Executive compensation linked to sales, operating profit and other metrics, and the Compensation Committee

「Beginning in the current consolidated fiscal year, the Company has introduced a performance-linked stock compensation plan, the Stock Benefit Trust for Directors and Other Officers, for directors (excluding outside directors) and executive officers (delegated type) (excluding non-residents of Japan, collectively referred to below as “directors and other officers”). The purpose is to clarify the linkage between their compensation and the Company's performance and share value, and to encourage them to contribute to improving performance over the medium to long term and increasing corporate value by having them share with shareholders not only the benefits of a rising share price but also the risk of a falling share price.」

「Beginning in the consolidated accounting period of the current third quarter, we introduced a performance-linked share compensation plan, the “Share Benefit Trust for Directors and Other Officers” (the “Plan”), for our directors, excluding outside directors, and executive officers serving under delegated contracts, excluding nonresidents of Japan. The Plan is intended to clarify the linkage between compensation for directors and other officers and the company’s performance and share value, and to enhance their motivation to contribute to medium- to long-term improvements in performance and corporate value by enabling them to share with shareholders not only the benefits of rising share prices but also the risks of declining share prices.」

「The purpose of introducing this system is to clarify the linkage between the compensation of directors and other officers and the Company's performance and share value, and to encourage directors and other officers to contribute to improving performance over the medium to long term and increasing corporate value by having them share with shareholders not only the benefits of a rising share price but also the risk of a falling share price.」

「During the fiscal year, the Compensation Committee met 8 times to consider the introduction of an executive officer system and discuss the fixed compensation for directors and the calculation of performance-linked directors' bonuses, and submitted its recommendations to the Board of Directors.」

「During the fiscal year, the Compensation Committee met 9 times to discuss the skills matrix for each director, fixed compensation for directors, and the calculation of performance-linked directors' bonuses, and submitted its recommendations to the Board of Directors.」

「During the fiscal year, the Compensation Committee met 8 times to discuss the number of restricted shares allocated to each director and the calculation of executive bonuses, which are performance-linked compensation, and submitted its recommendations to the Board of Directors.」

「Based on a resolution of the Board of Directors dated 27 October 2021, the Company disposed of 13,900 treasury shares as restricted share compensation on 26 November 2021.」

「At the 16th Annual General Meeting of Shareholders held on 29 September 2021, approval was obtained to introduce a share-based compensation plan under which restricted shares would be delivered to eligible directors, namely the Company's directors excluding outside directors, in order to enable them to share with shareholders the benefits and risks of share price fluctuations and further increase their incentive to contribute to share price appreciation and the enhancement of corporate value. Approval was also obtained to set the total amount of monetary compensation claims to be paid to eligible directors as compensation for restricted shares under the plan at no more than ¥100 million per year, to limit the total number of restricted shares allocated to eligible directors in each fiscal year to 15,000 shares, and to set the transfer restriction period for the restricted shares as the period from the date of delivery of the restricted shares until the date on which the eligible director retires or leaves any position as a director or employee of the Company, among other matters.」

「Share-based compensation is intended to increase the incentive to contribute to share price appreciation and the enhancement of corporate value. Whether awards are granted and the number of shares granted are determined according to our performance, share price, and the responsibilities and contributions of each director. Assuming 100% achievement of performance indicators and other targets, the approximate composition of director compensation is 65% fixed compensation, 30% executive bonuses as performance-linked compensation, and 5% share-based compensation.」

「Executive bonuses, which are performance-linked compensation, are determined based on the achievement rate against sales and operating profit plans, the growth rate compared with the previous year's results, and the evaluation of each director's achievement of individual objectives.」