Governance

Corporate Governance

Basic Policy

The Sumitomo Forestry Group utilizes wood as a healthy and environmentally friendly natural resource to provide a diverse range of lifestyle-related services that contribute to the realization of a sustainable and prosperous society. All our efforts are based on Sumitomo's Business Spirit, which places prime importance on fairness and integrity for the good of society. Based on this corporate philosophy, we strive to ensure management transparency and sound and legal business practices as well as rapid decision-making and business execution.

By further enhancing and strengthening our corporate governance through these efforts, we aim to continuously increase our corporate value and conduct management that lives up to expectations of various stakeholders of the Group.

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Corporate Governance and Internal Control

Sumitomo Forestry introduced the executive officer system to separate decision making and management oversight functions from operational execution functions. Composed of ten directors (eight male/80.0%, two female/20.0%) including four outside directors (two male, two female), the Board of Directors is structured to make quick decisions. The oversight function of the Board of Directors has been strengthened, the lines of operational responsibility clarified, and the chairman of the Board of Directors no longer serves as an executive officer. The Nomination and Remuneration Advisory Committee was also established to express opinions to the Board of Directors on the selection of director and Audit & Supervisory Board member candidates and executive officers as well as on the decision of remuneration of directors and executive officers, for the purpose of ensuring transparency and fairness of decision-making.

Composition of Directors (by gender)*

Male Female
Number of persons 8 2
Ratio (%) 80 20

*As of March 27, 2026

Composition of Directors (by age group)*

50s 60s 70s
Number of persons 3 4 3
Ratio (%) 30 40 30

*As of March 27, 2026

Sumitomo Forestry is a company with Audit & Supervisory Board. In addition to attending important meetings within the company, the Audit & Supervisory Board members conduct audits of the directors' execution of duties, through sharing information and opinions with auditors of Group companies and the staff of the internal audit departments, and by supervising staff assisting auditing operations.

As of March 27, 2026, Sumitomo Forestry has ten directors (including four outside directors), five Audit & Supervisory Board members (including three outside members) and 20 executive officers (including five persons concurrently serving as directors) and has notified Tokyo Stock Exchange, Inc. of the designation of four outside directors and three outside Audit & Supervisory Board members as independent officers as required by its regulations.

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Corporate Governance System

Corporate Governance System

Board of Directors and Executive Committee

In principle, the Board of Directors meets once a month, making decisions and carrying out its supervisory function for important issues in accordance with its discussion standards. In addition to making decisions on all important items and confirming business results, it supervises the directors' execution of their duties, receiving reports on the status of execution from the directors. Directors and Audit & Supervisory Board members are required to maintain an attendance rate of 75% or higher as a general rule.

The Executive Committee, which is an advisory body to the President, holds a meeting twice a month to sufficiently discuss important issues before the Board of Directors meetings. It is attended by the directors who also serve as executive officers, as well as full-time Audit & Supervisory Board members as a general principle.

Under the system as mentioned above, we ensure prompt decision-making and the separation of supervision and operational execution functions for the effectiveness of the Board of Directors. In fiscal 2025, the Board of Directors meetings were held 15 times while the Executive Committee meetings were held 27 times.

List of Directors

Position*1 Name Responsibility and Significant Concurrent Positions*1 Board of Directors*2
Attendance Frequency (times) Attendance Rate (%)
Representative Director,
Chairman of the Board		 Akira Ichikawa Outside Director, Sumitomo Chemical Company, Limited
Outside Director, Daiwa Securities Group Inc.		 15 100
Representative Director,
President and Executive Officer		 Toshiro Mitsuyoshi ― 15 100
Representative Director,
Executive Vice President		 Tatsumi Kawata Divisional Manager of Corporate Division,
Overseeing Lifestyle Service Division		 15 100
Director,
Senior Managing Executive Officer		 Atsushi Kawamura Divisional Manager of Real Estate Division,
Overseeing Timber and Building Materials Division and Overseas Housing Division		 15 100
Director,
Managing Executive Officer		 Nobuyuki Otani Deputy Divisional Manager of Corporate Division (Head of Corporate Planning and Finance),
Overseeing Environment and Resources Division		 15 100
Director,
Managing Executive Officer		 Kenji Inui*3 Divisional Manager of Housing Division ー ー
Outside Director Mitsue Kurihara Chairman & Director of Value Management Institute, Inc.,
Outside Director of Chubu Electric Power Co., Inc.,
Outside Director of Japan Finance Corporation,
Outside Director (Audit & Supervisory Committee Member) of Mizuho Bank, Ltd.		 15 100
Outside Director Yuko Toyoda Attorney at Law 15 100
Outside Director Toshio Iwamoto Outside Director of Daiwa Securities Group Inc.,
Outside Director of East Japan Railway Company,
Outside Director of Isetan Mitsukoshi Holdings Ltd.		 15 100
Outside Director Kenji Sukeno*4 Chairman & Director of FUJIFILM Holdings Corporation,
Chairman & Director of FUJIFILM Corporation,
Director of FUJIFILM Business Innovation Corporation,
Outside Director of Isetan Mitsukoshi Holdings Ltd.		 12 100

*1Position, responsibility, and significant concurrent positions are as of March 27, 2026.

