Japan Petroleum Exploration : Re-establishment of compensation limits for Performance-linked Share based Compensation Plan(196.5 KB)

Note: The following is an English translation of the Japanese-language original.

May 14, 2024

Company Name: Japan Petroleum Exploration Co., Ltd. (JAPEX)

Securities Code:	1662 (Prime Market of the Tokyo Stock Exchange)
Representative:	Michiro Yamashita, Representative Director and President
Inquiries:	Corporate Communication Office
TEL:	[phone]
	Re-establishment of compensation limits
	for Performance-linkedShare-based Compensation Plan

Japan Petroleum Exploration Co., Ltd. (JAPEX) has received approval for the introduction of a performance-linkedshare-based Compensation Plan called the "Board Benefit Trust (BBT) " (hereinafter "the Plan") for directors excluding outside directors and Executive Officers who don't concurrently serve as Directors (hereinafter collectively referred to as "Directors, etc.") at the 50th Annual General Meeting of Shareholders on June 26, 2020, and the Plan has been implemented to date.

JAPEX resolved to review the Plan and re-establish the compensation limits for the Plan at the Board of Directors held today. Therefore, JAPEX has decided to submit a proposal for its re-establishment to the 54th Ordinary General Meeting of Shareholders held on June 26, 2024 (hereinafter "the Shareholders' Meeting") as follows.

1. Background and the Purpose of Review

JAPEX has introduced the Plan to further clarify the linkage between compensation for the Directors, etc. and JAPEX's corporate performance and share value, and to ensure that not only the benefits of increases in share prices but also the risk of decrease in share prices is shared between Directors, etc. and the shareholders, in order to further motivate Directors, etc. to contribute to the improvement of the business performance and corporate value over the medium-to-long term. To make the Plan as an appropriate incentive to enhance its corporate value over the medium-to-long term and to further promote value sharing with shareholders, JAPEX has decided to review this system and submit a proposal to the Shareholders' Meeting to re-establish the compensation limit for the Plan. Specifically, considering the abovementioned purpose, JAPEX will review the maximum number of points per fiscal year. In conjunction with the review, taking into consideration the impact of stock price fluctuations on the number of shares to be acquired by the Trust, JAPEX will not set an upper limit on the amount of money to be contributed to the Trust and will determine a specific calculation method for the amount of compensation, etc. under the Plan.

2. Reference information for the Plan

(Underlines indicate major changes from the current Plan)

1. Outline of the Plan

The Plan is a performance-linkedshare-based compensation plan under which JAPEX's shares are acquired through a trust, using money contributed by JAPEX as the financial funds (hereinafter the trust that is established based on the Plan is referred to as "the Trust"), and Directors, etc. are provided with the JAPEX's shares and an amount of money equivalent to the market value of the JAPEX's shares (hereinafter referred to as "JAPEX's Shares, etc.") through the Trust, in accordance with the Rules on Provision of Shares to Officers established by JAPEX. Directors, etc. shall receive the JAPEX's Shares, etc. upon their retirement from office, in principle.

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1. Establishment of Rules on Provision of Shares to Officers

[Trustor]

(4) Granting of points

Directors, etc.

JAPEX

(2) Entrustment of money

(5) Non-exercise of

Instructions on

Trust administrator

voting rights

non-exercise of voting rights

(3) Acquisition

[Trustee]

Mizuho Trust & Banking Co., Ltd.

[Beneficiary]

of shares

(Re-trusted to the

Directors, etc. who have retired

Custody Bank of Japan, Ltd.)

and satisfy the beneficiary

(6) Provision of

requirements

JAPEX's shares

JAPEX's Shares, etc.

