Organization

1.Organizational Structure and Operation

Board Members

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.

• An operating officer of our company or its subsidiary
• An operating officer or non-executive Director of the parent company of our company
• An operating officer of a fellow subsidiary of our company
• An entity or an operating officer thereof that our company is a primary trading partner of
• An entity or an operating officer thereof that is a primary trading partner of our company
• A consultant, professional accountant or lawyer receiving a large sum of money or other properties other than Director compensation from our company
• A major shareholder of our company (if such a major shareholder is a corporation, an operating officer of the corporation)
• 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)
• An operating officer of an entity with which our company has a reciprocal outside officer appointment (Applies only to the said person)
• An operating officer of an entity which our company makes donations to (Applies only to the said person)
• Other

Relationship with our Company (2)

Audit & Supervisory Committee

Composition of Committee, and Attributes of Chairperson of the Committee

Matters Concerning Independence of Said Directors and/or Staffs from Executive Directors and Officers

Our company has established the "Audit & Supervisory Committee Staff" to assist the Audit & Supervisory Committee in its duties. The staffs have been selected from the members of Internal Auditing Division, a division of internal audit of our company, but full-time staff members have been appointed, who perform his/her duties under the direction and orders of the Audit & Supervisory Committee and its members. In addition, the regulation stipulates that personnel matters of the Audit & Supervisory Committee Staff, etc. shall be made with the prior consent of the Audit & Supervisory Committee.

Collaboration between Audit & Supervisory Committee, Accounting Auditors, and Audit Division

Our company maintains a three-way audit collaboration between the committee member Audit Committee, the Accounting Auditor, and Internal Auditing Division, the internal audit department of our company.
The Accounting Auditor, with the Audit & Supervisory Committee serving as the point of contact, sets up opportunities such as "Management Discussion Meeting" with the president and other management and business execution divisions to hear how management issues are being addressed. In addition, regular monthly meetings are held for the Audit & Supervisory Committee and the head of the Internal Auditing Division to report the status and results of accounting audits and exchange opinions in order to promote mutual cooperation.
Furthermore, the audit policy and audit plan of the Internal Auditing Division are subject to the resolution of the Audit & Supervisory Committee to ensure coordination of audits and to clarify that audits are under the operational direction of the Audit & Supervisory Committee in addition to the management direction and order authority by the President.

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

Additional Information

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 by an independent outside Director and with three out of four committee members as independent outside directors—as an advisory body to the Board of Directors. The Board of Directors makes decisions based on the opinions of the committee members to the maximum extent possible.
The committee members are appointed via resolutions of the Board of Directors, and the committee functions as both the Nomination Committee and the Compensation Committee.
In these meetings, the committee members deliberated on matters related to the appointment of directors and executive officers, including candidates for directors and executive officers, as well as resolutions related to establishment of a skills matrix for the composition of the Board of Directors, the CEO succession plan, and the compensation policy and compensation structure, in response to consultation from the President, and submitted reports to board of directors based on their decisions (Nine meetings were held in the fiscal year ended December 31, 2024, and the average attendance rate of those who were committee members during the relevant period was 100%.)

The chairperson and the members as of March 28, 2025 are as follows:
＜Chairperson＞
Director: Yojiro Shiba (Independent Outside Director)
＜Members＞
Director: Mitsuru Saito (Chairman and Representative Director)
Director: Yumiko Ito (Independent Outside Director)
Director: Tsukiko Tsukahara (Independent Outside Director)

Independent Directors

Other Matters Regarding Independent Directors

All Outside Directors who satisfy the qualifications for independent director are designated independent directors.

【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 in accordance with these standards.

When the following items do not apply to an outside director candidate, we consider that they have the appropriate independence:

• An individual who is an executive officer* of our company or our group company or has been one ten years before the selection;
• 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;
• An individual who is the executive officer of a business partner of our group company with more than 2% of our consolidated sales;
• 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;
• An individual who works at the auditing firm that is an accounting auditor of our company; or
• 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, an executive officer or an employee.

When appointing independent outside directors, we strive to select candidates who can be expected to make effective proposals to the Board of Directors regarding the company’s management policies and management improvements.

【Outside Directors’ Status of Combined Offices】

• Director Yumiko Ito concurrently serves as Representative of Ito Law Office and Outside Director of Kobe Steel, Ltd.,. There is no special interests between our Company and the above companies where she concurrently serves.
• Director Tsukiko Tsukahara concurrently serves as Representative of Kaleidist K.K.. There is no special interests between our Company and the above company where she concurrently serves.
• Director Yoshio Aoki concurrently serves as Representative of CPA Yoshio Aoki Office and an Outside Corporate Auditor of Nippon Denko Co., Ltd.. There are no special interests between our Company and the above entities where he concurrently serves.

And our company discloses the status of our outside directors holding additional posts through the Convening Notices of General Shareholder Meetings and annual Securities Reports.

Incentives

Additional Information

We have introduced stock options as part of director compensation. In addition, we have introduced a performance-based stock compensation plan. At the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, a resolution was passed to partially revise the amount and details of the performance-based stock compensation plan for directors and executive officers (excluding outside directors, part-time directors, directors who are members of the Audit & Supervisory Committee, and persons residing outside Japan) in order to foster a stronger mindset of contributing to the Company’s performance and corporate value over the medium to long term. Please refer to “Disclosure of Policies for Determining Compensation and Methods of Calculation” in this report for the method by which share grants under these systems are calculated.

