Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy
between this translated document and the Japanese original, the original shall prevail.

NEWS RELEASE

May 10, 2022

Name of Listed Company: TSUMURA & CO.
Listing:
TSE Prime Market
Securities code:
4540
URL:
https://www.tsumura.co.jp
Representative:
Terukazu Kato, President, Representative Director and CEO
Inquiries:
Ritsuko Inukai, Head of Corporate Communications Dept.
Telephone:+81-3-6361-7100

Tsumura Announces Revision of Performance-Based Stock Compensation System
TSUMURA & CO. today announces that, at a meeting of the Board of Directors held on May 10, 2022, theCompany resolved to introduce trust-type stock compensation as an alternative to Performance Share Units inconnection with revision of the performance-based stock compensation system (hereinafter “the System”) for
Directors of the Company (excluding the Directors who are also Audit and Supervisory Committee Members andthe Non-executive Directors) and the Executive Officers who have entered into an engagement agreement with theCompany (hereinafter “Director(s), Etc.”) and decided to submit a proposal concerning the System to the 86th
Ordinary General Meeting of Shareholders (hereinafter “the General Meeting of Shareholders”) to be held on June29, 2022. Details are as follows. On condition that the proposal accompanying revision of the System is approved
and adopted at the General Meeting of Shareholders, the Company will abolish Performance Share Units and will
henceforth no longer deliver shares based on Performance Share Units, with the delivery of shares corresponding to
the period from the fiscal year ended March 31, 2020 to the fiscal year ended March 31, 2022 as the last.
1. Purpose of the System and Main Points of Revision, etc.
(1) The Company newly established its Sustainability Vision and Long-term Management Vision TSUMURA
VISION “Cho-WA” 2031 (hereinafter collectively “the Long-term Vision”) through backcasting from its
Corporate Purpose “Lively Living for Everyone,” based on its philosophy and vision management for
upholding this purpose. The Company set out a Medium-term Management Plan as a milestone for achieving
this Long-term Vision and aims to create new markets and increase people’s happiness in anticipation of along-term future.
The Company will revise the composition of the System into the two categories “LTI (Long Term Incentive)-I”
for realization of the Medium-term Management Plan and “LTI (Long Term Incentive)-II” for realization of theLong-term Vision, for the purpose of further clarifying the link between compensation of Directors, Etc. andthe Company’s corporate value, thus encouraging Directors, Etc. to strive for realization of the Long-term
Vision and further increasing their awareness of contributing to sustainable growth and improvement incorporate value, based on the Pay-for-Purpose model.
(2) The System employs a framework called Board Incentive Plan trust (hereinafter “the BIP Trust”). As with
Performance Shares and Restricted Stock in Europe and North America, a BIP Trust is a system whereby
shares in the Company and cash equivalent to the conversion amount of the Company’s shares (hereinafter “theCompany’s shares, etc.”) will be delivered or provided (hereinafter “delivered, etc.,” “deliver, etc.,” “delivering,etc.,” “delivery, etc.”) to Directors, Etc. in accordance with rank, degree of achievement of targets undermanagement plans and other factors.
(3) Revision of the System is conditional upon obtaining approval at the General Meeting of Shareholders.

2. Structure of the System
1) Resolution at the General
Meeting of Shareholders[Trustor]
8) Transfer without
consideration andcancellation ofresidual shares
9) Provision ofresidual assets

The Company
3) Establishmentof trust

5) Dividends[Trustee (Co-Trustee)] (Planned)
Stock market

4) The Company’s
sharesMitsubishi UFJ Trust and Banking Corporation

4) Payment forthe shares

BIP Trust

2) Establishment of the
Share Delivery Rules
7) Delivery of theCompany’s sharesand cash payment

The Master Trust Bank of Japan, Ltd.

[Beneficiaries]
Directors, Etc.

