Basic Approach to Corporate Governance

We recognize our responsibility to society and offer beneficial products and services while maintaining the highest standards of integrity. Through our growth, we will contribute to society and enrich the lives of our employees.

Based on this philosophy, we created the NAGASE Vision, which is a promise to our stakeholders that each of us will embody our value proposition to Identify, Develop and Expand to realize a safe, secure, and humane world where people live with peace of mind, engaging in measures to improve corporate value over the medium and long term.

We believe that rapid decision-making, execution, and transparency are essential for us to accomplish these initiatives as we engage in strengthening our corporate governance.

Corporate Governance

Board of Directors & Executive Officers

Board of Directors & Executive Officers

Basic Policy on the composition of the Board of Directors

The basic policy of the Board of Directors is to consist of internal directors with business experience, knowledge, and expertise, and external directors who can raise issues based on the perspectives of stakeholders and society, so that the Board of Directors can appropriately understand the status of business execution, make decisions flexibly and promptly, and supervise the status of execution.

Under this basic policy, the Board of Directors currently consists of eight members, including three external directors who are independent officers. More than a third of the Board of Directors is composed of independent external directors. In addition, the Company promotes diversity in management regardless of gender, nationality, and race, and we believe that we have secured a certain level of diversity in terms of gender and internationality, as we have appointed one female director, and many directors have experienced working overseas for several years (average number of years of working overseas for internal directors: about six years).

At present, we believe that we are able to achieve both a certain level of diversity and an appropriate size of the Board of Directors. However, in order to ensure the effectiveness of the Board of Directors, we will aim to further improve the composition of the Board of Directors to achieve both diversity, including gender, and an appropriate size.

Skills Matrix

The Company has identified the skills required by the Board of Directors and disclosed the roles and expertise specifically expected of directors and auditors as follows.

Position in the Company
Name
Corporate Management Global Business Marketing / Sales R&D Production/Quality Finance and accounting Legal affairs / Risk management Human Resource Management Sustainability DX
Representative Director, Chairman
Kenji Asakura
Representative Director, President and CEO
Hiroyuki Ueshima
Representative Director
Masaya Ikemoto
Director
Masatoshi Kamada
Director
Tamotsu Isobe
Director, Senior Adviser
Hiroshi Nagase
Outside Director
Ritsuko Nonomiya
Outside Director
Noriaki Horikiri
Outside Director
Toshiaki Mikoshiba
Audit & Supervisory Board Member
Masanori Furukawa
Audit & Supervisory Board Member
Akira Takami
Outside Audit & Supervisory Board Member
Masaya ishida
Outside Audit & Supervisory Board Member
Gan Matsui

As of June 21, 2024

Corporate Governance System

Board of Directors The Board of Directors is clearly positioned as the body in charge of making decisions on management policies and strategies, and supervises the execution of operations. It holds a regular monthly meeting to make important decisions, track business performance and formulate measures.
Audit & Supervisory Board/Audit & Supervisory Board Members In accordance with the audit policy and audit plans set at Audit & Supervisory Board meetings, Audit & Supervisory Board members conduct audits of the execution of duties by directors by attending important meetings such as Board of Directors meetings and receiving reports solicited from subsidiaries on an as-needed basis.
Nomination Committee The Nomination Committee has five members, the majority being outside directors. It deliberates on appointment proposals for directors and executive officers and succession plans for the Chief Executive Officer. It then provides reports and recommendations to the Board of Directors with the aim of ensuring objectivity and transparency in nominations of NAGASE’s top management.
Compensation Committee The Compensation Committee has four members, the majority being outside directors. It enhances the objectivity and transparency of the decisionmaking process regarding compensation of directors and executive officers by screening the appropriateness of every compensation level and the compensation system to report and make recommendations to the Board of Directors.