[Reference : 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.
In addition, NIPPON EXPRESS HOLDINGS was established on January 4, 2022, and has inherited the status of the BIP Trust Contract from Nippon Express Co., Ltd. The details of the inherited BIP trust contract are as follows:

[Content of the trust agreement]

[Total number of shares to be acquired by Directors, etc.]
Maximum 420,000 shares (Trust period: five years, Total of the Company's portion and the subject Subsidiary's portion)
(Note) On January 1, 2025, a 3-for-1 stock split of common shares was conducted, and the number of shares shown above is the number of shares after the stock split.

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

Additional Information

-

Compensation for Board Members

Additional Information

Total Amount of Compensation, etc. breakdown for Directors and Audit & Supervisory Board Members are being made available for public inspection in Business Report and Securities Report which are available on our website. And for directors who receive 100 million yen or more in compensation, the amount is disclosed in the Securities Report.

• The Total Amounts of Compensation, etc. for Directors and Audit & Supervisory Board Members for the fiscal year ending December 31, 2024 (January 1, 2024, to December 31, 2024) are as follows:

  Classification	Total Compensation (Million Yen)	Total amount of remuneration, etc. by type (Million Yen)				Number of people to be covered (People)
  		Basic compensation	Performance-based remuneration		Other
  			Bonuses	Share-based remuneration
  Directors (Outside directors)	378 (46)	278 (46)	73 (-)	8 (-)	19 (-)	9 (4)
  Audit & Supervisory Committee member (Outside Members)	59 (35)	58 (35)	- (-)	- (-)	1 (-)	4 (3)
  Audit & Supervisory Board Members (Outside Members)	23 (8)	22 (8)	- (-)	- (-)	1 (-)	5 (3)

  (Notes)

  • Compensation, etc. for Directors (excluding Directors who are members of the Audit & Supervisory Committee) includes compensation, etc. for Directors prior to the transition to a company with an Audit & Supervisory Committee, including two Directors (of whom one was an outside Director) who retired at the conclusion of the 2nd Ordinary General Meeting of shareholders held on March 28, 2024.
  • Compensation paid to Directors who are members of the Audit & Supervisory Committee relates to the period following the transition to a Company with an Audit & Supervisory Committee, and compensation paid to Audit & Supervisory Board Members relates to the period prior to the transition to a Company with an Audit & Supervisory Committee.
  • At the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, it was resolved that the total amount of monetary remuneration paid to Directors (excluding Directors who are members of the Audit & Supervisory Committee) out of Compensation, etc. would not exceed 1 billion yen per year (of which an amount not exceeding 100 million yen per year for outside Directors).
    The number of directors (excluding Directors who are members of the Audit & Supervisory Committee) as of the conclusion of the said General Meeting of Shareholders was seven (including three outside directors).
  • Share-based remuneration is determined according to a performance-based share remuneration system, and the amount recorded for the current fiscal year is the share-based remuneration for FY2023, for which a single-year and mid-term evaluation was conducted based on FY2023 results.
    Because FY2023 was the final year of the previous medium-term business plan, shares were issued to all officers covered by the plan. However, the above amounts are the amounts recorded for the current fiscal year and do not include amounts reserved and reversed in and before the previous fiscal year, and thus differ from the actual amounts paid.
  • At the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, it was resolved that the maximum amount of remuneration for Directors who are members of the Audit & Supervisory Board would be 200 million yen per year.
    The number of directors who are members of the Audit & Supervisory Board as of the conclusion of the said Ordinary Meeting of Shareholders is four (including three outside directors).
  • Other compensation includes company housing expenses, etc. paid by our Company to the officers.
• Amounts of compensation for individual officers (limited to those whose total amount of consolidated remuneration is 100 million yen or more) for the fiscal year ending December 31, 2024 (January 1, 2024 to December 31, 2024) are as follows:
  
  

  Mitsuru Saito, Director
  Total compensation: 143 million yen of which the basic compensation was 92 million yen, the company performance-based compensation was 34 million yen (Breakdown/ Bonuses: 31 million yen/The performance and share-based remuneration: 3 million yen) and other compensation was 17 million yen

  Satoshi Horikiri, Director
  Total compensation: 100 million yen of which the basic compensation was 68 million yen, the company performance-based compensation was 31 million yen (Breakdown/ Bonuses: 31 million yen/The performance and share-based remuneration: 0 million yen) and other compensation was 1 million yen

  (Notes)

