Yamaha Motor: Revision of Director and Corporate Auditor Remuneration Amounts and Introduction of Performance Share System

IWATA, February 10, 2022 — Yamaha Motor Co., Ltd. (Tokyo: 7272) hereby announces that at the Board of Directors meeting held on February 10, 2022, a resolution was passed that the amount of renumeration for directors and corporate auditors will be revised, and that a Performance Share system will be introduced where the number of shares to be granted will be determined in conjunction with the Total Shareholder Return (TSR) performance of Yamaha Motor, replacing the conventional restricted share remuneration system with no attached performance conditions. For this revision of the remuneration amount and the new remuneration system for directors, a proposal is to be submitted at the 87th Ordinary General Meeting of Shareholders (hereinafter referred to as the “General Meeting”) scheduled to be held on March 23, 2022.

Note

I. Objectives of the revision for the remuneration system for directors and corporate auditors

Yamaha Motor has repeatedly deliberated on the ideal remuneration system to enhance the connection with corporate value over the medium to long term at the Executive Personnel Committee composed primarily of Independent Outside Directors. As a result, in order to strongly promote our company-based efforts to solve materiality (important societal issues) and realize the sustainable creation of corporate and brand value, Yamaha Motor has decided to expand its performance-based remuneration and introduce performance indicators related to materiality and TSR (Total Shareholder Return) in line with the start of the new Medium-Term Management Plan in 2022. In addition, it was determined that the base remuneration of Yamaha Motor’s outside directors and corporate auditors should be increased and revised due to the business environment becoming more complex and diverse, along with the increasing burden of roles and job performances expected of outside directors and corporate auditors.
Please refer to the (Reference) Outline of Remuneration System Revision for Executives below for an overview of the remuneration system revision.

II. Revision of remuneration amounts for directors

Currently, remuneration for Yamaha Motor directors consists of base remuneration (fixed remuneration), performance-based remuneration, and share-based remuneration.
Of the abovementioned remuneration for directors, the base remuneration (fixed remuneration) was approved to be up to 500 million yen per year at the 84th Ordinary General Meeting of Shareholders held on March 27, 2019 (of which up to 100 million will be paid annually for outside directors). As part of the continuous review of the remuneration system for directors of Yamaha Motor, base remuneration (fixed remuneration) takes into consideration the expansion of the expertise and diversity, and the increase in expected roles of directors in order to improve management governance. Yamaha Motor therefore plans to propose to the General Meeting that the annual remuneration will be up to 600 million yen (of which up to 200 million yen for outside directors). For outside directors, Yamaha Motor will continue to pay only base remuneration, which is at a fixed rate. As in the past, for directors who work both as an employee and a director, the amount of remuneration shall not include the employee salary amount.
In addition, with regards to performance-based remuneration, as in the past, individual performance-based bonuses linked to individual director performance will be up to 100 million yen per year. Yamaha Motor-wide performance-based bonuses that reflect short-term companywide consolidated performance will be paid within the range of 0.5% of the net income attributable to owners of parent from the previous consolidated fiscal year.

III. Revision of remuneration for corporate auditors

At the 84th Ordinary General Meeting of Shareholders held on March 27, 2019, the amount of remuneration for corporate auditors was approved to be up to 120 million yen per year. However, in consideration of the fact that the expertise and responsibilities expected of corporate auditors has been increasing, Yamaha Motor plans to propose to the General Meeting that the annual amount should be up to 200 million yen. The remuneration of each will be determined through discussions with the corporate auditors within the range of the above remuneration amount.

IV. Introduction of a Performance Share system for directors

As part of the continuous review of the remuneration system for directors, Yamaha Motor will promote further value-sharing between our directors and shareholders, and provide appropriate incentives for the sustainable improvement of our medium- to long-term corporate value. Regarding share remuneration for directors, a revision will be implemented from the conventional system of remuneration of shares with restriction on transfer with no attached performance conditions, to a system of performance-based remuneration of shares with restriction on transfer that determines the number of shares to be granted in conjunction with the TSR (Total Shareholder Return) performance of Yamaha Motor (hereinafter referred to as the “Performance Share system”).
Along with this revision, the former share remuneration resolution will be abolished, and directors excluding outside directors (hereinafter “Applicable Directors”) will be provided remuneration in a separate frame from the remuneration amount in the above “II. Revision of remuneration amounts for directors” for the granting of shares with restriction on transfer based on the Performance Share system. The company plans to ask all shareholders for their approval of the following: As an appropriate monetary amount and number of shares for the above purpose, and based on the Performance Share system, the total amount of monetary remuneration receivables to be paid to Applicable Directors for the granting of shares with restriction on transfer is to be up to 600 million yen per year (however, the employee salary amounts of directors who work both as an employee and a director are not included). The total number of shares of Yamaha Motor's common shares issued or disposed to Applicable Directors is to be up to 300,000 shares per year. However, when adjustment of the total number of shares with restriction on transfer allocated is necessary in the case of division, share merger or similar of ordinary shares in Yamaha Motor Co., Ltd. (including gratis allocation of ordinary shares in Yamaha Motor Co., Ltd.) with an effective date after the date of resolution at the General Meeting, the total number concerned is to be adjusted within a reasonable scope as necessary.

