Translation
Note:

This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the eventof any discrepancy between this translated document and the original Japanese document, the latter shall prevail.

Securities Code: 9843
April 20, 2017
To our shareholders:Toshiyuki Shirai,
Representative Director and Chief Operating
Officer

Nitori Holdings Co., Ltd.
1-2-39 Shinkotoni 7-jo, Kita-ku, Sapporo-shi,
Hokkaido

Notice of the 45th Annual General Meeting of Shareholders
You are cordially invited to attend the 45th Annual General Meeting of Shareholders of Nitori Holdings Co., Ltd.
(the “Company”), which will be held as indicated below.
If you are unable to attend the Meeting in person, you may exercise your voting rights in writing or via theinternet, etc. Please review the attached Reference Documents for the General Meeting of Shareholders,and exercise your voting rights following the guidance below by 6:30 p.m. on Wednesday, May 10, 2017
(JST).
1. Date and Time:Thursday, May 11, 2017, at 10:00 a.m. (JST)

2. Venue:

Conference Room, 6th floor, Sapporo Head Office of the Company
1-2-39 Shinkotoni 7-jo, Kita-ku, Sapporo-shi, Hokkaido

3. Purpose of the Meeting
Matters to be reported
1. The Business Report and the Consolidated Financial Statements for the 45th fiscal year
(from February 21, 2016 to February 20, 2017), and the results of audits of theConsolidated Financial Statements by the Financial Auditor and the Audit andSupervisory Committee
2. The Non-consolidated Financial Statements for the 45th fiscal year (from February 21,
2016 to February 20, 2017)
Matters to be resolved
Proposal No. 1: Election of Seven Directors (Excluding Directors Who Are Audit and Supervisory
Committee Members)
Proposal No. 2: Determination of Amount and Other Details of Performance-Linked Stock Compensation
Plan for Directors (Excluding Non-Executive Directors)
4. Guide to Exercising Voting Rights(1) Voting in writing
Please indicate your approval or disapproval of the proposals on the enclosed voting form and thenreturn it by postal mail to reach us by 6:30 p.m. on Wednesday, May 10, 2017 (JST).
(2) Voting via the internet, etc.
If you exercise your voting rights via the internet, etc., please vote by 6:30 p.m. on Wednesday, May 10,2017 (JST).
 If you attend the Meeting in person, please present the enclosed voting form at the reception.
 Of the documents that should be provided with the original Japanese version of this notice, the “Consolidated Statement of Changes in
Equity,” “Notes to Consolidated Financial Statements,” “Non-consolidated Statement of Changes in Equity” and “Notes to
Non-consolidated Financial Statements” are posted (in Japanese only) on the Company’s website (http://www.nitorihd.co.jp/ir/) pursuant
to the provisions of laws and regulations and the Article 16 of the Company’s Articles of Incorporation, and are not included in theoriginal Japanese version of this notice.
Accordingly, the original Japanese version of the attached documents constitutes one part of the documents that were audited by the Audit
and Supervisory Committee in preparing the audit report and by the Financial Auditor in preparing the financial audit reports.

 Any corrections in the Reference Documents for the General Meeting of Shareholders, Business Report, Consolidated Financial
Statements or Non-consolidated Financial Statements will be posted (in Japanese only) on the Company’s website above.

1

Reference Documents for the General Meeting of Shareholders

Proposal No. 1:

Election of Seven Directors (Excluding Directors Who Are Audit and Supervisory
Committee Members)

The terms of office of all seven Directors (excluding Directors who are Audit and Supervisory Committee
Members; applicable to the rest of this proposal) will expire at the conclusion of this General Meeting.
Therefore, the Company proposes the election of seven Directors.

The candidates for Director are as follows:
Candidate
No.

Name(Date of birth)

Career summary, position and responsibility in the Company, and significant
concurrent positions outside the Company

Number of
the Company’s
shares owned

Mar. 1972 Founded the Company, Senior Managing Director
May 1978 Representative Director and President of the Company
Feb. 2003 Director of P.T. MARUMITSU INDONESIA (currently P.T.
NITORI FURNITURE INDONESIA) (current position)
Director of Marumitsu Co., Ltd. (currently Nitori Furniture Co.,
Ltd.) (current position)
Oct. 2003 Director of MARUMITSU-VIETNAM EPE (currently NITORIFURNITURE VIETNAM EPE) (current position)
Nov. 2009 Representative Director and Chairperson of Nitori Public Co., Ltd.
Mar. 2010 Representative Director and President of Deco Home Co., Ltd.
(current position)
May 2010 Chairperson of DECOHOME CHINA Co., Ltd. (current position)
Aug. 2010 Representative Director and President of Nitori Co., Ltd.
Representative Director and President of Home Logistics Co., Ltd.
Aug. 2011 Representative Director and President of Nitori Facility Co., Ltd.
May 2012 Director and Chairperson of Nitori USA, Inc.
June 2013 Representative Director, Chairperson and President of Nitori
Public Co., Ltd.
May 2014 Representative Director and Chairperson of Nitori Co., Ltd.
(current position)
1

