(From April 1, 2021 to March 31, 2022)

At the 13th Ordinary General Meeting of Shareholders held on June 25, 2021, it was decided to introduce an incentive system with a three-tier structure for the remuneration, etc. of directors, which consists of fixed remuneration, short-term incentive (hereinafter, “STI”*1) and medium- to long-term incentive (hereinafter, “LTI”*2), each of which will be clearly defined. Specifically, the resolution stipulates that in addition to the fixed remuneration, the amount of remuneration, etc., including bonuses and other monetary remuneration as the above STI, shall be no more than 432 million yen per year (including no more than 96 million yen per year for external Directors).

The above amount of remuneration for Directors include the employee’s portion (including the Executive Officer’s portion) of the Directors who work as employees at the same time, and the above stock-based payment as LTI is separate. As of the close of the 14th Ordinary General Meeting of Shareholders held on June 24, 2022, the number of Directors was nine (including three external Directors), and the number of Directors concurrently serving as Executive Officers was six.

With respect to stock-based payment, it was resolved to introduce a stock-based remuneration system using a trust (below, “stock-based remuneration system”) and to contribute up to 32 million yen per fiscal year (96 million yen in total for the initial period) to the trust for Directors (excluding external Directors and Directors who do not concurrently serve as Executive Officers) who will hold office during a period of up to five fiscal years (for the initial coverage period, from the fiscal year ended March 31, 2022 to the fiscal year ending March 31, 2024) as determined by the Company, and the maximum number of points (number of shares) to be granted per fiscal year is 290,000 points (one point is one share of the Company’s stock, and the number of shares corresponding to the maximum number of points per fiscal year is 290,000 shares. However, in the event of a stock split, reverse stock split, etc., the number of points shall be adjusted in accordance with such split ratio, reverse stock split ratio, etc.).

The Company has an established method for determining the amounts of remuneration for Directors within the total amount of remuneration resolved by the General Meeting of Shareholders, based on the internal rules resolved by the Board of Directors’ meetings and with reports from the Nomination and Remuneration Advisory Committee. Specifically, the basic amount of remuneration for each person is determined after setting the base remuneration and the amount of remuneration for each title (President, Executive Vice President, Senior Managing Executive Officer, Managing Executive Officer, etc.) and each position (Representative, Chief Executive Officer, Chairman of the Board, Member of Nomination and Remuneration Advisory Committee, etc.) and paid.

The Company pays as a bonus the STI for FY2021 that will be added to or subtracted from the calculation base amount calculated from the individual basic remuneration amount, ranging from 0% (no payment) to 200% (double the amount of the calculation base) according to the annual performance (sales revenue, operating profit, capital efficiency index (ROE), etc.). The performance evaluation of STI eligible employees (Executive Officers, including those who concurrently serve as Directors) for FY2021 has not yet been conducted during the current fiscal year, as it will be determined based on their performance in FY2021, and the evaluation will be completed before the bonus payment in July 2022. Additionally, Directors and Executive Officers voluntarily acquire the Company’s shares corresponding to a certain amount of money each month through the Executive Shareholding Association in order to enable management from the perspective of shareholders with an emphasis on medium- to long-term performance.

In addition, the Company introduces a stock remuneration system using trusts ("this system") as LTI for Directors of the Company (excluding External Directors and Directors who do not concurrently serve as Executive Officers).
The purpose of this system is to raise Directors’ awareness of contributing to the improvement of medium- to long-term performance and the enhancement of corporate value by further clarifying the linkage between the remuneration for Directors and the value of the Company's shares, and enabling Directors to share profit and risks arising from share price fluctuation with shareholders. The Company also introduces a similar stock remuneration system for Executive Officers who do not concurrently serve as Directors.

An outline of this system is as follows.

[1] Eligibility for this system
Directors of the Company (excluding External Directors and Directors who do not concurrently serve as Executive Officers)

[2] Initial covered period
From the fiscal year ending March 31, 2022 to the fiscal year ending March 31, 2024

[3] The maximum amount of money that the Company contributes as funds necessary for the acquisition of the Company’s shares to be granted to the eligible Directors under [1] during the covered period under [2] (three (3) fiscal years)
Total amount: 96 million yen

[4] Method of acquiring the Company’s shares
Disposition of treasury shares or acquisition from a stock exchange (including off-hours trading)

[5] Limit to the total number of points and number of shares to be granted to the eligible Directors under [1]
290,000 points per fiscal year
(One (1) point is equivalent to one (1) share of the Company, and the maximum number of points per fiscal year is equivalent to 290,000 shares. However, in the event of a share split or share consolidation involving the Company’s shares, adjustment shall be made in accordance with the relevant split ratio, consolidation ratio, etc.)

[6] Criteria for granting points
Points are granted according to the position, etc.

[7] Timing of granting the Company’s shares to the eligible Directors under [1]
Generally at the time of resignation

The Company has established an environment in which Audit & Supervisory Board Members as well as Directors can voluntarily acquire the Company’s shares corresponding to a certain amount of money each month through the Executive Shareholding Association in order to enable management from the perspective of shareholders.

The 1st Ordinary General Meeting of Shareholders on June 24, 2009 resolved that remuneration to Audit & Supervisory Board Members would be no more than 9 million yen per month. Note that at the end of the 14th Ordinary General Meeting of Shareholders on June 24, 2022 there were four Audit & Supervisory Board Members, of which three were outside auditors.
With regard to remuneration for Audit & Supervisory Board Members, the Company has provided for a method of determining the amount of remuneration in internal rules up to a total amount of remuneration approved by resolution at the General Meeting of Shareholders. To be more specific, the remuneration for Audit & Supervisory Board Members comprises the base remuneration set for full-time and part-time members and the remuneration set according to the job title (Chairman of the Audit & Supervisory Board). The amount of remuneration for Audit & Supervisory Board Members is not linked to performance, but fixed. In the internal rules, the Company prescribes the method of determining the amount of monetary remuneration only and does not pay Audit & Supervisory Board Members non-monetary remuneration, such as shares or share acquisition rights, as consideration for executing their duties.
The Company has established an environment in which Audit & Supervisory Board Members as well as Directors can voluntarily acquire the Company’s shares corresponding to a certain amount of money each month through the Executive Shareholding Association in order to enable management from the perspective of shareholders.

The internal rules prescribing the remuneration for Audit & Supervisory Board Members have been established by the Audit & Supervisory Board through discussions based on the report on the appropriateness of remuneration by the Nomination and Remuneration Advisory Committee, in order to ensure the consistency with the internal rules prescribing the remuneration for Directors and Executive Officers. Regarding the revision and repeal of the internal rules prescribing the remuneration for Audit & Supervisory Board Members, the Company made a revision in August 2020 that allows Audit & Supervisory Board Members to voluntarily make a certain amount of contribution from their fixed remuneration for acquiring the Company’s shares through the Executive Shareholding Association. Such contribution was previously mandatory, but the revision was proposed to the Nomination and Remuneration Advisory Committee, which concluded that it was appropriate, and was carried out by the Audit & Supervisory Board.