Remuneration System for Executive Officers

Basic Policy for the Remuneration of Executive Officers

The Nomination and Remuneration Advisory Committee will discuss the remuneration of Directors and Executive Officers, and report to the Board based on the following policy. The Committee will consider levels of the remuneration and linkage with performance by comparing them objectively with officers’ remuneration survey data of an external research body, and incorporate findings in its report to the Board of Directors.

1.  The Company shall establish a remuneration structure that emphasizes the linkage of remuneration with business performance and medium- to long-term corporate value and share value with the shareholders.
2.  Remuneration levels shall be appropriate for the roles and responsibilities of the Kirin Group’s officers.
3.  Remuneration shall be deliberated by the Nomination and Remuneration Advisory Committee, in which Non-Executive Directors constitute a majority, in order to ensure objectivity and transparency.

Composition of the Remuneration

• In order to encourage awareness of achieving short-term performance targets and enhancing medium to long term corporate value, remuneration for Directors of the Board is composed of three parts: basic remuneration (fixed remuneration), bonus (short-term incentive remuneration), and Stock Compensation (medium- to long-term incentive remuneration). The specific composition of remuneration is as follows according to the classification of officers eligible for the payment.

Officer type	Fixed remuneration	Performance-linked remuneration		Purpose
	Basic remuneration	Bonus	Stock-based remuneration
Directors of the Board(excluding Nonexecutive Directors) and Executive Officers	○	○	○	Because they are responsible for the execution of business, Kirin Holdings have established remuneration structure that takes into account the achievement of short-term consolidated performance targets and the improvement of corporate value over the medium to long term.
Non-executive Directors	○	–	–	Because they are responsible for supervising and advising Company and Group management from an objective position, only basic remuneration (fixed remuneration) is provided.
Audit & Supervisory Board Members	○	–	–	Because of their role of auditing the performance of directors’ execution of their business from an objective position, only basic remuneration (fixed remuneration) is provided.

• The ratio of base remuneration to performance-linked remuneration for the Representative Director of the Board & CEO is designed to be approximately 30:70 (including 30 for bonuses and 40 for stock-based remuneration), with other directors (excluding Non-Executive Directors) and Executive Officers following suit in consideration of their positions and responsibilities.

Structure of performance-linked remuneration

1. Bonus

• The performance evaluation indicators are the Company's corporate performance evaluation indicators (consolidated normalized operating profit), business performance evaluation (Normalized operating profit of Group companies or sales and normalized operating profit of Health Science domain), and individual performance evaluation.
• The amount paid will vary from 0% to 200%, with 100% indicating target achievement.

Mechanism for linkage of bonuses to performance

1. The base amount of bonus is determined for each position in the bylaws.
2. "A" is the ratio of the portion linked to corporate performance, "B" is the ratio of the portion linked to business performance, and "C" is the ratio of the portion linked to individual performance.

Evaluation Weighting by each performance evaluation indicators (FY2024)

Performance indicators	Representative Director of the Board & CEO	Representative Director of the Board, President & COO	Executive Officer concurrently serving as operating company president, etc.	Other directors and executive officers
Company performance evaluation	70%	70%	20%	50%
Business performance evaluation	ー	ー	40%	ー
Individual performance evaluation	30%	30%	40%	50%
	The Nomination and Remuneration Advisory Committee determines the specific evaluation indicators, targets and outcomes following a discussion between the Representative Director of the Board & CEO and the Representative Director of the Board, President & COO and the Non-Executive Director who is either the Chairperson or a member of the Nomination and Remuneration Advisory Committee.		With regard to the priority issues, the concerned divisions and the Company's performance, the Representative Director of the Board, President & COO , after discussion with the relevant executive directors and executive officers, drafts specific evaluation indicators, targets and evaluation results, which are approved by the Representative Director of the Board & CEO, and then the Nomination and Remuneration Advisory Committee makes a decision.

2. Stock-based remuneration

• Stock-based remuneration is a Trust-type stock remuneration (performance based).
• Trust-type stock remuneration consists of (1) performance share units (the Single-Year PSU) linked to the achievement of performance in a single fiscal year, (2) restricted share units (RSUs) without performance-requirements, and (3) performance share units linked to the achievement of performance under the Medium-term Business Plan for multiple fiscal years (the Medium-term Plan PSU).
• The performance indicators for single-year PSU and Medium-term Plan PSU shall be ROIC, normalized EPS and non-financial indicators which are key management indicators in the Medium-term Business Plan.
• Non-financial indicators will be determined based on an item-by-item evaluation of the achievement level of specific indicators defined for each item in the three categories of "environment," "health," and "employees," followed by an overall evaluation based on the results of these evaluations and qualitative considerations.
• The payment rate for Single-Year PSU and Medium-term Business Plan PSU will fluctuate between 0% and 200%, with 100% at the time of target achievement.