Akio Nitori(March 5, 1944)

Representative Director and Chairperson of Home Logistics Co.,
Ltd.
Representative Director and Chairperson of Nitori Facility Co.,
Ltd. (current position)
Mar. 2015 Representative Director and Chairperson of Nitori Public Co., Ltd.
May 2015 Director and Senior Advisor of Home Logistics Co., Ltd. (current
position)
Feb. 2016 Representative Director and Chairperson (CEO) of the Company(current position)
May 2016 Outside Director of KOHNAN SHOJI CO., LTD. (current
position)
June 2016 Chairperson of NITORI (CHINA) HOLDING Co., Ltd.
Mar. 2017 Director and Senior Advisor of Nitori Public Co., Ltd. (current
position)
Reasons for nomination as candidate for Director:
The candidate founded the Company in 1972 and since then, aiming to achieve
the Company’s roman (vision), “to present the whole world with abundant
home decoration,” and while always making the most of his excellent foresightand strong leadership, has led Nitori to grow from being one furniture store to
one of Japan’s top home furnishing chains. The Company proposes the electionof the candidate, believing him to be qualified to continue as a Director thattakes responsibility of decision making related to management policies andcorporate strategy and supervisory functions regarding business execution.

2

3,409,612
sharesCandidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company, and significant
concurrent positions outside the Company
Apr. 1979

Number of
the Company’s
shares owned

Joined the Company

May 2001

Director of the Company

May 2004

Managing Director of the Company

May 2008

Senior Managing Director of the Company

May 2010

Director and Senior Managing Executive Officer of the Company

Aug. 2010

Director of Nitori Co., Ltd.

Dec. 2010

Director and General Manager of Merchandising Division of
Nitori Co., Ltd.

May 2012

Director of Nitori USA, Inc.

May 2014

Representative Director and Executive Vice President of theCompany

Director of Home Logistics Co., Ltd.

Representative Director and President of Nitori Co., Ltd. (current
position)
Representative Director and President of Home Logistics Co.,Ltd.
2

Toshiyuki Shirai(December 21,
1955)
Mar. 2015

Representative Director and President of Nitori Facility Co., Ltd.
(current position)
Representative Director and President of Nitori Public Co., Ltd.

May 2015

Representative Director and Chairperson of Home Logistics Co.,
Ltd. (current position)

Feb. 2016

Representative Director and Chief Operating Officer (COO) of
the Company (current position)

Mar. 2017

Representative Director and Chairperson of Nitori Public Co.,
Ltd. (current position)

Chairperson of NITORI (CHINA) HOLDING Co., Ltd. (current
position)
Reasons for nomination as candidate for Director:
The candidate has had a broad range of business experience since joining theCompany such as being involved in store operations, personnel, productdevelopment, logistics, and overseas business, and has abundant experienceand knowledge related to management gained from serving positions such as
Representative Director and President of Nitori Co., Ltd. from May 2014, andRepresentative Director and Chief Operating Officer (COO) of the Company
from February 2016. The Company proposes the election of the candidate,believing that he can continue to make use of his abilities and experience in the
supervision and direction of business execution.

3

41,652sharesCandidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company, and significant
concurrent positions outside the Company
Apr. 1979

3

Joined the Company

May 2001

Director of the Company

May 2004

Managing Director of the Company

May 2010

Managing Executive Officer of the Company

Aug. 2010

General Manager of Store Operations Division of Nitori Co., Ltd.

May 2014

Senior Managing Director of the Company (current position)

Masanori Ikeda(February 22, Oct. 2015
1957)
June 2016

Number of
the Company’s
shares owned

Senior Managing Director and General Manager ofMerchandising Division of Nitori Co., Ltd.
Senior Managing Director and Officer in Charge of China Sales
Operations of the Company (current position)

37,106
sharesPresident of NITORI (CHINA) HOLDING Co., Ltd.(current
position)
Reasons for nomination as candidate for Director:
The candidate has had a broad range of business experience since joining theCompany such as being involved in product development, sales planning,
management planning, and store operations, and has abundant experience andknowledge related to management gained from currently serving positions suchas Senior Managing Director at the Company and at Nitori Co., Ltd.
Accordingly, the Company proposes the election of the candidate.
Mar. 1979 Joined SHIMACHU CO., LTD.
Sept. 2000 Representative Director of KANSAI SHIMACHU CO., LTD.
Apr. 2001 Joined the Company
May 2005 Executive Officer of the Company
May 2008 Managing Director of the Company

