Deliver Attractive Return

Return on average capital employed for all projects to be above the cost of capital

• All projects should be evaluated based on KCC’s WACC. Other return requirements can be used for specific projects if agreed by the BOD

• The WACC to be update once a year prior to entering the year/early in the year

Distribution policy minimum 80% of free cash flow generation to equity after debt service and maintenance capex

• KCC intends to distribute dividends on a quarterly basis. The BOD will on regularly evaluate if share buyback programs should complement dividends within the 80% distribution policy

• Dividends/share repurchases are subject to that all known, future capital and debt commitments are accounted for, and the Company’s financial standing remains acceptable

• The timing and size of dividends and share repurchase programs are at the discretion of the Board of Directors and the General Meeting

• Dividends/share repurchase programs are further subject to any restrictions in the borrowing arrangements or other contractual arrangements in place at the time

• The distribution policy should not be at the expense of maintaining KCC’s business activities. I.e. KCC should be able lift the investment to replace existing vessels over the balance sheet

Accommodate the business strategy

Maintain active risk management

• KCC shall maximise the use of natural and operational hedges to mitigate risk before using financial derivatives. There is an exception for freight derivatives, which can be used to balance the desired risk in the physical portfolio. The main rule should be to use interest rate and currency derivatives to prevent a situation of financial distress, to prevent breach of covenants or in situations where fixing levels are considered particularly attractive. The hedging level should be evaluated based on cash flow stability and visibility/contract coverage, total financial risk of the company and earnings outlook/market cycle. The use of derivatives shall be subject to separate board decisions or mandates that will be renewed at least once every year

• KCC shall carry out quarterly risk reviews

• KCC shall have a formalised and standardised investment evaluation and decision process and methodology including return targets, set of criteria, risk assessment, prioritization, funding etc

Maintain a solid available liquidity position

• Priority number one is to ensure minimum risk that KCC does not have sufficient liquidity to meet liabilities as they fall due. KCC should be able to withstand 12-18 months of a realistic low case scenario defined by the Administration and agreed by the Board of Directors

• Excess liquidity should be available on a short notice. Cash reserves should only be invested in relatively low risk and short to medium term debt markets to be readily available for the needs of the company.

Ensure that costs and debt levels are at sustainable levels compared to cash flow

• KCC targets a NIBD/EBITDA adjusted for delivery/sale of vessels below 5x over time. The NIBD/EBITDA can temporarily be above the target during particularly weak markets.

Maintain a solid balance sheet

• KCC needs to maintain a solid capital structure and further optimize it to give sufficient assurance to the debt and equity providers that the company is solid and sustainable. KCC should aim at improving the financial capacity and flexibility through deleveraging in periods with strong cash flows, supporting the ability to increase leverage to fund renewal of the existing fleet when relevant

• KCC targets an equity ratio above 40% over time. The equity ratio can temporarily be below the target during investment periods or in the bottom of the

Maintain clear guidelines for funding of investments

• Equity should be raised prior to committing to growth investments

Ensure access to competitive funding

• KCC will work to make the share attractive for external investors through continuous development of the combination carrier business, an efficient capital structure, timely and relevant investor communications and by returning value to the shareholders. The ambition is to increase the liquidity in the share resulting in increased attractiveness of the stock

• Access to competitive funding will likely be impacted by KCC’s “ESG-standing”. Hence, KCC shall have strong sustainability communication and have ESG finance frameworks

• KCC shall over time aim to have diversified sources of funding whilst still aiming to minimize cost of funds and secure flexible terms. The general preference will be to finance growth through a mix of equity and bank debt. The Company shall in addition target to use the bond market on a continuous basis to have a supplementary funding source and to stretch out the average repayment structure of the loan portfolio through issuing bonds with bullet structure. In addition, sale-leaseback structures or alternative debt sources can be used provided that overall leverage, cash break even and interest costs remain within acceptable levels and that the geopolitical risk is acceptable. KCC aims at minimizing the cost of borrowing, but always target achieving maximum flexibility of covenants. The company should seek a diversified maturity profile to avoid concentration risk and reduce refinancing risk and seek bank debt from core relationship banks that have a solid credit rating and continuous presence in the shipping industry. Credit facilities denominated in USD are preferred or debt that can be swapped at a reasonable cost. The number of covenants should be minimized and standardized across loan agreements and the main part of debt funding should be long-term facilities to secure predictability.