We believe that improving profitability and capital efficiency, with the aim of enhancing long-term corporate value, is the top priority for all stakeholders, including our shareholders. Therefore, in addition to establishing an internal control system, we will strive to ensure the transparency and soundness of management and continuously strengthen our corporate governance.

As a company with an Audit & Supervisory Board, we have adopted a structure that incorporates the functions of a company with a Nomination Committee and Remuneration Committee into our basic organizational design. This enhances the objectivity and transparency of management, including the appointment of directors and the determination of remuneration. Furthermore, by introducing the Executive Officer system, we have clearly separated supervision from execution, establishing a structure capable of responding swiftly to changes in the external environment. Furthermore, starting in June 2024, we introduced a Corporate Officer system and appointed a CEO (Chief Executive Officer) to clarify the highest-level executive responsibility for group management. The Corporate Officer, as the highest-ranking executive position within our group with a company-wide perspective, bears responsibility for the Company's management execution. By attending Board of Directors meetings to explain proposals and respond to questions, the Corporate Officer further strengthens the supervisory function of the Board of Directors.

Under the mid-term management plan VISION2030, we will pursue sustainable growth and enhance corporate value over the medium to long term, while also focusing on management that prioritizes strengthening our governance framework. In executing VISION2030, considering our current circumstances and the challenges we must address, the Board of Directors has determined the following areas of experience and expertise to be important at this time. Based on this, we have established a well-balanced composition of directors and auditors.

(Basic Policy on Director Remuneration)

The key points emphasized in the basic policy on director remuneration for our Group are as follows:

• A competitive level and system to secure outstanding management talent within Japan
• Strong linkage between short-term performance and medium-to-long-term corporate value enhancement for sustainable growth
• Ensuring transparency and fairness in the remuneration determination process, and the appropriateness of remuneration

(Approach to Director Remuneration Levels)

• As remuneration for directors of a company whose mission is to address social issues through leading-edge technology, primarily semiconductors and IT, and to contribute to the sustainable development of society by offering solutions to those issues that have value beyond expectations, we aim for a competitive level among Japanese companies operating in this field.
• Fixed director remuneration is benchmarked based on external survey data, reflecting each director's functions and responsibilities.
• Variable remuneration for directors must incorporate elements linked to the Company's performance level. Therefore, we set annual performance-based remuneration within 5% of “Net Income Attributable to Owners of the Parent Company.”
• Medium-to-long-term incentive remuneration is set based on the target financial model, period, and other factors.

(Remuneration Structure)

• Directors with Business execution
  Composed of a fixed monthly salary, annual performance-based remuneration, and mid-to-long-term incentive remuneration. A portion of the annual performance-based remuneration and the mid-to-long-term incentive remuneration are provided as stock-based remuneration.
• Directors with Non-business execution
  Composed of a fixed monthly remuneration and non-performance-linked equity remuneration. Note: The retirement benefit system for directors of the Company has been abolished for periods starting from the fiscal year ending March 2015.

(Fixed Remuneration)

• Directors with Business execution
  Utilizing data from external research institutions, remuneration levels for each position at companies with similar market capitalization and scale are used as benchmarks. Based on these benchmarks, a fixed remuneration table has been established. This table sets the remuneration level range for each position at the Company relative to the President and Representative Director, whose remuneration is set as 100. Furthermore, based on data from external research institutions, the Remuneration Committee formulates a fixed remuneration proposal for the President and Representative Director, which is then decided by the Board of Directors. Applying the determined fixed remuneration amount for the President and Representative Director to the fixed remuneration table calculates the fixed remuneration ranges for directors in other positions. Within these ranges, the President and Representative Director determines the fixed remuneration amounts for other directors.
• Directors with Non-business execution
  Fixed remuneration ranges are established based on data from external research organizations. Allowances are paid for membership on the Nomination and Remuneration Committees. For committee chairs, a separate chairperson allowance is paid in addition to the committee member allowance.

(Annual Performance-Based Remuneration)

• Annual performance-based remuneration is established as a remuneration system that clearly links the remuneration of executive directors to the Company's performance and shareholder value. Its purpose is to enhance motivation for achieving performance improvements and awareness of contributing to increasing shareholder value.
• Annual performance-based remuneration is calculated based on an annual performance-based remuneration table using the following metrics: the amount of “Net Income Attributable to Owners of the Parent” for the fiscal year (hereinafter referred to as “Net Income Amount”) and the ratio of Net Income Amount to net sales (hereinafter referred to as “Net Profit Margin”). Net Income Amount and Net Profit Margin are currently judged to be the optimal metrics for clearly demonstrating linkage to the Company's performance and shareholder value.
• 65% of the annual performance-linked remuneration is paid as a cash bonus directly linked to the Company's performance, following approval at each regular shareholders' meeting. However, if performance exceeds certain thresholds specified in the annual performance-linked remuneration table, the excess performance-linked remuneration is paid as a cash bonus.
• 35% of the annual performance-based remuneration is paid as equity remuneration linked to shareholder value upon the director's retirement.
• Since the performance-based remuneration increases in line with growth in net profit amount and net profit margin, no policy has been established regarding the payment ratio of performance-based remuneration relative to fixed remuneration.

(Medium-to-Long-Term Incentive Remuneration)

• Medium-to-long-term incentive remuneration is established to enhance awareness of increasing corporate value over the medium to long term by aiming to achieve the medium-term management plan. Based on the degree of achievement of the financial target indicators (consolidated ordinary profit margin and consolidated ROE) and the degree of improvement in non-financial indicators (engagement score) set in the medium-term management plan, 0% to 125% of the base amount calculated according to position and responsibilities is paid.

(Non-Performance-Based Equity Remuneration)

• Non-performance-based equity remuneration is provided to Directors with Non-business execution to enhance their motivation to contribute to the medium- to long-term enhancement of corporate value and to further align their interests with shareholders.
• Stock remuneration is calculated based on tenure and other factors, and is paid upon retirement.

(Director Remuneration Determination Process)

• To ensure transparency and fairness, the remuneration system for directors (including the fixed remuneration table, annual performance-based remuneration table, and mid-to-long-term incentive remuneration table) is designed such that the Remuneration Committee, an internal committee of the Board of Directors, deliberates and formulates a draft proposal. This proposal is then submitted to the Board of Directors for deliberation and final decision.
• The remuneration details for the President and Representative Director (fixed remuneration and cash bonuses) are also determined by the Board of Directors after deliberation on a draft prepared by the Remuneration Committee. The remuneration details for directors other than the President and Representative Director (fixed remuneration and cash bonuses) are determined by the President and Representative Director, acting under delegation from the Board of Directors, based on tables corresponding to the responsibilities and positions decided by the Board. To ensure the appropriate exercise of authority delegated by the Board, the President and Representative Director must obtain the consent of the Remuneration Committee when making such determinations. Proposals deviating from the table require Board approval.
• For annual performance-linked stock remuneration, points calculated by applying the annual net profit amount and net profit margin to the annual performance-linked remuneration table are granted to eligible individuals by the end of May each year. Upon retirement as a director, shares of the Company corresponding to these points are delivered.
• For mid-to-long-term incentive remuneration, shares are granted in the fiscal year following the plan's completion. Points are calculated by multiplying a base amount (rights points) determined according to position by a payout ratio linked to the achievement level at the end of the final year of the mid-term management plan.
• Non-performance-linked stock remuneration is established for Directors with Non-business execution to enhance motivation for contributing to medium-to-long-term corporate value growth and to further share benefits with shareholders. It is calculated based on factors such as tenure and is paid upon retirement.