An overview of the Performance Share system is as follows:

1. Overview of Performance Share system

In the Performance Share system, as a general rule, the evaluation period (hereinafter referred to as the “Service provision period”) is the past three fiscal years (hereinafter referred to as “TSR performance period”),* with the final fiscal year being the previous fiscal year of the fiscal year with the date the Board of Directors (hereinafter referred to as the “Granting Board of Directors”) resolves to grant monetary remuneration receivables to Applicable Directors, and when the monetary remuneration receivables for the issuance or disposal of Company common shares in the number corresponding to Yamaha Motor’s TSR (Total Shareholder Return) performance during the TSR performance period will be granted. Applicable Directors are to pay all of the monetary remuneration receivables as contributed assets and common shares of Yamaha Motor are issued or disposed of.
However, if it becomes clear that an Applicable Director has violated the law or any other reason specified by the Board of Directors of Yamaha Motor before the payment of monetary remuneration receivables and the issuance or disposal of common shares of Yamaha Motor, Yamaha Motor will not make such payments to that Applicable Director.

(*) As a transitional measure accompanying the introduction of the Performance Share system, the TSR
performance period with 2022 as the Service provision period is limited to one fiscal year (2022), and the TSR
performance period with 2023 as the Service provision period is limited to two fiscal years (2022 and 2023).

2. Monetary remuneration receivables in the Performance Share system

(1) Calculation method of the amount of monetary remuneration receivables to be paid

The amount of monetary remuneration to be paid to each Applicable Director is calculated by multiplying the number of shares to be finally granted to each Applicable Director (hereinafter referred to as “target number of shares granted (by individual)”) based on the Performance Share system, with the amount to be paid per share (hereinafter referred to as “share price at the time of grant”) set by the Granting Board of Directors within a range that is not especially advantageous to Applicable Directors who may underwrite Yamaha Motor's shares based on the closing price of ordinary transactions of Yamaha Motor's shares on the Tokyo Stock Exchange on the business day before the date of a Board of Directors meeting (if the transaction is not completed on the said date, the closing price on the latest trading day prior to that date will be applicable).

(2) Calculation method of the target number of shares granted (by individuals)

The target number of shares is calculated by multiplying the coefficient calculated based on the TSR (Total Shareholder Return) performance of Yamaha Motor during the TSR performance period (hereinafter “TSR performance factor”) by the number of shares predetermined for each title as the standard for the number of shares to be granted. (The number of restricted shares to be granted when the TSR performance factor is 100% is hereinafter referred to as the “target number of shares granted (by title)”.)

1) Target number of shares granted (by title)

The target number of shares granted (by title) shall be obtained by dividing the annual target amount of Performance Share system by title (hereinafter referred to as the “target grant value”) by the average of the closing share price (hereinafter referred to as “target share price”) of ordinary transactions of Yamaha Motor's shares for a one-month period in the month immediately preceding the service provision period. The target number of shares granted by title and the target grant value will be resolved by the Board of Directors at the beginning of the Service provision period after a report by the Executive Personnel Committee.

2) TSR Performance Factor

The TSR performance factor is calculated in the range of 0% to 150% based on Yamaha Motor’s TSR (Total Shareholder Return) performance using the TOPIX (Tokyo Stock Price Index) growth rate, including dividends, as a benchmark using the following formula:

(3) Conclusion and content of contracts regarding Restricted Stock allocations

In issuing or disposing of Yamaha Motor's common shares under the Share Remuneration System, Yamaha Motor and Applicable Directors will conclude a restricted stock allocation contract (hereinafter referred to as the “Allocation Contract”). Allocation Contracts are to include the following:

1) Period of restriction on transfer

Applicable Directors shall not transfer, set collateral rights, or otherwise dispose of common shares of Yamaha Motor allocated under the Allocation Contract for a period of 30 years (hereinafter referred to as the “Transfer restriction period”) from the date of the allocation under the Allocation Contract (hereinafter referred to as the “Transfer restrictions”).

2) Cancellation of Transfer restrictions

On the condition that Applicable Directors continue to be directors, corporate auditors, executives, executive officers, fellows, or a similar status as employees of Yamaha Motor Co., Ltd. during the Transfer restriction period, Yamaha Motor Co., Ltd. is to cancel the Transfer restrictions of all of the allocated shares at the point when the Transfer restriction period expires.
However, if an Applicable Director retires from or relinquishes whatever their position is as set forth above even during the Transfer restriction period due to the expiration of a term, reaching mandatory retirement age, death, or other legitimate reason, the number of the allocated shares for which the Transfer restrictions are to be canceled and the timing thereof is to be reasonably adjusted, as necessary.