  • The above information is limited to those whose total amount of consolidated remuneration is 100 million yen or more.
  • At the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, it was resolved that the total amount of monetary remuneration paid to Directors (excluding Directors who are members of the Audit & Supervisory Committee) out of Compensation, etc. would not exceed 1 billion yen per year (of which an amount not exceeding 100 million yen per year for outside Directors).
  • Share-based remuneration is determined according to a performance-based share remuneration system, and the amount recorded for the current fiscal year is the share-based remuneration for FY2023, for which a single-year and mid-term evaluation was conducted based on FY2023 results.
    Because FY2023 was the final year of the previous medium-term business plan, shares were issued under the plan. However, the above amounts are the amounts recorded for the current fiscal year and do not include amounts reserved and reversed in and before the previous fiscal year, and thus differ from the actual amounts paid.
  • Other compensation includes company housing expenses, etc. paid by our Company to the officers.
• Details of the Resolution of the General Meeting of Shareholders regarding Remuneration for Officers
  At the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, it was resolved that the maximum amount of remuneration for directors (excluding directors who are members of the Audit & Supervisory Committee) shall be 1 billion yen per year (including 100 million yen per year for outside directors, excluding employee salaries for directors who serve concurrently as employees).
  In addition, at the same Ordinary General Meeting of Shareholders, a resolution was passed to partially revise the amount and details of the performance-based stock compensation plan for directors and executive officers (excluding outside directors, part-time directors, directors who are members of the Audit & Supervisory Committee, and persons residing outside Japan) , separately from the above limits on remuneration, with the aim of fostering a stronger mindset of contributing to our company’s performance and corporate value over the medium to long term. For details, please refer to [Incentives] in this report. The number of directors (excluding directors who are members of the Audit & Supervisory Committee) as of the conclusion of the said Ordinary Meeting of Shareholders is seven (including three outside directors).
  At the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, it was resolved that the maximum amount of remuneration for Directors who are members of the Audit & Supervisory Committee shall be 200 million yen per year. The number of directors who are members of the Audit & Supervisory Committee as of the conclusion of the said Ordinary Meeting of Shareholders is four (including three outside directors).

Disclosure of Policies for Determining Compensation and Methods of Calculation

• Policy for Determining the Amount of Remuneration, etc. of Directors (excluding Directors who are Audit & Supervisory Committee Members) or the Method of Calculation thereof
  

  In order to seek appropriate advice from independent outside directors on important matters including directors’ remuneration, we established a discretionary Remuneration and Nomination Advisory Committee - with three out of four committee members who are independent outside directors. The policy for determining the remuneration, etc. of Directors (excluding Directors who are Audit and Supervisory Committee Members) was determined by the Board of Directors after seeking advice from the Remuneration and Nomination Advisory Committee and taking the report into consideration. As the Remuneration and Nomination Advisory Committee has conducted a multifaceted review of the details of individual Directors' remuneration, including consistency with the decision-making policy, the Board of Directors respects its report and believes that it is in line with the decision-making policy.
  Our Policy for Determining the Amount of Remuneration, etc. of Directors is as follows:

  (Regarding executive compensation)
  Our company has established the Remuneration and Nomination Advisory Committee as an advisory body to the Board of Directors for the purpose of strengthening the independence, objectivity, and accountability of the Board of Directors' functions related to the nomination and remuneration of Directors (excluding Directors who are members of the Audit & Supervisory Committee).
  The remuneration of Directors (excluding Directors who are Audit and Supervisory Committee Members) and Executive Officers shall be determined by the Board of Directors after the Remuneration and Nomination Advisory Committee deliberates and reports on the system and details based on the following policy. The determination of the amount of compensation for each individual shall be delegated to the Representative Director by resolution of the Board of Directors.
  
  (Directors’ Remuneration Policy)

  • Basic policy
    • Ensure that remuneration levels are commensurate with the size of roles and responsibilities so that talented people who put the corporate philosophy into practice can be retained.
    • Design the remuneration system to motivate and encourage contribution to sustainable growth over the medium to long term and sustainable enhancement of corporate value.
    • The remuneration system shall be fair, reasonable and easily explainable to all stakeholders.
  • Remuneration structure
    • Remuneration shall consist of base remuneration, which is fixed, and performance-linked remuneration, which varies according to the degree to which targets have been achieved. Remuneration shall be structured appropriately for the proportion of remuneration linked to short- and medium- to long-term business performance respectively and also to reflect contributions to sustainable corporate growth, sustainable enhancement of corporate value, and the degree to which targets have been achieved.
    • Remuneration for outside directors shall consist of basic remuneration based on their roles and independent status.
  • Basic remuneration
    The amount of base remuneration shall be determined by taking into consideration industry standards based on surveys of external specialist institutions and also dependent on their roles.
  • Performance-based compensation
    • Short-term performance-linked remuneration shall be paid in the form of a bonus indexed to targets set for a single fiscal year.
    • Remuneration linked to medium- and long-term performance shall be paid in the form of share-based remuneration linked to the degree to which the medium-term business plan has been fulfilled and to increases in corporate value (share value).

  (Determining Directors’ Remuneration)

  • Basis(fixed) remuneration
    • Remuneration (monthly amount) for each individual will be determined according to their role, based on the standard amount for their position.
    • Fixed remuneration shall be paid on a monthly basis.
  • Bonuses
    • Bonuses will be determined for each individual, as appropriate for their role, based on an evaluation that takes into account performance in a single fiscal year, the results of ESG management initiatives, and the overall contribution to the enhancement of corporate value.
    • Bonuses shall be paid at the close of the ordinary general meeting of shareholders relating to the fiscal year ending within one year after appointment.
  • Performance-based stock compensation
    • The degree to which the business plan has been achieved for each fiscal year during the medium-term business plan period, in terms of financial and non-financial indicators, and the degree to which the business plan has been achieved for the final year of the medium-term business plan period will be evaluated in accordance with the Group and the individual’s role. The shares to be granted and the amount equivalent to the cash value of the shares to be used for the payment of income taxes will then be determined on that basis.
    • Performance-linked remuneration in shares shall be paid in accordance with the conditions and timing stipulated in the Regulations on Granting of Shares, etc.