4

Fumihiro Sudo
(May 5, 1956)

May 2010 Managing Executive Officer and General Manager of Store
Development Division of the Company
May 2014 Senior Managing Director and General Manager of Store
Development Division of the Company (current position)

12,826
sharesReasons for nomination as candidate for Director:
The candidate has abundant experience at the Company focused on store
development operations, and has abundant experience and knowledge related to
management gained from currently serving positions such as Senior Managing
Director. Accordingly, the Company proposes the election of the candidate.
Mar. 2004 Joined the Company
Feb. 2008 Manager of Recruitment Division of the Company
Oct. 2012 Merchandising Manager of Soft Goods Department of
Merchandising Division of Nitori Co., Ltd.
Sept. 2013 Merchandising Manager of Furniture Department of
Merchandising Division of Nitori Co., Ltd.

5

*Masanori
Takeda(January 10,
1966)

May 2014 Executive Officer of the Company
Merchandising Manager of Furniture Department of
Merchandising Division of Nitori Co., Ltd.
Oct. 2015 Executive Officer of the Company
General Manager of Merchandising Division of Nitori Co., Ltd.
May 2016 Senior Executive Officer of the Company
General Manager of Merchandising Division of Nitori Co., Ltd.
(current position)
Reasons for nomination as candidate for Director:
The candidate has abundant business experience and keen business insightowing to his broad experience in major operations of the Store Operations
Division, Recruitment Division, and Merchandising Division, etc. and his
currently serving positions such as Senior Executive Officer of the Company
and General Manager of Merchandising Division of Nitori Co., Ltd.
Accordingly, the Company proposes the election of the candidate.

4

7,836 shares

Candidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company, and significant
concurrent positions outside the Company

Number of
the Company’s
shares owned

Aug. 2007 Joined the Company
Aug. 2010 Manager of Recruitment Division of the Company
July 2014 General Manager of General Planning Office and Manager of
Public Relations Division of the Company
May 2015 Executive Officer and General Manager of General Planning
Office and Manager of Public Relations Division of the Company
May 2016 Senior Executive Officer and General Manager of General*MunetoPlanning Office and Manager of Public Relations Division of theTamagamiCompany (current position)(June 15, 1966)
Reasons for nomination as candidate for Director:
The candidate has abundant business experience and keen business insightowing to his broad experience in the Company’s principal business areas of theStore Operations Division, Recruitment Division, Merchandising Division andGeneral Planning Office, and his currently serving positions such as Senior
Executive Officer and General Manager of General Planning Office.
Accordingly, the Company proposes the election of the candidate.

6

2,534 shares

Apr. 1972 Joined National Police Agency
Sept. 1994 Chief of Gunma Prefectural Police Headquarters
Aug. 1999 Director of Public Security Department of Metropolitan Police
Department
Aug. 2004 Director General of Commissioner-General’s Secretariat of
National Police Agency
Aug. 2007 Deputy Commissioner General of National Police Agency
June 2009 Commissioner General of National Police Agency
Oct. 2011 Retired from National Police Agency
Takaharu Ando
(August 31,
1949)

7

Notes:

1.
2.
3.

4.
5.

May 2013 Outside Director of the Company (current position)
June 2014 Outside Director of Toyoko Inn Co., Ltd. (current position)– shares

June 2016 External Director of AMUSE INC. (current position)

Reasons for nomination as candidate for Outside Director:
The candidate has abundant experience and broad insight gained from serving
important positions such as the Commissioner General of the National Police
Agency and, based on this specialist experience and insight, he provides
appropriate supervision and advice for the Company’s overall management as
an Outside Director of the Company. Although the candidate has not directly
taken part in corporate management, based on his experience and insight, theCompany judges that he will continue to appropriately fulfill his duties as
Outside Director. Accordingly, the Company proposes the election of thecandidate.
Tenure as Outside Director: 4 years (at the conclusion of this meeting)
New candidates are indicated by an asterisk (*).
There is no special interest between any of the candidates and the Company.
Takaharu Ando is a candidate for Outside Director. He meets the “Independence Criteria for Outside Directors”
established by the Company. Please refer to page 6 for the “Independence Criteria for Outside Directors.”
Furthermore, during the period from May 2012 to May 2013, before he assumed office as Outside Director of
the Company, Takaharu Ando served as a Special Advisor (part-time) of the Company. The primary purpose forassigning him this role was to receive his opinions and suggestions concerning overall corporate management
based on his abundant experience and insight, while increasing his knowledge in regard to the state of affairs of
the furniture retail industry and the business models of the Company. His remuneration for this role was lessthan ¥10 million annually, and therefore is considered to be an immaterial amount.
The Company reported Takaharu Ando as an independent officer pursuant to the regulations of the Tokyo Stock
Exchange and the Sapporo Securities Exchange. If the election of Takaharu Ando in this proposal is approved,
the Company plans for his designation as an independent officer to continue.
Pursuant to the provisions of Article 427, paragraph 1 of the Companies Act, the Company has entered into anagreement with Takaharu Ando to limit his liability for damages under Article 423, paragraph 1 of theCompanies Act to the minimum liability amount provided for by Article 425, paragraph 1 of the same Act. If
his reelection is approved, the Company plans to renew the limited liability agreement with him.