3) Gratis acquisition of shares with restriction on transfer

In the case that an Applicable Director retires from or relinquishes whatever their position is as a director, corporate auditor, executive, executive officer, fellow, or similar status as an employee of Yamaha Motor Co., Ltd. before the expiration of the Transfer restriction period, and excluding cases of the expiration of a term, reaching mandatory retirement age, death, or other legitimate reason, Yamaha Motor Co., Ltd. is to naturally acquire for gratis all of the allocated shares. The same is to apply to the allocated shares for which Transfer restriction has not been canceled based on the provisions listed in (2) above at the point when the Transfer restriction period expires.

4) Handling in the event of organizational restructuring

If, during the Transfer restriction period, a merger contract in which Yamaha Motor Co., Ltd. is the defunct company, a share exchange contract in which Yamaha Motor becomes a wholly-owned subsidiary, a share transfer plan, or other item related to organizational restructuring, etc., is approved at a Yamaha Motor Ordinary General Meeting of Shareholders, (however, when approval at a Yamaha Motor Ordinary General Meeting of Shareholders is not required regarding the organizational restructuring, etc., of concern, then the Board of Directors of Yamaha Motor), the Transfer restrictions are to be canceled by a resolution of the Board of Directors of Yamaha Motor in advance of the effective date of the organizational restructuring, etc., of concern for a reasonably-specified number of the allocated shares, bearing in mind the period from the date of commencement of the Transfer restriction period until the date of approval of the organizational restructuring, etc., of concern. In addition, Yamaha Motor is to naturally acquire for gratis the allocated shares for which Transfer restrictions were not canceled at the point directly after Transfer restrictions were canceled pertaining to the provisions above.

5) Malus Clawback system

If an Applicable Director violates any laws and/or regulations during the Transfer restriction period, or if it becomes clear that certain reasons specified in the allotment agreement have occurred, Yamaha Motor will acquire all or part of the allotted shares held by the Applicable Director at no cost.
If it becomes clear that an Applicable Director has violated any laws and regulations or any other reason specified in this Allocation Contract within two years after the expiration of the Transfer restriction period, Yamaha Motor may request the Applicable Director to return all or part of the allotted shares held, or to pay a sum equivalent to the market value in lieu of the shares concerned.

6) Other provisions

Other provisions concerning this Allocation Contract shall be determined by the Board of Directors of Yamaha Motor.

Reference

Yamaha Motor is subject to the approval of each of the above series of proposals relating to the revision of the remuneration system for directors at this Ordinary General Meeting of Shareholders. Yamaha Motor also plans to allocate the same Performance Share as above to executive officers and fellows who do not concurrently serve as directors of Yamaha Motor.

End of Document

[Reference] Outline of the Remuneration System Revision for Executives

(provided that each of the above series of proposals related to the remuneration system revision for executives is approved at this Ordinary General Meeting of Shareholders)

(1) Remuneration mix / Remuneration level

With the aim of expanding performance-based remuneration, Yamaha Motor will revise the remuneration mix and remuneration level of directors, etc. (including executive officers who do not concurrently serve as directors) by referring to objective remuneration market research data (remuneration level of a manufacturing company of the same scale as the Company, which extends its business globally). As for outside directors and corporate auditors, Yamaha Motor will revise the remuneration level in the same way as directors, etc., as the roles expected by the company and the actual workload increase.

(2) Companywide performance-based bonuses

As adjustment items for evaluation by ROA, Yamaha Motor will add the overall progress of efforts to resolve materiality and ESG external evaluations.
(* Individual performance-based bonuses for directors other than representative directors have not changed.)

(3) Share remuneration

Yamaha Motor will introduce a new Performance Share system (settled in restricted stock) that determines the number of granted shares in conjunction with the TSR (Total Shareholder Return) performance of Yamaha Motor, in place of the existing restricted share remuneration system with no attached performance conditions. The number of shares to be granted is determined by multiplying the target number of shares to be granted according to the target grant value set for each title by the TSR performance factor (Variations occur from 0 to 150%. However, if the TSR performance factor is less than 50%, the TSR performance factor is set to zero.).
As previously, until retiring from the position of director, etc., the shares to be granted cannot be transferred, have collateral rights set, or otherwise disposed of.

Reference Chart 1 Example of remuneration mix ratio of the President and CEO (comparison between current system and new system)

*Remuneration mix ratio is calculated based on the target value.

Reference Chart 2 TSR Performance Factor

Reference Chart 3 Remuneration amount (upper limit amount) for directors and corporate auditors before and after the revision

The company plans to request approval for (1) and (2) at this Ordinary General Meeting of Shareholders.

(End of document)