Details of the trust-type stock remuneration plan

	Number of points*	Timing of granting of points	Timing of delivery of shares and cash
RSU	Fixed points	After the end of each fiscal year	At a certain point in time after the lapse of two years from the start of the fiscal year when points were granted (at a certain point in time after the lapse of three years from when the number of points was determined for the RSU)
Single-Year PSU	The number calculated by multiplying the basic points (for the Medium-Term Plan PSU, the basic points for three years) by the performance-linked factor (0% to 200%) depending on the level of achievement of performance targets and others for each performance evaluation period
Medium-Term Plan PSU		After the end of the final fiscal year of the Medium-Term Business Plan	At a certain point in time in the fiscal year following the final fiscal year of the Medium-Term Business Plan

• Basic points (fixed points for the RSU) are calculated based on the base amount predetermined for each executive rank and responsibilities.

Mechanism of the trust-type stock compensation

Mechanism for performance-linked trust-type stock remuneration (excluding the performance evaluation period; the scheme is common to the Single-Year PSU and the Medium-Term Plan PSU)

Evaluation Weighting by each performance evaluation indicators (Fiscal 2022)

Performance evaluation indicators	Evaluation ratio
ROIC	40%
Normalized EPS (CAGR within the period of the Medium-Term Business Plan for the Medium-Term Plan PSU)	40%
Non-financial evaluation	20%

Procedures for determining the remunerations of executive officers

• In order to ensure fair and reasonable application of the process in line with the above-mentioned basic policy for executive remuneration, the executive remuneration shall be deliberated at the Nomination and Remuneration Advisory Committee of which the majority of the members are Non-Executive Directors and whose Chairperson is also a Non-Executive Director, and the result is reported to the Board of Directors.
• As for determining the specific amount of remuneration, remuneration for Directors shall be decided at the Board and that for Audit & Supervisory Board members upon consultation with Audit & Supervisory Board based on the report from the Nomination and Remuneration Advisory Committee and within the limits of the remuneration amount determined in advance at the general meeting of shareholders.
• Nomination and Remuneration Advisory Committee regularly deliberates on the setting of remuneration levels, the ratio of performance-linked remuneration and its mechanisms and meets in response to changes in the environment of laws and regulations related to executive remuneration and submits a report to the Board.

Executive remuneration (FY2023)

Officer type		Total amount of remuneration, etc. (million yen)	Total amount of remuneration (million yen) by type and number of persons
			Fixed remuneration		Performance-linked remuneration
			Monetary remuneration						Non-monetary remuneration
			Basic Remuneration		Bonus		Performance-linked remuneration linked to stock price (Phantom Stock Plan)		Trust-type stock compensation
			Total amount	Number of persons	Total amount	Number of persons	Total amount	Number of persons	Total amount	Number of persons
Directors of the Board (excluding Non-executive Directors)		809	281	6	321	5	–	–	207	6
Audit & Supervisory Board Members (excluding External Audit & Supervisory Board Members)		76	76	3	–	–	–	–	–	–
Non-executive Officers	Non-Executive Directors	142	142	8	–	–	–	–	–	–
	External Audit & Supervisory Board Members	58	58	3	–	–	–	–	–	–
Total		1,084	556	20	321	5	–	–	207	6

1. Twelve (12) Directors of the Board and five (5) Audit & Supervisory Board members remain in their positions as of the end of this fiscal year, but the amounts above include remuneration for one two(2) Directors and one (1) Audit & Supervisory Board member who retired as of March 30, 2023.
2. There were no officers to whom the above performance-linked and stock-price-linked remuneration (Phantom Stock Plan) was applicable.
3. Trust-type stock remuneration was delivered to Directors of the Board (excluding Non-executive Directors) as non-monetary remuneration. The above total amount of trust-type stock remuneration is the amount recorded as expenses during this fiscal year for the Board Incentive Plan (BIP) Trust.
4. Amounts are rounded to the nearest one million yen.

Remuneration totals by officer (FY2023)

Name	Officer type	Total amount of remuneration, etc. (million yen)	Amount of remuneration by type (million yen)
			Fixed	Performance-linked remuneration
			Monetary remuneration		Non-monetary remuneration
			Basic remuneration	Bonus	Stock-based remuneration
Yoshinori Isozaki	President & CEO	338	103	137	98
Keisuke Nishimura	Representative Director, Senior Executive Vice President	172	62	67	43
Toshiya Miyoshi	Director of the Board	111	43	42	25

1. Only those persons whose total amount of remuneration, etc. exceeds 100 million yen are disclosed.
2. The total amount of trust-type stock-based remuneration above is the amount posted as expenses during the fiscal year for the Board Incentive Plan (BIP) trust.
3. Amounts are rounded to the nearest one million yen. 

Terms for forfeiture and return of stock-based compensation (Malus and Clawback clauses)

In the event that the Board of Directors recognizes that a Director, etc. has committed a misconduct, resigned for his/her own reasons, or that there are other reasons why it is reasonable not to allow him/her to acquire all or part of the beneficiary rights or entitlements, the Company may demand that the Director, etc. forfeit his/her entitlement to compensation under the stock compensation plan or return the money equivalent to the Company shares delivered to him/her.