【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 Internal Directors who do not concurrently serve as Executive Officers shall be determined on an individual basis, depending on whether they are full-time or part-time, the nature of their duties and their roles and responsibilities, etc.
Annual Base Salary of Executive Officers shall be determined individually, based on the role and responsibility, business performance, experience and difficulty of securing personnel, etc. of each Executive Officer, while referring to the compensation levels of domestic and foreign companies of similar business size as reference information in line with the purpose of the compensation basic policies. In view of the importance of attracting management talent from a variety of industries on a global basis to realize LIXIL’s Purpose, a wide range of companies of similar business size shall be referenced.

【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, Performance-linked compensation is calculated based on the company-wide performance targets used as a basis for calculating the payout rate.

• The base amount shall be determined individually as a certain percentage of Annual Base Salary according to the role and responsibility, etc. of subject officers after comparing compensation levels with domestic and foreign companies of a similar business scale based on the survey results conducted by external specialized agencies in line with the purpose of 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 profit attributable to owners of the parent (net profit).
• The payout rate according to business target achievement rate is shown in the chart below.

【Stock-linked compensation】

The Company has been applying Stock-linked compensation in order to encourage Directors and Executive Officers to deepen their shared interests with shareholders and work to improve corporate value over medium- to long-term. Since the Company has applied Restricted Stock Compensation Plan for Directors in place of Phantom Stock Plan from the day of the Annual Shareholders’ Meeting in 2025, Stock-linked compensation after the Annual Shareholders’ Meeting in 2025 consists of Restricted Stock Compensation Plan for Directors and Executive Officers and Phantom Stock Plan for Executive Officers. The ratio of Restricted Stock Compensation Plan and Phantom Stock Plan for Executive Officers is, in principle, 50% for each.

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

Since the Company has applied Restricted Stock Compensation Plan for Directors in place of Phantom Stock Plan from the day of the Annual Shareholders’ Meeting in 2025, officers subject to this plan are Directors and Executive Officers. In principle, for non-residents of Japan, the Phantom Stock Plan shall be applied.

• In principle, the Company allots shares to officers within two months of the appointment date of the officer.
• The number of shares of restricted stock allotted to each Director shall be the number calculated by dividing the base amount, which is set based on the role and responsibility of Director, by the average closing price of the Company’s stock for the 30 business days preceding the appointment date in line with the purpose of the compensation basic policies.
• The number of shares of restricted stock 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 the role and responsibilities, etc., of an Executive Officer after comparing compensation levels with domestic and foreign companies of a similar business scale based on the survey results conducted by external specialized agencies in line with the purpose of the compensation basic policies, by the average closing price of the Company’s stock for the 30 business days preceding the appointment date.
• The transfer restriction period is from the allotment date until the officer leaves office from every position as Director or Executive Officer of the Company.

【Stock-linked compensation II: Phantom Stock Plan】

The Phantom Stock Plan is a system for the compensation amount to increase or decrease in accordance with changes in the Company’s stock price.

• In principle, the Company grants the Phantom Stock to Executive Officers on the first day of each Fiscal Year.
• The number of the Phantom Stock shall be the number calculated by dividing the base amount, which is calculated by multiplying the Annual Base Salary by the coefficient that is set individually according to the role and responsibility, etc. of the Executive Officer after comparing compensation levels with domestic and foreign companies of a similar business scale based on the survey results conducted by external specialized agencies in line with the purpose of compensation basic policies, by the average closing price of the Company’s stock for the 30 business days preceding the grant date.
• After the holding period (three years) has passed, the Company shall pay the amount calculated by multiplying the average closing price of the Company’s stock for the 30 business days preceding the vesting date the number of stocks.

【Stock Ownership Guidelines】

The Company has established Stock Ownership Guidelines, 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, the Committee may decide to reduce or extinguish pre-vested compensation and to return post-vested compensation based on such reasons.