The Company’s shares and cash6) Instruction not to exercise voting rights

Trust administrator

1) The Company will obtain a resolution approving officers’ compensation with respect to revision of the
System at the General Meeting of Shareholders.
2) The Company will establish Share Delivery Rules as compensation rules concerning the System at a meetingof the Board of Directors.
3) The Company will contribute cash within the scope of the resolution approved by the General Meeting of
Shareholders in 1) and establish a BIP Trust (the Trust) with the Directors, Etc. who satisfy the beneficiary
requirements as the beneficiaries.
4) The Trust will acquire the Company’s shares from the stock market with cash entrusted in 3) as the source offunds, in accordance with the instructions of the trust administrator. The number of shares to be acquired by
the Trust will be within the range of the resolution approved by the General Meeting of Shareholders in 1).
5) Dividends on the Company’s shares held by the Trust will be paid in the same manner as for the other
Company’s shares.
6) Voting rights of the Company’s shares held by the Trust will not be exercised throughout the trust period.
7) During the trust period, Directors, Etc. who satisfy the beneficiary requirements will be granted a certain
number of points and will then receive delivery of the Company’s shares equivalent to 50% of such points(fractional shares will be discarded) and cash equivalent to the conversion amount of the Company’s sharescorresponding to the remaining points, after conversion into cash within the Trust, in accordance with theCompany’s Share Delivery Rules.
8) If residual shares occur upon expiration of the trust period, the Company may, by amending the trust
agreement and making additional contribution to the Trust, continue to use the Trust as part of the System as
it is, or as a similar stock compensation system. If the Trust is not continued and is terminated, the Trust willtransfer such residual shares to the Company without consideration and the Company will cancel these basedon a resolution of the Board of Directors, as a way of providing returns to shareholders.
9) Any residual dividends pertaining to the Company’s shares in the Trust when the trust period expires will beutilized as acquisition funds for shares if the Trust continues to be used, but if the Trust is terminated upon
expiry of the trust period, the portion in excess of the trust expense reserve will be donated to organizations
that have no interest in the Company and the Directors, Etc.
(Note) If, during the trust period, a possibility arises that the number of shares in the Trust will fall short of thenumber of shares corresponding to the number of points (defined in 3. (5) below; the same applies
hereinafter) stipulated for Directors, Etc., or a possibility arises that the amount of cash in the trust assets
will fall short of payments of trust fees and trust expenses, the Company may entrust additional cash to theTrust within the upper limit on trust money provided for in 3. (7) below for additional acquisition of theCompany’s shares by the Trust.

3. Details of the System(1) Overview of the System
The Trust is a stock compensation system for making delivery, etc. of the Company’s shares, etc., to the
Directors, Etc. through the Trust for the fiscal years covered by the Company’s Medium-term Management
Plan (hereinafter “the Applicable Period”). The initial Applicable Period will be the three fiscal years from thefiscal year ending March 31, 2023 to the fiscal year ending March 31, 2025.
Compensation under the System is composed of “LTI-I” and “LTI-II.” “LTI-I” is for the delivery, etc. of theCompany’s shares, etc. to Directors, Etc. according to their rank, duties, etc. mainly based on the degree ofachievement of performance targets under the Medium-term Management Plan. “LTI-II” is for the delivery,
etc. of the Company’s shares, etc. to Directors, Etc. according to their rank, duties, etc. mainly based on the
degree of realization of the Long-term Vision. “LTI-I” and “LTI-II” will each account for a 50% share of totalcompensation under the System.
(2) Resolution of the General Meeting of Shareholders for introduction of the System
The General Meeting of Shareholders will resolve the upper limit on the trust money to be contributed to theTrust, the upper limit on the total number of points to be granted to Directors, Etc., and other importantmatters.
(3) Eligibility under the System (beneficiary requirements)
Directors, Etc. will, contingent upon satisfying the following beneficiary requirements and after completion of
the prescribed beneficiary vesting procedure, receive delivery, etc. of the Company’s shares, etc. in a number
corresponding to the number of points from the Trust.
1) The beneficiary is a Director, Etc. (including persons who became a Director, Etc. after revision of the
System) during the Applicable Period.
2) The beneficiary has not resigned (excludes resignation due to injury, illness or other unavoidable
circumstances) or has not resigned or been dismissed on grounds such as having committed certain
unlawful acts or major infractions of duties or company rules during the term of office.
3) The beneficiary has otherwise satisfied requirements deemed necessary for achieving the aims of the stockcompensation system.
(*) Non-residents in Japan are also eligible under the System. However, if eligibility under the System poses
difficulties under the legislation of the country of residence, the Company may pay cash equivalent to thedelivery, etc. of shares in place of the System.
(4) Trust period1) Initial trust period
The initial trust period will be approximately three years from August 4, 2022 (plan) to August 31, 2025
(plan).
2) Continuation of the Trust
When the trust period expires, the Company may continue the Trust by amending the trust agreement andmaking additional contributions. In this case, a number of years corresponding to the medium-term
management plan formulated by the Company at that time will be the new Applicable Period, the trust periodof the Trust will be extended by the same length of period as the new Applicable Period and, for eachextended Applicable Period, the Company will make additional contributions of trust money within the rangeof the upper limit on trust money, as approved by resolution at the General Meeting of Shareholders, andcontinue granting points and delivering, etc. the Company’s shares, etc. to Directors, Etc. for the extended
Applicable Periods. However, when making such additional contributions, if there are shares in the Company(excluding shares in the Company corresponding to points granted to Directors, Etc., whose delivery, etc. is
incomplete) and cash remaining in the trust assets on the final day of the trust period prior to extension(hereinafter “Residual Shares, Etc.”), the total amount of the amount of the Residual Shares, Etc., and any
trust money additionally contributed will be within the range of the upper limit on trust money, as approvedby resolution at the General Meeting of Shareholders.
Such extensions of the trust period shall not be limited to one time only, and the trust period may subsequently
be similarly reextended.
3) Handling at the time of termination of the Trust (Extension of trust period not accompanied by additional
contributions)
If the Company does not amend the trust agreement and make additional contributions on expiry of the trust
period, no more points will be granted to Directors, Etc. from that point onwards. However, if Directors, Etc.
who may satisfy the beneficiary requirements are in office at the expiry of the trust period, the Trust will not
be terminated immediately, and the trust period of the Trust may be extended until such Directors, Etc. haveretired from office and delivery, etc. of the Company’s shares, etc. is complete, up to a limit of 10 years.
(5) Number of the Company’s shares, etc. to be delivered, etc. to Directors, Etc.
The Company’s shares, etc. will be delivered, etc. to Directors, Etc. after the end of the Applicable Period in
the case of “LTI-I” and after retirement from office in the case of “LTI-II” in accordance with (6) below.

