Organization

1.Organizational Structure and Operation

Board Members【Updated】

Relationship with our Company (1)

(*1)
○: This person is currently or was recently placed in this category.
△: This person was previously placed in this category.
●: A relative of this person is currently or was recently placed in this category.
▲: A relative of this person was previously placed in this category.

1. An operating officer of our company or its subsidiary
2. An operating officer or non-executive Director of the parent company of our company
3. An operating officer of a fellow subsidiary of our company
4. An entity or an operating officer thereof that our company is a primary trading partner of
5. An entity or an operating officer thereof that is a primary trading partner of our company
6. A consultant, professional accountant or lawyer receiving a large sum of money or other properties other than Director compensation from our company
7. A major shareholder of our company (if such a major shareholder is a corporation, an operating officer of the corporation)
8. An operating officer of a trading partner of our company (not placed in the categories d, e or f) (Applies only to the said person)
9. An operating officer of an entity with which our company has a reciprocal outside officer appointment (Applies only to the said person)
10. An operating officer of an entity which our company makes donations to (Applies only to the said person)
11. Other

Relationship with our Company (2)【Updated】

Establishment of Discretionary Committee, Composition of Committee, and Attributes of Head (Chairperson) of the Committee【Updated】

Additional Information【Updated】

In order to obtain the opinions of independent outside Directors concerning important matters such as the compensation and nomination of Officers, our company has established a fair and transparent discretionary Compensation and Nomination Advisory Committee with three out of four committee members as independent outside directors, as an advisory body to the Board of Directors. This committee functions as both the Nomination Committee and Compensation Committee.

Audit & Supervisory Board Members

Collaboration between Audit & Supervisory Board Members, Accounting Auditors, and Audit Division

Our Audit & Supervisory Board Members and accounting auditors hold meetings periodically or whenever necessary. Additionally, our Audit & Supervisory Board Members meet with the staff members of the Audit Division. In cooperation with the Division, Audit & Supervisory Board Members review accountant reports, conduct internal inspections and observe checkups on the Division.

Relationship with our Company (1)

(*2)
○: This person is currently or was recently placed in this category.
△: This person was previously placed in this category.
●: A relative of this person is currently or was recently placed in this category.
▲: A relative of this person was previously placed in this category.

1. An operating officer of our company or its subsidiary
2. A non-executive Director or an accounting counselor of our company or its subsidiary
3. An operating officer or non-executive Director of the parent company of our company
4. An Audit & Supervisory Board Members of the parent company of our company
5. An operating officer of a fellow subsidiary of our company
6. An entity or an operating officer thereof that our company is a primary trading partner of
7. An entity or an operating officer thereof that is a primary trading partner of our company
8. A consultant, professional accountant or lawyer receiving a large sum of money or other properties other than Director compensation from our company
9. A major shareholder of our company (if such a major shareholder is a corporation, an operating officer of the corporation)
10. An executive officer of a trading partner of our company (not placed in the categories f, g or h) (Applies only to the said person)
11. An operating officer of an entity with which our company has a reciprocal outside Director appointment (Applies only to the said person)
12. An operating officer of an entity which our company makes donations to (Applies only to the said person)
13. Other

Relationship with our Company (2)【Updated】

Independent Officers

Other Matters Regarding Independent Officers【Updated】

All outside Directors and outside Audit & Supervisory Board Members who satisfy the qualifications for Independent Officers are designated Independent Officers.

【Independence Criteria for Independent Outside Directors】

Taking into consideration the requirement for outside directors stipulated in the Companies Act and the criteria set by securities exchanges, our company has established our own standards; and we appoint outside directors and outside A & S Board Members in accordance with these standards.

When the following items do not apply to an outside director or an outside A & S Board Member candidate, we consider that they have the appropriate independence.

• 1. An individual who is an executive officer* of our company or our group company or has been one ten years before the selection;
• 2. An individual who is a shareholder or a representative of a shareholder who owns 10% or more of the total voting rights of our company shares;
• 3. An individual who is the executive officer of a business partner of our group company with more than 2% of our consolidated sales;
• 4. An individual who has received more than 10 million yen per business year from our company as remuneration as a consultant, a lawyer or a public accountant;
• 5. An individual who works at the auditing firm of our company’s A & S Board Member; or
• 6. An individual who belongs to one of the groups which received an average of 10 million yen of donations during the last three business years from our company or our group company.