*2Lists the attendance frequency and rate at Board of Directors meetings in fiscal 2025.

*3Assumed the position on March 27, 2026.

*4Lists the situation since assuming the position of Director on March 28, 2025.

Structure of the Board of Directors

The Board of Directors is composed of 17 individuals selected based on their knowledge, experience and ability. Specifically, Sumitomo Forestry appoints those who have a wealth of experience and proven track records in the operations of the Sumitomo Forestry Group, those who have abundant experience and expertise concerning business management, industries and governmental policies, and those who are specialists in laws and accounting as its directors, while also giving consideration to their diversity, including gender and nationality.

Officer Skill Matrix

The table below outlines the skills (expertise and experience) that Sumitomo Forestry takes into special consideration for each of the directors and Audit & Supervisory Board members.

Position Corporate management Resources, environment Construction,
real estate development		 Global Finance, accounting Human resources development, DEI Legal, risk management IT/DX Industrial policy
Directors Akira Ichikawa Chairman of the Board, Representative Director ● ● ● ● ● ● ●
Toshiro Mitsuyoshi Representative Director, President, Executive Officer ● ● ● ●
Tatsumi Kawata Representative Director, Executive Vice President ● ● ● ● ● ● ●
Atsushi Kawamura Director, Senior Managing Executive Officer ● ● ● ●
Nobuyuki Otani Director, Managing Executive Officer ● ● ● ●
Kenji Inui Director, Managing Executive Officer ● ●
Mitsue Kurihara Outside Director ● ● ● ● ●
Yuko Toyoda Outside Director ● ●
Toshio Iwamoto Outside Director ● ● ● ●
Kenji Sukeno Outside Director ● ● ● ● ●
Audit & Supervisory Board Members Toshio Kakumoto Audit & Supervisory Board Member ● ●
Junko Saishu Audit & Supervisory Board Member ● ● ● ●
Yoshimasa Tetsu Outside Audit & Supervisory Board Member ●
Takashi Kawachi Outside Audit & Supervisory Board Member ● ● ●
Naoko Munakata Outside Audit & Supervisory Board Member ● ● ● ●

Reasons for Selection of the Skills

Corporate management The Company needs board members who have experience in corporate management to achieve further growth of existing businesses, which cover a wide variety of aspects of people's lifestyles, such as forestry management, timber and building materials distribution and manufacturing, housing construction, etc. and to fulfill our long-term vision amidst a global movement toward decarbonization.
Resources/Environment In our long-term vision, we have set out to enhance the value of "forests" and "trees" through sustainable forestry management. To promote the creation of new value from properly managed forests and the expansion of sustainable forests, and to steadily implement initiatives such as responding to the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures) and TNFD (Task Force on Nature-related Financial Disclosures), as well as achieving our SBT-based greenhouse gas emissions reduction targets, the Company needs board members who have expertise and experience in resources and the environment.
Construction/
Real estate development		 The Company needs board members who have expertise and experience in construction and real estate development to establish an early and stable profit base for our medium- and large-scale wooden construction operations, as set out in our long-term vision and Medium-Term Management Plan, and to ensure that our real estate development operations contribute sustainably to the realization of the wood cycle.
Global "Advancing globalization" is one of the business policies of our long-term vision. The Company needs board members who have global experience to promote the expansion of the business areas and scale of our overseas group operations.
Finance/Accounting To execute strategic investments with an awareness of capital costs while maintaining financial soundness and achieving sustainable and steady profit growth, the Company needs board members who have expertise and experience in finance and accounting.
Human resource development/DEI In our long-term vision, we have set out to enhance "value for people and society." To strengthen our ability to continually secure and develop talent capable of driving business transformation and innovation, and to foster a vibrant organizational culture that maximizes employee performance while promoting health and well-being, the Company needs board members who have expertise and experience in human resource development and DEI (diversity, equity, and inclusion).
Legal affairs/
Risk management		 The Company needs board members who have expertise and experience in legal affairs and risk management to create a corporate governance structure for sustainable growth and mid- to long-term improvement of corporate value, and to build a risk management system for the global growth of our business operations and other.
IT/DX In our long-term vision, we have set out to enhance "value for the market economy." To renew our business foundation through IT and digitalization, drive operational reform and efficiency through digital transformation (DX), and strengthen the medium- to long-term competitiveness of our businesses by leveraging emerging IT technologies, the Company needs board members who have expertise and experience in IT and DX.
Industrial policy In our long-term vision, we have set out to enhance "value for the market economy." The Company must create policy frameworks in relation to society and therefore needs board members who have knowledge of industrial policy to promote the value and market penetration of sustainable, decarbonization-contributing products and services.

