Officer compensation, etc.

Policy on Determining Compensation Amounts or Calculation Methods

The Company resolves the policy on determining compensation details for individual directors at the board meeting following the prior deliberation at the Compensation Committee.

For individual directors’ compensation for the latest business year, the Board of Directors confirmed that the method to determine the compensation details and their contents was consistent with the policy resolved by the board above, and the conclusion of the deliberation at the Compensation Committee was adequately respected. Thereby, we decide the above method and details are in line with the above policy. The policy on determining compensation amounts and calculation methods are as follows:

As to the compensations for Directors (excluding Audit & Supervisory Committee Members, and the same shall apply in paragraph (1) below) and Officers (collectively referred to as “Officers, etc.” in this section, including (1) and (2) below), the Compensation Committee, an advisory body to the board, deliberates the compensation scheme, its components, payment level, the balance of allocation, and other details. Receiving a report (toshin) on the result of such deliberations from the Compensation Committee, the Board of Directors determines the compensations for Officers, etc., within a range approved by the relevant general meeting of shareholders. Further, after making the payment of compensation to the Officers, etc., the Compensation Committee shall confirm the process to determine compensations, the result of payment, and other related matters to secure the transparency of those processes before reporting them to the board.

Basic policy

(1) Compensations for Officers, etc.

The basic principles in the compensation scheme for Officers, etc., are as follows:

1. Its scheme and components shall motivate Officers to constantly achieve management objectives and increase corporate value.
2. Its scheme and components shall attract and retain capable and diverse personnel sought after as officers of a global corporation.
3. Its scheme shall ensure the appropriateness and objectivity of the decision-making process and the balanced allocation of compensations.

Through the compensations, the Company primarily intends to give Officers, etc., motivational effects as an incentive to increase their business performance in each business year and to enhance the mid-to-long term corporate value. Therefore, under the principles above, it determines their compensations, using outside research firms’ survey data on officers’ compensation as a reference in terms of the scheme and payment level and considering a balance between the basic remuneration and the performance-linked one depending on their respective responsibilities and duties. Anritsu has currently introduced a compensation package for Officers, etc. In that package, the amount equivalent to 50% of their basic remuneration is the performance-linked compensation to motivate them to share a profit orientation with the shareholders and engage in management with an awareness of performance and the stock value from the mid-to-long-term perspective. However, for non-executive Officers, etc. (including Outside Directors), the Company provides, in principle, the fixed pay only.

The performance-linked compensation consists of pecuniary one (annual bonus equivalent to 30% of the basic remuneration) and non-pecuniary one under the incentive plan that employs a trust structure for distributing shares (stock compensation is equivalent to 20% of the basic remuneration). The Company evaluates each of its Officers etc., based on several factors, including the degree of achievement of their numerical target related to the Company’s performance key indicators and their management objectives, including non-financial ones, set by themselves in advance. In evaluating them, some factors require performance rating from the nonfinancial aspect. The Board of Directors may give the President and Representative Director by its resolution the discretion to decide the amount of compensation to be allocated to each Director, considering the above performance rating together with other calculation factors.

(2) Compensations for Directors on the Audit & Supervisory Committee

The Company determines the compensations for Directors on the Audit & Supervisory Committee as the fixed pay within a range approved by the relevant general meeting of shareholders, based on the Audit & Supervisory Committee Members’ consultation. The primary purpose of compensating is to ensure the effectiveness of audits on the company’s business execution and encourage them to fulfill their duties as the Audit & Supervisory Committee Members independent of Executive Directors. We also decide the payment level, using the survey data on officers’ compensation gathered by outside research firms and considering the level for part-time Directors who are neither Executive Directors nor Directors on the Audit & Supervisory Committee.

As described above, since the compensations for Executive Directors include the performance-linked compensation, the Company sets out its policy on the proportion of the performance-linked one in the total compensation package containing the basic remuneration. The compensation program’s purpose is to motivate Directors to forge ahead with attaining their performance target toward realizing the Company Vision. In this light, the Company has introduced several goal indicators deemed appropriate, which respond to the short-term incentive compensation (pecuniary compensation or bonus) and the mid-to-long-term incentive one (the stock compensation program that employs a trust structure for distributing shares), respectively. Specifically, in calculating the bonus, we use the consolidated ROE as an evaluation criterion for the degree of achievement of the Company’s overall performance targets for the relevant business year. In addition, to measure the contribution of a department or unit of which a particular Director takes charge to the Company’s performance, we employ other indicators: i.e., the degree of achievement of projected sales, operating profit, and ESG/SDGs targets. The actual progress toward non-financial targets set by Directors, respectively, is also considered in their evaluation. As a judging criterion for the stock compensation program, we use the operating profit targets set at the beginning of each business year during the Program Period and the same in the mid-term management plan. Under the performance-linked compensation program, payment amount and the number of evaluation points (to be granted to Directors, respectively) fluctuate on the achievement degree of their target level. For the stock compensation program, the Company issues and grant a certain number of shares to Directors, in principle, at their retirement as Director, respectively, through the trust for distributing shares. The number of such shares should be equivalent to the number of points combining the performance points given to a Director on the business result of each business year and the same calculated based on the result of the final year of the mid-term management plan.

Total amount of compensation for directors

(Notes)

1. The non-monetary remuneration, etc. will consist of Anritsu shares to be delivered under the stock compensation plan.
2. Anritsu does not pay bonuses or stock-based compensation to outside directors and directors who are Audit & Supervisory Committee Member.
3. None of the officers of the Company has a total of 100 million yen or more in consolidated compensation, etc. (including compensation as officers of major consolidated subsidiaries).
4. The above number of officers includes one director (excluding directors who are Audit & Supervisory Committee Members) who retired at the conclusion of the 95th Ordinary General Meeting of Shareholders held on June 24, 2021 and two directors who are Audit & Supervisory Committee Members (including one outside director).