Basic Philosophy

Guided by our corporate philosophy under the slogan “With established trust and confidence inside and outside the company, we aim to contribute to the peoples of the world by creating and putting at their disposal new values for the future”, we have established, and are working to enhance, our corporate governance system to promote management aimed at increasing our corporate value over the medium to long term. Our basic view on corporate governance is to build relationships of trust with our shareholders, customers, business partners, employees, local communities, and other stakeholders through management that ensures fairness and a high degree of transparency, and to develop and operate management framework and internal control system to achieve sustainable growth through efficient and sound management.

Corporate Governance System

The Company has selected a company with an Audit and Supervisory Committee for the purpose of further enhancing discussions on management policies and strategies at the Board of Directors, strengthening the supervisory function, and further speeding up management decision-making and execution of business. Each organization is set up within the framework of a company with an Audit and Supervisory Committee.

Board of Directors

The Board of Directors comprises eleven members (of which seven are outside directors), and regular meetings are held once a month in principle, with extraordinary meetings held as necessary. In principle, directors are required to attend all Board of Directors meetings, and the average attendance rate in fiscal year 2025 was 100%.
The Board of Directors deliberates and makes decisions on matters specified in laws and regulations and other important management issues, receives reports from each member and supervises the status of business execution. A majority of independent outside directors are appointed in order to strengthen the supervisory functions of the Board of Directors and secure transparency of management.

＜Views on Balance and Diversity of Knowledge, Experience, and Skills within and Size of the Board of Directors as a Whole＞
The Company’s Board of Directors believes that it is important for the Board to comprise diverse human resources with different backgrounds, including specialized knowledge and experience, in order to achieve sustainable growth and increases in corporate value over the medium to long term. The Board is made up of human resources with extensive experience, high levels of knowledge, and advanced specialization, with consideration given to gender, nationality, work experience, and age, to achieve a good balance according to the business environment at a given time.
In addition, by making up the majority of the Board of Directors with outside directors who have experience and specialized knowledge gained under environments that differ from the Company, the Board can strengthen its supervisory function and engage in deliberations from various perspectives in an effort to ensure transparency and objectivity in decision making.
Director candidates are not excluded from consideration on the basis of their race, ethnicity, nationality, country of birth, cultural background, etc.

＜Skill Matrix of Directors＞
Based on the above approach, the knowledge and experience that the Board of Directors should possess is determined based on the Group's business activities and management structure by selecting directors from the fields of "corporate management," "finance / accounting," "governance / legal / risk management," "human capital," "global business," "technology / R&D," and "business development / M&A," and by appointing directors in a well-balanced manner while also taking diversity into consideration.

1. As he was appointed at the Ordinary General Meeting of Shareholders held on 25 June 2025, his attendance covers the 10 Board of Directors meetings held since his appointment.

＜Reason for Selection of Skills＞

＜Board of Directors Dept.＞

The Board of Directors Dept. has been established as a dedicated organization to support the operation of the Board of Directors, with the aim of enhancing the content of deliberations at Board of Directors meetings, strengthening the supervisory function and providing better support and information to the outside directors, who constitute the majority of the Board of Directors. In addition to organizing and selecting the agenda for the Board of Directors meetings, formulating the annual schedule and liaising with relevant departments, the Board of Directors Dept. supports the smooth operation and effectiveness of the Board of Directors meetings by holding briefing sessions for outside directors in advance of the Board of Directors meetings, providing orientation for outside directors when they assume office and operating the Board of Directors effectiveness evaluation. The Board of Directors Dept. is also in charge of the Nomination Committee and Remuneration Committee and supports the operation of both committees.

Audit and Supervisory Committee

The Audit and Supervisory Committee comprises four members (of which three are outside members) and as an independent body entrusted by the shareholders, audits and supervises the execution of business by the directors. Full-time Audit and Supervisory Committee members are selected from the perspective of maintaining the audit environment, gathering information from within the Company, and monitoring and verifying the establishment and operation of internal control systems on a daily basis and sharing such information with other members to ensure the effectiveness of organizational audits. The Audit and Supervisory Committee also confirms the appropriateness and suitability of the nominations and remuneration of directors (excluding directors who are Audit and Supervisory Committee members) by attending Nomination Committee and Remuneration Committee meetings and receiving explanations from the representative directors and forming opinions on these matters.