Directors, Etc. will be granted share delivery points (LTI-I and LTI-II), as defined in 1) and 2) below, on theassumption of delivery, etc. of the Company’s shares, etc. One (1) share in the Company will be delivered,etc. for every one (1) share delivery point (LTI-I and LTI-II), with fractions of less than one point discarded. If
a share split, share consolidation, etc., of the Company’s shares is conducted during the trust period, thenumber of points and the upper limit on the total number of points to be granted to Directors, Etc. in (7) below
will be adjusted in accordance with the split ratio, consolidation ratio, etc.
1) Share delivery points (LTI-I)
Share delivery points (LTI-I) granted to Directors, Etc. will be calculated by multiplying cumulative total basepoints (*1) awarded for each fiscal year in the Applicable Period by a performance-based coefficient (LTI-I)(*2) after the end of the Applicable Period.
2) Share delivery points (LTI-Ⅱ)
Share delivery points (LTI-II) granted to Directors, Etc. will be total performance-based points calculated bymultiplying cumulative total base points (*1) awarded for each fiscal year in the Applicable Period by aperformance-based coefficient (LTI-II) (*3) after the end of the Applicable Period.
(*1) Base points are calculated by dividing an amount set according to compensation benchmarks based on
the role, duties, etc. of Directors, Etc. by the benchmark stock price (average closing price of theCompany’s shares in ordinary trading on the Tokyo Stock Exchange during March directly preceding thestart of the Applicable Period (with any fractions less than one discarded)).
(*2) Performance-based coefficient (LTI-I) will be set within the range of 15-150% mainly according to thedegree of achievement of performance targets under the Medium-term Management Plan. The indicators
used to evaluate the degree of achievement of performance targets include consolidated net sales,
consolidated operating profit, consolidated ROE (Applicable Period average) as well as degree ofachievement of individually set performance targets.
(*3) Performance-based coefficient (LTI-II) will be set within the range of 0-150% mainly according to thedegree of achievement of progress targets towards realization of the Long-term Vision which will be set
for each Applicable Period (or within the range of 0%-100% when the period from the fiscal year ending
March 31, 2023 to the fiscal year ending March 31, 2025 is the applicable period). Indicators used toevaluate degree of achievement of progress targets will be non-financial targets such as corporate value(relative TSR; TSR: Total Shareholder Returns), sustainability, governance, and business value (ratio of
net sales from overseas business).
(6) Method and timing of delivery, etc. of the Company’s shares, etc.
1) LTI-Ⅰ
The Company’s shares, etc. for LTI-I will be delivered, etc. after the end of the Applicable Period.
Directors, Etc. who satisfy the beneficiary requirements will receive delivery of the Company’s sharescorresponding to 50% of the number of share delivery points (LTI-I) (with fractional shares discarded), andwill receive cash equivalent to the conversion amount of the Company’s shares corresponding to theremaining number of share delivery points (LTI-I), after conversion into cash within the Trust.
If a Director, Etc. passes away before the end of the Applicable Period, a number of share delivery points(LTI-I) will be calculated according to the degree of progress of the Medium-term Management Plan at such
point in time, and the heir of such Director, Etc. will receive a provision of cash equivalent to the number of
the Company’s shares corresponding to such points, after conversion into cash within the Trust.
2) LTI-Ⅱ
The Company’s shares, etc. for LTI-II will be delivered, etc. after retirement from office of a Director, Etc.
Directors, Etc. who satisfy the beneficiary requirements will receive delivery of the Company’s sharescorresponding to 50% of the number of share delivery points (LTI-II) calculated upon retirement from office(with fractional shares discarded), and will receive cash equivalent to the conversion amount of theCompany’s shares corresponding to the remaining number of share delivery points (LTI-II), after conversion
