MITSUBISHI ESTATE | INVESTOR RELATIONS | CORPORATE GOVERNANCE

Board Policies and Procedures in Determining the Remuneration of Senior Management and Directors

(ⅰ) Procedures for Deciding Remuneration Paid to Officers

The policy concerning decisions on the details of remuneration paid to directors and corporate executive officers of the Company and the details of remuneration for each person shall be decided upon by a resolution of the Remuneration Committee, which comprises solely outside directors.

(ⅱ) The Basic Policy for Deciding Remuneration for Officers

The basic policy for deciding remuneration for directors and corporate executive officers of the Company is as follows.

The remuneration system shall be linked with our medium- to long-term performance targets, etc., aimed at in management strategies and medium-term management plans and realize sustained corporate value improvement and the sharing of value with our shareholders.
The remuneration system shall allow for the giving of incentives to management executives to encourage them to take on challenges and conduct appropriate risk-taking in line with the above strategies’ targets and expectations of shareholders and other stakeholders.
The remuneration system shall make it possible to fulfill high accountability for the benefit of our shareholders and other stakeholders through objective deliberations and judgments by the Remuneration Committee.

(ⅲ) Remuneration Systems for Officers

The remuneration systems for directors and corporate executive officers shall be separately established in consideration of respective functions and roles to be fulfilled for the purpose of achieving sustained corporate value improvement. In addition, directors who concurrently serve as corporate executive officers shall be paid remuneration as corporate executive officers.

• Directors (excluding directors who concurrently serve as corporate executive officers)

In consideration of their function and role of supervising the performance of duties by corporate executive officers and directors, they shall receive, in principle, only basic remuneration in the form of cash, and the standards shall be decided upon individually taking into account factors such as their position and responsibilities as directors and whether they are full-time or part-time.

• Corporate executive officers

In consideration of their function and role of taking charge of business execution of the Company, their remuneration shall, in principle, comprise basic remuneration and variable remuneration. Variable remuneration comprises monetary compensation that is paid based on short-term performance, etc., and stock compensation, etc., (including monetary compensation paid based on indicators such as stock price) that is paid with a view to realizing the medium- to long-term sharing of value with shareholders. The standards and ratio of basic remuneration and variable remuneration, valuation indicators for variable remuneration, and other matters shall be decided upon taking into account medium- to long-term performance targets, etc., aimed at in management strategies and the current management plan and factors such as position and responsibilities as corporate executive officers.

Composition of the Remuneration of Corporate Executive Officers

Overview of Performance-Based Remuneration

(ⅰ) Single-Year, Performance-Based Remuneration

①Form of remuneration: Cash
②Performance evaluation and method for determining remuneration

With the aim of achieving further corporate growth and greater efficiency while guaranteeing financial soundness, the amount ofremuneration varies depending on consolidated operating income, EBITDA, ROA, ROE, and the target level of operating income in the divisions for which the individual officers are responsible.
When determining remuneration, the amount is calculated using the actual indicators, etc., for the previous fiscal year, to which is added an evaluation of qualitative aspects, established during interviews with the president,* including the degree of contribution to performance over the medium to long term and the status of ESG-related initiatives, with the final remuneration amount being decided by the Remuneration Committee.
Companywide performance and the performance of the officer’s division impact remuneration amounts at a ratio of 50:50. The fluctuation range for remuneration is 0% to 200% of the base amount. The results for performance in the previous fiscal year were 112.6% for Companywide performance and, on average, 80.0% for divisional performance.

Indicators and Process for Calculating the Evaluation Index

Companywide performance: 50^*1	Achievement ratio compared with performance over the last five fiscal years: 30	・Use the four indicators of consolidated operating income, EBITDA, ROA, and ROE (1:1:1:1) ・Use standard deviation to calculate the level of difficulty for achieving the performance of the relevant fiscal year compared with performance over the last five fiscal years ・Fluctuation range of 200%–0%
Companywide performance: 50^*1	Achievement ratio compared with annual business plan targets: 20	・Use the four indicators of consolidated operating income, EBITDA, ROA, and ROE (1:1:1:1) ・Level of payment determined through comparisons with figures for the four above indicators under annual business plans (payment level of 100% if in line with the plan’s targets, but can fluctuate between 200% and 0% depending on the level of achievement)
Performance of responsible division:50^*1	Corporate executive officers and executive officers ・①Level of achievement toward the business group budget: Use consolidated operating income as a general rule ②Medium-term initiatives: Approximately five years ahead, includes ESG initiatives ③Initiatives to establish new business models: New business creation, non-asset businesses, service and content provision, etc. ④Initiatives to realize earnings for the entire Mitsubishi Estate Group: Use the four indexes at a ratio of 10:10:10:20 for initiatives that go beyond the business group, etc. (initiatives that go beyond the individual role in the case of Group executive officers) ・Employees are interviewed by the president & CEO, who assesses each item using three levels (200%, 100%, and 0%^2). Group executive officers* ・Use the four indicators of “level of achievement toward the individual company’s budget,” “medium-term initiatives,” “initiatives to establish new business models,” and “initiatives to realize earnings for the entire Mitsubishi Estate Group” at a ratio of 20:10:10:10. ・Evaluation method is the same as that for corporate executive officers and executive officers.

*1 Accounts for 12.5% of total remuneration
*2 Targets for each item listed in annual business plans, and evaluations conducted using the details of these targets as the base score of 100%

(ⅱ) Medium- to Long-Term Performance-Based Remuneration (Remuneration by Shares with Restriction on Transfer)

①Form of remuneration: Shares
②Restricted stock period: Approximately three years
③Performance evaluation and method for determining remuneration

With the objectives of creating an incentive to work for sustainable growth and of promoting the further sharing of value with shareholders, the Company adopted stock-based remuneration with a restricted transfer period of approximately three years. The amount of monetary compensation that can be claimed when allocating stock is determined by the Remuneration Committee.

(ⅲ) Medium- to Long-Term Performance-Based Remuneration (Phantom Stock)

①Form of remuneration: Cash
②Performance evaluation period: Approximately three years
③Performance evaluation and method for determining remuneration

With the objectives of creating an incentive to work for sustainable growth and of promoting the further sharing of value with shareholders, the amount of phantom stock remuneration varies depending on the share price and on an indicator based on the Company’s total shareholder return (TSR) ranking relative to five peer companies.^*1 The base amount by position as well as the final remuneration amount is determined by the Remuneration Committee.

*1 Five peer companies: Nomura Real Estate Holdings, Inc., Tokyu Fudosan Holdings Corporation, Mitsui Fudosan Co., Ltd., Tokyo Tatemono Co., Ltd., and Sumitomo Realty & Development Co., Ltd.

④Calculation method for individual amount paid

Calculation method for individual amount paid

*2 Remuneration base amount
The remuneration base amount corresponds to the rank of the officer eligible for payment, as listed below.

President and chief executive officer	Deputy president	Executive vice president	Senior executive officer	Corporate executive officer
¥19,647,000	¥12,675,000	¥10,413,000	¥8,352,000	¥6,288,000

*3 Vesting ratio
A rank is given to the TSR of the Company and its peers. The percentages in the table below correspond to the Company’s TSR rank, with 100% being the upper limit.

TSR rank	1st	2nd	3rd	4th	5th	6th
Vesting ratio	100%	80%	60%	40%	20%	0%

TSR is calculated using the formula below.

TSR

(IV) Remuneration Payment Period

Payment periods for remuneration other than basic remuneration, which is fixed, will begin from the upcoming fiscal year.
The payment schedule is as follows.

Remuneration Payment Period

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