Compliance Framework

The NEC Group has established the NEC Group Compliance Policy, under which the CRCO takes a comprehensive view of all compliance issues and, through the Risk Control and Compliance Committee, deliberates on and promotes specific measures to address these issues.

In addition, the Group formulates and implements various initiatives designed to enforce compliance, including instilling knowledge of the NEC Group Code of Conduct. Furthermore, the Group provides the necessary support, coordination, and guidance to ensure that risk management in the business and corporate staff departments is implemented systematically and effectively.

Group Internal Audit Division

Members of the Group Internal Audit Division include experts in internal audits. The division conducts audits to ensure that NEC is operating lawfully, properly, and efficiently. It also points out problems and proposes improvements.

Compliance Promotion at Consolidated Subsidiaries

Compliance Policy

In its Principles, the NEC Group subscribes to “Uncompromising Integrity and Respect for Human Rights,” and conducts continuous companywide activities involving everyone from officers to employees with management firmly based on compliance.

Compliance

NEC aims to establish compliance within its corporate culture by ensuring that each officer and employee acts with integrity (judgment and behavior) in accordance with the NEC Group Code of Conduct. Moreover, the Code is available in Japanese, English, Chinese, Portuguese, and Spanish. By promoting the Code at consolidated subsidiaries outside Japan, we are creating a corporate culture worldwide that puts compliance on top priority. Also, we recognize that the Code must be reviewed regularly to confirm whether revisions need to be made. If a violation is found, the person or persons associated with the violation will be dealt with according to employee regulations, and consideration will be given to reflecting the violation in the performance evaluation of the relevant division.

In order to realize effective compliance measures, the general managers of every division have taken leadership and responsibility for discussing and implementing the optimal measures for their divisions with support from the corporate divisions.

Furthermore, identifying compliance as one of NEC’s priority management themes from an ESG perspective—materiality—Mid-term Management Plan 2025 sets forth a KPI of zero cases of serious involvement with cartels and/or bid-rigging.

Tax Policy

In the NEC Group Code of Conduct, all officers and employees promise that they will:

We adopt the same fundamental approach to tax matters and are striving to optimize our tax position from a mediumto long-term perspective.

Furthermore at NEC, we provide the basic structure of corporate taxation and other related matters on our intranet.

When new tax laws and regulations or rules are announced, we promptly notify the relevant departments and conduct training sessions as necessary.

With the aim of establishing a common framework for managing tax risk and tax policies, NEC has formulated the NEC Group Tax Governance Policy, which sets out the principles of tax governance that should be followed. We do not undertake tax planning solely for the purpose of tax avoidance without any business purpose or business substance.

Similarly, we do not use tax havens solely for the purpose of tax avoidance.
The CFO of NEC Corporation is responsible for tax governance across the NEC Group. The CFO, who is a member of the Board of Directors, reports to the Audit Committee about any updates to the NEC Group Tax Governance Policy and any significant tax risk that arises.

The results of our tax filings and tax audits are reported to the CFO as appropriate, and we take necessary actions on tax-related issues while continuously working to prevent misconduct.

Transactions between Affiliated Companies

To ensure thorough management of tax risk in response to globalization, NEC decides prices for transactions between related companies based on the arm’s length principle with reference to the approach advocated by the Organization for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. In accordance with the purpose of the generally accepted rules and guidance in relation to international taxation, such as the Action Plan on Base Erosion and Profit Shifting (BEPS), NEC pays taxes in a timely and appropriate manner based on tax laws, regulations and treaties for each jurisdiction, by reflecting its business results, and does not undertake any activities for the purpose of inappropriate tax avoidance.

Relationship with Tax Authorities

NEC endeavors to reduce tax uncertainties by sincerely engaging in advance consultation with tax authorities and disclosing relevant information requested by tax authorities.

Transparency

NEC complies with the Financial Instruments and Exchange Act and all applicable laws and regulations in preparing and disclosing its Annual Securities Report. Tax-related disclosures required by applicable laws and regulations are also included in the Annual Securities Report.

Starting from fiscal year 2017, NEC has disclosed its consolidated financial results in accordance with International Financial Reporting Standards (IFRS). By adopting IFRS, NEC aims to enhance the international comparability of financial information in capital markets and further improve the transparency of its financial disclosures.

Preventing Bribery and Corruption

The NEC Group Code of Conduct covers prevention of bribery and corruption; response to entertainment, gifts, donations, and political activities; prohibition against involvement in antisocial acts; prohibition on insider trading; and prohibition of any act contrary to the Company’s interests. In this way, NEC strives to prevent all forms of bribery and corruption.

In addition, the Legal and Compliance Division has formulated the Anti-Bribery Policy and the Anti-Bribery Manual and disseminates/shares them throughout the Company. The manual stipulates the roles of general managers and specific methods for preventing bribery. These roles and methods include bribery risk assessments regarding a division’s business and operations, including procedures if risk is deemed to be high, and due diligence regarding retained parties¹ or partners employed in the Company’s business activities.