5For reference

Independence Criteria for Outside Directors
The Company designates Outside Directors who do not fall under any of the following items as
independent Directors.
1) A person who is currently or was in the past ten years an executive director, executive officer, manager,
or any other employee (hereinafter collectively referred to as “Executive”) of the Company or asubsidiary of the Company.
2) A person or the Executive of a corporation who holds either directly or indirectly 10% or more of thetotal number of the voting rights of the Company.
3) A person or the Executive of a corporation for whom the Company or a subsidiary of the Company is amajor business partner (Note 1), and a person or the Executive of a corporation who is a major business
partner (Note 2) of the Company or a subsidiary of the Company.
4) The financial auditor or one of their employees, etc., for the Company or for a subsidiary of theCompany.
5) A consultant, attorney at law, certified public accountant, certified public tax accountant, etc., whoreceived from the Company or a subsidiary of the Company monetary payment or other property
benefits exceeding ¥10 million annually other than director/corporate auditor remuneration (referring to
the person belonging to the organization if the one who received the relevant property is anorganization such as a corporation or partnership).
6) A person or the Executive of a corporation who received donations or aid funds exceeding ¥10 million
annually from the Company or a subsidiary of the Company.
7) A person who has fallen under any of 2) through 6) in the past three years.
8) A person whose spouse or relative who is within the second degree of kinship falls under any of 1)
through 7). However, in the event that the person who falls under 1) through 7) is the Executive, this islimited to the important Executive (Note 3).
9) Any other person, even if they do not fall under 1) through 8), for whom there is potential for constantconflict of interests with general shareholders as a whole.
Notes:

1.
2.

3.

A business partner for whom 2% or more of its annual consolidated net sales in the most recent fiscal year was
paid by the Company or a subsidiary of the Company.
A business partner who paid 2% or more of the annual consolidated net sales of the Company to the Company
or a subsidiary of the Company in the most recent fiscal year, or a business partner who loaned money thatmakes up 2% or more of the consolidated total assets of the Company to the Company or a subsidiary of theCompany at the end of the most recent fiscal year.
A person, among the Executives, who executes important business such as a director (excluding an outside
director), executive officer, manager or a person in charge of a department.

6

Proposal No. 2:

Determination of Amount and Other Details of Performance-Linked Stock
Compensation Plan for Directors (Excluding Non-Executive Directors)

The compensation for Company’s Directors (excluding non-executive Directors) currently consists of thebase compensation, bonuses, and stock options. The Company proposes to establish a new structure ofnon-base compensation for Directors (excluding non-executive Directors), under which the Company will
pay bonuses as a short-term incentive and introduce a performance-linked stock compensation plan(hereinafter referred to as the “Plan”) as an incentive linked to medium- to long-term performance in placeof stock options.
Specifically, the maximum amount of compensation for the Company’s Directors (including non-executive
Directors but excluding Directors who are Audit and Supervisory Committee Members) was set at ¥600
million per year (including that for Outside Directors of ¥100 million per year), which was approved at the44th Annual General Meeting of Shareholders held on May 13, 2016, and has remained at that amount to
the present. Separately from the above-mentioned maximum amount for compensation, the Company
proposes to introduce a stock compensation plan under which it presets numerical targets for corporate
performance, etc. and pays stock compensation according to achievement ratios, etc. of said numericaltargets during the plan period covering two fiscal years (hereinafter referred to as the “Plan Period”; theinitial Plan Period shall be from the fiscal year ending February 20, 2018 to the fiscal year ending February
20, 2019, and the Company plans to renew the Plan every two fiscal years after the end of the initial Plan
Period), to Directors who are eligible for the Plan (excluding non-executive Directors such as Directors
who are Audit and Supervisory Committee Members; hereinafter referred to as “Eligible Directors”), up toa limit of ¥300 million per year in place of the upper limit of stock option compensation for Directors of¥180 million per year (including the upper limit of compensation for Outside Directors of ¥20 million peryear), which was approved at the 42nd Annual General Meeting of Shareholders held on May 9, 2014.
The number of Eligible Directors, if Proposal No. 1 “Election of Seven Directors (Excluding Directors
Who Are Audit & Supervisory Committee Members) is approved as originally proposed, will be six
excluding one Outside Director at the time of introduction of the Plan. Note, however, that the number of
Eligible Directors may change due to the new appointment or retirement of Directors during the Plan
Period.
1. Reason for the proposal and the reason such compensation is considered appropriate
The Company, as part of its efforts to revise the directors’ compensation plan, will introduce the Plan
with the aim of providing Directors who execute the operations of the Company with incentives forpromoting sustainable improvement of corporate value of the Company and further aligning theirinterests with interests of the shareholders. The Company considers it desirable to introduce the Plan inorder to make clearer the link between the compensation for Eligible Directors on the one hand and theCompany’s performance, etc. and the Company’s shareholder interests on the other, and in order tofurther enhance Directors’ awareness about contributing to sustainable growth of the corporate value
and common interests of shareholders by improving the Company’s medium- to long-term
performance.
In introducing the Plan, the Company has submitted this proposal for approval after taking into
consideration the result of deliberation on this matter by the Nomination and Compensation Committee,
which is an optional advisory body of the Board of Directors.
2. Amount and other details of the compensation, etc., of the Plan
(1) Outline of the Plan
The Plan shall be a performance-linked stock compensation plan by which each Eligible Director
will be delivered the Company’s common shares according to achievement ratios, etc. of preset
numerical targets for corporate performance, etc., during the Plan Period. Accordingly, the actual
delivery of the Company’s common shares will be made to Eligible Directors after the Plan Period
has terminated. Given the nature of the Plan where actual delivery or lack thereof of the Company’scommon shares is according to achievement ratios, etc. of the above-mentioned numerical targets,
etc., the Company is unable to determine at the time of introduction of the Plan whether actual
delivery of its shares will take place or the names of the Eligible Directors who will receive its
shares, and the number of deliverable shares, if any, to each recipient.

