlights, Financial Reports and audio
				recordings (Japanese only), "K" LINE REPORT, the
				FACTBOOK, brochures issued for shareholders and
				investors (Japanese only), Annual Securities Reports
				(Japanese only) and Quarterly Reports (Japanese
				only), business briefing materials, and Financial and
				Performance Information including Shipping Market
				Information. It also contains Japanese and English
				language versions of materials and information that
				facilitate understanding of the Company, including a
				profile of the Company and an overview of its
				strengths.
	Establishment of Department			The Company has established the Investor Relations
	and/or Manager in Charge of			Division of the IR & PR Group as the department in
	IR			charge of investor relations, and investor relations
				activities are carried out by the President, Chief
				Financial Officer (CFO), Executive Officer in charge
				of IR, and the General Manager and staff of IR & PR
				Group.

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3. Measures to Ensure Due Respect for Stakeholders [Updated]

						Supplementary Explanations
				 The Company has established the Charter of Conduct for "K" Line Group
					Companies and the "K" Line Implementation Guideline for Charter of
					Conduct. The Charter of Conduct for "K" Line Group Companies is
					intended to clearly state principles of behavior for Group companies.
					Accordingly, it declares that companies of the "K" LINE Group are to act
					in accordance with principles of the Charter of Conduct, thereby
					remaining aware that growth or Group companies must be in harmony
	Provisions to Ensure Due				with society, premised on the fundamental notion that business activities
				are to respect human rights and comply with applicable laws, regulations
	Respect for Stakeholders in
				and other norms of behavior. In addition, the "K" Line Implementation
	Internal Rules, etc.
				Guideline for Charter of Conduct encompasses the Company's
					relationships with its respective stakeholders in stipulating specific
					guidelines for executing the Charter of Conduct for "K" Line Group
					Companies.
				 The Company has established the CSR & Environmental Committee in
					order to oversee and promote CSR initiatives encompassing conservation
					of natural resources. It consists of the Representative Directors and
					Executive Officers of relevant divisions and is chaired by the President.
				 The Basic CSR Policy defines the notions of "managing the impact of
					business activities" and "creating new values."
				 The Company has established medium- to long-term goals toward
					resolving priority themes of CSR that have been identified through
					stakeholder dialogue, and has furthermore drawn up single fiscal-year
					targets toward achieving such goals.
				 Thirteen companies of the Group have obtained ISO 14001 certification
					and have established environmental management systems encompassing
					chartered vessel operations. Moreover, the Company promotes
					environmental conservation through the Group's worldwide
					environmental Drive Green Network.
				 World's top-level safe operational system enlisting quality standards
					derived from the Company's proprietary expertise
	Implementation of				Customers and business partners:
	Environmental Activities, CSR				*	Cooperation in conserving the environment and
	Activities, etc.					contributing to society
					*	Fair business transactions without discrimination
				 Shareholders and investors: The Charter of Conduct for "K" Line Group
					Companies and the "K" Line Implementation Guideline for Charter of
					Conduct stipulate that the Company is to develop relationships of trust
					through extensive communications with its shareholders and other
					investors.
					Employees: *	Equal opportunity in hiring and treatment
					*	Stratified training suited to improving professional
						competency
					* Ensuring health and safety of the workplace
				 Society: Social action programs including those that entail exchange
					with local communities in Japan and abroad, disaster relief, and support
					for environmental projects

- 25 -

				Supplementary Explanations
				The Company adheres to the Financial Instruments and Exchange Act, the
				Unfair Competition Prevention Act, the Act on the Protection of Personal
				Information and other laws and regulations pertaining to information, and
				furthermore provides information to each of its stakeholders in a timely and
				impartial manner by enlisting the following approaches.
	Formulation of Policies for			 Issuance of the "K" LINE REPORT (every summer)
			 Meetings with customers and business partners
	Information Provision to
			 General Meetings of Shareholders, investor briefings and other such
	Stakeholders
			gatherings
				 Interactive opinion and information exchanges with stakeholders
				enlisting information technology centered on the corporate website
				 Timely disclosure to stock exchanges and Financial Services Agency
				 Brochures issued for shareholders and investors, employee training,
				human resources consultation

- 26 -

IV. Matters Related to Internal Control System

1. Basic Views on Internal Control System and Progress of System Development

The Board of Directors passed a resolution with respect to the Company's internal control system in May 2006, and the Company subsequently made a series of revisions. The Company is currently expanding the internal control system across the Group, established as follows.

