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Compensation of Members of the Board and Audit & Supervisory Board Members

Last updated : August 12, 2021

The Board of Directors resolved at its meeting held on May 12, 2021 to revise the policy for determining details of individual compensation and related matters for Members of the Board (hereinafter referred to as the "Determination Policy"), contingent on the approval of Second and Third Items submitted to the General Meeting of Shareholders.

With respect to the determination policy for compensation and the composition and level of compensation for Members of the Board of NTT, in order to secure objectivity and transparency, NTT established the Appointment and Compensation Committee, comprised of four Members of the Board, including two outside independent Members of the Board. Compensation matters are decided by the Board of Directors after deliberation by this committee. Moreover, decisions on the composition ratios and calculation methods for compensation, and individual amounts of compensation for each Member of the Board, are delegated by the Board of Directors to the Appointment and Compensation Committee.

Compensation of Members of the Board (excluding outside Members of the Board) consists of a monthly salary (base salary). a bonus (compensation linked to short-term performance) and NTT stock purchased through the Board Members Shareholding Association and stock compensation (compensation linked to medium- to long-term performance).

The base salary is a fixed compensation paid monthly on the basis of the scope of roles and responsibilities of each Member of the Board. The bonus is paid in June each year, taking into account NTT's business results for the current fiscal year.

With respect to the performance indicators for bonuses, performance is evaluated against the performance indicator targets set forth in the Medium-Term Management Strategy.

In addition, Members of the Board make contributions of a certain defined amount or more every month for the purchase of NTT shares through the Board Members Shareholding Association in order to reflect NTT's medium- to long-term business results in compensation. All purchased shares are to be held by the Members of the Board throughout their terms of office.

Stock compensation is made pursuant to a trust established by NTT. Members of the Board are granted points corresponding to their role in June of each year, and a performance-linked coefficient corresponding to the degree to which performance indicators have been achieved is determined in June of the year following the final fiscal year of the Medium-Term Management Strategy. The number of shares to be granted to each Member of the Board is calculated by multiplying the performance-linked coefficient by the number of accumulated points. Shares are granted upon retirement.

The composition ratio of compensation in the event that standard business results are achieved is roughly as follows: Fixed compensation: Short-term performance-linked compensation: Medium- to long-term performance-linked compensation = 50%: 30%: 20% (before the revision, the composition ratio of compensation in the event that standard business results are achieved is roughly as follows: Fixed compensation: Performance-linked compensation = 70%: 30%).

In order to maintain a high level of independence, compensation of outside Members of the Board consists of monthly fixed compensation only, and is not linked to NTT's business results. Compensation of Audit & Supervisory Board Members is determined by resolution of the Audit & Supervisory Board and consists of a base salary only, for the same reasons as those cited above with respect to outside Members of the Board. In the fiscal year ended March 31, 2021, the membership of the Appointment and Compensation Committee consisted of Jun Sawada (Representative Member of the Board, President), Akira Shimada (Representative Member of the Board, Senior Executive Vice President), Katsuhiko Shirai (outside Member of the Board), and Sadayuki Sakakibara (outside Member of the Board). The committee maintained the same membership from April 2021, and, starting on August 6, 2021, Ken Sakamura (outside Member of the Board) has been added as an additional member.

Bonus Performance Indicators

The financial targets set forth in the Medium-Term Management Strategy and other measures are set as performance indicators, and evaluations are made based on the level of year-on-year improvement or degree to which the plan has been achieved.

Performance
Indicators*
Evaluation
Weighting
Evaluation
Method
Results
(Fiscal Year Ended March 31 2020)
Results
(Fiscal Year Ended March 31 2021)
EPS 35% Year on Year
improvement
¥231 ¥248
Performance
Indicators*
Evaluation
Weighting
Evaluation
Method
Results
(Fiscal Year Ended March 31 2020)
Results
(Fiscal Year Ended March 31 2021)
Operating Profit 35% Achievement level
of plan
¥1,590.0 billion ¥1,671.4 billion
ROIC 9% 6.8% 7.2%
Capex to Sales 6% 13.8% 13.6%
Overseas Sales 6% $18,390 million $18,648 million
Overseas Operating
Profit Margin
6% 2.2% 3.0%

* In addition to the above performance indicators, the level of achievement of the plan target for the number of B2B2X projects was evaluated.

Total Compensation of Members of the Board and Audit & Supervisory Board Members (Fiscal Year Ended March 31, 2021)

The new determination policy for compensation is as described in the above section. As compensation and related matters of Members of the Board for the fiscal year under review were determined on the basis of the determination policy prior to the revision, an overview of such policy is described below.

