Director's remuneration

Remuneration for directors is divided into two categories: fixed remuneration paid monthly (regular fixed amount) and performance-linked remuneration paid at a certain time each year.
Fixed remuneration is paid in a standard amount by position, taking into consideration the level commensurate with the required abilities and responsibilities. As for the maximum amount, the annual amount of fixed remuneration for directors (excluding Audit and Supervisory Committee Members) was approved at the 26th Ordinary General Meeting of Shareholders held on September 27, 2022 as ¥150 million or less (the number of directors immediately after that meeting was 4 (including 2 outside directors)).

Performance-linked remuneration is for directors excluding outside directors (hereinafter referred to as "eligible directors" in this "2. Remuneration for directors (excluding Directors who are members of the Audit Committee)"). The performance-linked remuneration consists of (1) short-term performance-linked remuneration, which is bonuses linked to the Company's business year performance, and (2) medium-term performance-linked remuneration, which is performance-linked stock remuneration linked to changes in indicators during the applicable period. The medium-term performance-linked remuneration is a stock-based remuneration in which common shares of the Company are issued, with the aim of further sharing value between the eligible directors and shareholders through sustained improvement of the stock price, and to give the eligible directors an incentive to continuously enhance the Company's corporate value. The upper limit of the performance-linked bonuses was approved at the 26th term Ordinary General Meeting of Shareholders held on September 27, 2022, with an annual amount of ¥41,250 thousand or less per eligible director (the number of eligible directors immediately after the said meeting was two). The upper limit of the medium-term performance-linked remuneration was approved at the 26th term Ordinary General Meeting of Shareholders held on September 27, 2022, at ¥100,000 thousand or less for each applicable period, with the number of shares to be issued by the Company to eligible directors under this system not exceeding 60,000 shares per eligible director and not exceeding 100,000 shares in total per year for all eligible directors (the number of eligible directors immediately after the said meeting was two).

The terms and conditions of the medium-term performance-linked remuneration are reviewed by resolution of the general meeting of shareholders as necessary. Most recently, at the 27th Ordinary General Meeting of Shareholders held on September 27, 2023, it was approved that the remuneration consists of two parts: (1) a component under which the Company's common stock is issued at the end of the applicable one-year period if the Company's stock price has increased from the beginning of the period, and (2) a component under which the number of shares of the Company's common stock to be issued is calculated based on the Company's stock growth rate. Immediately after the said meeting, the number of eligible directors was two. 
The ratio of remuneration is as follows: fixed remuneration 45%-50%, short-term performance-linked remuneration 15%-20%, and medium-term performance-linked remuneration 35%, based on the achievement of performance targets (based on a short-term performance incentive coefficient of 100%).
Since outside directors are independent from the execution of business, they are not subject to performance-linked remuneration and are paid the above fixed remuneration.

 

Remuneration for directors who are Audit Committee Members consists solely of fixed remuneration, in consideration of their responsibilities and roles in supervising business execution and performing audit functions, and is determined through discussions among the directors who are Audit Committee Members, within the maximum amount of remuneration resolved at the general meeting of shareholders, taking into account such factors as whether they serve full-time or part-time, whether they are internal directors or outside directors (and outside directors who are Audit Committee Members), and the division of duties. The maximum amount of remuneration was resolved at the 26th Ordinary General Meeting of Shareholders held on September 27, 2022 to be within ¥55,000 thousand per year (the number of directors who are Audit Committee Members immediately after said meeting was three).

Short-term performance-linked remuneration is a monetary remuneration system, and the amount is calculated by multiplying a short-term incentive coefficient by a standard amount determined according to position and other factors. Specifically, the amount is calculated by the following formula.

 

Short-term performance-linked remuneration = Short-term performance-linked remuneration standard amount x short-term incentive coefficient

 

Short-term performance-linked remuneration paid to directors (excluding outside directors and directors who are Audit and Supervisory Committee Members; eligible Directors in this "2) Purpose, basis of indicators and specific calculation methods of performancelinked remuneration and performance-linked stock remuneration") shall be a monetary amount calculated in conjunction with the year-on-year increase or decrease in consolidated net profit, which is consistently emphasized in the Company's medium-term management strategy, medium-term management plan and annual business results. The amount is calculated by multiplying the base amount (base amount of performance-linked bonus), which is determined according to position and other factors, by the short-term incentive coefficient, which is set in the range of 0% to 150% according to the change in consolidated net profit from the previous fiscal year.

 

The coefficients are calculated as follows.

If consolidated net profit after tax for the current period is "a" and consolidated net profit after tax for the previous period is "b," the value calculated by the following formula is used as the coefficient.

 

1) If "a" is less than or equal to "b": 0
2) If "a" exceeds "b" and is less than "b" × 137.5%: (a÷b-1) ÷0.375 × 1.5
3) If "a" is 137.5% or more of "b": 1.5

 

Consolidated net profit for the current fiscal year, which serves as the performance indicator, was ¥2,985 million, lower than the consolidated net profit of ¥3,434 million for the previous fiscal year. Accordingly, no short-term performance-linked remuneration will be paid.

This is a performance-linked stock remuneration plan in which common stock of the Company is issued in accordance with the degree of achievement of performance targets.

< Image of medium- to long-term performance-linked remuneration (stock) under both the old and new systems >

For the medium- to long-term performance-linked remuneration (stock-based remuneration) under the pre-revision scheme covering the period from September 2022 to September 2025, for which a determination was made during the current fiscal year as to whether payment would be made and other related matters, the Company's total shareholder return (TSR) was 112.9%, compared with the TOPIX growth rate of 163.1%.
Since this falls under item (1) of the stock grant ownership interest (%) described below—where the Company's stock growth rate (A) is less than 100%—no shares were granted.

Regarding the medium- to long-term performance-linked remuneration (stock) based on the post-revision scheme for the subject period from September 2024 to September 2025, for which a decision on granting was made during the current fiscal year, no shares were granted. This was because, in relation to Part I, the average closing price of the Company's common stock on the Tokyo Stock Exchange in September 2025 fell below the average closing price of the Company's common stock on the Tokyo Stock Exchange in September 2024.

In Part II, the Company's TSR (Total Shareholder Return) for the subject period was 74.4%, underperforming the TOPIX growth rate of 119.2%.
Since this falls under item (1) of the stock grant ownership interest (%) described below—where the Company's stock growth rate (A) is less than 100%—no shares were granted.

No individual's total amount of consolidated remuneration, etc. was ¥100 million or more.