into cash within the Trust.
If a Director, Etc. passes away whilst in office, a number of share delivery points (LTI-II) will be calculated
according to the degree of progress made towards realization of the Long-term Vision at such point in time,
and the heir of such Director, Etc. will receive a provision of cash equivalent to the number of the Company’s
shares corresponding to such points, after conversion into cash within the Trust.
Directors, Etc. will continue to hold the Company’s shares delivered through the System until one year has
elapsed after their retirement from office.
(7) Upper limit on the trust money to be contributed to the Trust and upper limit on the total number of points tobe granted to Directors, Etc. from the Trust
The total amount of trust money to be contributed to the Trust during the trust period and the total number ofpoints to be granted to Directors, Etc., in the Trust are subject to the upper limits below, pursuant to theresolution of the General Meeting of Shareholders. Trust money includes trust fees and trust expenses in
addition to funds for the acquisition of shares by the Trust.
1) Upper limit on the total amount of trust money to be contributed to the Trust: 290 million yen per fiscal
year × number of years in the Applicable Period (*4)2) Upper limit on the total number of points to be granted to Directors, Etc. per fiscal year: 100,000 points(*5)(*4) If the Trust is continued in accordance with (4) 2) above, the Company will make contributions to theTrust, with 290 million yen multiplied by the number of years in the new Applicable Period as the upper
limit.
(*5) If the Trust is continued in accordance with (4) 2) above, the upper limit on the total number of points tobe granted to Directors, Etc. each extended Applicable Period will be 100,000 points multiplied by the
number of years in the new Applicable Period. This upper limit on the total number of points will be set
based on the above upper limit of trust money, taking into consideration the most recent stock price andother factors.
(8) Method of acquisition of the Company’s shares by the Trust
The Company intends for the Trust to acquire the Company’s shares from the stock market, within the rangeof the funds for the acquisition of shares and the number of the Company’s shares to be delivered described in(7) above.
(9) Exercise of voting rights of the Company’s shares in the Trust
In order to ensure neutrality toward management, voting rights of the Company’s shares in the Trust will not
be exercised during the trust period.
(10) Treatment of dividends from surplus pertaining to the Company’s shares in the Trust
Dividends pertaining to the Company’s shares in the Trust will be received by the Trust and used for the trust
fees and trust expenses of the Trust.
(11) Treatment of residual shares at the expiry of the trust period
Any residual shares at the time of expiry of the trust period will be used for delivery, etc. to Directors, Etc. if
the Company continues to use the Trust as part of the System as it is, or as a similar stock compensation
system. If the Trust is terminated on expiry of the trust period, the Trust will transfer such residual shares to
the Company without consideration and the Company will cancel these based on a resolution of the Board of
Directors, as a way of providing returns to shareholders.
In addition, any residual dividends pertaining to the Company’s shares in the Trust when the trust period
expires will be utilized as acquisition funds for shares if the Trust continues to be used, but if the Trust is
terminated upon expiry of the trust period, the portion in excess of the trust expense reserve will be donated toorganizations that have no interest in the Company and Directors, Etc.
(Reference 1)
Details of the trust agreement
1) Type of trust
2) Purpose of the trust3) Trustor
4) Trustee
5) Beneficiaries
6) Trust administrator
7) Date of trust agreement
8) Period of trust9) Exercise of voting rights
10) Type of shares to be acquired11) Amount of trust money12) Method of share acquisition
13) Timing of share acquisition
14) Rights holder
15) Residual assets