Nomination Procedure for Directors

Director candidates are selected by the Board of Directors from a pool of personnel who have superior personality traits and acumen as well as potential value to the business management of Sumitomo Forestry through consultation with the Nomination and Remuneration Advisory Committee. In addition, only those who meet the following criteria are selected to be director candidates:

(1) Have a strong sense of ethics

(2) Be able to implement the corporate philosophy of the Sumitomo Forestry Group

(3) Have the management ability (skills) necessary to increase our corporate value on a medium- to long-term basis.

Summaries of the background and interlocking status of the directors are available on our official website.

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Training for Directors

Sumitomo Forestry has established a provision on training for directors, Audit & Supervisory Board members, and executive officers in Article 15 of its Basic Policy on Corporate Governance. Under this policy, the company provides information and training opportunities to directors, Audit & Supervisory Board members and executive officers both at the time of appointment and on an ongoing basis during their term of office. In fiscal 2025, we provided the Board of Directors with training on the responses to be made to changes in the market environment.

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Analysis and Evaluation of the Effectiveness of the Board of Directors and the Results

1. Method of evaluation
(1) Evaluation process
This fiscal year, we conducted a questionnaire survey on the following self-evaluation items targeting all directors and Audit & Supervisory Board members. For this anonymous survey, we received advice from an external organization and asked the respondents to send their completed questionnaire forms directly to the external organization to ensure anonymity. We also had the questionnaire results evaluated externally. In addition, the Board of Directors checked the fulfillment level of their roles as set out in the company’s Basic Policy on Corporate Governance and exchanged opinions with Audit & Supervisory Board members for the evaluation of their own effectiveness.

(2) Evaluation items

  • Composition of the Board of Directors
  • System for supporting the directors and Audit & Supervisory Board members
  • Management of the Board of Directors
  • Training
  • Management strategies and plans
  • Dialogue with shareholders (investors)
  • Internal controls and risk management
  • Measures taken by themselves
  • Functions related to nomination, remuneration and monitoring
  • Evaluation of the Nomination and Remuneration Advisory Committee
  • Performance of outside directors
  • Overall evaluation

2. Results of evaluation
(1) Overall evaluation
As a result of the evaluation described in 1., the Board of Directors was evaluated to be functioning effectively.

(2) Measures taken for the issues identified in the previous fiscal year’s evaluation
1) For the Board of Directors to appropriately supervise the formulation of successor candidate development plans to increase their effectiveness, the Nomination and Remuneration Advisory Committee discussed the items related to the director candidate selection criteria to clarify the criteria and other issues, including their approach to the selection of the candidates. The committee also worked to enrich the content of deliberations related to their succession plan and then shared all the details with the Board of Directors.
2) In order to have more meaningful dialogue with shareholders (investors), the status of dialogue with them was reported to the Board of Directors for timely information sharing, feedback and the examination of measures to optimize the dialogue.

(3) Future challenges and measures to meet them
In order to further improve the management of the Board of Directors, we will review issues related to the delegation of authorities, the ideal way to hold discussions at Board meetings, and the content of reference materials.

Sumitomo Forestry will continue to strive to further improve the effectiveness of the Board of Directors by continually working to make improvements on identified issues.

Audit & Supervisory Board

The Audit & Supervisory Board meets to discuss and make decisions on important matters regarding audits. The five members, including three outside members, utilize the deep insights and diverse perspectives they have acquired from their various business backgrounds to conduct audits of the execution of duties by the directors. The Audit & Supervisory Board met 14 times during fiscal 2025.

Sumitomo Forestry also ensures that appropriate personnel are appointed as corporate auditors at its main subsidiaries. For the purpose of improving the effectiveness of audits conducted at the subsidiaries and promoting related information exchange across the Group, we hold a meeting of full-time corporate auditors of Sumitomo Forestry and the corporate auditors of its major subsidiaries as the Group. This groupwide meeting was held six times in fiscal 2025.