An “executive officer” signifies an executive director, a corporate officer or an employee.

【Outside Officers’ Status of Combined Offices】

Our company discloses the status of our outside directors and outside A & S Board Members holding additional posts through the Convening Notices of General Shareholder Meetings and annual securities reports.

【Board Meeting Attendance】

Directors Masahiro Sugiyama, Shigeo Nakayama and Sadako Yasuoka attended all board meetings held in 2018.
A & S Board Members Tadashi Kanki, Toshiaki Nojiri and Yoshio Aoki attended all board meetings and A & S Board Meetings held in 2018.

Incentives

Additional Information

We have introduced stock options as part of Director compensation. In addition, from the fiscal year ended March 31, 2017 we have introduced a performance-based stock compensation plan.

Additional Information

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Compensation for Board Members

Additional Information【Updated】

• 113th term (April 1, 2018 - March 31, 2019)
• Compensation for Directors and Audit & Supervisory Board Members
• Directors: 630 million yen for 16 Directors (including 36 million yen for 3 outside Directors)
• Audit & Supervisory Board Members: 102 million yen for 6 Audit & Supervisory Board Members (including 46 million yen for 4 outside Audit & Supervisory Board Members)

As well as the above remuneration, our company calculated 34 million yen as provisions for the performance and share-based remuneration for thirteen directors (excluding three outside directors) during the current business year. This plan was introduced at the 110th Annual Shareholder Meeting on June 29, 2016.

Disclosure of Policies for Determining Compensation and Methods of Calculation【Updated】

In order to seek appropriate advice from independent outside directors on important matters including officers’ remuneration, we established a discretionary Remuneration and Nomination Advisory Committee—with three out of four committee members who are independent outside directors. Our board makes decisions based on the report from the committee. Our policy for officers’ remuneration is as follows:

(Policy for Officers’ Remuneration)

• Basic Policy
  (1) The remuneration system should allow our company to employ excellent individuals who can achieve our corporate philosophy.
  (2) The remuneration system should provide a continuous improvement to our corporate value.
• Remuneration Structure
  (1) Officers’ remuneration consists of monthly fixed remuneration and performance-based remuneration.
  (2) Outside directors receive a monthly fixed remuneration since they are independent and their roles are limited.
• Basic Remuneration
  Officers’ basic remuneration is determined by their roles, while taking into consideration industry standards, and is based on an investigation by an outside specialist institution.
• Performance-Based Remuneration
  (1) As short-term performance-based remuneration, we pay bonuses using the officers’ performance per year as the indicator.
  (2) As mid-term performance-based remuneration, we pay share-based remuneration based on our company’s achievement of the mid-term business plan and improvement of corporate value (share price).

Directors’ remuneration is determined by the board after the Remuneration and Nomination Advisory Committee hold an evaluation based on the directors’ duties and performance in accordance with the above policy and then submit a report to the board. The remuneration for A & S Board Members is determined via discussion among the members.

Specific amounts will be within those limits—the maximum is 55 million yen per month for a director (excluding a portion of the employee’s salary for directors who concurrently serve as employees), and the maximum is 1 million yen for an A & S Board Member—as resolved by the 100th Annual Shareholder Meeting held on June 29, 2006, while taking into consideration company performance, industry standards and employee salary levels.
Bonus amounts were determined at the 113th Annual Shareholder Meeting on June 27, 2019. A total of 110 million yen will be paid to the eleven directors, excluding the three outside directors, (as of the end of the business year) by taking into consideration our normal bonus payments and their performance during the year.
Separate from the above remuneration, the introduction of a performance and share-based remuneration system for directors and corporate officers (excluding outside directors and those who do not reside in Japan) with a goal to further enhance the motivation of officers to contribute to the improvement of our company’s performance and corporate value over the mid to long-term was determined at the 110th Annual Shareholder Meeting on June 29, 2016. Both the continuation and partial amendment of this system were resolved at the 113th Annual Shareholder Meeting on June 27, 2019.
The board has the right to determine the amounts which include officers’ remuneration and the calculation method. However, the discretionary Remuneration and Nomination Advisory Committee, which was established as an advisory body of our board, discusses the base amounts including officers’ remuneration and policies regarding the determination of officers’ remuneration. The board makes a decision based on the committee’s report.

