Corporate Governance

Remuneration Committee and Nomination Committee

The Company has established the Remuneration Committee and the Nomination Committee as advisory bodies to the Board of Directors and ensures the transparency and reasonableness of the process for determining the appointment, dismissal, and compensation of the Company’s directors and corporate officers through the deliberation and resolution of such matters at the Board of Directors’ meetings.

Note: Compositions of the Remuneration Committee and the Nomination Committee are as of October 31, 2022.

Activities of the Remuneration Committee

Activities by the Remuneration Committee as part of the process of deciding director remuneration for fiscal 2021 included the following.

Number of meetings	4
Major discussion topics	· Annual director compensation and total remuneration levels	· Total annual bonuses for fiscal 2021
Major discussion topics	· Annual compensation amounts for individual directors in fiscal 2021	· Annual bonus amounts for individual directors for fiscal 2021

Activities of the Nomination Committee

Activities by the Nomination Committee as part of the process of nominating directors in fiscal 2021 included the following.

Number of meetings	3
Major discussion topics	· Appointment, dismissal, and areas of responsibility for director and Audit & Supervisory member candidates and corporate officers for fiscal 2022
Major discussion topics	· Formulation of a skills matrix

The Board of Directors receives reports from the outside director who chairs the Remuneration and Nomination committees regarding the discussions that took place at meetings of the Remuneration Committee and the Nomination Committee during the respective fiscal year.

Audit & Supervisory Board

The Audit & Supervisory Board, which consists of five members, three of whom are outside Audit & Supervisory Board members, meets once a month, in principle, and whenever necessary. The Audit & Supervisory Board members audit the performance of director duties from the perspective of a holding company of the Group by attending the Board of Directors’ and other important meetings, exchanging opinions with directors and key personnel, and receiving reports on the status of performance of core operating companies.

Activities of the Audit & Supervisory Board (Fiscal 2021)

The Audit & Supervisory Board meets once a month, in principle, and additional meetings are arranged as necessary. In fiscal 2021, the Audit & Supervisory Board met 22 times, the average meeting duration was 63 minutes, and the number of items raised with the Board was 73. The attendance of individual Audit & Supervisory Board members at meetings is detailed below.

Position	Name	Attendance
Full-time Audit & Supervisory Board member	Osamu Nishimura	22/22 (100.0%)
Full-time Audit & Supervisory Board member	Tomoyuki Imaizumi	Appointed in June 2022

Position	Name	Attendance
Outside Audit & Supervisory Board member	Katsuyuki Yamaguchi	22/22 (100.0%)
Outside Audit & Supervisory Board member	Kazuhiko Tomoda	22/22 (100.0%)
Outside Audit & Supervisory Board member	Shin Kikuchi	Appointed in June 2022

Meetings of Outside Directors and Outside Audit & Supervisory Board Members

Regular meetings of independent outside directors and outside Audit & Supervisory Board members are held to allow these officers to exchange information and build shared understanding based on their independent and objective standpoints. Standing Audit & Supervisory Board members also attend these meetings as observers. The most recent meeting was held on June 9, 2022.

Executive Compensation

Compensation System Basic Policy

· Rooted in the Group corporate philosophy
· Shared sense of value with our shareholders, incentivizing increases in corporate value over the medium to long term
· Compensation levels appropriate for the roles and responsibilities of the directors of the Company and that secure and maintain superior human resources
· Transparency and reasonableness ensured in the compensation decision process

Compensation Items

Director compensation is composed of three items: annual compensation, annual bonuses, and stock-type compensation. In reflection of their roles and their need to maintain independence, however, compensation for outside directors consists solely of annual compensation.
The percentage of the annual bonus and stock-type compensation, for which the amounts and values change according to business performance, is set at 40% of the total compensation for each director in the case of standard business performance.

①Annual Compensation

Annual compensation is decided based on the expected results, actual results, and other factors for the position and duties of each director.
②Annual Bonus (Short-Term Incentive)

The annual bonus provides a strong incentive to achieve business results in a given fiscal year and is decided comprehensively in consideration of the Group’s profit level in each fiscal year, the achievement of management benchmarks, and the results of the individual directors in the individual year.
③Stock-Type Compensation (Medium- to Long-Term Incentive)

Stock-type compensation is a form of compensation in which restricted stock is provided each year to directors to incentivize the increase of corporate value over the medium to long term and provide a shared sense of value with shareholders.