Attendance of Directors and Corporate Auditors at Board of Directors Meetings in FY2023

position Name Board of Director meetings Audit & Supervisory Board meetings Nomination Committee Compensation Committee
Director Kenji Asakura 16/16
(100%)
- 4/4
(100%)
-
Director Hiroyuki Ueshima 16/16
(100%)
- 4/4
(100%)
4/4
(100%)
Director Masaya Ikemoto 16/16
(100%)
- - -
Director Masatoshi Kamada 16/16
(100%)
- - -
Director Hiroshi Nagase 16/16
(100%)
- - -
Director Ritsuko Nonomiya 16/16
(100%)
- 4/4
(100%)
4/4
(100%)
Director Noriaki Horikiri 16/16
(100%)
- 4/4
(100%)
4/4
(100%)
Director Toshiaki Mikoshiba 12/12
(100%)
- 3/3
(100%)
3/3
(100%)
Audit & Supervisory Board Nobuyuki Shirafuji 16/16
(100%)
16/16
(100%)
- -
Audit & Supervisory Board Masanori Furukawa 16/16
(100%)
16/16
(100%)
- -
Audit & Supervisory Board Akira Takami 12/12
(100%)
12/12
(100%)
- -
Audit & Supervisory Board Gan Matsui 16/16
(100%)
16/16
(100%)
- -

※The number of meetings of the Board of Directors does not include resolutions adopted in writing. The number of the Board/the Audit & Supervisory Board meetings in the attendance of Toshiaki Mikoshiba and Akira Takami at the Board of Directors / the Audit & Supervisory Board meetings are the number of meetings held since they became a director/a corporate auditor, respectively.

※The number of meetings of the Nominating Committee and the Executive Compensation Committee in the attendance of Toshiaki Mikoshiba at the meetings of the Nominating Committee and the Executive Compensation Committee is the number of meetings held since he assumed office as a member of the Committee on June, 2023.

※ Nobuyuki Shirafuji retired from his position at the Annual General Meeting of Shareholders in June 2024.

Resolutions adopted or reported at Board of Directors meetings and the number of items on the agenda(FY2023)

Classification Number of meetings
Management Strategy, Sustainability and Governance 15
Financial Results and Financial Affairs 32 22
Risk management, internal control and compliance related 5
Human Resources 9
Individual case 19
Total amount 70
Group Management Committee The Group Management Committee comprises executive officers appointed by the Board of Directors, and in principle, meets regularly twice a month to discuss management strategies, investment projects, and other important matters to support business decision-making. This committee serves as an advisory body that discusses matters resolved by the Board of Directors.
Risk Management & Compliance Committee The Risk Management & Compliance Committee establishes and strengthens risk management and compliance systems that cover not only legal compliance with also corporate ethics, ESG Risks. Risks related to the business operations of the NAGASE Group and regular supervision of the effectiveness of the management system are managed by the Risk Management and Compliance Committee under the supervision of the Board of Directors.
Sustainability Committee The Sustainability Committee is chaired by the President with executive officers and senior management of Group companies as members. This committee formulates policies for promoting sustainability throughout the Group, establishes and maintains the promotion system, monitors measures, and conducts educational activities within the Group.
Internal Control Committee The Committee deliberates on basic policies for the internal control system, builds frameworks established by the internal control system, and monitors the management of the frameworks to ensure the appropriateness of business operations.
Security Trade Control Committee The Security Trade Control Committee ensures compliance with export-related laws and regulations in relation to foreign currency exchange and foreign trade for the Company’s trading of cargoes and technologies covered by such laws and regulations.

As described above, the current corporate governance system, functioning in cooperation between outside directors, the Audit & Supervisory Board, and various committees with the aim of strengthening the Group's corporate governance function, acts in a supervisory and audit function from multifaceted perspectives, including from outside the company. At present, we have determined that this is the most reasonable system to realize this.

Corporate Governance System

コーポレートガバナンス体制

Internal Controls

The NAGASE Group established an internal control system to build a stable and sustainable corporate foundation for the Group with the aim of enhancing corporate value through corporate activities. In line with the Management Philosophy of maintaining highest integrity, the internal controls of the NAGASE Group monitor the construction and operation of frameworks defined under the internal control system and ensures the propriety of operations.

Status of Internal Controls Systems

a) Systems to ensure that Directors and employees execute their duties in accordance with laws and regulations and the Articles of Incorporation

b) Systems for retaining and managing information relating to the execution of duties by Directors

c) Rules relating to management of loss-related risks and other systems

d) Systems for ensuring the efficient execution of duties by Directors

e) Systems for ensuring the proper implementation of business by the corporate group comprising a stock corporation and its subsidiaries

f) Matters pertaining to employees when Audit & Supervisory Board members request the appointment of employees to assist them in the execution of their duties

g) Matters pertaining to ensuring the independence of employees specified in the preceding paragraph from Directors and ensuring the effectiveness of instructions from Audit & Supervisory Board members

h) Systems for Directors and employees to report to Audit & Supervisory Board members and other systems for reporting to Audit & Supervisory Board members

i) Other systems to ensure that audits are conducted effectively by Audit & Supervisory Board members

j) Matters concerning procedures for prepayment or reimbursement of expenses incurred in connection with the performance of duties by Corporate Auditors and other expenses or liabilities incurred in connection with the performance of such duties. Matters related to the policy for the treatment of expenses or liabilities that arise in the performance of duties of the Corporate Auditors

k) Other systems to ensure that audits by corporate auditors are conducted effectively