For due diligence, NEC stresses the importance of evaluating bribery risk through communication and collection of information by retained parties or partners on behalf of the Company or as its agent, as well as the importance of continued monitoring due to the possibility of risks related to retained parties or partners changing with the passage of time.

Additionally, to counter the risk of bribery in business transactions conducted by retained parties or partners, NEC mandates that contracts include provisions about preventing bribery and has changed the scope of monitoring that is performed.

Retained parties enlisted to assist with sales promotions and winning orders are made aware that there may be additional procedures to take, including with related staff divisions, in accordance with the type of risk.
Furthermore, as nations around the world work on strengthening their anti-bribery laws, NEC has also developed a “Guideline for Provision of Gifts, Hospitality, Travel Expenses and Donations,” and provides guidance, support, instructions and the like to relevant internal divisions and consolidated subsidiaries in and outside Japan.

Checking on routine operations is an important part of preventing corruption, and therefore guidelines and rules have been established by the General Affairs Department for hospitality, gifts, and donations, such as political donations; the planning divisions of each business unit for operating expenses; and the Supply Chain Conductor Department for procurement expenses. At the same time, expenditures requested by Company divisions are checked to ensure there are no problems.

In addition, to thoroughly enforce the prohibition of any act intended for personal benefit or third-party interests contrary to the legitimate interests of the Company, NEC has established and operates necessary procedures, such as guidelines for required procedures in the event of conflicts of interest.

In fiscal year 2025, we conducted training focused on anti-bribery and anti-corruption in multiple languages (English, Arabic, Portuguese, Spanish, Italian, French, and German), primarily for employees of subsidiaries outside Japan operating in EMEA regions. The completion rate was 95.6%. This training promoted understanding of the risks of bribery and corruption and how to address them.

Competition Law Compliance

One of the initiatives to eliminate serious compliance violations is the reinforcement of non-financial measurement methodologies to underpin sustainable growth of the Company and society, a goal of Mid-term Management Plan 2025. To this end, we are working to prevent cartels, bid-rigging, and other violations of competition laws.

Furthermore, in the NEC Group Code of Conduct the Company has stipulated guidelines for fair competition and strives to thoroughly prevent violations of competition laws. In addition, the Company has established the NEC Group Competition Policy, formulating basic considerations on compliance with competition laws in and outside Japan to reduce the risk of violations, and broadly disseminates information about this policy within NEC Group companies around the world.

In addition, we monitor email to detect signs of competition law violations at an early stage.
Furthermore, we confirm the competition risk status of each NEC Group company, and according to the risks relevant to each company, we implement regulations and measures necessary for preventing violations of competition laws.

In fiscal year 2025, we conducted training focused on competition law together with anti-bribery and anti-corruption training in multiple languages (English, Arabic, Portuguese, Spanish, Italian, French, and German), primarily for employees of subsidiaries outside Japan operating in EMEA regions. The completion rate was 95.6%. This training promoted understanding of the risks of violating competition law and the measures required for compliance.

Response to Past Incidents of Violations

In July 2016, NEC was notified by the Japan Fair Trade Commission of violations of the Antimonopoly Act related to business transactions with Tokyo Electric Power Co., Ltd. (now Tokyo Electric Power Company Holdings, Inc.) involving electric power security communications equipment. NEC was notified again of similar violations in February 2017 involving wireless digital emergency firefighting equipment, and also for business transactions with Chubu Electric Power Co., Ltd. involving electric power security communications equipment. In order to keep these three events fresh in mind and to use them as a basis for reflection, we established NEC Compliance Day on November 18, being the date on which we received an on-site inspection by the Japan Fair Trade Commission regarding the transaction involving wireless digital emergency firefighting equipment . In order to promote fair commercial transactions, we consider the commitment of executives to be the most important element in promoting fair commercial transactions. For this reason, every year on NEC Compliance Day, executives issue a message to all employees to help reaffirm the importance of compliance, including promoting fair commercial transactions.

Preventing Accounting Fraud

To prevent accounting fraud, NEC operates in accordance with the regulations such as those that are based on the Certified Public Accountants Act, as outlined below.

Response to Political Activities

Please see below for more details.

Compliance Training and Education

NEC Corporation and its consolidated subsidiaries in and outside Japan conduct compliance training for all officers and employees (including temporary workers) once a year (completion rates for NEC Corporation, consolidated subsidiaries in Japan and consolidated subsidiaries outside Japan for fiscal year 2025: 99.3%, 96.9% and 94.5%, respectively).

Furthermore, officers and employees participating in this training pledge to consistently maintain unwavering integrity based on the Principles of the NEC Group and act in accordance with the Group’s Code of Conduct. They also announce their own initiatives to ensure a corporate culture of compliance. Furthermore, NEC Corporation uses training for new employees and trainings for each management layer for new officers and new division general managers as opportunities to emphasize the importance of conduct that complies with the NEC Group Code of Conduct.

