Overview of Executive Remuneration Plan

Matters related to policy for deciding the remuneration for individual directors

The decision making policy for the remuneration of individual Directors was resolved at the Board of Directors meeting after deliberation within the Nomination and Remuneration Advisory Committee (chaired by Outside Director), a majority of whose members are Outside Directors.

System for remuneration (● indicates such Director eligible for each type of remuneration)

Type of Remuneration		Director Type
Type of Remuneration		Executive Director	Chairman of the Board of Directors	Outside Director
Fixed	Monthly Remuneration	●	●	●
Variable	Performance Linked Bonus	●	—	—
Variable	Stock-based remuneration	●	●	—

Ratio and remuneration standards regarding each types of remuneration
The Company will establish an appropriate ratio, etc. between fixed remuneration (monthly remuneration) and variable remuneration (“performance linked bonus” which is linked with short term performance of the Company and “stock-based remuneration” which is linked with middle and long term performance of the Company and shareholder value) which corresponds to Director’s position, (i) by setting an appropriate remuneration standards to acquire and retain highly capable management who will bring about the Company’s sustainable growth and increase of corporate value in the middle to long term, and (ii) to design as healthy incentive to sustainable growth of the Company, based on its business environment, management strategy and human resources strategy, with reference to objective remuneration market research data, etc. provided by external specialized agencies.
Policy and method on the decision of the amount of each remuneration
- Policy on the decision of the amount of each remuneration: as follows
- Method on the decision of the amount of each remuneration: Remuneration of each Directors is resolved by the Board of Directors within the limit resolved at the General Meeting of Shareholders. For the resolution by the Board of Directors, the details are deliberated by the Nomination and Remuneration Advisory Committee and the results thereof are reported to the Board of Directors. For other method, as follows

		Policy on the decision of the amount of each remuneration	Method on the decision of the amount of each remuneration
		Fixed	Monthly Remuneration	Fixed amount remuneration determined based on the abovementioned standards is provided.	—
Variable	Performance Linked Bonus	From the perspective of reinforcing the relationship with its group’s management strategy, the total amount to be paid is determined in accordance with the performance management index to be focused on in the medium-term management plan. The amount to be paid to individual Executive Directors is distributed according to their position and personal evaluation and is paid after the end of the fiscal year. Each Executive Director is evaluated on the basis of both financial indicators and non-financial indicators.	The Board of Directors, reflecting reports from the Nomination and Remuneration Advisory Committee, set assumed values for each performance management index and decide formula for calculating the performance linked bonuses for individual Executive Directors (for the relevant fiscal year) based on actual values for each performance management index. After the end of fiscal year, Representative Director, President and Chief Executive Officer (who is delegated such decision by the Board of Directors) shall decide personal evaluations of each Executive Directors regarding the performance management index which is a part of the formula, following meetings with each of Executive Directors, and performance linked bonuses for each fiscal year will be determined as per the formula, within the limit resolved at the General Meeting of Shareholders. Representative Director, President and Chief Executive Officer will 70 report to the Nomination and Remuneration Advisory Committee about the grading results to make sure that the personal evaluations are appropriate.
Variable	Restricted Performance Share Unit-Based Remuneration	This remuneration is aimed at promoting efforts at optimizing its business portfolio, increasing corporate value in the medium to long term and to ensure sustainable growth, focusing on the link with indicators related to environment, society and governance (ESG) together with shareholder value. Further, we shall promote to share value with the shareholders. The actual contents and timing of payment of the stock-based remuneration for each Directors is decided by the Board of Directors after consultation with the Nomination and Remuneration Advisory Committee.	The Board of Directors, reflecting reports from the Nomination and Remuneration Advisory Committee, decide formula for calculating the stock-based remuneration for individual Executive Directors at the first board meeting of relevant evaluation period based on actual values for each performance management index in several fiscal years. Nomination and Remuneration Advisory Committee (who is delegated such decision by the Board of Directors), comprised of Outside Directors, Chairman of the Board of Directors and Representative Director, President and Chief Executive Officer, shall decide personal evaluations of each Executive Directors on the indicator regarding environment, society, and governance (ESG) which is a part of the formula, and report the evaluations to the Board of Directors.

Remuneration system

Executive remuneration plan (● indicates the persons eligible for each type of remuneration, etc.)

Type of remuneration, etc.		Eligibility
Type of remuneration, etc.		Executive Directors/ Executive Officers	Chairman of the Board of Directors	Outside Directors	Audit & Supervisory Board Members
Fixed	Monthly Remuneration	●	●	●	●
Variable	Performance-Linked Bonus	●	—	—	—
Variable	Restricted Performance Share Unit-Based Remuneration	●	●	—	—

Remuneration standards and remuneration composition ratios of Executive Directors and Executive Officers
- We have set our remuneration standards and remuneration composition ratios to appropriate levels in light of current business environment, business strategies and human resources strategy, . We have done so with reference to objective remuneration market research data, etc. provided by external specialized agencies.
- The image of the remuneration of Representative Director, President and Chief Executive Officer is as shown below.
Performance-linked bonus
- From the perspective of reinforcing the relationship with our group’s management strategy, the total amount to be paid is determined in accordance with the performance management index to be focused on in the medium term management plan “SHIFT 2023”, as well as the year-on-year stock price growth rate (ratio of the Company’s stock price growth to the growth rate of TOPIX(Tokyo Stock Exchange Stock Price Index))
- The amount to be paid to individual officers is distributed according to their position and personal evaluation and paid after the end of the fiscal year.
- Each officer is evaluated on the basis of both financial indicators (status of achievement of business plans, etc. in the respective areas of responsibility) and non-financial indicators (such as individual Strategic Business Units’ achievement of KPIs and KAIs, and progress in addressing important company-wide issues) so that they can become more aware in regard to their commitment to management strategy and results.
- The ratio of financial indicators to non-financial indicators in personal evaluation is 50:50, and of evaluation based on non-financial indicators, 20% relates to the important company-wide issues of business reform through digital transformation (DX), enhancement of sustainability management, and promotion of Diversity, Equity & Inclusion.
[Total amount of performance-linked bonuses]
- The potential range of business results in terms of consolidated net income and basic profit cash flow is assumed to be from 200 to 600 billion yen; if business results fall outside this range, the total amount of performance-linked bonuses to be paid is decided separately by the Board of Directors based on report from the Nomination and Remuneration Advisory Committee.
- In order to further promote the initiatives of the medium term management plan “SHIFT 2023”, we added the year-on-year stock price growth rate as a new indicator for determining the total amount of performance-linked bonuses. The total amount to be paid is worked out by multiplying the amount calculated from consolidated net income and basic profit cash flow by the year-on year stock price growth rate. The range of the year-on-year stock price growth rate is from 80 to 120%.
Restricted Performance Share Unit-Based Remuneration
- With the aim of further promoting efforts to increase the Company’s corporate value over the medium to long term and share value with our shareholders, the number of company’s common shares (restricted) to be provided are determined according to the Company’s stock growth rate (ratio of the Company’s stock price growth to the growth rate of TOPIX (Tokyo Stock Exchange Stock Price Index)) during the three-year evaluation period.
- In order to promote efforts to help solve Company’s Key Social Issues and to make non-financial indicators (related to environment and/or society) be more closely linked with Share Unit-Based Remuneration so that increase awareness of the Company’s commitment to the enhancement of sustainability management, evaluation on the non-financial indicators (“climate change”, “promotion of women's active engagement” and “employee engagement”) is used to calculate the amount of Company’s common shares to be granted as restricted shares.
- The restriction period will be from the day the shares are provided until the day the recipient resigns or retires from all their positions as Director or Executive Officer of the Company or any other position determined by the Board of Directors to realize shareholder value over the medium to long term.