1. Basic framework regarding internal control

The Company continues its efforts to establish a system to ensure the execution of duties by its Directors in compliance with laws and regulations and the Articles of Incorporation, as well as a system to ensure the appropriateness of businesses of the corporate group comprised of the Company and its subsidiaries (hereinafter, the "Group") specified by laws and regulations.

To be precise, the Company's Board of Directors assumes responsibility for establishing an internal control system, evaluating its effectiveness and ensuring its functions.

Currently, the Company establishes the following systems and will strive to review and improve them on a continuous basis and as necessary in order to enhance the effectiveness of its internal control.

II. Internal control system

1. System to ensure the execution of duties by the Company's Directors, Executive Officers and employees in compliance with laws and regulations as well as the Articles of Incorporation

The Company has established the Charter of Conduct for "K" Line Group Companies and the "K" Line Implementation Guideline for Charter of Conduct, in which the compliance of the Group with laws and regulations as well as business ethics is specified as one of the principles of the conduct. The Directors are required to ensure thorough implementation of compliance and establish an effective internal system in order to achieve it. To that end, the Company constantly implements the following measures:

1. The Company promotes the appropriate management of the Board of Directors in accordance with the Rules for the Board of Directors, in order to ensure the executions of duties by the Directors in compliance with laws and regulations as well as the Articles of Incorporation.
2. The Company establishes the Rules for Executive Officers, which specify matters to be complied with by the Executive Officers in order to ensure that the execution of duties by the Executive Officers appointed by the Board of Directors is in compliance with laws and regulations as well as the Articles of Incorporation, and promotes the active and faithful execution of the business delegated to them.
3. The Company establishes internal rules such as the Rules for Employees in order to ensure the execution of duties by the employees in compliance with laws and regulations as well as the Articles of Incorporation.
4. The Internal Audit Group supports the performance of responsibilities by the Board of Directors regarding the establishment, maintenance and improvement of the internal control system through the supervision and verification of the system.
5. The Company establishes the Compliance Committee chaired by the President & CEO and strives to develop and maintain its compliance system.
6. The Company establishes a whistle-blowing system called the Hotline System in order to identify and appropriately handle legal violations and other compliance issues at an early stage. The Group specifies some internal contacts as well as a law firm as an external contact for whistle-blowers. This system is managed under the Rules for the Hotline System.

2. System for retaining and managing information pertaining to the execution of duties by the Company's Directors

The Company appropriately retains and manages information regarding the execution of duties by its Directors in the form of fully searchable data that ensures the availability of perusal at any time, in accordance with the Rules for the Board of Directors and the Regulations for Documentation during the period specified by such rules and regulations.

3. Rules and systems for the Company to manage risks of loss

The Company remains aware of the risks, as listed below, inherent in the course of conducting business. Accordingly, we develop systems for identifying and managing the risks as well as addressing the respective risks.

1. Risks related to safe operation of vessels (including incidents involving seawater contamination)
2. Risks related to major disasters

- 27 -

1. Risks related to compliance
2. Other management risks

The Company establishes crisis and risk management systems which has involved drawing up its Crisis Management Regulations to ensure the Company fulfills its social responsibility as a corporation in the event of a crisis whereby a risk materializes. The Company has established committees to address each of the aforementioned risks, and has accordingly established the Crisis Management Committee as a body that unifies the four committees and otherwise controls and facilitates overall crisis and risk management initiatives.

Committee's Name	Function
Crisis Management Committee	Supervision of overall crisis and risk management initiatives
Ship Safety Promotion Committee	Implementation of measures to ensure safety of the Company's
	vessels in operation, prevention of vessel accidents (including
	incidents involving seawater contamination), and response in
	the event of an accident
Disaster Response Committee	Major disaster preparation during normal times and response in
	the event of a disaster
Compliance Committee	Responding to compliance-related issues
Management Risk Committee	Responding to other management risks

4. System to ensure that Directors of the Company execute their duties efficiently

The Company adopts the executive officer system and promotes smooth decision-making on the execution of duties.