Trust of cash other than individually operated cash trust (third-party benefit
trust)
To provide incentive to Directors, Etc.
The Company
Mitsubishi UFJ Trust and Banking Corporation (planned)
Co-trustee: The Master Trust Bank of Japan, Ltd.)
Directors, Etc. who satisfy the beneficiary requirements
Third party with no special interests with the Company (Certified Public
Accountant)August 4, 2022 (planned)
August 4, 2022 (planned) to August 31, 2025 (planned)
None
Common shares of the Company
4.5 billion yen (planned) (including trust fees and trust expenses)
Acquisition in the stock market
August 12, 2022 (planned) to August 31, 2022 (planned)
The Company
Residual assets that may be received by the Company, the rights holder, shallbe within the range of trust expense reserve after deducting share acquisition
funds from the trust money.

(Reference 2)
Background to Revision of the Compensation System
The Company’s philosophy consists of its Corporate Value: The Best of Nature and Science and its Corporate
Mission: To contribute to the unparalleled medical therapeutic power of the combination of Kampo medicine andWestern medicine. To pursue this basic philosophy, the Company formulated its Long-term Management Vision
and Medium-term Management Plan, which serves as a milestone for realizing this vision, and has been practicing
a style of management which integrates its basic philosophy, Long-term Management Vision and Medium-termManagement Plan.
The Company recently established its Purpose: Lively Living for Everyone. This is the business aspiration which
the Company ultimately aims to achieve and serves as a social mission linking the origin of its founding and theworld 50 years or 100 years in the future. Through backcasting from this purpose, the Company formulated its
Sustainability Vision and Long-term Management Vision 2031 (hereinafter collectively “the Long-term Vision”).
The Company’s business consists of the Kampo Value Chain, which starts with the cultivation of crude drugs, and
it is strongly linked to the natural environment. In its Sustainability Vision, the Company sets out initiatives inareas such as preservation of the environment and diversity & inclusion to continue to be a company that isextremely sensitive to changes in and crises facing the natural environment, which is fundamental to its business,and to continue to supply, as a shared value with society, naturally-derived, traditional pharmaceuticals using ascientific approach. Meanwhile, in “Long-term Management Vision 2031,” the Company sets out businessinitiatives such as expanding standard Kampo treatments and personalizing Kampo treatments, undertaking thescientific study of pre-symptomatic diseases, and building the foundation for the China Business, with the goal of
creating a future that achieves “Cho-WA” (harmony). The Long-term Vision consists of initiatives which are allvery difficult but the Company believes that steady realization of the Long-term Vision is necessary to achievesustainable improvement in its corporate value and to achieve its purpose.
Since cohesive efforts by the management team as a whole will be essential for realizing the Long-term Vision, theCompany recently decided, after much discussion by the Nomination/Remuneration Advisory Committee over thecourse of a year, to revise the compensation system for Directors (excluding the Directors who are also Audit andSupervisory Committee Members and the Non-executive Directors; the same applies hereinafter) and its policy for
determining the details of remuneration. The Company decided to submit a proposal, which is a prerequisite of therevision, to the General Meeting of Shareholders by resolution of the Board of Directors, taking the findings of thereport by the Nomination/Remuneration Advisory Committee into consideration. If such proposal is approved andadopted as proposed, the revised compensation system is expected to be applied from FY2022.
The main points of revisions to the compensation system for Directors are as follows.
1. In light of the Company’s management style and Long-term Vision, the Company will adopt a compensation
system for Directors based on the the Pay-for-Purpose model.
2. The Company will adopt a long-term incentive system that further clarifies the link between compensation of
Directors and the Company’s corporate value for the purpose of encouraging Directors to strive for realizationof the Long-term Vision and further increasing their awareness of contributing to sustainable growth andimprovement in corporate value.
3. In addition to evaluation based on financial results, the Company will incorporate evaluation based on nonfinancial indicators, etc. and seek to lay business foundations which will enable sustainable growth, aiming forrealization of the Long-term Vision.
The Company will also make revisions to its compensation system and policy for Executive Officers similar to
those for Directors.
Outline of the Company’s New Officers’ Compensation System
Following continuous deliberation by the Nomination/Remuneration Advisory Committee, the Company resolved,
at a meeting of the Board of Directors held on May 10, 2022, to seek shareholders’ approval for the revision of its
performance-based stock compensation system. An outline of the new system, assuming shareholders’ approval at
the 86th Ordinary General Meeting of Shareholders to be held on June 29, 2022, is as follows.

