Strengthening Governance

Corporate governance structure

NICIGAS Group believes that corporate governance is a system for achieving the sustainable improvement of corporate value. The Company elected a corporate governance system of a company with an Audit Committee. This is because we believe that a system that allows each corporate auditor to exercise audit authority in a speedy manner is appropriate, considering the size of its business and the organizational structure of the company, while emphasizing a well-balanced control of its unique business model by both internal and external directors.

Corporate governance structure

As at 1st April 2025

Supervision by the Board of Directors

Board of Directors

NICIGAS’ Board of Directors believes that decision-making by directors who are well-versed in our business is crucial, and therefore, 60% of the board consists of internal directors. On the other hand, the Nomination and Remuneration, Environmental, etc., Committee (NR&E Committee), with a majority of its members are being outside directors and the chairman is an outside director, has been consulting with the Board of Directors regarding the core Corporate Governance of Nomination and Remuneration functions. As at 31st March 2026, out of the eight officers for attendance at Board of Directors meeting, half of them are made up of outside officers. Two out of five directors are from outside, and two out of three corporate auditors are from outside.

Board Member Skills Matrix (As at 25th June 2026)

The Company has identified the skills considered necessary for its medium- to long-term corporate value growth, thus creating a skills matrix in line with this. The Company annually reviews the skills it believes are necessary for corporate value growth, supplementing the skills and knowledge required by the Company through the participation of Outside Directors, thereby invigorating discussions and enhancing the effectiveness of the Board of Directors. The Independent Outside Directors include individuals with experience in management of other companies.

Up to five skills possessed by each officer are listed. This table does not represent all of the skills possessed by each candidate.

Nomination and Remuneration, Environmental, etc.,Committee ("NR&E Committee")
（Former name: ESG Management Promotion Committee）

The NR&E Committee, under the name of the ESG Management Promotion Committee, has been advising on ESG-related matters and reporting to the Board of Directors since 2020 as an advisory body to the Board of Directors. As a result of discussions on the purpose of its activities, the Committee has decided to change its name to the NR&E Committee at the Board of Directors meeting held on 25th June 2024, confirming that the most important matters to consider are nomination and remuneration, which form the core of the monitoring function of the Board of Directors, and the environment, which is a key of medium- to long-term strategies. We believe that this name change will clarify the purpose of the Committee's activities and make the governance system easier to understand for stakeholders.

This committee is a voluntary advisory body to the Board of Directors and consists of three members (two external and one internal). As at 31st March 2026, the chairman is an outside director (Tsuyoshi Yamada), and the members consist of the following: outside director (Eriko Satonaka), representative director chief executive officer (Kunihiko Kashiwaya). The Committee holds in-depth discussions and then reports to the Board of Directors on key themes such as executive Remuneration (Executive Remuneration), the executives’ appointment/dismissal, succession planning, environmental initiatives. The Committee fully discusses and resolves the appointment of officers, including CEO, after confirming that the candidates are sufficiently qualified in various aspects, and reports to the Board of Directors. The details of the Committee's discussions are documented in the minutes of the meeting. In the event that the dismissal of a director or an executive officer, including CEO, should be considered due to poor performance or other reasons, the Company convenes the Committee to discuss the dismissal or recommendation for resignation.

Management Meeting

A decision-making body for business execution.
In principle, a meeting is arranged once a month for the members to meet to report on the status of business operations from each department (4-5 agenda items per month), afterwards they discuss with each other and implement specific measures for management plans and strategies resolved by the Board of Directors, thereby enhancing agile business execution. Since FYE 03/23, an Investment Committee has been established as a subordinate body, and investments exceeding 30 million yen are reviewed by this Committee prior to the Management Meeting. Furthermore, the progress of investments is monitored regularly and updates are reported to the Management Meeting accordingly.

Board of Corporate Auditors

The Board of Corporate Auditors consists of three members: 1 full-time corporate auditor and 2 independent outside corporate auditors. In June 2023, the number of corporate auditors was reduced from 4 to 3. However, the appointed members possess the necessary skills to ensure that the Board of Corporate Auditors is fully capable to uphold its independence and effectiveness. Additionally, we actively facilitate opportunities for discussions with various departments and outside directors to strengthen the company-wide audit function.

Activities of the Board of Corporate Auditors

The Board of Corporate Auditors operates with the objective of monitoring and verifying the execution of duties by directors. The full-time corporate auditor reports on the overall execution of operations within the Group and the results of on-site audits to the outside auditors. The outside auditors provide advice based on their independent stance and specialized knowledge, facilitating active discussions.