7* Eligible Directors (including those who retire after delivery of the shares based on the Plan) will hold the sharesthat are delivered to them based on the Plan for a certain period of time in accordance with the shareholding
guidelines set forth by the Board of Directors of the Company from the viewpoint of further aligning theirinterests with interests of the shareholders on a medium- to long-term basis. With regard to shares to be delivered
pertaining to the initial Plan Period based on the Plan, the shareholding guidelines will have a provision that
restricts the transfer of such shares for three years after the delivery.

(2) Maximum amount of compensation, etc.
The Company will give or contribute to Eligible Directors monetary compensation claims for use as
in-kind contribution and money equivalent to the amount of tax payable by Eligible Directors as aresult of receipt of the Company’s common shares based on the Plan, on the basis of the number ofdeliverable shares that is determined according to achievement ratios, etc., of numerical targets forcorporate performance, etc., during the Plan Period as prescribed in (3) and (4) below. Eligible
Directors will receive the Company’s common shares, the number of which will be determined asprescribed in (3) and (4) below, by making an in-kind contribution of the monetary compensation
claims for use as such in-kind contribution at the time of the Company’s issuance of shares ordisposal of treasury shares. The amount of the monetary compensation claims for use as in-kind
contribution will be determined by the Board of Directors to the extent that it is not unduly favorable
to Eligible Directors who subscribe for the Company’s common shares. In addition, the Company
will set the maximum total amount of the monetary compensation claims for use as in-kind
contribution granted to Eligible Directors based on the Plan and the amount of money equivalent tothe above-mentioned amount of tax payable at ¥300 million per year, an amount deemed to beappropriate in light of the purposes of the Plan, separately from the maximum amount ofcompensation for Directors (including non-executive Directors but excluding Directors who are
Audit and Supervisory Committee Members) of ¥600 million per year (including that for Outside
Directors of ¥100 million per year), which was approved at the 44th Annual General Meeting of
Shareholders held on May 13, 2016, in place of the maximum amount of stock option compensationof ¥180 million per year (including that for Outside Directors of ¥20 million per year), which wasapproved at the 42nd Annual General Meeting of Shareholders held on May 9, 2014.
(3) Calculation method of the number of the Company’s shares which Directors receive
The Company calculates the number of shares deliverable to each Eligible Director by totaling thenumber of shares pertaining to each numerical target obtained by multiplying (x) the number ofreference deliverable shares (determined according to positions of each such Eligible Director andtheir achievement ratios, etc. of performance targets for a single fiscal year during the Plan Period,etc.) by (y) (i) the allocation ratio of each numerical target set for each such Eligible Director (to be
selected from among company-wide targets (consolidated operating income, consolidated net sales,etc.), personal targets (performance, etc., of division in charge), etc.) and (ii) eachperformance-linked coefficient determined based on the achievement ratio of each such numericaltarget.
Note that if any fractional shares are contained in the number of deliverable shares thus calculated,
those fractional shares will be rounded down.
[Calculation formula for the number of deliverable shares]

Number ofsharesdeliverable
to eachEligible
Director=

The sumof

Number of referencedeliverable sharespertaining to eachsuch Eligible
Director(Determinedaccording topositions of eachsuch Eligible
Director andachievement ratios,
etc. of performancetargets for a single
fiscal year during
the Plan Period pereach such Eligible
Director, etc.)