＜Audit and Supervisory Committee Dept.＞

To support the execution of duties by the Audit and Supervisory Committee, the Audit and Supervisory Committee Dept. has been established and dedicated employees are assigned. These employees receive instruction from the Audit and Supervisory Committee members, liaise and coordinate internally, and gather and provide the necessary information. These employees work under the supervision and direction of the Audit and Supervisory Committee and their independence in relation to supervision and direction from directors (excluding directors who are Audit and Supervisory Committee members), corporate officers and employees is ensured. In addition, transfers, personnel evaluations, etc. require the prior consent of the Audit and Supervisory Committee.

Nomination Committee

To ensure rationality and transparency in the nomination of directors and corporate officers, the company has established the Nomination Committee as an advisory body to the Board of Directors. The Nomination Committee is composed of directors selected by the Board of Directors (excluding directors who are Audit and Supervisory Committee members), with the majority of its members being independent outside directors.
Based on the Board of Directors’ request for opinion, the Nomination Committee deliberates on matters including proposals on the appointment of directors to be submitted to the General Meeting of Shareholders, the appointment and dismissal of corporate officers, the Company’s performance evaluations, and, based on such evaluations, evaluation of the management’s performance, and then delivers its opinions to the Board of Directors.
In addition, directors who are Audit and Supervisory Committee members also attend a Nomination Committee as observers.

Remuneration Committee

To ensure the rationality and transparency of the determination of compensation for directors and corporate officers, the company has established the Remuneration Committee as an advisory body to the Board of Directors. The Remuneration Committee is composed of directors selected by the Board of Directors (excluding directors who are Audit and Supervisory Committee members), with the majority of its members being independent outside directors.
Based on the Board of Directors’ request for opinions, the Remuneration Committee deliberates on matters related to remuneration of directors (excluding directors who are Audit and Supervisory Committee members) and corporate officers, including the appropriateness of policies, procedures, and systems, as well as the appropriateness of the proposed remuneration of each director (excluding directors who are Audit and Supervisory Committee members) and corporate officer, and delivers its opinions to the Board of Directors.
In addition, directors who are Audit and Supervisory Committee members also attend a Remuneration Committee as observers.

Sustainability Committee

To ensure our Group's sustainable growth alongside society, we have established a Sustainability Committee as an advisory body to the Board of Directors. With an outside director serving as chairperson to emphasize external perspectives, we have established a supervisory framework. The Sustainability Committee deliberates on matters concerning medium- to long-term sustainability management policies and submits its recommendations accordingly to the Board of Directors.

Members of the Committees

Management Meeting

The Management Meeting, comprising representative directors, executive vice president, and some corporate officers, was established to make decisions on and supervise important matters relating to business execution in accordance with the basic management policies determined by the Board of Directors, to discuss and understand in advance management issues to be addressed and risks that the Group is facing, and to promptly respond to changes in the management environment. The Management Meeting addresses management strategy and other important matters relating to overall management and also focuses its deliberations on important human resource strategies and measures relating to the assignment and development of human resources as well as significant investments including capital expenditures, equity contributions, acquisitions, and capital tie-ups.

Corporate Officers and Company Presidents Meeting

The Company adopts the Corporate Officer framework, the objective of which is to expedite execution of business operations based on policies determined by the Board of Directors and clarify responsibilities for the results. The corporate officers are elected by the Board of Directors, and meet monthly at Corporate Officers and Company Presidents Meeting to report on the status of business execution for cross-divisional sharing and exchange of information. In addition, directors who are not corporate officers will also attend the Corporate Officers and Company Presidents Meeting from time to time to provide supervision and advice on business operations.

Cooperation among Audit and Supervisory Committee, Independent Auditors and Internal Audit Departments

The Company strives to improve the effectiveness of audits by the independent auditor and by having the Audit and Supervisory Committee, independent auditor, and Internal Audit Department meet regularly and as necessary to exchange information on audit policies, audit plans, audit implementation status, accounting system revisions, etc. and to work in close collaboration with one another.
The Audit and Supervisory Committee and Internal Audit Department meet regularly and as necessary to provide direct reports and exchange information on audit policies, audit plans, audit implementation status, and other matters and to work in close collaboration with one another.
In addition, Audit and Supervisory Committee members attend audits conducted by the Internal Audit Department when necessary, and the Internal Audit Department conducts investigations and makes reports as requested by the Audit and Supervisory Committee, improving the quality of audits by both bodies.