Succession Planning

NICIGAS recognizes that succession planning for the Chief Executive Officer (CEO) and other key executives is a critical factor for enhancing medium- to long-term corporate value, and the Company holds discussions at the Board of Directors based on reports from the Nomination and Remuneration, Environmental, etc., Committee. In FYE 03/25, the Company worked to define the qualities required of the CEO. From FYE 03/26, the Company is working to establish the procedures for candidate selection by identifying key next-generation management themes and discussing the competencies required across the management team, as well as the skills and attributes necessary for each executive role. NICIGAS is actively incorporating the insights of outside directors in these discussions as it works to develop an effective succession plan.

Executive Remuneration

Our executive remuneration is designed to ensure that management shares benefits and risks with our shareholders (“we are in the same boat as our shareholders” concept), and to increase their awareness of the importance of enhancing our corporate value over the medium- to long-term as well as short-term, and have introduced (1) Basic remuneration linked to consolidated operating income, etc. and (2) Stock remuneration more closely linked to shareholder value.

NICIGAS established the Nomination and Remuneration, Environmental, etc. Committee (“NR&E Committee”), chaired by an outside director as well as majority of members are outside directors, as an advisory committee to the Board of Directors. By allowing NR&E Committee to both evaluate and finalize executive remuneration, ensures transparency in the remuneration determination process.

Number of officers subject to both (1) Performance-based basic remuneration and (2) a Stock remuneration(BIP trust) (FYE 03/25)

The 61st Ordinary General Meeting of Shareholders held on 25th June 2015 passed a resolution setting the limit of remuneration for Directors at the annual amount of JPY 400 million or less (of which annual remuneration for Outside Directors is JPY 30 million or less, and excluding employee salaries).

Our remuneration for outside directors consists of a fixed basic remuneration only, without performance-linked or stock remuneration, considering their role to avoid excessive risky business decisions by internal management and to ensure their independence. We consider that this structure will further ensure the supervisory responsibility of outside directors.

(1) Performance-based basic remuneration

The amount of performance-based basic remuneration for each director and executive officer is linked to consolidated operating income and other business results, and is calculated based on internal evaluations and evaluations by independent outside evaluators.

Steps for deciding the amount of basic remuneration

1. Each Director and Executive Officer conducts evaluation interviews with independent outside evaluators after the end of the fiscal year to discuss the challenges undertaken and achievements made.
2. Evaluations:
   1. External evaluation: Once a year, independent external evaluators conduct quantitative and qualitative assessment based on interview results, for each required competency tailored to the individual's roles and duties. Quantitative evaluation is based on operating income and the degree to which individually assigned KPIs are achieved. Qualitative evaluation focuses on key criteria, including contributions to corporate value enhancement, the dissemination of policies and strategies, the development and identification of successors, personal expertise, and foresight, among other factors.
   2. Internal evaluation: Conducted by the direct supervisor of the individual being evaluated. At NICIGAS, evaluations are conducted by the Representative Director, Chief Executive Officer or Division Heads; at group companies, they are conducted by the President of each company.
3. The Representative Director, Chief Executive Officer and Executive Officer in charge of the Human Resource Department, delegated by the Board of Directors, determine individual basic remuneration concept in accordance with the policies approved by the Board of Directors, taking into account both external and internal evaluations. The contents were approved by the NR&E Committee. Based on the approved concepts by the NR&E Committee, the Representative Director, Chief Executive Officer and Executive Officer in charge of the Human Resource Department engage in discussions to make the final decision on individual basic remunerations.

(2)Stock remuneration (BIP trust) (2015 and onward)

To strengthen executive commitment to increasing corporate value, NICIGAS has adopted a stock remuneration system designed to align the medium- to long-term interests of executives with the Company's shareholders. The purpose of this plan is to enable Directors and Executive Officers to share medium- to long-term profit value with shareholders. In the stock remuneration, the BIP trust is used, and points calculated based on the position factor and the monthly amount of basic remuneration that will change according to the degree of achievement of consolidated operating income and others will be granted. The points are accumulated during the term of office and granted at the time of retirement.The ratio of basic remuneration to stock remuneration, which is linked to performances such as consolidated operating income and other business results, is determined by a rank-based coefficient determined for each position stipulated in the internal guideline. The proportion of stock remuneration increases for higher executive positions.