[Outline of Performance-based Stock Compensation Plan]
This plan is a stock compensation system that is linked to the medium to long-term performance of our　company using the Executive Compensation BIP (Board Incentive Plan) Trust (hereinafter the “BIP Trust”).　The BIP Trust is an executive incentive plan based on US Performance Share Plans and Restricted Stock Plans, and is a system which grants benefits (hereinafter “grants etc.”) to Officers, etc. in the form of company stock or the cash equivalent of our company stock price based on business performance, etc.

[Content of the trust agreement]

[Number of Shares Offered to Directors]
Maximum 90,000 shares (Trust period: three years)
(This will be changed to 115,000 shares with a trust period of five years at the time of the amendment of the trust contract in August 2019.)
(Note) Our company conducted a reverse stock split at the rate of ten ordinary shares to one share on October 1, 2017. Therefore, the above figures signify the number of shares after the split.

[Individuals Eligible for Beneficial Interest and Other Interests]
Directors who meet the requirements.

Regarding indicator of Performance-based Compensation plan, as short-term performance-based remuneration, we pay bonuses using the officers’ performance per year as the indicator, and as mid-term performance-based remuneration, we pay share-based remuneration based on our company’s achievement of the mid-term business plan including consolidated Revenues, Operating income and ROA (ROE, upon approval at the annual shareholder meeting in June 2019) and, etc. These are the same target of our company`s business plan and we select them as performance evaluation indicators because the remuneration plan is for incentive to achievement of business plan`s numerical target.
Our performance and share-based remuneration is managed by a point system with one company share per point. (We adjusted the points after the reverse stock split on October 1, 2017.) In July each year, the “share-based remuneration per role” divided by the “system-standard share price” is given as the standard point for the individual entitled to receive it.
The evaluation period is the same time period as our company’s business plan. We set performance evaluation indicators in accordance with the business plan and conduct an evaluation each business year. As the level corresponding to the achievement of performance goal set as the standard at 100 percent, we adjust the points between 0 and 150 percent for all the mid-term evaluations at the end of each business year and the evaluation period. After conducting a final evaluation, we determine the number of points.
After the end of each business plan, we grant the same number of shares as the points. Half of the shares each eligible individual holds is delivered in the form of a company share, rounding down any share less than one unit. Our company’s shares corresponding to the remaining points are sold in order to use a portion for tax payments, including income taxes. The individual receives the amount after taxes in the form of cash.
In the current business year, an achievement of indicators related to the performance and share-based remuneration are 99.5 percent in consolidated sales, 106.1 percent in consolidated operating income and 115.4 percent in consolidated return on assets (ROA) against the business plan`s numerical target.

Support Structure for Outside Directors / Outside Audit & Supervisory Board Members

The General Affairs & Labor Division as a secretariat of the Board of Directors, and other divisions, depend on the agenda, explains about our company's situation to outside Directors appropriately. The Audit Division, in charge of internal auditing, provides the necessary job-related communication information that the occasion demands in order to support the duties of Audit & Supervisory Board Members, including outside Audit & Supervisory Board Members.

Status of Former President and Representative Director, etc.

The Names, etc. of Consultants, Advisors, etc. Who Are Former President and Representative Director, etc.

Other Matters

• Our Company does not provide an advisor and consultant system in its Articles of Incorporation. Though we have established internal rules regarding the treatment of advisors and consultants who are not involved in management, we currently have no consultants in office.
• Although advisors are involved in external activities at industry organizations, etc., that would bring value to the development of our company and the logistics industry utilizing their experience and knowledge obtained through engagement in the management and sales of our company, they do not have any authority that may have an impact on management judgment and are not involved in any managerial decision-making.
• "Date of Retirement as President, etc." in the above table shows the date of retirement as the Chairman and Representative Director, Chairman and Director, or Director of our company.