Policy for Determining Details of Remuneration for Directors (excluding the Directors who are also Audit
and Supervisory Committee Members and the Non-executive Directors)
1. Basic policy
The Company will determine compensation for Directors in accordance with the following policy based on the
Pay-for-Purpose model.
1) The Company will reward realization of the TSUMURA Group’s vision, which stems from Philosophy-BasedManagement in line with an underlying purpose.
2) The Company will reward TSUMURA’s sustainable growth achieved by earning stakeholders’ trust andresolving social issues through sustainability and governance initiatives.
3) The Company will incentivize efforts towards ambitious goals.
- Rewarding individual officers who strive for ambitious goals- Rewarding achievements as a “management team” which are essential for the achievement of ambitious goals

Basic compensation(cash)

2. Compensation structure
Compensation for Directors of the Company is composed of basic compensation (fixed portion, short-term
performance-based portion) and performance-based stock compensation (LTI-I and LTI-II), with the short-term
performance-based portion of the basic compensation and the performance-based stock compensation regarded as
incentives (variable compensation). The positioning and an outline of each type of compensation is as follows.
Type of compensation
Purpose and outline
Fixed
Fixed portion
Fixed compensation according to role, duties, etc.
Annual incentive to reward efforts towards company performance results andachievement of individually set business targets each fiscal year
Short-term- Base amount to be provided on achievement of targets is set at a certain
performancepercentage of the total compensation according to role, duties, etc.
based portion- Actual amount provided is determined in range 15%-150% of base amountaccording to degree of achievement of performance targets each fiscal year
Provided in cash each month together with fixed portion
Medium-term incentive to reward initiatives for realization of the Medium-termManagement Plan
- Base points according to role, duties, etc. are granted/accumulated each year,
and the Company’s shares corresponding to a number of points which is based
LTI-Ⅰ
on such accumulated points are delivered according to the degree of(Medium-term
achievement of performance targets under the Medium-term Management Plan
performanceand the degree of achievement of individually set business targets (50% is
Variablebased)
provided in cash for the purpose of paying tax)
- The actual number of shares delivered is determined in the range 15-150% of
cumulative total base points- Shares are delivered altogether around July directly after the end of theMedium-term Management Plan, in principle
Long-term incentive to encourage efforts for realization of the Long-term Vision- Base points according to role, duties, etc. are granted/accumulated each year,
and the Company’s shares in a number corresponding to a total number ofpoints which is based on such accumulated points are delivered according to
LTI-Ⅱ
the degree of achievement of progress targets towards realization of the Long(Based on Longterm Vision after the end of the Medium-term Management Plan period (50%term Vision)is provided in cash for the purpose of paying tax)
- The actual number of shares delivered is determined in the range 0-150% of
cumulative total base points- Shares are delivered altogether after retirement from office, in principle
Performance-based stock compensation (non-cash)

3. Level of compensation
The Company sets compensation levels which are commensurate with roles, duties, etc. in light of the Company’s
operating environment, through objective comparison with compensation levels at other companies in the same
industry and other companies of a similar scale based on the research data of an outside specialist company, and inview of the salary levels of the Company’s employees.