Acquisition of beneficiary rights

1. JAPEX will establish the Rules on Provision of Shares to Officers within the scope of the framework approved in this proposal.
2. JAPEX will entrust money within the scope approved in this proposal.
3. The Trust will acquire JAPEX's shares through the stock market on which JAPEX's shares are listed, or by way of subscribing to a disposition of JAPEX's treasury shares, using the money entrusted as in (2) above as the funds.
4. JAPEX will grant points to Directors, etc. in accordance with the Rules on Provision of Shares to Officers.
5. The Trust will not exercise voting rights of JAPEX's shares held in the Trust in accordance with the instructions of the trust administrator, who is independent from JAPEX.
6. The Trust will provide those individuals who retire from office as Directors, etc. and fulfill the beneficiary eligibility requirements stipulated in the Rules on Provision of Shares to Officers (hereinafter referred to as the "Beneficiaries") with JAPEX's shares, according to the number of points granted to the relevant Beneficiary. However, if a Director, etc. fulfills the requirements stipulated in the Rules on Provision of Shares to Officers, JAPEX will provide the Director, etc. with money equivalent to the market price of JAPEX's shares, for a certain proportion of the number of granted points.

1. Persons eligible for the Plan
   Directors (excluding Outside Directors) and Executive Officers who do not concurrently serve as

Directors.

(3) Trust period

From August 2020 until the termination of the Trust. (With regard to the trust period, we shall not set a specific date for the termination of the Trust, and the Trust will continue as long as the Plan continues. The Plan will terminate upon the delisting of JAPEX's shares or abolition of the Rules on Provision of Shares to Officers, or in certain other cases.)

1. Trust amount (amount of compensation, etc.)
   JAPEX has introducedthe Plan for the three fiscal years from the fiscal year ended March 31, 2021

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to the fiscal year ended March 31, 2023(hereinafter, such three-fiscal-year period is referred to as the "Initial Period," while the Initial Period and each five consecutive fiscal year period following the Initial Period are respectively referred to as the "Applicable Period"), as well as each Applicable Period that follows. With respect to the Initial Period, JAPEX has contributed 141 million yen to the Trust as funds for the acquisition of JAPEX's sharesto provide Directors, etc. with JAPEX's shares, etc. under the Plan, and established the Trust, the beneficiaries of which are Directors, etc. who satisfy the requirements. The Trust acquired 77,600 shares of JAPEX's stock for the Initial Period, using money entrusted by JAPEX as the source of funds.

Furthermore, after the expiration of the Initial Period, in principle, for each Applicable Period, JAPEX will reasonably estimate the number of shares necessary to provide benefits to Directors, etc. and make additional contributions to the Trust of the funds deemed necessary for the Trust to acquire the shares in advance under the Plan.However, in the case that such additional contributions are made, if JAPEX's shares (excluding the number of the JAPEX's shares that have not yet been provided to Directors, etc. equivalent to points granted to them for each Applicable Period up to the immediately preceding Applicable Period) and money remain in the Trust (such shares and money are collectively referred to as the "Remaining Shares, etc."), JAPEX will use Remaining Shares, etc. to fund the benefits under the Plan in subsequent Applicable Period, and calculate the amount of the additional contribution after taking into account the Remaining shares, etc.

Moreover, JAPEX shall disclose information in a timely and appropriate manner, in the event of a decision to make additional contributions.

(5) Acquisition method of JAPEX's shares and number of shares to be acquired by the Trust

The Trust shall acquire the JAPEX's shares through the stock market on which JAPEX's shares are listed, or by way of subscribing to a disposition of JAPEX's treasury shares, using the money contributed in accordance with (4) above as the funds.

Since the maximum number of points to be granted to Directors, etc. is 45,400 points per fiscal year as described in (6) below, the maximum number of JAPEX's shares to be acquired by the Trust for each Applicable Period is 227,000 shares.

The details of the acquisition of JAPEX's shares by the Trust shall be disclosed in a timely and appropriate manner.

(6) Calculation method of the number of JAPEX's Shares, etc. to be provided to Directors, etc.

Based on the Rules on Provision of Shares to Officers, JAPEX shall grant Directors, etc. a specified number of points determined after having given consideration to factors related to the respective fiscal years, such as their positions and business performance of JAPEX. The total number of points granted to Directors, etc. per fiscal year shall be limited to 45,400 points(including 18,300 pointsfor Directors). This was decided based on a comprehensive consideration of the current level of officer compensation, as well as trends and future prospects, etc. for the number of Directors, etc., and was judged to be appropriate.

Each point granted to the Directors, etc. shall be converted into one common share of JAPEX at the time of the provision of JAPEX's Shares, etc., as explained in (7) below (provided, however, in the case where JAPEX's shares become the subject of a share split, allotment of shares without contribution, or consolidation of shares, etc. after this proposal is approved, the limit on the number of points, accumulated number of points granted, or the conversion rate shall be adjusted in a reasonable manner, in proportion to the relevant ratio, etc.).

The number of shares equivalent to the maximum number of points granted to Directors, etc. per fiscal year (45,400 shares), as a percentage of the total number of issued shares (as of March 31, 2024; excluding treasury shares) is approximately 0.09%.

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The number of points for Directors, etc. to be used as the basis for the provision of JAPEX's Shares, etc. described in (7) below shall be the accumulated points granted to Directors, etc. by the time of their retirement from office, in principle (hereinafter referred to as the "Number of Points Held" for the points calculated in this manner).

(7) Provision of the JAPEX's Shares, etc.

If a Director, etc. retires from office and fulfills the beneficiary requirements stipulated in the Rules on Provision of Shares to Officers, the Director, etc. may receive the provision of JAPEX's shares from the Trust after his/her retirement from office, in accordance with the Number of Points Held as explained in (6) above, in principle, by completion of the prescribed procedures to become a beneficiary. However, if the requirements stipulated in the Rules on Provision of Shares to Officers are fulfilled, a Director, etc. can receive monetary provisions equivalent to the market value of JAPEX's shares, in place of provision of JAPEX's shares, for a certain proportion. In this case, the Trust may sell JAPEX's shares in order to make the monetary provisions.

Even Directors, etc. who have been granted points may not acquire all or part of the right to receive benefits if any of the matters stipulated in the Directors' Share Benefit Regulations arise.

(8) Exercising voting rights

Voting rights of JAPEX's shares held in the Trust shall not be exercised, without exception, at the instruction of the trust administrator. This is intended to ensure that the exercise of voting rights of JAPEX's shares held in the Trust is neutral with respect to the management of JAPEX.

(9) Handling of dividends

The dividends of JAPEX's shares held in the Trust shall be received by the Trust, and shall be used primarily for acquisition of JAPEX's shares, or for trust fees to the trustee pertaining to the Trust. Upon any termination of the Trust, any dividends, etc. remaining in the Trust shall be provided to the Directors, etc. in office at that point in time in a proportionate manner, depending on the number of points respectively held.

(10) Handling of the termination of the Trust

The Trust will terminate in cases such as the delisting of JAPEX's shares or abolition of the Rules on Provision of Shares to Officers.

With regard to JAPEX's shares among the residual assets of the Trust at the time of termination of the Trust, JAPEX plans to acquire all such shares without consideration, and cancel them by resolution of the Board of Directors. Of the residual assets of the Trust at the time of termination of the Trust, the balance of said money excluding money provided to Directors, etc. in accordance with (9) above, will be provided to JAPEX.

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[Outline of the Trust]

(1) Name:	Board Benefit Trust (BBT)
(2) Trustor:	Japan Petroleum Exploration Co., Ltd. (JAPEX)
(3) Trustee:	Mizuho Trust & Banking Co., Ltd.
	(Re-Trustee: Custody Bank of Japan, Ltd.)
(4) Beneficiaries:	Directors, etc. who have retired and satisfy the beneficiary
	requirements stipulated in the Rules on Provision of Shares to
	Officers
(5) Trust administrator:	Planned to call for the selection of a third-party with no vested
	interest in JAPEX
(6) Type of trust:	Money trust other than cash trust (third-party beneficiary trust)
(7) Date of conclusion of trust agreement:	August 25, 2020
(8) Date of entrustment of money:	August 25, 2020
(9) Period of trust:	From August 25, 2020 until termination of the trust
	(The trust will continue, without a specific termination date, as long
	as the Plan continues.)
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