×8

Allocation ratioof eachnumerical target
pertaining toeach such
Eligible Director(Allocation ratioof eachnumerical target
will be set foreach such
Eligible
Director)×

Performance-linked
coefficient based on
the achievement
ratio of eachnumerical target(Determined basedon the achievement
ratio of eachnumerical target(company-widetargets, personal
targets, etc.)(*)

pertaining
to allnumerical
targets

* Performance-linked coefficient based on the achievement ratios of company-wide targets (consolidated operating
income, consolidated net sales, etc.) will be set, within the range of 0% to 200%, according to the achievement
ratios of company-wide targets (consolidated operating income, consolidated net sales, etc.) during the Plan Period,
which are determined by the Nomination and Compensation Committee based on the average past growth rate andother factors.
* Performance-linked coefficient based on the achievement ratios of personal targets (performance, etc., of divisionof which the Eligible Director is in charge) will be set, within the range of 0% to 200%, according to theachievement ratios of performance targets for divisional profit, etc. during the Plan Period, which are determinedby the Nomination and Compensation Committee.

The maximum number of the total of the Company’s common shares to be delivered to Eligible
Directors shall be the number equivalent to 30,000 shares during the Plan Period; provided, however,
that, if the total number of issued shares of the Company increases or decreases as a result of shareconsolidations, share splits, allotments of shares without contribution, etc., such maximum number
and the number of shares deliverable to Eligible Directors shall be reasonably adjusted according to
the ratio of such share consolidation, share split, or share allotment, etc..
Furthermore, if there arises the likelihood that delivery of the number of the Company’s commonshares specified above is not to be made within the maximum amount of compensation specified in(2) above or the above-mentioned maximum number of the total of deliverable shares, the number ofshares deliverable to each Eligible Director will be reasonably reduced respectively within the extent
capped by such maximum amount or number, such as on a prorated basis, etc.
(4) Conditions for delivering the Company’s shares to Directors
Under the Plan, after the termination of the Plan Period and on condition that the requirements
described below are satisfied, the Company shall deliver its common shares to Eligible Directors.
Delivering of the Company’s common shares, if any, shall be made by way of issuance of shares ordisposal of treasury shares by the Company, and specific Eligible Directors to whom the Company’scommon shares are delivered and the number of deliverable shares will be determined at a meetingof the Board of Directors to be held after the expiry of the Plan Period.
1) The person was in office as a Director during the Plan Period.
2) The person has not engaged in any of the certain types of improper conduct specified by the
Board of Directors.
3) The person meets other conditions set by the Board of Directors that are deemed necessary toachieve the purposes of the Plan.
* Eligible Directors who retire from office during the Plan Period will receive the number of the Company’scommon shares reasonably prorated, by the Board of Directors, to the period they have held office up to the timeof retirement during the Plan Period. In addition, Eligible Directors who are newly appointed during the Plan
Period will receive the number of the Company’s common shares prorated to the period in office.

9

(For reference) Q&A on the performance-linked stock compensation plan
* This Q&A is attached for your reference to provide a clear explanation of our performance-linked stockcompensation plan and not as the Reference Document for the General Meeting of Shareholders. For
accurate and thorough details, please see the information from the Company’s press release dated April
12, 2017, “Notice Regarding Introduction of Performance-Linked Stock Compensation Plan” (inJapanese only).
Q.1

What are the purposes of introducing a performance-linked stock compensation plan by theCompany?

A. The performance-linked stock compensation plan (hereinafter referred to as the “Plan”) that is linked
to medium- to long-term performance for Directors (excluding non-executive Directors), which theCompany seeks to obtain shareholder approval for under Proposal No. 2, is designed to make clearer
the link between the compensation for Directors who are eligible for the Plan (excluding
non-executive Directors such as Directors who are Audit and Supervisory Committee Members;hereinafter referred to as “Eligible Directors”) on the one hand and the Company’s performance, etc.
and the Company’s shareholder interests on the other, and to further enhance Directors’ awarenessabout contributing to sustainable growth of the corporate value and common interests ofshareholders by improving the Company’s medium- to long-term performance. The Company, as
part of its efforts to revise the directors’ compensation plan, will introduce the Plan with the aim ofproviding Directors who execute the operations of the Company with incentives for promoting
sustainable improvement of corporate value of the Company and further aligning their interests withinterests of the shareholders.
The introduction of the Plan has undergone deliberation by the Nomination and Compensation
Committee, which is an optional advisory body of the Board of Directors and the majority membersof which are independent Outside directors.
Q.2

What is the outline of the Plan?