Evaluation of the effectiveness of the Board of Directors

The company conducts an evaluation on the effectiveness of the Board of Directors once a year. A summary of the evaluation results for the fiscal year 2025 is provided below.

＜１.Method of evaluation＞

The Company conducted a questionnaire survey and individual interviews of Directors with evaluation items on the composition and operation of the Board of Directors, review of management strategies, etc., the status of supervision of the execution of business, and other topics relating to fiscal year 2025. Based on these results and other data, we evaluated the effectiveness of the Board of Directors. The content of the effectiveness evaluation is designed with advice from outside directors, and the distribution of the questionnaires and the collection and compilation of responses are outsourced to an external organization.

＜２.Overview of evaluation results＞

As a result, we confirmed that the Company’s Board of Directors is sufficiently effective and that effective measures are implemented with respect to the following matters in particular

• • The Board of Directors engages in active discussions under a culture of mutual respect and open communication, with a composition of members that ensures the necessary knowledge, ability, experience and diversity to fulfil its roles and functions. In addition, in order to focus on reviewing important proposals such as medium- to long-term management strategies, the Board of Directors appropriately and sufficiently delegates decision-making authority to the executive side regarding proposals related to individual business execution.
• • The Board of Directors encourages the management team to take appropriate risks toward achieving the value creation story (reasonably taking risks and actively taking action in the face of uncertainty to strengthen new earnings opportunities and the capacity to earn).
• • The Board of Directors confirms that objective, timely, and transparent procedures and evaluation criteria have been appropriately established for the appointment and dismissal of the President and other officers, and also confirms that discussions are being held to ensure that management incentives match management strategies or management plans and generate appropriate incentives.
• • The Board of Directors implements appropriate improvement measures regarding the key issues identified through evaluation of the effectiveness of the Board of Directors, and strives to enhance its effectiveness.

Among the issues raised in the effectiveness evaluation for fiscal year 2024, regarding "Streamlining operations to further promote discussion," we established a mechanism to further promote discussion at Board of Directors meetings, such as clarifying important matters and monitoring items through sharing the annual review schedule of the Board of Directors, and providing sufficient information and organizing key points for outside directors through pre-briefing sessions before Board of Directors meetings.
Regarding "Strengthening monitoring by the Board of Directors to respond to changes in the business environment and implementing deeper discussions on business strategies," in addition to the conventional quarterly execution reports by executive directors, we incorporated reports on important projects and businesses requiring close attention into the annual plan for Board of Directors agendas, introducing a mechanism to grasp the progress of each business in detail at appropriate times and engage in agile and deep discussions.
In this evaluation, as desirable items for further enhancing the effectiveness of the Board of Directors, we shared the issue of ensuring the reliable implementation of the above measures established and introduced in the current fiscal year, while also securing deliberation time at the Board of Directors meetings to expand discussions from a broader perspective, not limited to individual execution projects, but on long-term management strategies, capital policies, and human capital investment. Going forward, the Company will continue to maintain and enhance the effectiveness of the Board of Directors by addressing these issues.

 

Roles and Independence of Outside Directors

To enhance the supervisory function of the Board of Directors and to ensure the transparency and objectivity of decision-making through discussions from multifaceted viewpoints, outside directors make up the majority of the Board of Directors, which comprises diverse individuals who have abundant experience, tremendous insight and a high degree of professionalism. We appoint all the independent outside directors as independent officers and notify the Tokyo Stock Exchange and the Nagoya Stock Exchange of their appointment. In order to ensure that candidates have neither special relationships with the management team and major shareholders nor conflicts of interest with general shareholders, we designate those who meet all the following as independent officers: our own criteria for the appointment of independent officers; the requirements for independent officers set by the Companies Act; and the rules and regulations stipulated by the financial instruments exchanges.
Outside directors attend the Board of Directors meetings and non-statutory advisory bodies to demonstrate their supervisory function by becoming involved in the important decision-making of the company from an independent standpoint, while providing advice from an overall perspective based on their abundant experience and insight when formulating and confirming the progress of medium- to long-term management policies at the Board of Directors meetings. Outside directors who are Audit and Supervisory Committee members serve as a supervisory and auditing function based on their independence and expert knowledge.