Compensation of Members of the Board (excluding outside Members of the Board) consists of a base salary and bonuses. The base salary is paid on the basis of the scope of each Member of the Board's roles and responsibilities. The bonus is paid based on consideration of the degree to which performance indicators have been achieved. The financial targets set forth in the Medium-Term Management Strategy have been selected as performance indicators, based on the reasoning that creating a clearer correlation between the compensation of Members of the Board and NTT's corporate value increases the motivation to achieve the financial targets set forth in the Medium-Term Management Strategy. In addition, the method for calculating bonuses is to convert the level of year-on-year improvement or the achievement level of the plan for each financial target into a payment rate with a predetermined method for each indicator, weighting the average based on the weight of each indicator and then multiplying the base salary by position by a fixed number. (Please refer to “Bonus Performance Indicators” above.) In addition, Members of the Board make contributions of a certain defined amount or more from their base salary and bonus for the purchase of NTT shares through the Board Members Shareholding Association in order to reflect NTT's medium-to longterm business results in compensation. All purchased shares are to be held by the Members of the Board throughout their terms of office. The composition ratio of compensation in the event that standard business results are achieved is roughly as follows: Fixed compensation: Performance-related compensation = 70%: 30%.

In order to maintain a high level of independence, compensation of outside Members of the Board consists of a monthly base salary only, and is not linked to NTT's business results.

Specific details of individual compensation and related matters for Members of the Board for the fiscal year under review were determined by the Appointment and Compensation Committee in accordance with the Determination Policy resolved at the Board of Directors. Matters for which authority has been delegated to the Appointment and Compensation Committee by the Board of Directors include the determination of the proportion of compensation, the method of calculation and the amount of compensation for each individual. These matters have been entrusted to the Appointment and Compensation Committee because the committee comprises two Representative Members of the Board and two outside Members of the Board (Jun Sawada (Representative Member of the Board, President), Akira Shimada (Representative Member of the Board, Senior Executive Vice President), Katsuhiko Shirai (outside Member of the Board) and Sadayuki Sakakibara (outside Member of the Board), Ken Sakamura (outside Member of the Board) ), and is considered to be capable of making appropriate judgments by maintaining a bird's-eye view of the business performance of the entire company while also considering outside perspectives.

Note that the method of determining the Determination Policy for details of the individual compensation and related matters of Members of the Board, and an overview of the particulars of the Determination Policy, are as provided in the previous section. When determining the details of the individual compensation and related matters of Members of the Board, as the Appointment and Compensation Committee conducts an examination from multiple perspectives including consistency with the Determination Policy, the Board of Directors also respects the committee's judgment, and has determined that the details of the individual compensation and related matters of Members of the Board for the fiscal year under review are in line with the Determination Policy.

Compensation of Audit & Supervisory Board Members is determined by resolution of the Audit & Supervisory Board and consists of a base salary only, for the same reasons as those cited above with respect to outside Members of the Board.

During the fiscal year ended March 31, 2021, in addition to the Appointment and Compensation Committee meeting five times, committee members met on multiple occasions to exchange opinions, engaging in active discussions on subjects such as enhancing governance at Group companies, succession planning and revising the officer compensation system.

Total Compensation of Members of the Board and Audit & Supervisory Board Members (Fiscal Year Ended March 31, 2021)

Class Number of Persons
Paid

(persons)
Monthly
Remuneration

(millions of yen)
Board Member
Bonuses

(millions of yen)
Total Amount
(millions of yen)
Members of the Board
(excluding Outside Members of the Board)
12 290 97 387
Audit & Supervisory Board
Members
(excluding Outside Audit & Supervisory Board Members)
3 74 - 74
Total 15 364 97 461

Notes:

1. Compensation amounts shown above include compensation paid to eight Members of the Board and one Audit & Supervisory Board Member who resigned on June 23, 2020, at the conclusion of the 35th Ordinary General Meeting of Shareholders.

2. Maximum limits on total annual compensation of Members of the Board had previously been set at up to ¥750 million for Members of the Board at the 21st Ordinary General Meeting of Shareholders held on June 28, 2006. At the 36th Ordinary General Meeting of Shareholders held on June 24, 2021, however, it was resolved that compensation would be revised to comprise the following three types: (i) amount of monetary compensation: up to ¥600 million per year; (ii) amount to be paid to Members of the Board as funds to acquire company shares through the Board Members Shareholding Association: up to ¥50 million per year; and (iii) funds to be contributed to the performance-linked stock compensation system: up to ¥100 million per year. If all three types of compensation are aggregated, the resulting amount of up to ¥750 million per year would maintain the previous level of compensation. The actual amount of total compensation paid for the fiscal year ended March 31, 2021 was ¥447 million.

3. In addition to the above, an aggregate of ¥3 million is to be paid to Members of the Board who are also employees as bonuses for their service as employees.

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