A. The Plan is a performance-linked stock compensation plan under which the Company presets
numerical targets for corporate performance, etc., during the plan period covering two fiscal years(hereinafter referred to as the “Plan Period”) and delivers its common shares to each Eligible
Director according to the achievement ratios, etc., of numerical targets of corporate performance, etc.
during the Plan Period. The details of the structure of the Plan are as follows:
1) If Proposal No. 2 is approved, the Company will determine, at the Nomination andCompensation Committee, indices, such as numerical targets (to be selected from among
company-wide targets (consolidated operating income, consolidated net sales, etc.) and personal
targets (performance, etc., of divisions of which the directors are in charge), etc.) andperformance-linked coefficient, which will be necessary for calculating the number ofdeliverable shares.
2) The Company, after the expiration of the Plan Period, determines the number of sharesdeliverable to each Eligible Director according to the achievement ratios, etc., of numericaltargets for corporate performance, etc. during the Plan Period.
3) The Company will give each Eligible Director monetary compensation claims for use as in-kind
contribution on the basis of the number of shares deliverable to each Eligible Director
determined in 2) above. The amount of such monetary compensation claims will be determinedby the Board of Directors to the extent that it is not unduly favorable to each Eligible Director
who subscribes for the Company’s common shares.
4) Each Eligible Director will incur tax payable due to receipt of the Company’s common sharesbased on the Plan. Accordingly, the Company, in addition to the above-mentioned monetarycompensation claims, will contribute money equivalent to the amount of tax payable by each
Eligible Director resulting from receipt of the Company’s common shares based on the Plan.

105) Each Eligible Director will receive the Company’s common shares by making an in-kind
contribution of the monetary compensation claims for use as in-kind contribution at the time of
the Company’s issuance of shares or disposal of treasury shares.
The initial Plan Period after introduction of the Plan shall be from the fiscal year ending February 20,
2018 to the fiscal year ending February 20, 2019, and the Company plans to renew the Plan every
two fiscal years after the end of the initial Plan Period.
Q.3

How will the structure of Directors’ compensation change after the introduction of the Plan?

A. As shown in “Current system” in Figure 1, the compensation for the Company’s Directors(excluding non-executive Directors) currently consists of (i) base compensation, (ii) bonuses, and(iii) stock options, while that of the Company’s non-executive Directors (including Outside Directors
but excluding Directors who are Audit and Supervisory Committee Members) comprises (i) basecompensation and (ii) stock options. The Company will establish a new structure of non-basecompensation for Directors (excluding non-executive Directors), under which the Company will pay
bonuses as a short-term incentive and introduce the Plan in place of stock options. Following
introduction of the Plan, stock options currently granted to the Company’s non-executive Directors
will be abolished.
If Proposal No. 2 is approved, the structure of compensation for Directors (excluding non-executive
Directors such as Directors who are Audit and Supervisory Committee Members) will be changed asshown under “New system” in Figure 1. Under the new system, performance-linked compensationfor executive Directors will account for a greater portion of the total compensation.
[Figure 1]

Base compensation

Bonuses

Stock options<<Current system>><<New system>>¥600 million or less per year¥600 million or less per year Base compensation
 Bonuses* Excluding Outside Directors

 Base compensation
 Bonuses [performance-linked]* Excluding Outside Directors¥180 million or less per year
¥300 million or less per year

Performance-linked
stock compensation
Total

Q.4

* Excluding Outside Directors¥780 million or less per year

¥900 million or less per year

How does the Company calculate the number of shares to be delivered to Eligible Directors based on
the Plan?

A The Company calculates the number of shares deliverable to each Eligible Director by totaling thenumber of shares pertaining to each numerical target obtained by multiplying (x) the number ofreference deliverable shares (determined according to positions of each such Eligible Director andtheir achievement ratios, etc. of performance targets for a single fiscal year during the Plan Period,etc.) by (y) (i) the allocation ratio of each numerical target set for each such Eligible Director (to be
selected from among company-wide targets (consolidated operating income, consolidated net sales,etc.) and personal targets (performance, etc., of division of which the Eligible Director is in charge),etc.) and (ii) each performance-linked coefficient determined based on the achievement ratio of eachsuch numerical target (cf. Figure 2). (Any fractional shares contained in the number of deliverable
shares thus calculated will be rounded down.) Accordingly, the number of reference deliverable
shares, details of personal targets, allocation ratios of each numerical target, used for calculation of
the number of shares deliverable to Eligible Directors, may be different for each Eligible Director.

11

[Figure 2]

Number ofsharesdeliverable
to eachEligible
Director=

The sumof

Number of referencedeliverable sharespertaining to eachsuch Eligible
Director(Determinedaccording topositions of eachsuch Eligible
Director andachievement ratios,
etc. of performancetargets for a single
fiscal year during
the Plan Period pereach such Eligible
Director, etc.)

