Chugai has designed its remuneration plan for directors and Audit & Supervisory Board members to attract outstanding people and appropriately motivate them in order to continuously increase the Chugai Group’s corporate value.

As part of this plan, we target marketcompetitive levels of remuneration. Executive director remuneration is determined by benchmarking levels against a group of major Japanese corporations and other domestic pharmaceutical companies. Specifically, the Board of Directors decides remuneration levels annually after deliberation by the Compensation Committee based on the results of a survey by an external expert organization and other factors.

In order to further clarify the link between remuneration and the Company’s business performance and shareholder value, and to raise directors’ ambition and motivate them to improve performance, executive director remuneration consists of bonuses paid according to performance and other factors in each fiscal year as a short-term incentive and restricted stock compensation linked to medium- and long-term performance (tenure-based and performance-based) as a long-term incentive, in addition to fixed regular compensation. Remuneration of non-executive directors, including outside directors, and Audit & Supervisory Board members consists solely of fixed regular compensation. The guideline for the composition of CEO remuneration is 35 percent regular compensation, 30 percent bonuses and 35 percent restricted stock compensation, and the composition for other executive directors is determined in consideration of duties and other factors.

Bonuses, which are a short-term incentive, are determined by multiplying the base amount set according to individual positions, by the evaluation coefficient based on comprehensive evaluation consisted of the level of the target achievement of company-wide performance and individual performance in the respective fiscal years based on the announced forecasts. For restricted stock compensation granted as a long-term incentive, 50 percent is tenure-based restricted stock with a transfer restriction period of three to five years, and 50 percent is performance-based restricted stock. The number of shares to be granted is determined by dividing the standard amount set for each position by the closing price of the Company’s shares on the day before the resolution for their allotment by the Board of Directors. The transfer restriction shall be removed at the expiration of the transfer restriction period for the shares granted, provided that the recipient has held the position of director of the Company continuously during the transfer restriction period. For performance-based restricted stock, the number of shares for which the transfer restriction shall be removed is additionally based on the result of a comparison between the total shareholder returns of domestic pharmaceutical companies and total shareholder returns of the Company.

Officer remuneration is determined by resolution of the Board of Directors for directors and following deliberation by the Audit & Supervisory Board members for Audit & Supervisory Board members, both within the total amounts approved at the General Meeting of Shareholders. The Compensation Committee, which consists of three or more external members appointed by the Board of Directors, including at least one independent outside director, deliberates on remuneration of individual directors to ensure the transparency and objectivity of the determination process.

A resolution was passed in the 98th Annual General Meeting of Shareholders held in March 2009 to abolish the retirement benefits system for directors. A resolution was passed in the 95th Annual General Meeting of Shareholders held in March 2006 to abolish the retirement benefits system for outside directors and Audit & Supervisory Board members (including outside members).

At the 106th Annual General Meeting of Shareholders held on March 23, 2017, a resolution was passed to newly introduce restricted stock in place of the current stock options for executive directors of the Company. The aggregate amount of such compensation shall not exceed ¥345 million on top of the aforementioned fixed regular compensation and bonuses.

System for Remuneration of Directors and Audit & Supervisory Board Members

Criteria for Performance-Based Remuneration and the Method to Determine Its Amount

Amount of Remuneration Paid to Directors and Audit & Supervisory Board Members (2022)

• 1. Amounts are rounded to the nearest million yen.
• 2. The above includes two directors who retired during the fiscal year under review.
• 3. The above bonus amount is the actual amount of executive bonuses for the fiscal year under review.
• 4. The amounts of restricted stock compensation (tenure-based and performance-based) shown in the table above are the amounts recorded as expenses for the fiscal year under review as each respective restricted stock compensation.

Amount of Remuneration Paid to Representative Directors (2022)

• 1. Amounts are rounded to the nearest million yen.
• 2. Figures show the total amount of remuneration, etc., for representative directors.
• 3. Other than the representative directors in the table above, no director or Audit & Supervisory Board member received total remuneration of more than ¥100 million.