2.Matters Regarding Functions of Execution of Duties, Auditing and Supervision, Appointment, Decisions on Compensation, etc. (Overview of Current Corporate governance)【Updated】

• (ⅰ) Overview of the Implementation of Corporate Governance
  • Our Company is a company based on an Audit & Supervisory Board structure. In addition to the Board of Directors and Audit & Supervisory Board, our company has introduced a Board of Officers system with the goal of ensuring rapid decision-making and business execution.
• (ⅱ) Business Execution
  • To guarantee transparency and legality through deliberation, decisions concerning company operations will be made at Meetings of the Board of Directors at which 3 outside Directors and 5 Audit & Supervisory Board Members, including 3 outside Audit & Supervisory Board Members are present. Alternatively, such decisions will be made at meetings of the Board of Executives; meetings of the Board of Officers; or department head meetings attended by the chief managing officer and general manager, if attended by 3 Audit & Supervisory Board Members, including 1 outside Audit & Supervisory Board Members.
  • Duties will be carried out by the executive officers selected by the Board of Directors to perform the duties in accordance with Board of Directors resolutions, and the Board of Directors will oversee the performance of the duties.
  • The Board of Directors resolves matters defined by laws, regulations and the Articles of Incorporation, as well as matters concerning important business executions. However, with the aim of facilitating a rapid decision-making process and enhancing the supervisory function of the Board of Directors, we have established management meetings as the location to discuss overall execution policies, and decision on matters concerning each business to be executed is delegated as much as possible, to an Executive Officer who is responsible for the execution of business.
• (ⅲ) Compensation and Nomination
  • In order to obtain the opinions of independent outside Directors concerning important matters such as the compensation and nomination of Officers, our company has established a fair and transparent discretionary Compensation and Nomination Advisory Committee chaired Committee with three out of four committee members as independent outside directors, as an advisory body to the Board of Directors, and bases its decisions on the Committee’s report.
• (ⅳ) Audits
  • Audit & Supervisory Board Member audits are conducted through inspection audits of major business locations and examinations of subsidiary companies in collaboration with staff in charge at the Auditing Division.
  • In appointing Audit & Supervisory Board Members, our company appoints personnel who possess diversified skills including integrity and insight, and expertise in law and accounting, etc. Particularly for outside Audit & Supervisory Board Members, we strengthen the function of the Audit & Supervisory Board such as by appointing those who have academic backgrounds and expertise in finance, accounting, and other fields.
  • For internal auditing, the Auditing Division was set up in the Head Office, which conducts internal audits in line with the audit plan, such as visiting audits and paper audits, and reports to the President on a timely basis.
  • Ernst & Young ShinNihon LLC has been selected as an accounting auditor. This audit corporation conducts audits as an independent third party, and it audits our company and its consolidated subsidiaries in accordance with the yearly accounting audit plan and in collaboration with our internal auditing departments and the Audit & Supervisory Board.
  • Objectivity in auditing is maintained by conducting internal audits, Audit & Supervisory Board Member audits and accounting audits in an independent and complementary fashion.
  • The names of the certified public accountants performing the audit operations at the aforementioned audit corporation in FY2018 and the numbers of persons assisting in these audit operations are given below:

    【Names of certified public accountants performing audit operations】

    Representatives and Partners: Motoki Yoshimura, Ichirou Ogawa, Chihiro Yasunaga

    Comments have been omitted as the above persons have each conducted these audits for less than seven consecutive years.

    Numbers of persons assisting in auditing operations: 31 certified public accountants, 54 other persons

• (ⅴ) Overview of Agreements to Limit Liability
  • In accordance with the Articles of Incorporation, our company and outside Directors Masahiro Sugiyama, Shigeo Nakayama, Sadako Yasuoka, outside Audit & Supervisory Board Members Tadashi Kanki, Toshiaki Nojiri, and Yoshio Aoki have entered into an agreement to limit their liability, providing that they satisfy conditions prescribed by laws. Under the agreement, the limit of liability shall be an amount stipulated by laws.

3.Reasons for Adopting Current Corporate Governance Structure【Updated】

By including 3 outside Directors among 9 Directors, our company aims to draw on the knowledge of outside experts in making important management decisions, and to strengthen the function of the Board of Directors in supervising business execution.
In addition, audits by Audit & Supervisory Board Members, including 3 outside Audit & Supervisory Board Members, are conducted.
By adopting such structure, we determine that the objectivity and neutrality of management supervision functions are ensured at the sufficient level.