Details

Corporate Governance Report (pdf:553KB)

Compensation

Policy for Determining Level of Compensation

NAGASE CO., LTD. has established a policy for determining overall board member compensation and methods for calculating the actual amounts through consultation at the Compensation Committee, a majority of whom are outside directors, and deliberation at the Board of Directors. Our basic policy is to ensure that compensation is appropriate for the role and scope of responsibilities for each board member and motivates them to sustainably enhance corporate value in light of objective external data and Company earnings for the period in question, etc., and that a fixed basic salary for each position and performance incentives shall be 50-70% and 25-40%, 5-10%(When 100% of performance targets are achieved) respectively. Compensation for outside directors and auditors is limited to the basic compensation, a fixed basic salary, in view of their duties.

Our basic policy for a fixed basic salary is that annual compensation will be paid equally each month, and variable compensation will be paid in a lump sum at the end of June.

The indicators selected for performance-linked compensation are net income attributable to shareholders of the parent company, which is the final profit, as an incentive to improve business performance, and ROE as an incentive to improve capital efficiency.
The basic amount of performance-linked remuneration based on net income attributable to shareholders of the parent company is determined based on the consolidated performance forecast at the beginning of the fiscal year, and is multiplied by the ratio of the crimp to the actual amount of net income for the previous fiscal year and the achievement ratio to the consolidated performance forecast at the beginning of the fiscal year, and adjusted by the individual assessment.
Compensation based on ROE is calculated based on the degree of achievement of each fiscal year's target, which is set for each fiscal year in order to achieve the final target of the medium-term management plan.
ROE for the fiscal year ending March 31, 2024 is 5.9%.

In order to strengthen the linkage between sustainability-related initiatives and executive compensation, ESG-related indicators will be added to the performance-linked indicators beginning in FY2024.

Amount of remuneration paid to directors and corporate auditors in office for the fiscal year ended March 31, 2024

Compensation paid to 10 directors was 271 million yen, and that paid to 4 corporate auditors was 83 million yen.
The total amount of remuneration paid to six outside directors and six outside corporate auditors was 71 million yen.
The amount paid to directors includes 120 million yen that was expensed as a provision in the fiscal year ended March 31, 2024.In addition, an amount equivalent to employee salary of 13 million yen was paid to directors who concurrently serve as employees.
The amount of compensation above includes compensation paid to two directors and one corporate auditor who retired at the conclusion of the 109th Ordinary General Meeting of Shareholders held on June 21, 2024.

Breakdown of Compensation and Total Amounts(Fiscal year ended March 2024)

Title Number of Eligible Directors Total Compensation
(Millions of yen)
Total Compensation by Type (Millions of yen)
Basic Salary Performance Incentives (Bonuses) Non-monetary compensation, etc. of Amounts Shown on the Left
Board of Directors Internal Directors 6 234 177 30 26
Outside Directors 4 36 36 - -
Total 10 271 214 30 26
Audit & Supervisory Board Members Internal Audit & Supervisory Board Member 3 48 48 - -
Outside Audit & Supervisory Board Member 2 34 34 - -
Total 5 83 83 - -

Important Matters regarding Employee Bonuses for Employees Also Serving as Directors(Fiscal year ended March 2024)

Total Compensation
(Millions of yen)
Number of Eligible Directors Comments
13 1 Paid in an amount equivalent to employee bonus.

Revision of executive compensation
Addition of ESG evaluation indicators for performance-linked compensation

In recent years, there has been a shift from a “trade-off” mentality, in which social value and economic value are incompatible, to a “trade-on” mentality, in which social and especially environmental considerations are a prerequisite for economic value. As Nagase moves forward with corporate activities based on this “trade-on” approach, we added ESG-related indicators to our performance-linked indicators from FY2024 in order to strengthen the linkage between our sustainability-related initiatives and executive compensation.