[Board of Directors] The Board of Directors determines the fundamental management policies, matters required by laws and regulations, and other important matters regarding the management of businesses, while supervising the execution of duties by the Directors and Executive Officers. A meeting of the Board of Directors should be held at least once a month.

The Company adopts a system of making resolutions in writing for the Board of Directors, which enables the flexible operation of the board.

[Management Conference] The Company hosts a Management Conference that requires the attendance of the Director and Chairman, President & CEO, Vice President Executive Officer, Executive Officers equivalent to or higher than Senior Executive Officer, Executive Officers responsible for business units, Executive Officers in charge of corporate planning, finance and accounting as well as Audit & Supervisory Board Members once a week in principle. By doing so, the Company establishes a system that contributes to decision-making by the President & CEO or the delegate based on open discussions.

[Executive Officers' Meeting] Executive Officers' Meetings are held once a month in principle, attended by Executive Officers including those concurrently serving as Directors, and Audit & Supervisory Board Members. It acts as a forum for reporting and discussion regarding matters that include business execution encompassing monthly income and expenditure of operating organizations and decision-matters.

5. Systems to ensure proper business operations of the corporate group comprised of the Company and its subsidiaries

The Company establishes the Charter of Conduct for "K" Line Group Companies as the code of conduct applicable to the entire Group, in order to ensure the appropriate operations of its subsidiaries (hereinafter, the "Group companies"). Each Group company establishes internal rules and regulations based on the charter. In addition, the Company establishes the Regulations for Business Operations by Subsidiaries in order to ensure the appropriate operations by its Group companies by supporting and managing the establishment and effective operation of their internal control systems while respecting the independence of these Group companies.

1. System for reporting matters regarding the execution of duties by Directors, etc. of the Group companies to the Company
   The Company establishes the Regulations for Business Operations by Subsidiaries and requires its Group companies to report important matters to the relevant departments of the Company. In addition, the Company provides its hotline contact as well as hotline systems of each Group company for whistle- blowers who identify any legal violations and other compliance issues in each respective office. The Company also hosts the Group Management Meeting twice a year to facilitate information exchange among the Company and the Group companies.

- 28 -

1. Rules and systems for managing risk of loss of the Group companies
   The Group companies establish their own crisis management system independently according to their business scale and characteristics. The Company establishes the Regulations for Business Operations by Subsidiaries and requires the Group companies to report risks in executing their respective business operations according to the characteristics of their businesses to the Company, which will be handled by the Crisis Management Committee and other organizations.
2. System to ensure that Directors, etc. of the Group companies execute their duties efficiently
   The Group companies independently manage their respective businesses in principle. The Company establishes the Regulations for Business Operations by Subsidiaries and specifies that certain important matters of the Group companies require approval of, discussion with, or reporting to the Company.
3. System to ensure that Directors, etc. and employees of the Group companies execute their duties in compliance with relevant laws and regulations and the Articles of Incorporation
   The Company establishes the Charter of Conduct for "K" Line Group Companies and requires the Group companies to comply with the charter. In addition, the Company requires each Group company to establish its Implementation Guideline for Charter of Conduct according to the characteristics of their businesses and verifies the content of such guidelines.
   Furthermore, the Company monitors via the Internal Audit Group, etc. the status of compliance and implementation of the internal control system by the Group companies.

1. Matters concerning the employees who are to assist Audit & Supervisory Board Members in their duties The Company establishes the Rules Concerning Employees Tasked With the Assisting Audit & Supervisory Board Members, and appoints employees who are required to assist the duties of Audit & Supervisory Board Members ("employees assisting Audit & Supervisory Board Members") under the supervision of the Audit & Supervisory Board.
2. Matters concerning the independence of the employees assisting Audit & Supervisory Board Members

from the Directors of the Company

The Company establishes the Rules Concerning Employees Tasked With the Assisting Audit & Supervisory Board Members, and specifies that it shall not order the employees assisting Audit & Supervisory Board Members to assume other duties concurrently in principle. If it needs to do so due to unavoidable reasons, prior approval should be obtained from the Audit & Supervisory Board. The Audit & Supervisory Board Members evaluate the performance of the employees assisting Audit & Supervisory Board Members. The appointment and transfer of the employees assisting Audit & Supervisory Board Members require prior approval from the Audit & Supervisory Board.