Audit & Supervisory Board Members

Position*1 Name Responsibility and Significant Concurrent Positions*1 Board of Directors*2 Audit & Supervisory Board*2
Attendance Frequency (times) Attendance Rate (%) Attendance Frequency (times) Attendance Rate (%)
Full-time Audit & Supervisory Board Member Toshio Kakumoto ― 15 100 14 100
Full-time Audit & Supervisory Board Member Junko Saishu*3 ― ― ― ― ―
Outside Audit & Supervisory Board Member Yoshimasa Tetsu Certified Public Accountant 15 100 14 100
Outside Audit & Supervisory Board Member Takashi Kawachi President of Japan Foundation for Regional Art-Activities,
Outside Audit & Supervisory Board Member of The Yomiuri Shimbun
Special Advisor to the Cabinet		 15 100 14 100
Outside Audit & Supervisory Board Member Naoko Munakata*3 Project Professor, Graduate School of Public Policy, The University of Tokyo
Outside Director (Audit and Supervisory Committee Member) of Murata Manufacturing Co., Ltd.
Outside Director of ExaWizards Inc.		 ― ― ― ―

*1Position, responsibility, and significant concurrent positions are as of March 27, 2026.

*2Lists the attendance frequency and rate at Board of Directors and Audit & Supervisory Board meetings in fiscal 2025.

*3Assumed the position on March 27, 2026.

Outside Directors

We appoint outside directors and Audit & Supervisory Board members based on the following criteria for independence and concurrent Board positions.

(1) Criteria for independence

If none of the following apply, an individual will be considered independent.

1. An executive of the Company
An executive officer, operating officer, manager or other type of worker (hereinafter, “executive”) of the Company, its subsidiary or affiliate

2. Consultant and others
（ⅰ）An employee, partner or other type of worker of an auditing firm that conducts financial audits on Sumitomo Forestry or its subsidiary and is in charge of auditing Sumitomo Forestry or its subsidiary
（ⅱ）A lawyer, certified public accountant, tax attorney or other type of consultant who has received from Sumitomo Forestry or its subsidiary outside of director compensation an annual average of 10 million yen or more in money or other types of financial gain in the past three fiscal years
（ⅲ）An employee, partner, associate or other type of worker of a law office, audit company, tax accountant office, consulting firm or other type of advisory firm that is a major transaction party of Sumitomo Forestry or its subsidiary (has received from Sumitomo Forestry or its subsidiary payment in the amount equivalent to 2% or more of its average consolidated total revenue over the past three fiscal years)

3. Major shareholder (Investor in Sumitomo Forestry)
An individual (or in the case of a corporate entity, an executive of that entity) who directly or indirectly owns at least 10% of Sumitomo Forestry’s total voting rights

4. Major shareholder (Investee for Sumitomo Forestry/its subsidiary)
An executive of a corporate entity that Sumitomo Forestry or its subsidiary owns at least 10% of the entity’s total voting rights

5. Business partners
（ⅰ）Customers (major business partners): An individual (or in the case of a corporate entity, an executive of that entity) to whom Sumitomo Forestry sells in the amount that is equivalent to 2% or more of Sumitomo Forestry’s consolidated net sales
（ⅱ）Suppliers (for whom Sumitomo Forestry is a major business partner): An individual (or in the case of a corporate entity, an executive of that entity) from whom Sumitomo Forestry purchases in the amount that is equivalent to 2% or more of the supplier’s consolidated net sales

6. Lenders
An individual (or in the case of a corporate entity, an executive of that entity) who has lent Sumitomo Forestry in the amount equivalent to 2% or more of Sumitomo Forestry’s consolidated total assets

7. Donation recipients
An individual (or in the case of a corporate entity, an executive of that entity) that Sumitomo Forestry or its subsidiary has donated 10 million yen or 2% of its total revenue a year, whichever is higher, on average over the past three fiscal years

8. Relatives
A spouse or relative within the second degree of an individual who cannot be declared independent according to this standard (excluding persons of no importance*)

9. Past requirements
An individual for whom item 1 within the past ten years, or any of items 2 to 7 within the past five years, applies

10. Mutual appointment of outside directors
An executive or full-time Audit & Supervisory Board member of a company that has an outside director who is an executive director or full-time Audit & Supervisory Board member of the Company or its subsidiary

*A person of no importance, in line with the independence criteria set by the Financial Instruments Exchange, is defined as follows:
・For each company, an individual who is not in the position of executive director, operating officer, manager or general manager of the company
・For advisory firms, such as law firms and auditing firms, an individual who is not the firm’s employee, partner or associate

For the current four outside directors and three outside Audit & Supervisory Board members of Sumitomo Forestry, they are considered independent individuals with no conflict of interest with general shareholders, according to the independency criteria as described above.

(2) Criteria for Concurrent Board Positions

（ⅰ） (i) