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Remuneration for officers

[As of June 22, 2020]

Design of the officer remuneration system

Remuneration of officers is divided into basic remuneration, bonus and restricted shares remuneration and is determined within the scope of remuneration resolved at the general meeting of shareholders.

A fixed-amount approach is applied for basic remuneration to provide a stable standard of living, while a performance-linked remuneration system is adopted for bonuses to incorporate a certain level of incentive factor for contributions made to business results. Restricted shares remuneration is to provide monetary remuneration claims to Directors (excluding Outside Directors and Directors serving on the Audit and Supervisory Committee, hereinafter referred to as “Eligible Directors”) as remuneration in order to grant shares with restriction on transfer to them, for the purpose of providing Eligible Directors with incentives for achieving sustained improvement in the corporate value of the Company and further promoting value sharing with shareholders. The general meetings of shareholders of the Company held on June 19, 2015 and June 21, 2019 passed a resolution on the remuneration, etc., for officers, which requires the maximum amount of remuneration for Directors (excluding those serving on the Audit and Supervisory Committee) is 300 million yen per year (excluding the employee salaries for Directors who concurrently serve as an employee) and the maximum amount of remuneration for Directors serving on the Audit and Supervisory Committee is 50 million yen per year. The maximum amount of monetary remuneration claims to be provided to Eligible Directors in order to grant shares with restriction on transfer is 60 million yen per year within the said limit of remuneration, and the maximum number of common shares of the Company that can be issued or disposed of under the system is 60,000 shares per year.

Policy and procedure for determining remuneration of officers, etc.

The policy on determining remuneration of Directors, etc., and the process of determination are defined separately for Directors serving on the Audit and Supervisory Committee and other Directors, and remuneration is decided separately for each of the categories: the basic remuneration, the bonus and the restricted shares remuneration.

Basic remuneration is set by determining the monthly standard compensation amount based on principle, position, duties and other elements from the perspective of fairness in personnel administration while bonuses are determined under a performance-linked remuneration system in consideration of the performance and the status of execution of responsible duties for each period. The total amount of provision for directors’ bonuses is determined based on the financial results for each year once they are largely finalized in the course of the preparation of financial statements for that year. Regarding the restricted shares remuneration, in view of that purpose, we have decided as principle to continuously grant shares at a level that is considered an incentive for Eligible Directors and that does not harm the interests of our shareholders. No objective calculation method has been established to determine specific amounts of remuneration by position and duties.

The amount of remuneration for each Director not serving on the Audit and Supervisory Committee is decided through consultation between Toshio Iwasaki, Chairman of the Board, and Hiroyuki Nemoto, President and Executive Officer, who also take into consideration the opinion of the Audit and Supervisory Committee, based on the resolution of the Board of Directors for the delegation of the relevant authority, within the scope of remuneration resolved at the general meeting of shareholders. The amount of remuneration for each Director serving on the Audit and Supervisory Committee is decided through consultation among Directors serving on the Audit and Supervisory Committee, within the scope of remuneration resolved at the general meeting of shareholders.

Restricted shares remuneration system

The overview of restricted shares remuneration system of the Company is as follows.

(1) Restriction period
Eligible Directors may not transfer, hypothecate or otherwise dispose of common shares of the Company allotted per the restricted share allotment agreement (hereinafter referred to as “Allotted Shares”) during a certain period of 20 to 30 years from the day on which under restricted share allotment agreement, they are Allotted Shares (hereinafter referred to as the “Restriction Period”) specified in advance by the Board of Directors of the Company (hereinafter referred to as the “Transfer Restriction”).

(2) Treatment on retirement from office
If an Eligible Director retires from the position of Director of the Company before the expiration of the Restriction Period, the Company will necessarily acquire his or her Allotted Shares without contribution, unless there is any justifiable reason for the retirement including the expiration of his or her term of office and death (however, this does not apply when an Eligible Director is reelected as and assumes the office of Director following the expiration of the terms of the office, or when an Eligible Director retires from the position of Director not serving on the Audit and Supervisory Committee, and is reappointed to and assumes the office of Director serving on the Audit and Supervisory Committee immediately after the retirement).

(3) Lifting of Transfer Restriction
Notwithstanding the provision of (1) above, the Company shall lift the Transfer Restriction of all of Allotted Shares upon expiration of the Restriction Periods, on the condition that Eligible Directors have remained in the position of Director of the Company throughout the Restriction Periods. If, however, an Eligible Director retires from the position specified in (2) above before the Restriction Period expires due to the expiration of the term of office or death, or any other justifiable reason, the Company shall reasonably adjust, as required, the number of his or her Allotted Shares and the time at which the Transfer Restriction will be lifted (however, this does not apply when an Eligible Director is reelected as and assumes the office of Director following the expiration of the terms of office, or when an Eligible Director retires from the position of Director not serving on the Audit and Supervisory Committee and is reappointed to and assumes the office of Director serving on the Audit and Supervisory Committee immediately after the retirement). In cases specified above, the Company shall necessarily acquire such Allotted Shares whose Transfer Restrictions have not been lifted, as of the time immediately after Transfer Restriction is lifted.

(4) Treatment during reorganization, etc.
Notwithstanding the provision of (1) above, if, during the Restriction Period, a merger agreement in which the Company is the disappearing company, a share exchange agreement or share transfer plan in which the Company becomes a wholly owned subsidiary, or any other matter relating to reorganization, etc. is approved at the Company’s general meeting of shareholders (or at a meeting of its Board of Directors in cases where approval at the Company’s general meeting of shareholders is not required regarding the reorganization, etc.), the Company shall lift, prior to the date on which the reorganization, etc. becomes effective, Transfer Restriction on Allotted Shares at the number that is reasonably determined by a resolution of the Board of Directors of the Company in light of the period from the start date of the Restriction Period to the date of approval of the reorganization, etc. In cases specified above, the Company shall necessarily acquire without contribution such Allotted Shares whose Transfer Restrictions have not been lifted, as of the time immediately after Transfer Restriction is lifted.

(5) Other matters
Any other matters pertaining to the agreement on the allotment of shares with restriction on transfer shall be decided at meetings of the Board of Directors of the Company.

Total amount of remuneration (fiscal year ended March 31, 2020)

Category Number of officers Total amount of remuneration, etc.
(Thousands of yen)
Total amount of remuneration, etc. by type
(Thousands of yen)
Basic remuneration Bonuses Restricted shares remuneration
Directors
(excluding Outside Directors)
5 140,709 113,520 20,600 6,589
Directors serving on the Audit and Supervisory Committee
(excluding Outside Directors)
1 18,000 15,600 2,400
Outside Officers 3 13,800 10,800 3,000
  1. The total remuneration, etc. on a consolidated basis of individual officers are not disclosed as there is no officer whose total remuneration, etc. on a consolidated basis is 100 million yen or more.
  2. The employee salaries for officers who concurrently serve as an employees are as follows:
Number of Officers Total amount
(Thousands of yen)
Description
1 11,800 Salaries and allowances