8. Matters to ensure the effectiveness of instructions by the Audit & Supervisory Board Members of the Company given to the employees assisting them

When the employees assisting Audit & Supervisory Board Members request the Company for any information materials and/or reporting, the Company will promptly provide such materials and/or reporting.

9. System for reporting to the Audit & Supervisory Board Members of the Company by the Directors, Executive Officers and employees of the Company; the Directors, the Audit & Supervisory Board Members, and employees of the Group companies; or a person who received a report from the above

persons; and other systems for reporting to Audit & Supervisory Board Members of the Company The Directors, Executive Officers and employees of the Company are required to report important matters regarding the management and operations of the Company's businesses and the status of executing its business in charge to the Audit & Supervisory Board Members as needed at a meeting of the Board of Directors or other important meetings, as well as to promptly report any compliance issues and other matters that may cause serious damage to the Company, if identified, to the Audit & Supervisory Board in accordance with the Rules for Systems of Reporting to Audit & Supervisory Board Members, Etc. The Directors are required to promptly report matters regarding the execution of duties in an appropriate manner to the Audit & Supervisory Board or its Members when being requested to do so. The Internal Audit Group is required to report the progress of its audits to the Audit & Supervisory Board as necessary and conduct additional audits if being requested to do so by the board.

The Directors, Audit & Supervisory Board Members and employees of the Group companies are required to report compliance issues and other important matters specified to the relevant department of the Company, and

- 29 -

the relevant department is required to report the matter to the Audit & Supervisory Board Members of the Company as necessary in accordance with the Regulations for Business Operations by Subsidiaries. The Company hosts a Group Companies' Audit & Supervisory Board Communication Meeting, in order to share information among the Company, its Group companies and subsidiaries.

1. System to ensure the non-unfair treatment of persons who made reporting as described in the above The Company prohibits the Company or its Group companies, under the Rules for Systems of Reporting to Audit & Supervisory Board Members, Etc. and the Regulations for Business Operations by Subsidiaries, from unfairly treating the Directors, Audit & Supervisory Board Members, Executive Officers and employees of the Company and its Group companies who conducted whistle-blowing to the Audit & Supervisory Board Members of the Company due to the act of such whistle-blowing.
2. Matters concerning policies on the advance payments and reimbursements of expenditures and other procedures for settlements of expenditures and/or liabilities incurred from the execution of duties by the

Audit & Supervisory Board Members of the Company

The Company establishes policies on the advance payments and reimbursements of expenditures and procedures for settlements of liabilities incurred from the execution of duties by the Audit & Supervisory Board Members, and conducts such advance payments, reimbursements and settlements based on the policies.

12. Other systems to ensure performance of effective audits by Audit & Supervisory Board Members of the Company

The Company cooperates in developing an environment ensuring effective audits by the Audit & Supervisory Board Members by coordinating regular meetings with the Audit & Supervisory Board Members and the Representative Directors, arranging collaboration of the Audit & Supervisory Board Members with the Internal Audit Group, and other such means.

13. System to ensure the reliability of financial reports

To ensure the reliability of the Group's financial reports, the Company engages in ongoing efforts to evaluate and improve the effectiveness of internal control systems pertaining to financial reporting, on the basis of Japan's Financial Instruments and Exchange Act, and other relevant laws and regulations.

14. Fundamental policy toward anti-social forces and status of policy implementation

The Charter of Conduct for "K" Line Group Companies vows that "the "K" LINE Group will resolutely confront any anti-social force or organization which may threaten social order and public safety." Accordingly, the Company enables the swift and appropriate handling of matters relating to anti-social forces occurring within the Group, by appointing a department in charge of handling matters relating to anti-social forces and working with law enforcement officials, expert corporate legal counsel and other external organizations on a normal basis, with the aim of precluding all involvement of anti-social forces and severing any ties that could emerge.

2. Fundamental Policy Toward Anti-social Forces and Status of Policy Implementation

As stated in 1. II 14. Fundamental policy toward anti-social forces and status of policy implementation.