  The remuneration of our company's Directors (excluding Directors who are Audit and Supervisory Committee Members) consists of base remuneration and performance-based remuneration. The performance-based remuneration is paid according to the results and performance based on the expected duties. The composition ratio of remuneration is set appropriately to the ratio of remuneration linked to short-term and medium - to long-term performance, and it reflects the degree of sustainable corporate growth, contribution to sustainable improvement of corporate value, and achievement of targets.
  In addition, by setting the ratio of performance-linked remuneration to be higher for higher positions, it is designed to require higher performance and performance responsibilities for higher positions. Bonuses and stock-based compensation, which are performance-linked compensation, are allocated according to a standard amount set by position.
  Regarding the performance-based remuneration in shares, the Regulations on Granting of Shares, etc. stipulate a “Malus Clawback Clause.” This means that in the event of any conduct by a recipient that is deemed inappropriate in light of the purpose of the scheme, the company may demand that the recipient forfeit all or part of the right to receive company shares, etc. under the scheme or return a monetary amount equivalent to all or part of the value of the company shares, etc. granted.

• Indicators for performance-based remuneration, reasons for selecting such indicators, and method for determining the amount of performance-based remuneration
  

  As for the indicator related to performance-based remuneration, the bonus as short-term performance-based remuneration shall be determined through quantitative and qualitative evaluation based on the single-year performance according to the role played, the results of ESG management initiatives, and the overall contribution to the improvement of corporate value. For performance-based stock compensation as medium - to long-term performance-linked compensation, indicators include consolidated revenue, consolidated business income, consolidated ROE, and ESG-related non-financial indicators.
  Performance-based stock compensation is basically managed in terms of points, with 1 point = 1 share of the Company's stock. Each year, the number obtained by dividing the amount of stock compensation for each position by the plan's base stock price is granted as the base points to the plan's eligible persons. The period subject to evaluation is the same fiscal business year as our business plan (five business years from FY2024 to FY2028), and performance evaluation indicators are set according to the business plan and evaluated for each fiscal business year. The range of increase/decrease corresponding to the achievement of performance targets, etc., is from 0% to 150%, with 100% being the standard corresponding to achieving the performance targets set as the standards for the annual performance evaluation and the mid-term performance evaluation as a whole. After the end of the period covered by the business plan, the same number of shares as the number of points determined will be delivered. As for the details of the share delivery, the number of our company's shares corresponding to half of the points held by the Eligible Persons (fractional shares are rounded down) will be delivered, and the number of our company's shares corresponding to the remaining points will be sold for use in paying income tax, etc., and the remaining amount after tax payment will be paid to the eligible persons.
  The actual performance of the indices related to performance-based stock compensation for the fiscal year ending December 31, 2024, was 101.08% for consolidated net sales, 60.56% for consolidated operating income, and 38.00% for consolidated ROE, compared to the target figures throughout the period subject to evaluation.

• Matters concerning the delegation of authority regarding the determination of remuneration, etc. for individual Directors (excluding Directors who are Audit and Supervisory Committee Members)
  Based on the above policy, the Board of Directors has resolved to delegate the determination of the specific content of remuneration for individual Directors (excluding Directors who are Audit and Supervisory Committee Members) to the Representative Director.
  The authority to be delegated is to determine the amount of basic remuneration for each Director and the evaluation and allocation of bonuses in accordance with the standards for setting remuneration for Directors, which are deliberated and established in advance by the Remuneration and Nomination Advisory Committee, within the remuneration framework determined by resolution of the General Meeting of Shareholders.
  The reason for delegating these authorities is that the representative director was the most suitable person to evaluate the business of each director while keeping an overview of the performance of our company as a whole.
  In FY2024, at the Board of Directors meeting held on March 28, 2024, it was resolved that Satoshi Horikiri, President, would be entrusted with the determination of the specific content of individual compensation amounts.

Support System for Outside Directors

The Secretarial 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 Internal Auditing Division, in charge of internal auditing, provides the necessary job-related communication information that the occasion demands in order to support the duties of directors who are Audit & Supervisory Committee Members, including outside Audit & Supervisory Committee Members.

Status of Former President and Representative Director, etc.

Other Matters

Our company does not have a system of advisors, counselors, etc. appointed by former Representative Director President, etc.

Kenji Watanabe, formerly of our Chairman and Representative Director, is an advisor to Nippon Express, which is our subsidiary.
A summary of duties, etc., is as follows:
Duties: External activities for industry associations, etc.
Type of work and conditions: Part-time, with compensation
Date of retirement of President, etc.: March 28, 2024 (date of retirement from our company's Board of Director)
Term of office: Unspecified

The Nippon Express Advisor will utilize his experience and expertise in the management and sales of Nippon Express to engage in outside activities in industry associations and other organizations that are beneficial to the development of Nippon Express and the logistics industry, and will not have any authority to influence management decisions or be involved in any management decision-making.