4. Composition of compensation
The Company adopts the following compensation composition ratios for Directors, to promote the Company’ssustainable growth and improvement in its corporate value, with reference to trends at other companies in the same
industry and other companies of a similar scale based on the research data of an outside specialist company.
■ If LTI-II is provided
Fixed
portion
固定部分

Short-term
LTI-Ⅰ
LTI-Ⅱ
短期業績連動部分
performance-based
中期
長期
短期
Medium-termLong-term
portionincentive
incentive
Short-term
incentive
インセンティブ インセンティブ
インセンティブ
［10%］
［10%］
[25%]

［55%］
Basic基本報酬
compensation(cash)（金銭）

業績連動型株式報酬
Performance-based
stock
compensation(non-cash)
（非金銭）

Fixed
固定

Variable変動* Composition ratios are ratios of compensation base amount according to role, duties, etc.
* The model assumes 100% achievement of targets for variable compensation.
■ If LTI-II is not paid

固定部分
Fixed
portion［60%］

短期業績連動部分
Short-term
performancebased portion
短期incentive
Short-term

Basic基本報酬
compensation(cash)

（金銭）

Fixed
固定

インセンティブ
[30%]

LTI-Ⅰ

Medium-term
中期
incentive

インセンティブ
［10%］
Performance-based
業績連動型株式報酬
stock compensation(non-cash)（非金銭）

Variable
変動

5. Incentive compensation system[Short-term Incentive: Short-term performance-based portion (basic compensation)]
The amount paid for the short-term performance-based portion of basic compensation is determined based on the
degree of achievement of each fiscal year’s targets for consolidated net sales and consolidated operating profit,
which are used as target indicators under the Medium-term Management Plan, and the degree of achievement of
the individually set business targets of those responsible for business execution.
The allocation ratio of each evaluation indicator and fluctuation ranges are as follows.
(1) Allocation ratio of each evaluation indicator and fluctuation ranges
Coefficient
Evaluation indicators
Allocation ratio
fluctuation range
Consolidated net sales
25%-35%0%-150%Consolidated operating profit
25%-35%0%-150%Degree of achievement of
30%-50%50%-150%
individually set business targets
Total
100%
15%-150%[Medium-term Incentive: LTI-I (Performance-based stock compensation)]
The number of shares delivered for LTI-I is determined based on the degree of achievement of targets forconsolidated net sales, consolidated operating profit and consolidated ROE, under the Medium-term Management
Plan, and the degree of achievement of the individually set business targets of those responsible for businessexecution. On share delivery, 50% of the shares are converted into and provided as cash to be applied to thepayment of tax. The provision of shares and cash to each Director is carried out through a Board Incentive Plantrust (hereinafter “the BIP Trust”) with Mitsubishi UFJ Trust and Banking Corporation as Trustee.
The calculation formula for the number of shares to be delivered, as well as the allocation ratios of each evaluation
indicator and fluctuation ranges are as follows.
(1) Calculation formula for stock compensation (medium-term performance-based)
Base points = Amount specified according to compensation benchmark based on role, duties, etc. of Director ÷
Benchmark stock price (*)