Succession Plan

To achieve sustained growth and improve mid- to long-term corporate value for our Group, we are working on the formulation and implementation of a succession plan, investing a sufficient amount of time and resources to ensure that the optimal candidate with the right qualities to lead the future management of our Group can be appointed as president.  

Specific involvement by the Board of Directors

Although our succession plan is formulated and implemented under the leadership of the Chairman of the Board of Directors and the Representative Director and President, to ensure its objectivity and transparency, we continuously report on the formulation and implementation status to the Nomination Committee, where independent outside directors comprise the majority, while also reflecting advice from outside directors into our measures as appropriate.

Details of human capital identification and development measures

At the Niterra Group, to cultivate talent who will lead the next generation of management, we implement various next-generation management talent development programs, such as the global selection program HAGI and the domestic selection program Nittoku Business School for selected domestic talent. Additionally, we are promoting the development of local leadership that contributes to management within each country and region via our unique selective training programs.

Training for officers

We provide the directors with sufficient assistance to fulfill their expected roles and responsibilities where applicable. For the internal directors, we encourage them to take external seminars to acquire additional knowledge to meet their obligations, while the internal directors and corporate officers are required to attend an executive training session to share the managerial issues and seek out the solution. In order for the outside directors to deepen understanding of the Group, each department explains the businesses and operations in addition to providing them with opportunities to visit major sites of the businesses. Directors who are Audit and Supervisory Committee members periodically take external sessions to gain understanding of what roles the Audit and Supervisory Committee members fulfill, the audit methods, the relevant laws and regulations, and financial accounting knowledge required for the accounting audit.

Remuneration for Director

Officer remuneration comprises fixed remuneration paid in cash, bonuses linked to the degree of achievement of the Company’s performance over the course of a single year and other factors, and performance-linked, stock-based remuneration that is determined according to rank and the degree of achievement of performance targets set forth in the Medium-Term Management Plan and so on.
This structure is intended to raise awareness regarding the contribution to improving corporate performance and maximizing corporate value over the medium- to long-term and is based on a fundamental policy of officers sharing interests with shareholders through ownership of Company shares. However, remuneration for director who is an Audit and Supervisory Committee members comprise only fixed remuneration.
The Remuneration Committee deliberates on the appropriateness of remuneration and reports back to the Board of Directors.

Fixed remuneration

Fixed compensation is determined based on a comprehensive assessment that takes into account the position and responsibilities, as well as the standards of other companies, our company's performance, and the level of employee salaries.

Policy on the payment of bonus

As for bonuses, in addition to the base amount set for each position, by a coefficient corresponding to the degree of target achievement of single-year consolidated performance indicators, which reflect the results of sales activities, and the degree of target achievement of non-financial indicators, which reflect the results of efforts towards sustainable growth and improving corporate value.
The base amount for each position, each indicator and its target value used to evaluate the degree of target achievement, etc., are determined by the Board of Directors at the time of formulating the medium-term management plan, respecting the recommendations of the Remuneration Committee, so as to be consistent with the plan, and are reviewed as appropriate in response to changes in the environment.