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

• (ⅰ) Overview of the Implementation of Corporate Governance
  • Following the resolution of the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, our company transitioned from a Company with a Board of Company Auditors to a Company with an Audit & Supervisory Committee in order to accelerate decision-making, focus on strategic discussions, and strengthen oversight functions. In addition to the Board of Directors and the Audit & Supervisory Committee, our company has established a discretionary Remuneration and Nomination Advisory Committee as an advisory body to the Board of Directors to obtain the opinions of independent outside directors on important matters related to remuneration and nomination of officers. Moreover, in addition to ensuring prompt decision-making and execution of duties by delegating a part of the decision-making process regarding important business execution to the President and introducing an executive officer system, the supervisory function of the Board of Directors has been strengthened by separating supervision and execution.
• (ⅱ) Board of Directors
  • The Board of Directors is responsible for ensuring our company’s sustainable growth and maximizing its corporate value through the implementation of effective corporate governance, as delegated by the shareholders. In order to fulfill this responsibility, the Board of Directors deliberates and makes decisions on important management policies, management plans, and other critical matters related to overall management, deliberates and makes decisions on matters stipulated by the Companies Act to prevent loss of corporate value, and exercises a supervisory function over overall management, overseeing divisions engaged in the execution of business and ensuring transparency in management. The Board of Directors delegates a part of the decision-making process regarding business execution, except for the aforementioned important business execution decisions, to the President and other business execution divisions, as well as supervising their execution of said business operations.
  • The outline of the Board of Directors, etc. is as follows.

  [Board of Directors]

  • Authority: Resolving important management policies and matters defined by laws and regulations as well as supervising business execution of duties by the business execution divisions.
  • Chairperson: Non-executive board director
  • Structure: 11 directors (as of end of March 2025)
    

    *Breakdown: 7 Directors (excluding Directors who are Audit & Supervisory Committee Members, including 3 outside directors),
    4 Directors who are an Audit & Supervisory Committee Member (including 3 outside members)

  • Frequency of Meetings: Once a month and as necessary. The number of meetings of the Board of Directors in FY2024 was 19.
  • Director's attendance: The average attendance rate of Directors and Audit & Supervisory Board Members as of the end of the fiscal year under review was 100%.

  ＜Major topics of discussion at Board of Directors meetings held in FY2024 (fiscal year ending December 2024)＞

  • Organizational change; progress in the restructuring of NX Group businesses; formulation of “Action to Implement Management that is Conscious of Cost of Capital and Stock Price”; formulation of basic policies and strategies for the business portfolio; review of the appropriateness of cross-shareholdings; periodic reports on compliance and safety management; periodic reports on systemic risk; response to the Corporate Governance Code; status of dialogue with institutional investors and initiatives for this year, progress of IT strategy, progress of DX strategy, progress of sustainability management promotion, progress of Corporate Management Headquarters policies based on the business plan, progress of Risk Management Headquarters policies based on the business plan, progress of Global Business Headquarters policies based on the business plan, results of human rights risk assessment and future initiatives
  • Effort to invigorate board deliberations:
    In consideration of other matters to be discussed, including quarterly financial results, our company determines the annual schedule of board meetings before the beginning of each year and notifies the directors. As for proposals, since these are to be discussed at Board of Executives - the consultation organization for business execution - prior to the board meetings, executive directors and full-time Audit & Supervisory Committee Members attend the meeting and are familiar with the contents of the agenda topics before attending Board of Directors Meeting. For outside directors including outside Audit & Supervisory Committee Members, our company strives to allocate sufficient time for question-and-answer sessions and discussions by providing briefings in advance and invigorating board deliberations.
  • Appropriate setting of the Board of Directors agenda:
    Our Board of Directors delegates a part of important business execution, such as individual investment projects, to the Director President and focuses on constructive discussions on important management issues and management strategies that set the company's major direction, as well as setting the criteria for resolutions on matters stipulated by the Companies Act and other laws to secure the rights of shareholders and prevent loss of corporate value.
    In addition, in order to enhance the supervisory function of the Board of Directors, the agenda items to be handled by the Board of Directors are systematically organized and the “Standards for Deliberation at Board of Directors" have been established. The annual plan for reporting important matters is set forth in the annual agenda plan of Board of Directors, and efforts are made to manage the Board of Directors so that appropriate information is reported by the executive divisions.
  • Effectiveness of the board:
    The effectiveness of the Board of Directors, including the Compensation and Nomination Advisory Committee, is evaluated through a questionnaire survey conducted once a year by an external organization targeting all Directors (in addition to Directors, Audit & Supervisory Board Members until FY2023 when our company was a Company with Audit & Supervisory Board before the change of institution), and opinions are gathered for the improvement of the Board of Directors. The results are analyzed and evaluated, and the Board of Directors holds a discussion and reviews the results. The board then evaluates its effectiveness based on the aggregated results from the external organization. In addition, based on the issues and opinions extracted through the questionnaire, we are making improvements to improve the effectiveness of the Board of Directors.

  ＜Reference: Effectiveness evaluation in FY2024 (for the fiscal year ending in December 2024)＞

  〇 Questionnaire by an outside institution, results of evaluation

  Time Period	December 2024
  Participants	7 Directors (excluding Directors who are Audit & Supervisory Committee Members, including 3 outside directors), 4 Directors who are an Audit & Supervisory Committee Member (including 3 outside members); 11 in total
  Evaluation method	by selecting one in five levels (“5: Effective, Appropriate” to “1: Improvement required, Inappropriate”)
  Evaluation items (themes)	“Structure and Management of the Board of Directors,” “Management and Business Strategies,” “Corporate Philosophy and Risk Management,” “Performance Monitoring and Management Evaluation,” “Dialogue with shareholders etc”. Evaluation based on the answers to a total of 26 questions and comments (optional)
  Evaluation results	The Board of Directors evaluated the average score per question and the comments and confirmed that the efficiency of the board is roughly assured.

  Items highly evaluated:
  “(1) There is mutual trust between management and the outside directors, with a healthy degree of tension, and the outside directors are able to contribute to discussions at meetings of the Board of Directors by providing constructive opinions to management,“ “(2) The Board of Directors delegates decision-making authority to the executive side as appropriate for matters such as proposals concerning individual business execution decisions, and is able to focus on deliberating important proposals such as medium- to long-term business strategies,” “(3) The Board of Directors is working to enhance its effectiveness by taking appropriate measures to address the important issues identified in the annual analysis and the Board of Directors effectiveness evaluation.” etc.

  Issues identified in the survey:
  “(1) Ideas are needed for facilitating in-depth discussions on human resources and DX strategies,” “(2) Further discussion at the Board of Directors meeting is required regarding the progress of the succession plan,” “(3) There is a need for discussion on identifying and disclosing non-financial information that leads to improving corporate value,” “(4) Supervision is required to monitor the progress of the review of the business portfolio,” etc.

  Status of response/improvement to issues:
  “(1) Establishing opportunities for deliberation linked to the business strategy and developing a system for promoting DX,” “(2) The Remuneration and Nomination Advisory Committee deliberates thoroughly and reports to the Board of Directors,” “(3) Enhancement of the system for disclosing non-financial information, supervision of the disclosure of approaches and initiatives related to sustainability,” “(4) Supervision of the progress of the review of the business portfolio, and analysis and evaluation of the current situation regarding improvement of management with an awareness of the cost of capital.”

  • Training for Directors and etc.:
    Our company provides opportunities for seminars and social gatherings for directors to deepen their understanding of our company’s business challenges and acquire the necessary knowledge of corporate governance, financial affairs and laws. We bear the expenses of these.
    In addition to internal orientation sessions upon appointment and as necessary, we help newly appointed directors to acquire the necessary expertise for their roles and responsibilities, providing opportunities them to enhance their expertise in the performance of their duties, particularly with respect to corporate governance, such as external seminars and other training tailored to their needs.
    We also provide opportunities for seminars, exchange meetings, and other events where, after their appointment, outside Directors can acquire essential knowledge on the company’s management issues, finance, legal compliance, etc., as appropriate.
    We expect our Audit & Supervisory Committee Members to acquire wide knowledge through attending various meetings of the Japan Audit & Supervisory Board Members Association as its members and seminars held by the Japan Industrial Management & Accounting Institute.
    For our outside directors we provide opportunities to acquire knowledge concerning our company’s business operations through participating in various internal events and site visits.
    In addition, in order to seek management judgment from an independent perspective, we also hold monthly “Outside Directors Seminar,” in which executive officers and executives give presentations on the operational challenges facing the company as well as the management visions, goals, and challenges of the divisions under their jurisdiction, providing an opportunity for outside officers to develop an understanding of these topics.
    For our executive officers and the candidates for our company’s senior managers who are candidates for Representative Director, we provide external training courses, such as a Master of Business Management, so that they can acquire knowledge necessary for executive managers including global business management, financial literacy, business strategies and governance.
    We consider the above trainings a good method for training successors of top management.
    In particular, in order to confirm whether appropriate measures are being taken with regard to training, including the provision of internal information, for outside directors, we conduct surveys regarding opportunities to provide them with information in its questionnaire for evaluating the effectiveness of the Board of Directors. The results of the questionnaire are reported to the Board of Directors, where discussions are held regarding future improvements, and reflected in the next round of activities.
• (ⅲ) Compensation and Nomination
  • In order to obtain the opinions of independent outside directors concerning important matters such as the compensation and nomination of directors and officers, our company has established a fair and highly 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. Our board greatly respects the committee’s report when making decisions.
    Please also refer to “Establishment of Discretionary Committee, Composition of Committee, and Attributes of Head (Chairperson) of the Committee” in this report.
• (ⅳ) Audits
  • Audit & Supervisory Committee
    • Following a resolution at the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024, our company transitioned from a company with an Audit & Supervisory Board to a Company with an Audit & Supervisory Committee.
      The Audit & Supervisory Committee consists of one director who is a full-time Audit & Supervisory Committee member and three outside directors (part-time) who are Audit & Supervisory Committee members and has a total of four members. As a rule, The Audit & Supervisory Committee will hold regular meetings once a month and extraordinary meetings as necessary. In addition, the Company has appointed staff to assist the Audit & Supervisory Committee in its duties, thereby enhancing its audit and supervisory functions.
      (Reference) During the fiscal year under review, the Audit & Supervisory Board and the Audit & Supervisory Committee held a total of 14 meetings, and the attendance rate of each member was 100%.
    • The Audit & Supervisory Committee will take over the operation of the Audit & Supervisory Board and its audits to a certain extent, and will conduct effective audits while further strengthening cooperation with the Internal Auditing Division, our company’s internal auditing unit. The activities of the Audit & Supervisory Board in FY2024, prior to the transition to a company with an Audit & Supervisory Committee, are as follows:

    (Activities of the Audit & Supervisory Board　and the Audit & Supervisory Committee in FY2024)