×

Allocation ratioof eachnumerical target
pertaining toeach such
Eligible Director(Allocation ratioof eachnumerical target
will be set foreach such
Eligible
Director)×

Performance-linked
coefficient based on
the achievement
ratio of eachnumerical target(Determined basedon the achievement
ratio of eachnumerical target(company-widetargets, personal
targets, etc.)(*)

pertaining
to allnumerical
targets* Performance-linked coefficient based on the achievement ratios of company-wide targets (consolidated operating
income, consolidated net sales, etc.) will be set, within the range of 0% to 200%, according to the achievement
ratios of company-wide targets (consolidated operating income, consolidated net sales, etc.) during the Plan Period,
which are determined by the Nomination and Compensation Committee based on the average past growth rate andother factors.
* Performance-linked coefficient based on the achievement ratios of personal targets (performance, etc., of divisionof which the Eligible Director is in charge) will be set, within the range of 0% to 200%, according to theachievement ratios of performance targets for divisional profit, etc. during the Plan Period, which are determinedby the Nomination and Compensation Committee.

Examples of the number of deliverable shares calculated by the number of reference deliverable
shares, numerical targets, allocation ratios, and performance-linked coefficient based on theachievement ratios of numerical targets are as shown in Figure 3 (Illustration) below.
[Figure 3] (Illustration)
Director A

Director B
Performance-linked coefficient based on
the target achievement ratio (120%)[Company-wide target]
Numerical target:
Consolidated operating
income(Allocation ratio: 60%)

Performance-linked coefficient based on
the target achievement ratio (150%)[Company-wide target]
Numerical target:
Consolidated operating
income(Allocation ratio: 30%)

Number of reference deliverable
shares x Allocation ratio

Performance-linked coefficient based on
the target achievement ratio (120%)

Performance-linked coefficient based on
the target achievement ratio (80%)[Company-wide target]
Numerical target:
Consolidated net sales(Allocation ratio: 20%)
Performance-linked coefficient based on
the target achievement ratio (100%)[Personal target][Personal target]
Numerical target:
Numerical target: –Divisional profit(Allocation ratio: 0%)(Allocation ratio: 50%)*
: Number of deliverable shares pertaining to each numerical target[Company-wide target]
Numerical target:
Consolidated net sales(Allocation ratio: 40%)

* In the case of Director A: The target achievement ratios are 120% respectively, in which (i) the
allocation ratio of consolidated operating income as a company-wide target is set at 60% and (ii)the allocation ratio of consolidated net sales as a company-wide target is set at 40% (with nopersonal target set).
* In the case of Director B: The target achievement ratios are 150%, 80%, and 100%, respectively,
in which (i) the allocation ratio of consolidated operating income as a company-wide target is set

12

at 30%, (ii) the allocation ratio of consolidated net sales as a company-wide target is set at 20%,and (iii) the allocation ratio of divisional profit as a personal target is set at 50%.
Q.5

Will Eligible Directors who are delivered shares based on the Plan be allowed to freely transfer or
dispose of such shares afterward?

A Eligible Directors (including those who retire after delivery of the shares based on the Plan) willhold the shares that are delivered to them based on the Plan for a certain period of time inaccordance with the shareholding guidelines set forth by the Board of Directors of the Company
from the viewpoint of further aligning their interests with interests of the shareholders on a mediumto long-term basis. Accordingly, Eligible Directors who are delivered shares based on the Plan will
be subject to restrictions on free transfer of such shares for a certain period of time after delivery.
With regard to shares to be delivered pertaining to the initial Plan Period based on the Plan, theshareholding guidelines will have a provision that restricts the transfer of such shares for three years
after the delivery as shown in Figure 4 below.
[Figure 4]

First year
Second year
Share
The initial Plan Period based on the Plan delivery

Q.6

Third year

Fourth year

Fifth year

Transfer restriction period(specified in the shareholding guidelines)

Will the introduction of the Plan result in dilution of voting rights of shareholders?

A The Company, after the expiration of the Plan Period, will deliver to each Eligible Director thenumber of deliverable shares calculated by the calculation formula for the number of deliverable
shares described in Q.4 above, up to the number equivalent to 30,000 shares during the Plan Period,by way of issuance of shares or disposal of treasury shares by the Company. Accordingly, there is alikelihood that the voting rights per share of the Company held by shareholders will be diluted. Evenso, the total number of the Company’s common shares to be delivered to Eligible Directors by theCompany based on the Plan will be limited to the maximum number equivalent to 30,000 shares
during the Plan Period, and therefore the dilution ratio of voting rights per share of the Company
held by shareholders will be capped by such maximum number.

13