- 30 -

1. Other

1. Adoption of Anti-Takeover Measures

	Adoption of Anti-Takeover Measures		Not adopted

Supplementary Explanation

―――

2. Other Matters Concerning Corporate Governance System

• The Internal Audit Group engages in evaluation and supervision from an independent standpoint as the Group proceeds with respect to building and establishing its internal control system in response to internal control evaluation and reporting systems that ensure reliability of financial reporting based on the Financial Instruments and Exchange Act.
• Status of internal system for timely disclosure of Company information is as follows:

1. Department in charge in relation to timely disclosure and mechanisms of execution thereof
2. 1. Department in charge of filings with stock exchanges
      Matters subject to timely disclosure are channeled to the General Affairs Group, and filings with stock exchanges are made by the General Manager of the General Affairs Group upon having gained approval from the Executive Officer in charge of General Affairs.
      However, the General Manager of Accounting Group is to gain approval of the Executive Officer in charge of Accounting with respect to filings of information on financial results.
   2. In-houseintegration of information and preparation of disclosure documents
      General Managers of each group overseeing respective matters handle in-house filings (channeling information to the General Affairs Group) and preparation of disclosure documents with respect to matters subject to timely disclosure.
3. Assessment and management of information requiring timely disclosure
4. 1. General methods
   2. 1. The General Managers of groups overseeing matters relating to the Company assess such matters and file them with the General Manager of the General Affairs Group.
      2. The General Managers of each group overseeing matters relating to subsidiaries assess such matters pursuant to the Regulations for Business Operations by Subsidiaries and other such guidelines. Such General Managers subsequently channel such matters to the General Manager of Logistics and Affiliated Business Promotion Group supervising and managing subsidiaries who then files them with the General Manager of General Affairs Group.
   3. Secondary methods (supervisory system)
      The three parties listed below engage in supervision over proposals and reporting matters for meetings of the Board of Directors and the Executive Officers' Meeting, from the perspective of whether or not such matters should be subject to timely disclosure.
   4. 1. General Manager of Corporate Planning Group (Serves as the Secretariats of both the Board of Directors and the Executive Officers' Meeting, which involves compiling agenda topics and examining formalities with respect to issues for deliberation)
      2. General Manager of General Affairs Group (Serves as the person in charge of filings with stock exchanges)
      3. Executive Officer in charge of General Affairs

In addition, the officers and employees concurrently serving as officers of subsidiaries assess developments with respect to the situation at the dispatch destination from the perspective of timely disclosure. They then furnish advice to those in charge at subsidiaries when applicable and notify the General Manager of Logistics and Affiliated Business Promotion Group in that regard.

- 31 -

3. Flow of timely disclosure

The separate Attachment illustrates the aforementioned system of timely disclosure.

4. Management of internal information

When it comes to controls placed on internal information until performance of timely disclosure, the Company strives to properly manage such information and prevent insider trading pursuant to its Rules on Management of Internal Information and Insider Trading Restrictions.

- 32 -

Mechanisms Underpinning Systems of Business Execution, Management Supervision, and Internal Controls

- 33 -

(Attachment)

＝ Mechanisms of Business Execution Related to Timely Disclosure ＝

General process of	Secondary process of information
information assessment	assessment (monitoring for omissions)

Information on decisions

New information

Information on financial

results

Information on subsidiaries

Filed by General Manager of the respective group overseeing the matter

Supervise and

manage subsidiaries

Prior approval, discussion and reporting regarding significant matters by officers and employees in charge at subsidiaries

Executive Officer in charge of

General Affairs

(Executive Officer in charge of

Accounting)

Supervise	Department in	Pinpoint
	charge of timely	issues
	disclosure
	subject to		(Deliberation and decision
General Manager of	timely
	on significant matters)
General Affairs Group	disclosure
(General Manager of	Assess		Board of Directors
Accounting Group)	issues for		Management Conference
			deliberation
Notify					Notify
General Manager of Logistics and	Notify	General Manager of
Affiliated Business Promotion Group			Corporate Planning Group
					Secretariat of the Board of Directors
					and Management Conference
Notify
		Furnish notification of timely disclosure matter per
		assessment at subsidiary's key meeting or other such forum
General Manager of			Officers and employees
group overseeing			concurrently serving as
respective subsidiaries			officers of subsidiaries

Division in charge of

disclosure

General Affairs	Timely
Group,
General Affairs	disclosure
Team

- 34 -