Remuneration to Directors and Audit & Supervisory Board Members

The total (maximum) amounts of remuneration paid to directors as well as Audit & Supervisory Board Members are determined by way of resolution at the Company’s General Meeting of Shareholders. The Company also discloses the number of officers receiving remuneration and the total amount of remuneration by director as well as by Audit & Supervisory Board Member.

Remuneration for directors is paid as a total amount including corporate vice president remuneration, and it is determined by the resolution of the BoD in accordance with the structure of the remuneration and evaluation system discussed at the Nomination and Remuneration Advisory Committee. The remuneration to be paid consists of fixed remuneration and non-performance-linked share-based remuneration, which are determined according to their positions and responsibilities, and of short-term performance-linked remuneration and medium-term performance-linked share-based remuneration, which change according to business performance.

The Company has introduced a new non-performance-linked share-based remuneration and medium-term performance-linked share-based remuneration in place of the previous share-based remuneration plan, through the 128th annual General Meeting of Shareholders held on June 27, 2024, for the purposes of (i) responding to the further globalization of the business and organization of the Company and fostering a sense of unity for the company group by applying the global common concept of share-based remuneration and (ii) enhancing the consciousness of directors to contribute to improving medium-term to long-term performance and increasing corporate value by further clarifying the linkage between directors' remuneration and the Company’s performance and share value through share-based remuneration for directors, including outside directors, and by having directors appropriately share profits and risks from share price fluctuations with shareholders according to their responsibilities.

The share-based remuneration plan is comprised of two plans: one is to grant shares of the Company’s common stock subject to provisions, including those concerning a certain restriction period and those concerning justifiable reasons for the Company to acquire the shares without contribution, etc. or the like, from the Company (hereinafter, the “Non-Performance-Linked Share-Based Remuneration Plan”), and the other one is to grant shares of the Company’s common stock or pay cash according to the level of achievement of medium-term numerical targets such as the Company’s performance set in advance by the Company’s BoD as medium-term performance-linked share-based remuneration (hereinafter, the “Medium-Term Performance-Linked Share-Based Remuneration Plan”).

Allocation ratios for fixed remuneration, short-term performance-linked remuneration and share-based remuneration shall be (all figures are approximate): 55% for fixed remuneration, 15% for performance-linked remuneration (of which 10% is short-term performance-linked remuneration, and 5% is medium-term performance-linked share-based remuneration), and 30% for the non-performance-linked share-based remuneration. These ratios shall be applied to the total amount of consolidated remuneration, etc., including the amount of employee portion of bonuses and remuneration for directors who concurrently serve as employees and the amount booked for share-based remuneration expenses. These ratios shall be determined based on each director’s position and other such factors. Note that these ratios are therefore subject to variation depending on the Company’s evaluation of business performance and changes in the Company’s share price, etc.

The amount of remuneration for outside directors and non-executive directors is determined based on fixed remuneration and non-performance-linked share-based remuneration, which are determined according to their roles and responsibilities.

The Company will issue or dispose of restricted shares by granting monetary remuneration claims to directors of the Company including outside directors (in this section hereinafter, the “Eligible Directors”) for the purpose of allotting restricted shares, in principle, every fiscal year, and have the Eligible Directors hold these shares by having them contribute in kind all of these monetary remuneration claims. The aforementioned monetary remuneration claims shall be paid on the condition that the Eligible Directors agree to said contribution in kind and that the Company and the Eligible Directors have concluded an allotment agreement for transfer restricted shares.

In this plan, in order to enhance the motivation of Eligible Directors toward sustainable growth in corporate value over the medium to long term and to further encourage management from the shareholder’s perspective, the Company imposes share transfer restrictions from the day the allotment was received until the day on which the Eligible Director loses the position of director, Audit & Supervisory Board member, corporate vice president, fellow, etc., or employee of the Company or its consolidated subsidiary.

In this performance-linked share-based remuneration plan, the Company will deliver shares of its common stock or pay cash to directors of the Company excluding outside directors (in this section hereinafter, the “Eligible Directors”) after the three fiscal years. When making such deliveries and payments, the figures set in advance by the BoD corresponding to each Eligible Director’s title, etc., shall be the base, with adjustments made in a range of 0% to 150% according to the level of achievement of indicators in the Company, such as financial indicators including consolidated operating income, consolidated revenue and return on invested capital (ROIC), as well as ESG indicator, etc. or other factors, and the number of the Company’s shares of common stock equating to 50% of that adjusted number and the cash equivalent to the stock price of the same number of the Company’s shares of common stock at time of delivery shall be delivered or paid. The initial eligible period for business performance evaluation is from April 1, 2024 to March 31, 2027, and thereafter, the Medium-Term Performance-Linked Share-Based Remuneration Plan may be implemented for the three consecutive fiscal years beginning on April 1 of each year.

The purpose of this plan is for Eligible Directors to share the benefits and risks of stock price fluctuations with shareholders, and to motivate them toward increasing our stock price, enhancing corporate value and improving business performance over the medium term.

With respect to non-domestic-resident directors, due to the laws and regulations of their countries of residence or for other reasons, the Company may deliver shares and cash as a Non-Performance-Linked Share-Based Remuneration Plan after a service period of three years (equivalent to a three-year term of office as a director) or pay cash in lieu of non-performance-linked share-based remuneration, or pay the equivalent amount in cash in lieu of medium-term performance-linked remuneration.

For short-term performance-linked remuneration, “consolidated operating income,” “consolidated revenue” and “CCC,” which are the numerical targets for the Company’s short-term business management, are selected as performance-linked indicators in a single fiscal year, and the amount of short-term performance-linked remuneration is changed based on the achievement level of the indicators and the comparison with the previous fiscal year’s results for “consolidated operating income” and “consolidated revenue,” and based on the comparison with the previous fiscal year’s results for “CCC”.

The remuneration for outside directors consists of only fixed remuneration and non-performance-linked share-based remuneration in consideration of their roles and independence.

The remuneration for Audit & Supervisory Board Members consists of only fixed remuneration in consideration of their roles and independence, and the amount of remuneration paid to each Audit & Supervisory Board Member is determined based on deliberations among Audit & Supervisory Board Members.

• *1 The table above is based on the remuneration plan that applied until fiscal 2023. The Company has revised its remuneration plan to the one described above from fiscal 2024.
• *2 The amount of remuneration for “Performance share units” and “Restricted share-based remuneration” is the amount recorded in the income statement for the portion corresponding to the period in fiscal 2022.
• *3 The number of Directors who received remuneration includes two Directors who retired during fiscal 2022.
• *4 The above amounts include remuneration paid to directors who also hold employee posts as consideration for the fulfillment of their employee duties.