    • The Audit & Supervisory Committee conducts its activities throughout the year in accordance with the Audit & Supervisory Committee Regulations and the Audit & Supervisory Committee Audit Standards established by the Audit & Supervisory Committee, as well as the audit policy, division of duties, etc. The Audit & Supervisory Committee Members attend meetings of the Board of Directors and other important meetings, express objective and fair opinions on overall management and individual matters, and audit the status of the execution of duties by Directors by investigating the legality and the status of internal controls. In addition, audits are conducted by inspecting important documents, etc. and investigating subsidiaries, etc., and the results of these audits are reported to the Audit & Supervisory Committee, thereby auditing the status of the execution of duties by business execution divisions. The Audit & Supervisory Committee Members conduct audits in accordance with the Audit & Supervisory Committee Regulations and the Audit Standards of the Audit & Supervisory Committee to determine whether the execution of duties by Directors is conducted appropriately in accordance with laws and regulations, the Articles of Incorporation, etc. The Audit & Supervisory Committee also confirms the status and results of audits by the Accounting Auditor. In addition, the Audit and Supervisory Committee Members conduct audits of NX Group companies from the perspective of consolidated management and in relation to the consolidated financial statements. In order to prevent inappropriate transactions or accounting treatment between the Company and NX Group companies, the Audit & Supervisory Committee Members cooperate and exchange information with the Audit & Supervisory Committee Members of NX Group companies, and strive to conduct efficient audits. During the fiscal year under review, we established the following priority audit items as specific audit activities, and conducted effective audits.
    • Status of compliance with laws and regulations, the Articles of Incorporation, and company regulations
    • Progress of" "NX Group Management Plan 2028"
    • Development of Management Measures and Performance
    • Status of property preservation
    • Status of establishment and operation of internal control system・ Status of operations of subsidiaries and affiliates (including overseas subsidiaries)
  • Internal Auditing Division
    • For internal auditing, our company established the Internal Auditing Division (44 employees in Japan and 13 employees in overseas regions as of the end of FY2024). According to the annual audit plan, our company conducts internal audits of our subsidiaries (both in Japan and overseas) and internal control audits related to financial reporting based on Japan’s Financial Instruments and Exchange Act.
    • The Internal Auditing Division, in accordance with the "NX Group Audit Regulations," conducts internal audits, including on-site inspections and document audits, to evaluate the effectiveness of risk management, control, and governance processes for the governance system that our company and its subsidiaries should establish to achieve their management objectives and sustainable growth. It also conducts independent and objective assurance and advisory activities with the aim of contributing to the proper execution of operations, enhancing management efficiency, and contributing to operational efficiency and improvement.
    • In internal control audit activities, we set key audit items and strive to conduct effective audit activities. The following were the key audit items for the internal audit in FY2024. Internal audit in Japan: Business operations, receipt and placement of illegal work orders, safety promotion, credit management and evidence-based accounting, and harassment prevention efforts Overseas internal audit: Credit and debt management, purchasing management, and outsourcing management
    • In internal control audits in Japan, an audit round-table meeting is held for the organization being audited to provide a forum for review after the audit inspection. After sharing the causes and risks of the issues pointed out, advice is provided for improvements to be formulated by the organization being audited, and the commitment of the organization to implement the improvement plan is confirmed. As for the issues pointed out, a follow-up audit is conducted three months after the audit to confirm the status of improvements. In addition, our company conducts internal control audits by auditing the design and operation of “internal controls regarding credibility of financial reporting,” evaluating the effectiveness of internal controls, and performing procedures in accordance with the internal control reporting system (such as preparation of “internal control reports”). For overseas internal control audits, in order to conduct audits efficiently and flexibly, an auditor under the jurisdiction of our company's Internal Auditing Division has been assigned to each overseas headquarter, and the roles, functions, and reporting lines of such auditors have been reorganized. Subsequently, recruitment of local auditors has been implemented and is currently being consolidated and expanded.
  • Accounting auditor
    • Deloitte Touché Tohmatsu LLC was selected as an accounting auditor. This audit firm conducts audits as an independent third party. The firm audits our company and its consolidated subsidiaries in accordance with the annual accounting audit plan and in collaboration with our Internal Auditing Division and the Audit & Supervisory Committee.
    • Our company has established a highly objective auditing system by conducting Audit & Supervisory Committee audits, internal audits and accounting audits in an independent and complementary fashion.
• (ⅴ) Execution of Duties
  • The business operations execution framework consists of five divisions under the leadership of the President and Representative Director who is delegated by the Board of Directors to make important business decisions and execute duties, and a certain amount of authority is delegated to each division to allow them to quickly implement the business plan as single units. In conducting business, each group company fulfils its roles and responsibilities as delegated to them by our company as the group headquarters, and in this role, our company oversees the conduct of each group company’s business. The “NX GROUP Governance Regulations” and the “Group Approval Authority Table” accompanying the regulations stipulate the group management system and matters delegated to group companies, and are reviewed as necessary to promote efficient and effective group management.
  • The status of various meetings related to business execution is as follows:

  [Board of Executives]

  • Roles: An advisory body to the President and Chief Executive Officer (CEO), which discusses important matters related to overall management and reports on the status of Executive Officer business execution.
  • Chairperson: President
  • Structure: Vice President, Chief Managing Officers, (4 as of the date of submission), and the Executive Officer in charge of the division proposing the agenda for discussion, Supervision by Directors, full-time Audit & Supervisory Committee Members, etc.
  • Main agenda: Discussions on important business execution decisions such as investment projects delegated by the Board of Directors, progress reports on important matters and other matters decided by the Board of Executives, etc.