Annual Bonus Calculation Method

Annual bonuses are calculated by multiplying a standard value set for each director (one-twelfth of annual compensation) by a bonus coefficient and then adjusting this amount by the performance of a given director in the respective fiscal year.
Consolidated pre-depreciation and amortization operating income is the primary indicator used for determining annual bonuses. Other indicators considered include ordinary income and income before income taxes as displayed on the consolidated statements of income.
Bonus coefficients are adjusted within the range of 0% to 200%, with 100% representing the accomplishment of targets.
In assessing the performance of individual directors, the degree of accomplishment of individual targets set at the beginning of the fiscal year is evaluated qualitatively.

Stock-Type Compensation (Restricted Stock) Allocation Method

Directors are allocated monetary remuneration receivables in an amount set on an individual basis and they then conclude restricted stock allocation contracts with the Company. Directors use these receivables to make in-kind contributions to the Company, after which they receive allocations of restricted stock.
The restricted stock allocation contracts impose a 30-year period for transfer restrictions on the allocated shares. These transfer restrictions, however, can be canceled if a director’s term expires or they resign from their position for another reason deemed appropriate during the transfer restriction period.
Should a director resign from their position for reasons not deemed appropriate by the Board of Directors during the transfer restriction period, the Company shall claim the allocated shares of restricted stock with no compensation provided.

Policies for Determining Compensation

The Compensation Committee has been established as an advisory body to the Board of Directors. The majority of the members of this committee are independent outside directors, and an independent outside director serves as the chairperson.
Levels of annual compensation, annual bonuses, and stock-type compensation paid to directors are decided by the president based on authority delegated by the Board of Directors. Authority for deciding director compensation amounts has been delegated to the president by the Board of Directors to ensure the transparency and rationality of compensation. This authority, however, is conditional upon the Compensation Committee’s review of the president’s compensation proposal.

Policies for Determining Compensation of Audit & Supervisory Board Members

The compensation of Audit & Supervisory Board members is composed solely of annual compensation pursuant to the Internal Rules on Audit & Supervisory Board Member Compensation and is determined through consultation among the Audit & Supervisory Board members.

General Meeting of Shareholders’ Resolutions Regarding Officer Compensation (Fiscal 2021)

The following resolutions have been made by the General Meeting of Shareholders regarding the compensation of directors and Audit & Supervisory Board members.

Applicable officers	Resolution	Resolution date	Number of applicable officers at resolution date
Directors	Upper limit of ¥800 million for annual compensation and annual bonuses	June 29, 2017	14 (including 2 outside directors)
Directors (excluding outside directors)	Upper limit of ¥200 million for stocktype compensation (monetary remuneration receivables paid in relation to restricted stock compensation)	June 29, 2017	12 (excluding outside directors)
Audit & Supervisory Board members	Upper limit of ¥100 million for compensation	June 29, 2022	5 (including 3 outside directors)

Total Amount of Compensation by Class of Executives, Total Amount of Compensation by Type of Compensation, and Number of Executives Receiving Executive Compensation

Total compensation by type

- Classification
- Total value of
  remuneration
  (Millions of yen)
Annual compensation
- Number
  (People)
- Total
  (Millions of yen)
Annual bonuses
- Number
  (People)
- Total
  (Millions of yen)
Stock-type compensation
- Number
  (People)
- Total
  (Millions of yen)

- Directors
  (excluding outside directors)
- 492
- Outside directors
- 39
- Audit & Supervisory
  Board members
  (excluding outside Audit &
  Supervisory Board members)
- 45
- Outside Audit &
  Supervisory Board
  members
- 32
- Total
- 609
- 6
- 235
- 3
- 39
- 2
- 45
- 3
- 32
- 14
- 353
- 6
- 202
- 6
- 202
- 6
- 54
- 6
- 54