Number of shares delivered = Cumulative total number of base points during Medium-term Management Plan
period × Performance-based coefficient(*) Average closing price of the Company’s shares in ordinary trading on the Tokyo Stock Exchange during Marchdirectly preceding the start of the Medium-term Management Plan period (with any fractions less than one
discarded).
(2) Allocation ratio of each evaluation indicator and fluctuation ranges
Coefficient
Evaluation indicators
Allocation ratio
fluctuation range
Consolidated net sales
30%
0%-150%Consolidated operating profit
20%
0%-150%Consolidated ROE
20%
0%-150%Degree of achievement of
30%
50%-150%
individually set business targets
Total
100%
15%-150%[Long-term Incentive: LTI-II (Performance-based stock compensation)]
The number of shares to be delivered for LTI-II is determined based on the degree of achievement of evaluation
indicators related to corporate value, sustainability, corporate governance and business value during the period
corresponding to the Medium-term Management Plan. On share delivery, 50% of the shares are converted into andprovided as cash to be applied to the payment of tax. The provision of shares and cash to each Director is carriedout through the BIP Trust.
The calculation formula for the number of shares to be delivered, as well as the allocation ratios of each evaluation
indicator and fluctuation ranges are as follows.
(1) Calculation formula for stock compensation (Long-term Vision-based)
Base points = Amount specified according to compensation benchmark based on role, duties, etc. of Director ÷
Benchmark stock price (*)
Performance-based points = Cumulative total number of base points during Medium-term Management Plan period
× Performance-based coefficient
Number of shares delivered = Total performance-based points granted as of retirement from office(*) Average closing price of the Company’s shares in ordinary trading on the Tokyo Stock Exchange during Marchdirectly preceding the start of the Medium-term Management Plan period (with any fractions less than one
discarded).
(2) Purpose of each evaluation indicator and selection approach
Evaluation indicators
Approach to selection of indicators- Indicator for measuring degree of realization of Long-term
Relative TSR*1
VisionCorporate value (Compared with TOPIX - Intended to increase motivation to help realize the Long-term
growth rate)
Vision and enhance corporate value and to encourage value
sharing with shareholders- Indicator which measures the degree of realization of the
GHG reduction
Sustainability Vision- Promotion of wild
Sustainability- Intended to promote and raise awareness of initiatives to realize
crude drug cultivation,
sustainable business activities such as preservation of the naturaletc.
environment and wild crude drug cultivation- Indicator which can measure the degree of achievement of the
Sustainability Vision and encourage realization of the Long-termManagement VisionCorporate- Diversity of- Intended to encourage the formation of a TSUMURA Groupmanagement team encompassing overseas business units whichgovernancemanagement team, etc.
can make the right management decisions at the right time andcan drive corporate value in the medium and long term
including transformation of the business structure
Business value Ratio of net sales from- Indicator which can measure the degree of realization of theoverseas businessLong-term Management Vision- Intended to increase motivation to help lay the foundation foroverseas business and improve corporate value through growthin overseas market*1 TSR: Total Shareholder Return. The ratio of the Company’s TSR to the TOPIX growth rate is used.
(3) Allocation ratio of each evaluation indicator, fluctuation ranges, and key targets
Allocation
Coefficient fluctuation
Evaluation indicators
Key targets
ratio
range
Relative TSR
0%-200%
1.0
Corporate(Compared with TOPIX 25%(or 0%-100% in the initialvalue
growth rate)
Applicable Period*1)
GHG reduction
Reduce GHG emissions by
Sustainability - Promotion of wild crude 25%0%-100%50% by the end of FY2031
drug cultivation, etc.
(versus FY2020), etc.*2
Corporate- Diversity of*2
25%
0%-100%governance management team, etc.
0%-200%50% by the end of FY2031
Business
Ratio of net sales from25%
(or 0%-100% in the initial (versus FY2020)*2
value
overseas business
Applicable Period*1)
0%-150%
Total
100%(or 0%-100% in the initial
Applicable Period*1)*1 The initial Applicable Period indicates the period from the fiscal year ending March 31, 2023 to the fiscal
year ending March 31, 2028.
*2 If the degree of achievement is below 100% or 80%, depending on the evaluation indicator, the coefficient is0%.
6. Rule on the holding of shares
Directors will continue to hold the Company’s shares delivered through performance-based stock compensation
until one year has elapsed after their retirement from office.
7. The process for determining compensation
The compensation benchmark amount for Directors of the Company, the performance evaluation method, and therules for calculating final amounts according to performance evaluation results are determined by resolution of theBoard of Directors within the limits of a total amount resolved by a General Meeting of Shareholders, taking into
consideration the deliberation results of the Nomination/Remuneration Advisory Committee (which is composed of
one internal Director and five Independent Outside Directors and is chaired by an Independent Outside Director),
to increase the objectivity and transparency of the deliberation process. The performance evaluation method andthe rules for calculating the final amounts according to performance evaluation results that form part of this process
must be set out in internal regulations and any revisions to such method and rules will require a resolution at a
meeting of the Board of Directors based on the deliberation and report of the Nomination/Remuneration Advisory
Committee. Decisions on the degree of achievement of individually set business targets for the short-term
performance-based portion of basic compensation and LTI-I will be delegated to the Nomination/Remuneration
Advisory Committee.
Policy and procedure for determining the remuneration for Non-executive Directors who are not Audit andSupervisory Committee Members and Directors who are Audit and Supervisory Committee Members
The remuneration for Non-executive Directors who are not Audit and Supervisory Committee Members andDirectors who are Audit and Supervisory Committee Members will consist of basic compensation (fixed
portion/cash) only, in light of their role of overseeing the Company’s management from an objective andindependent perspective.