【Annual Base Salary】

Annual Base Salary of Outside Directors shall be determined, based on the role of Outside Directors at the Company, while referring to the compensation levels of the upper group among domestic companies as reference information in line with the purpose of the compensation basic policies.
Annual Base Salary of Executive Officers shall be determined individually, based on role and responsibility, business performance, experience and difficulty of securing personnel, etc. of each Executive Officer, while referring to the compensation levels inside and outside Japan as reference information in line with the purpose of the compensation basic policies. As for the referenced compensation levels, the external specialized agencies’ data for each country is compared based on criteria such as revenue and market value, mainly in Global Industry Classification Standard categories. The Company intends to eliminate as much as possible any differences in compensation based on the country of residence.

【Performance-linked compensation】

In order to encourage the Executive Officers to work together to achieve single-year management goals and to ensure that they are fairly equitably rewarded in accordance with the results of their performance, the calculation formula has been composed of only company-wide performance.

• The base amount shall be determined individually by the Committee as a certain percentage of Annual Base Salary according to the role and responsibility, etc. of subject officers compared with the compensation level of companies inside and outside Japan with a business scale similar to that of the Company, based on the survey report on executive compensation by the external specialized agencies in line with the purpose of the compensation basic policies.
• Business target achievement rate shall be set by calculating the ratio based on the actual figures disclosed in the Annual Securities Report versus the forecast figures disclosed in the flash reports or the like at the beginning of each period. If there is more than one business target, business target achievement rate is multiplied by the percentage of each target in the total performance target, and then aggregated.
• Business target items are return on invested capital (ROIC), core earnings, and net profit for the period belonging to the owners of the parent company (net income).
• The payout rate according to business target achievement rate is shown in the chart below.

【Stock-linked compensation】

The Company has been applying the Phantom Stock Plan, which is a stock-linked monetary compensation plan, to Directors and Executive Officers since the Fiscal Year ended March 2020. The Committee has confirmed that the Phantom Stock Plan has indeed been having the desired effect from its introduction until the present.
On the other hand, in recent years when Japan’s corporate governance reforms have been progressing remarkably, the Committee has been deliberating on the revision of the medium- to long-term incentive compensation plan for Executive Officers in view of the increasing emphasis on the significance of management’s ownership of their own company’s shares.
As a result, the Committee resolved that the current Phantom Stock Plan shall be 50% of the overall Stock-linked compensation plan for Executive Officers and the Restricted Stock Compensation Plan shall be the remaining 50% from April 2023, in order to encourage Executive Officers to deepen their shared interests with shareholders over their term of office and work to create value over medium- to long-term.

【Stock-linked compensation I: Phantom Stock Plan】

The Company has been applying the Phantom Stock Plan since the Fiscal Year ended March 2020, with the aim of encouraging Directors and Executive Officers to monitor, supervise and make management decisions for achieving improvement of the sustainable corporate value of the Company over the medium- to long-term, further promoting shared corporate values with shareholders of the Company, and attracting and retaining superior personnel from around the globe by standardizing global officers’ compensation system.

• The Company grants the Phantom Stock to Directors on the day of each Annual Shareholders’ Meeting, and to Executive Officers on the first day of each business year.
• The number of the Phantom Stock granted to each Director and Executive Officer shall be the number calculated by dividing the base amount, which is calculated by multiplies Annual Base Salary by the coefficient according to responsibilities, etc., of the eligible officer, by the Company’s stock price at the time of grant.
• After the period from the grant date to the vesting date (the “Holding Period”) has passed, the amount calculated by multiplying the stock price at that time by the number of stocks held shall be paid.
• As the above mechanism, the amount of compensation increases or decreases according to changes in the stock price similar to the Restricted Stock Compensation Plan, etc., and Directors and Executive Officers are encouraged to act with an awareness of the impact on the Company’s stock price.

Note: The average of closing price of the Company's stock for the previous 30 business days is applied at both grant and vesting.

【Stock-linked compensation II: Restricted Stock Compensation Plan】

The Committee resolved that 50% of the entire Stock-linked compensation plan for Executive Officers shall be the Restricted Stock Compensation Plan from April 2023. Executive Officers subject to this plan include Executive Officers who concurrently serve as Directors and exclude non-residents of Japan. For non-residents of Japan, the Phantom Stock Plan shall be applied.

• In principle, the Company allots shares to Executive Officers within two months of the first day of each Fiscal Year.
• The number of shares allotted to each Executive Officer shall be the number calculated by dividing the base amount, which is calculated by multiplies Annual Base Salary by the coefficient according to responsibilities, etc., of each Executive Officer, by the Company’s stock price at the time of allotment.
• The transfer restriction period is from the allotment date until the person subject to the allotment leaves office from every position as Director or Executive Officer of the Company.

【Stock Ownership Guidelines】

The Company has established Stock Ownership Guidelines from the Fiscal Year ending March 2024, which indicate the number of the Company’s shares recommended to be held by Executive Officers during their term of office.
Representative Executive Officers: Three times the amount of Annual Base Salary; other Executive Officers: One time the amount of Annual Base Salary

【Malus and claw back provisions】

In Performance-linked compensation and Stock-linked compensation, if there has been any material accounting mistake with the Company or the Board of Directors determines that there has been a material violation, etc. by the officer concerned, the Committee may decide to reduce or extinguish pre-vested compensation and to return post-vested compensation based on such reasons.