<ESG-related Indicators Evaluation Indicators>

①Employee engagement
②Carbon neutra
③External evaluation
※We will set appropriate evaluation indicators depending on the status of material issues and materiality at our company.

Composition of executive compensation and performance-linked indicators (KPI)

Type of Reward Performance indicators(KPI) Composition ratio
base payment Fixation - Cash - 50-70%
performance-linked remuneration Variable short term Cash Net income (% of plan), Individual Assessments 25-40%
Net income (year over year), Individual Assessments
ESG-related indicators
mid-term Stock ROE 5-10%

Compensation by Type

Compensation Type Compensation Content Fixed / Variable Payment Method
Basic salary ・ A fixed salary is paid commensurate with each director’s position Fixed Cash
Performance incentives (bonuses) ・ A basic payment amount is decided in line with performance for the period.
・ Incentives reflect individual evaluations based on the Goal Management System.
Variable (by fiscal year) Cash
Performance incentives (non-monetary) ・ Points are awarded based on position and achievement of performance targets, etc.
・ 1 point is converted to 1 share and shares are paid out at the time of retirement.
Variable (mid-term) Stock

Audit System

Status of Audit by Audit & Supervisory Board Members

Audits by corporate auditors are conducted by three full-time corporate auditors (including one outside corporate auditor) and one non-full-time corporate auditor (outside corporate auditor), for a total of four corporate auditors, including corporate auditors with considerable financial and accounting knowledge.

The Board of Corporate Auditors meets once a month in principle and as needed. Each Corporate Auditor reports on audit activities and results, and exchanges various opinions regarding audit perspectives and opinions.

In addition, in order to ensure the effectiveness of audits by corporate auditors, the Company has appointed one corporate auditor staff member with considerable knowledge of finance, accounting and internal auditing from among the members of the Audit Office, which is the internal auditing department of the Company.

Status of Audit by Internal Auditors

The internal audit is conducted by 11 employees, including certified internal auditors (CIA) and qualified internal auditors (QIA) with expert opinions on internal auditing, who audit the appropriateness and efficiency of the business activities of the Company and its subsidiaries in accordance with the internal audit rules.

Status of Audit by Independent Auditor

Independent audits are performed in a fair and impartial manner by the following specified limited liability partners.

Certified Public Accountants Auditing Firm
Specified limited liability partners
Managing partners
Takafumi Mitsuki Ernst & Young ShinNihon LLC
Takuya Suzuki

Neither of the certified public accountants, who have executed the aforementioned duties, have performed audits continuously for more than seven years.

Outside Officers

Through participation in the Board of Directors, outside directors receive reports on the implementation plans of audits by the auditors, the results of audits by the auditors and the accounting auditor, the evaluation results of the Company relating to the internal control in accordance with the Financial Commodity Exchange Act, and the status of the development and operation of the internal control system, etc. in accordance with the Companies Act.

Outside auditors exchange information on internal audits and audits of domestic and overseas affiliates at the Audit & Supervisory Board, and receive reports on audit results from corporate auditors and exchange opinions. In addition, the outside auditors receive a direct explanation of an audit plan and results from the accounting auditor, exchange opinions on risk recognition, and receive reports on the status of the accounting auditor's execution of duties from the full-time auditors.

In addition, outside directors and the Audit & Supervisory Board members exchange opinions through regular meetings.

Outside Director

NAGASE has three outside directors, Ms. Ritsuko Nonomiya, Mr. Noriaki Horikiri and Mr. Toshiaki Mikoshiba. All three are independent outside directors based on the definition set forth by the Financial Instruments Exchange.

Name Reasons of Appointment
Ms. Ritsuko Nonomiya
Assumed office in June 2020

< Attendance at Board of Director meetings in fiscal 2023 >
16/16 (100%)

Ms. Ritsuko Nonomiya has a high level of financial and accounting knowledge as well as sufficient insight and experience in corporate management through her experience in auditing and other operations at KPMG Group and her involvement in M&A and business development at UBS Group and GE Group.

She is appointed as an outside director because She is expected to strengthen the corporate governance of our Group, which is increasing its overseas ratio, by making use of her knowledge and experience and by offering suggestions on the overall management of our company.

She has no personal, capital, or business relationships or other interests with the Company, except for her shareholding in the Company's stock, and is therefore considered an outside director with no potential conflicts of interest with general shareholders.

Mr. Noriaki Horikiri
Assumed office in June 2022

< Attendance at Board of Director meetings in fiscal 2023 >
16/16(100%)

Mr. Noriaki Horikiri has long been involved in the management of Kikkoman Corporation and has a high degree of insight and a wealth of experience in corporate management.

We have elected him as an outside director because we expect that he will make use of this experience to make recommendations regarding our overall management, including overseas development and production activities, and thereby strengthen the corporate governance of the Group. He is the Representative Director, Chairman and CEO of Kikkoman Corporation, and although the Company has transactions with Kikkoman Corporation, there is no materiality that would give rise to a special interest relationship in light of the size of the transactions.

Other than the above, there is no personal, capital, business, or other relationship of interest with the Company, except for the Company's shareholding, and therefore, the Company recognizes that the Outside Director is an Outside Director who is unlikely to have any conflict of interest with general shareholders.

Mr. Toshiaki Mikoshiba
Assumed office in June 2023

< Attendance at Board of Director meetings in fiscal 2023 >
12/12(100%)

Mr. Toshiaki Mikoshiba has long been involved in the management of Honda Motor Co., Ltd. for many years and has a high degree of insight and a wealth of experience in corporate management.

We have elected him as an outside director because we expect that he will strengthen the corporate governance of our group by making use of his expertise to make proposals regarding our overall management, including overseas development and sales.

He has served as Chairman of the Board of Directors of Honda Motor Co., Ltd. in the past, and although the Company has transactions with the company, there is nothing of importance that would give rise to a special interest relationship, given the size of the transactions.

In addition to the above, there are no personal, capital, business, or other relationships of interest with the Company, and therefore, the Company recognizes him as an outside director who is unlikely to have any conflicts of interest with general shareholders.

Details (Outside Directors’ Relationship with the Company)

Corporate Governance Report (pdf:553KB)

Outside Auditors

NAGASE has two outside Audit & Supervisory Board members, Mr. Masaya Ishida and Mr. Gan Matsui. Both are independent members based on the definition set forth by the Financial Instruments Exchange. Reason for Appointment of Outside Directors, Conc

Name Reasons of Appointment
Mr. Masaya Ishida
Assumed office in June 2024

Mr. Masaya Ishida has considerable knowledge of finance and accounting based on his long and broad experience at financial institutions in Japan and overseas.He has worked for Sumitomo Mitsui Banking Corporation, our correspondent bank, in the past.However, We has a sound financial structure with a high capital adequacy ratio, is not dependent on borrowing from financial institutions, and the degree of influence of financial institutions on the Company's management is minimal, and the Company has determined that there is no materiality that would give rise to a special interest relationship. Other than the above, there are no personal, capital, business, or other relationships of interest with the Company, and therefore, the Company recognizes him as an outside corporate auditor who is unlikely to have any conflicts of interest with general shareholders.

Mr. Gan Matsui
Assumed office in June 2018

< Attendance in fiscal 2023 >
Board of Directors meetings: 16/16 (100%)
Audit & Supervisory Board meetings: 16/16 (100%)
Mr. Gan Matsui has a wealth of experience and insight in the legal profession.
And his insightful knowledge, we believe that he will be able to appropriately perform his duties as an outside corporate auditor. Therefore, he is considered to be an outside corporate auditor who is not likely to have a conflict of interest with general shareholders.

Details (Outside Directors’ Relationship with the Company)

Corporate Governance Report (pdf:553KB)

Criteria for appointment of external officers

The candidate for external director is a person who can raise issues based on his or her honest personality, high insight and ability, and the perspectives of stakeholders and society. The Representative Director selects those candidates, and after deliberation by the independent Nominating Committee, the Board of Directors deliberates and makes a resolution, which is then submitted to the Shareholders’ Meeting.

With regard to audit and supervisory board members, the Representative Director selects candidates from among those who meet the requirements set forth in the Corporate Auditor Auditing Standards, and after prior consultation with the Audit and Supervisory Board and obtaining their consent, the Board of Directors deliberates and makes a resolution, and the matter is submitted to the Shareholders’ Meeting. In addition, our Company discloses the reasons for the nomination of each candidate for director and each candidate for audit and supervisory board member in the reference documents of the Notice of Convocation of the Shareholders’ Meeting.

Directors' own transactions and transactions with conflicts of interest

The regulations of the Board of Directors stipulate that directors or executive officers must obtain the approval of the Board of Directors in the event that they engage in own transactions or transactions with conflicts of interest.

Directors' compensation and shareholder voting rights

The Company's Articles of Incorporation stipulate that the total amount of remuneration for Directors, etc. shall be determined by a resolution of the Shareholders’ Meeting.

Board of Directors Effectiveness Evaluation

[Board of Directors Effectiveness Evaluation]

The Company believes that it is important to analyze and evaluate the effectiveness of the Board of Directors every year to enhance its effectiveness. For this reason, we conduct a questionnaire survey of all directors and audit and supervisory board members, and analyze and evaluate the results at the Board of Directors. The results are summarized in the Corporate Governance Report every year. The results for the fiscal year ended March 2021 are disclosed in Supplementary Principle 4 -11 (3) in “Disclosure Based on the Principles of the Corporate Governance Code” of this report.

[Summary of Effectiveness Evaluation Results]

As a result, the Company confirmed that our Board of Directors conducts appropriate and timely deliberations and decision-making, functioning effectively.
Furthermore, in response to the requirement to further expand deliberations on medium- to long-term management policies, company-wide strategies and important matters identified in the evaluation from the previous year's Board of Directors' meeting, we carried out a review of resolutions of the Board of Directors and made improvements.
At the same time, from the perspective of further improvement of effectiveness, we confirmed the issues that need to be addressed in order to optimize the provision of information in the preliminary examination to make the deliberations more effective, to expand feedback and follow-up, and to ensure diversity in the composition of the Board of Directors over the medium and long term.
The Company intends to continue with initiatives for improving the effectiveness of the Board of Directors.

Policies Related to Information Disclosure

Pursuant to the NAGASE Group Code of Conduct for Risk Management & Compliance, we engage in ongoing communications with society and our stakeholders through timely disclosure of truly important information over appropriate channels. We are mindful that all corporate activities remain within the bounds of socially accepted norms.

This basic philosophy guides us as we conduct timely, appropriate, and fair disclosure of information through investor relations activities, public relations programs, and websites for our shareholders and investors to improve management transparency and accountability.

Timely Disclosure System

The Company has established Basic Compliance Policy. In pursuit of compliance with laws, regulations, and internal regulations/rules and public disclosure to stakeholders (interested parties), the company actively and fairly discloses corporate information striving to ensure transparency.

Under this basic approach, the company has created the following structure for identifying and managing information subject to timely disclosure which functions as an internal system for providing me timely and appropriate disclosure of company information to investors.

適時開示体制の概要

■ Information Related to Material Facts

The relevant headquarters general managers and division managers report information collected from departments and subsidiaries to the individual designated to handle such information. The individual designated to handle information coordinates with the relevant internal departments, summarizes information, and submits a report to the representative director and president.As necessary, a report is submitted to the board of directors, after which the Corporate Management Department (body responsible for timely disclosures) promptly issues a timely disclosure.

■ Information Related to Decision-Supporting Facts

Each department or subsidiary circulates a proposal draft, based on which the Corporate Management Department and related departments hold consultations. After a decision by the president, the board of directors makes a final approval, after which the Corporate Management Department promptly issues a timely disclosure.

■ Financial Information

The Corporate Management Departments receive financial information from each consolidated subsidiary, accepting advice and guidance from members of the Audit & Supervisory Board and outside experts as necessary to ensure the reliability of financial information received. These divisions then prepare financial reports and drafts of public announcements. After decision by the president, the board of directors makes a final approval, after which the Corporate Management Department promptly issues a timely disclosure.

Group Tax Policy

The NAGASE Group has established a Group Tax Policy.

Group Tax Policy

Background and Objectives

In accordance with its management philosophy, the NAGASE Group has established a Basic Compliance Policy to ensure that it complies with laws and rules, does not deviate from social norms, and engages in honest and fair corporate activities. As a multinational corporation, we conduct our business activities on a global scale and aim for further development as a global company by operating in accordance with international rules.
In accordance with the above philosophy, it is necessary to comply with the tax laws of each country and minimize tax risks. At the same time, to maximize shareholder value, it is necessary to establish a system to regularly check the tax positions of NAGASE Group companies on a global basis and reduce unnecessary tax expenses such as double taxation and apply the tax incentives. In order to achieve the above objectives, a global tax policy applicable to the NAGASE Group will be established.

1. Compliance with tax laws

The NAGASE Group complies with applicable tax laws and regulations, and conducts its business activities in accordance with standards published by international organizations (e.g., OECD Guidelines).
It is obligatory to pay the taxes set in each country on the set due date.

2. Minimize tax risk

In order to maximize shareholder value, the NAGASE Group will respond to changes in taxation systems and tax administration in each country and aim to minimize tax risks.

3. Maximize consolidated free cash flow

The NAGASE Group's tax organization advises each business unit and management on measures and schemes to optimize tax and tax-related expenses in order to achieve management objectives, based on the perspectives of 1 and 2 above. We aim to maximize after-tax profit, ROE, EPS, free cash flow, and ultimately shareholder value.

4. Part of business activities (structuring and planning)

Business considerations can lead to a decrease in business value if taxes are not taken into account. Tax considerations are an integral part of sustainable business growth. All planning has a business purpose and is not done solely for tax purposes.
In accordance with the spirit of domestic and international law, the NAGASE Group will not avoid taxes through the application of organizational forms or tax benefits that are not consistent with its business purposes or actual conditions. We do not utilize tax havens for the purpose of tax avoidance.

5. Tax Liability and Structure

The NAGASE Group's director in charge of tax management is the Chief Financial Officer (CFO). Tax issues arising from day-to-day business activities will be handled by the tax staff of each Group company in accordance with the Tax Guidelines, Group Tax Regulations, and other guidelines that stipulate the procedures for handling tax issues. Any issues raised during tax audits or significant issues related to tax risks will be reported by the tax staff of each Group company to the head office tax staff and the director in charge of administration, who will work together to consider measures to deal with such issues as necessary.

6. Relationship with Tax Authorities

The NAGASE Group will follow the tax administration and collection procedures, etc. of each country. If a tax audit is requested, we will disclose information to the authorities in a timely and appropriate manner and respond and cooperate with them in good faith, thereby building a relationship of trust. On the other hand, if there is a difference of opinion on a tax position, we will appropriately respond to and resolve any unreasonable claims in accordance with the legal principle of taxation. We maintain sound and normal relationships with tax authorities and do not provide unfair advantages.

7. Transfer Pricing

The NAGASE Group will consider arm's length pricing for foreign affiliate transactions and will allocate profits appropriately based on an analysis of the functions, risks, and assets between countries and between each subsidiary in proportion to their contributions. If the use of an Advance Pricing Agreement (APA) is appropriate, NAGASE Group will consult with the tax authorities in the relevant jurisdictions in advance. We will take appropriate documentation measures in accordance with the laws and regulations of each country.

8. Elimination of double taxation

In order to eliminate double taxation, where the same economic benefit is taxed in more than one country, tax treaties are applied between countries in which the business operates.

9. Tax Haven Tax Compliance

When investing in countries with low tax rate or when tax rates are reduced due to revisions of laws and regulations in each country, the NAGASE Group determines whether the anti-tax haven system is applicable in accordance with the tax laws and regulations.
As a result, if it is subject to anti-tax haven taxation, NAGASE Group will file a tax return and pay taxes appropriately.

10. Uncertain tax positions and tax interpretations

For cases where taxation relationships and tax positions are unclear, we will conduct risk assessments for each case and handle them appropriately. Our goal is to maintain shareholder value by ensuring proper tax payment through compliance with laws and regulations, and we aim to keep tax risks low. We seek advice from tax consultants or consult with tax authorities in each country or region in advance to reduce uncertainties and handle uncertain tax positions.

Information Dissemination and Communication to Shareholders and Investors

Communication with Analysts and Institutional Investors

By providing briefings on medium-term management plans and financial results, we offer forums where analysts and institutional investors can directly interact with management. Briefing session materials are published both in Japanese and English. In addition, members of management, including the President, regularly visit institutional investors and engage in active dialogue.

Communication with Individual Investors and Shareholders

In order to help outside parties gain an understanding of the NAGASE Group, we have set up a subsection of the investor relations section of our website, called “Individual Investors.” In addition, we hold briefings for individual investors to provide an easy-to-understand introduction of our global business activities, as well as NAGASE Group management strategies and performance reports.