Performance-linked stock remuneration system

We introduced a performance-linked stock remuneration system that is highly linked to the company's performance and offers high transparency and objectivity for directors (excluding directors who are Audit and Supervisory Committee members and outside directors) and corporate officers (excluding employment-type corporate officers) to have them share interests with shareholders, so as to incentivize them to contribute to the improvement of the Company’s medium- to long-term performance and to increasing corporate value.  Under the system, the Board Incentive Plan (BIP) trust is adopted, where points are granted based on their position and the level of achievement against the performance targets set in the Med-term Management Plan, etc. Points are calculated according to the method stipulated in share granting regulations, which were determined by the Board of Directors after the deliberation of the Remuneration Committee. After the end of the subject period of the system, shares of the company and money in the amount equivalent to the value of the shares are to be given or granted to directors (excluding directors who are Audit and Supervisory Committee members) based on the total number of granted points.
The degree of achievement of performance targets is evaluated based on mid-term performance indicators, shareholder value indicators and non-financial indicators. Mid-term performance indicators are the consolidated revenue and profit attributable to owners of the parent company, which are set as targets in the Mid-term Management Plan. Shareholder value indicators are the relative TSR, calculated based on the comparison of the Company's TSR (total shareholder return) during the Mid-term Management Plan period with the TSR of peer group companies during the same period, in order to strengthen awareness of the need to improve shareholder value. Non-financial indicators are employee engagement, which is used to evaluate the results of human capital management efforts aimed at the sustainable growth of the Group.
Each indicator used to evaluate the degree of achievement of performance targets is determined by the Board of Directors, respecting the recommendations of the Remuneration Committee, so as to be consistent with the Mid-term Management Plan, and is resolved as the content of performance-linked stock remuneration, etc. at the General Meeting of Shareholders.

 

Remuneration and bonus paid to directors in fiscal year 2025

*1 The following limits are set on the remuneration paid to directors (excluding Directors who are Audit and Supervisory Committee Members) according to the resolution made at the 125th general meeting of shareholders held on June 25, 2025.

Separately from the above, a performance-linked  stock compensation plan was established by resolution of the 125th Ordinary General Meeting of Shareholders held on June 25, 2025, for directors of the Company (excluding directors who are Audit and Supervisory Committee members and outside directors) and executive/corporate officers (excluding officers with employment contract), for a maximum amount of 3,400 million yen over a period of five fiscal years from the fiscal year ending March 31, 2026 to the fiscal year ending March 31, 2030.

*2 The following limits are set on remuneration paid to Directors who are Audit and Supervisory Committee members according to the resolution made at the 122th general meeting of shareholders held on June 24, 2022.

*3 “Bonus” corresponds to “performance-linked remuneration, etc.”, and “performance-linked, stock-based remuneration, etc.” corresponds to “performance-linked remuneration, etc.” and “non-monetary remuneration, etc.” The total amounts of "bonuses" and "performance-linked, stock-based remuneration" are the amounts recorded as expenses during the current fiscal year.

*4 The above includes remuneration for one director (excluding Directors who are Audit and Supervisory Committee Members) who retired at the conclusion of the 125th Annual General Meeting of Shareholders.

For details of the calculation method, please see the Annual Securities Report.

Stocks Held for Reasons Other than Pure Investment Purposes

Policy on the stocks held for reasons other than pure investment purposes

Niterra holds the stocks of its suppliers and others basically to maintain and enhance stable business relationships with them, when the company decides that holding the stocks will help increase its corporate value after verifying the economic rationality from medium- to long-term viewpoints. The Board of Directors annually checks whether it is rational and useful in terms of enhancing its corporate value to keep the stocks individually for each of the investee companies, in consideration of the capital cost and comparing the related risks and returns on a medium- to long-term basis. When the Board decides that the company should not continue to hold any of the stocks, the company will sell them as appropriate, in consideration of the market trend.

Criteria for the exercise of voting rights

For the exercise of voting rights for the stocks owned by our company, we will decide whether to exercise the rights for each item of the agenda, considering whether it will contribute to increasing the corporate value of the investee company and of our own company. In particular for the selection of directors, appropriation of retained earnings and other items that have a large impact on shareholder value, we will exercise the voting rights according to the criteria set for the rights.

Enhancement of Group Governance

We have corporate officers who were locally recruited at its regional headquarters (RHQs) for the Americas and EMEA in order to ensure that speedy and accurate managerial decisions are made at bases closer to the markets they serve in view of the company’s globally expanding business environment. We have also formed unique governance teams at the RHQs to build an optimal decentralized system on a group-wide basis and enhance corporate governance as the entire Group.
Moreover, the Group Internal Audit Headquarters is in place as an organization that audits the effectiveness of the Group’s governance as an entity that is separate from its business execution. This organization formulates and implements measures to carry out audits on the management of Group companies and RHQs and on the core business operations of each department. It also formulates and implements measures to enhance internal control across the Group and thus plays an important role for the enhancement of the Group’s governance.