  [Board of Officers]

  • Roles: Discussion of policies related to overall business execution, resolution within the scope of delegation from the Board of Directors (Resolution of Representative Director), and instructions from the president and each chief managing officer
  • Chairperson: President
  • Structure: Participation of executive officers (18 as of the date of submission), representatives of group companies, etc.
    Supervision by Full-time Audit & Supervisory Committee Members and attendance of group company directors, etc. as observers
  • Frequency: In principle, once a month except for months when the Group Management Committee is held.
  • Main agenda: Instructions and communications from the President and Chief Managing Officers of each division, reports on the status of business execution from each Executive Officer, etc.

    * During the fiscal year under review, the “Board of Officers” met five times to perform the functions of the above-mentioned “Board of Executives” and “Board of Officers” before transition to a company with an Audit & Supervisory Committee. In light of the transition to a company with an Audit & Supervisory Committee and the partial delegation of important business execution decisions to Director President, etc., for the purpose of making the consultative body independent and stronger as an advisory body to the President, the body's functions were separated, and the “Board of Executives” and “Board of Officers” were established in March 2024, with meetings of the Board of Executives held 16 times and meetings of the Board of Officers held 8 times.

  [Group Management committees]

  • Role: To enhance inter-group cooperation and foster a sense of unity by providing instructions and communication on group business policies, and reporting on business progress from operating companies.
  • Chairperson: President
  • Composition: Executive officers, presidents of major group companies, senior management, etc.
    Attendance of full-time Audit & Supervisory Committee Members for supervision, etc.
  • Frequency: Quarterly and as necessary (2 meetings were held in 2024)
  • Main agenda: Instructions on group management policies, communication of policies of each headquarter, reports from group companies on individual themes related to group management, etc.

  [Summary of other executive division committees]

  • As committees involved with internal control, we established a Risk Management Committee, which is in charge of drawing up risk management policies and establishing the group’s risk management system and held 2 times a year; a Compliance Committee, which is in charge of establishing and implementing the group’s compliance system and held four times a year; a Crisis Management Committee, which is in charge of establishing a response in advance and taking action after the emergence of risks and crises and held as needed, and a System Risk Countermeasures Committee, which is in charge of establishing a system for information system security and taking action when security incidents occur and held two times a year. Important matters discussed by each committee shall, depending on the relevant approval criteria, be submitted to the Board of Directors for approval, or reported to the board of directors on a regular basis, and the Board of Directors shall oversee these activities.
  • As committees involved in business strategy, we established a Sustainability Promotion Committee, which is responsible for addressing issues related to sustainability and planning group policies and held two times a year, an Investment Committee, which is responsible for discussing approaches to M&A projects and held as needed, and CVC Steering Committee, which is responsible for discussing investment intentions for selected investments in CVC funds in which the Board of Directors has made a resolution to make investments and held as needed. Important matters discussed by the Sustainability Promotion Committee shall, depending on the relevant approval criteria, be submitted to the Board of Directors for approval, or reported to the board of directors on a regular basis, with the board overseeing these activities. In addition, projects discussed by the Investment Committee are, depending on the relevant approval criteria, submitted to the Board of Directors for approval, which decides on corporate acquisitions and other matters. The progress of investment projects is regularly reported to the board of directors, and necessary discussions are held among the relevant divisions and operating companies at meetings such as those of the PMI Joint Council. The investment status in the CVC fund shall also be reported regularly to Board of Directors.
  • In addition, the Group Management Committee and other committees have established subcommittees for individual themes such as human resources, DX, and safety, as well as councils with group companies to promote group-wide strategies and strengthen internal controls.
• (ⅵ) Overview of Agreements to Limit Liability
  • In accordance with the Articles of Incorporation, our company and outside Directors Yojiro Shiba, Yumiko Ito, and Tsukiko Tsukahara, Director & Audit & Supervisory Committee Members Takashi Nakamoto, outside Director Yoshio Aoki, Nobuko Sanui, and Ryuji Masuno 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

Our company is a company with an Audit & Supervisory Committee, having transitioned from a Company with a Board of Company Auditors following a resolution at the 2nd Ordinary General Meeting of Shareholders held on March 28, 2024. This decision was made for the following reasons. A company with an Audit & Supervisory Committee is an organization in which decision-making authority for many important business operations can be delegated to the President and other executive directors, thereby speeding up decision-making and allowing the Board of Directors to focus on discussions of important management issues such as sustainability management and the business portfolio to realize our group’s long-term vision. In addition, by separating business execution and supervision and appointing directors who are members of the Audit & Supervisory Committee with voting rights in the Board of Directors, it allows for the strengthening of the Board of Directors’ supervisory function. Meanwhile, we believe that the establishment, separate from the Audit & Supervisory Committee (which has the right to express opinions on the selection and dismissal of directors and their compensation), of a voluntary Remuneration and Nomination Advisory Committee, the majority of whose members are outside directors who are not members of the Audit & Supervisory Committee, will enable our company to achieve highly effective supervision and auditing while ensuring that the roles of remuneration/nomination and auditing are assigned separately. In terms of the overall composition of the Board of Directors, by having 6 of the 11 members (as of the date of submission) be outside directors, our company is able to incorporate the knowledge of outside experts who also speak for shareholders and other stakeholders when discussing important management policies and other matters, while at the same time properly maintaining the Board’s supervisory function.
Accordingly, we have determined that this structure sufficiently ensures the objectivity and neutrality of the management oversight function, and that the composition of the Board of Directors within the current structure is appropriate.
In order to realize our vision for 2037 of becoming a “logistics company with a strong presence in the global market,” we will continue to discuss ways to globalize our management structure and improve our corporate governance with a view to increasing our corporate value.