Conducting Various Initiatives for NEC Compliance Day

Every November 18, NEC holds NEC Compliance Day for NEC Corporation and all subsidiaries worldwide to reaffirm the importance of compliance, marking the date on which it received an on-site inspection by the Japan Fair Trade Commission in connection with sales of wireless digital emergency firefighting equipment. NEC raises employee awareness by posting activities and information related to NEC Compliance Day on the portal dedicated to the event.

Messages from Senior Management

Officers, including the president, corporate officers, division general managers, and the presidents of consolidated subsidiaries in and outside Japan, communicate messages to underscore the importance of compliance to all employees. This includes adherence to the NEC Group Code of Conduct. NEC also ensures the passing down of lessons learned from past incidents by holding sessions led by the presidents of NEC Group companies and distributing video interviews with executives.

Survey on Compliance Promotion Initiatives

We conduct a survey of all corporate officers and employees in conjunction with compliance training in order to evaluate the status of initiatives on compliance promotion and awareness of compliance. The results of the questionnaire surveys were posted as feedback on the intranet portal and have been useful for proposing and implementing measures to further enforce compliance.

Study Sessions by Corporate Divisions

Webinars are held to promote awareness of laws and internal rules by using real-world examples to clearly explain related risks.

Integrity Theme Talks

As a coordinated initiative alongside the NEC Compliance Day broadcasts, Group-wide theme talks are held to deepen understanding of integrity across the entire NEC Group.

Compliance Quizzes and Integrity Senryu

Activities such as compliance quizzes and calls for submissions of integrity-themed senryu poems (comical forms of haiku) are held to make compliance and integrity feel more familiar and to promote deeper understanding.

Whistleblowing System

NEC Compliance & Integrity Hotline (Whistleblowing System for Employees and Business Partners)

We have established a whistleblowing system covering compliance matters, including the prevention of corruption.
The reporting channel under this system, the NEC Compliance & Integrity Hotline, was created by integrating multiple previous hotlines (the Compliance Hotline and the HR Hotline ) to improve user convenience. The integrated hotline continues to support early response to a wide range of risks by using a third-party service provider capable of handling reports in multiple languages as a contact point, and it accepts reports not only from NEC employees but also from its consolidated subsidiaries in Japan and business partners. The identity of whistleblowers who contact the hotline and the nature of their reports are guaranteed confidentiality by the personnel in charge. In addition, whistleblowers may choose to report anonymously, and they will never suffer retaliation for having made a report. In the unlikely event that such retaliation takes place and is confirmed, necessary corrective measures will be taken.

In fiscal year 2025, the number of reported cases was 230. The reported cases included ethical behavior violations, violations of the NEC Group Code of Conduct or Company rules and fraud. All 230 cases have been appropriately handled.

In addition, we have established the “Audit Committee Hotline,” a whistleblowing system that allows whistleblowers to report fraudulent corporate officer activity to the Audit Committee.

NEC and its consolidated subsidiaries in Japan have taken steps to ensure the protection of confidentiality and the prevention of retaliation by establishing internal rules regarding the whistleblowing system and promote employee awareness through training programs and other means.

For NEC’s consolidated subsidiaries outside Japan, Regional Headquarters (RHQ) also set up multilingual whistleblowing systems operated by third parties in each region. They are available for local officers and employees to use in multiple languages (English, Spanish, Portuguese, and Chinese). The consulted/reported cases and their handling by consolidated subsidiaries outside Japan are shared with NEC Corporation. This has also been integrated as a part of the NEC Compliance & Integrity Hotline since April 2025.

The Global Hotline had also been established as an additional contact point, aimed at early detection and resolution of fraudulent activities involving executives at consolidated subsidiaries outside Japan, and accordingly, this hotline functioned independently of these executives. However, this has been integrated with the NEC Compliance & Integrity Hotline as of April 2025. We will continue to ensure the protection of whistleblowers and work to establish a system that allows employees and other parties to make reports with peace of mind.

The status of enhancement and operation of the NEC Compliance & Integrity Hotline (including the whistleblowing systems of NEC Corporation subsidiaries) is regularly reported by the Group Internal Audit Division to the Board of Directors and the Audit Committee.

Medium- to Long-term Goals, Priority Activities and Progress, Achievements and Issues

Medium- to Long-term Goals, and Priority Activities

(Scope: NEC Corporation unless otherwise specified) Period: April 2021 to March 2026
M: Indicates the main non-financial targets related to materiality.

M: Engage in thorough compliance

Establish a groupwide culture that puts compliance on top priority and promotes fair commercial transactions, drawing from the NEC Group Code of Conduct

FY2025 Goals, Progress, Achievements and Issues, and FY2026 Goals

FY2025 Goals

Engage in thorough compliance

Progress, Achievement, and Issues

FY2026 Goals

Number of, Details on and Measures for Handling Compliance Violations

Compliance violations in fiscal year 2025 were as follows: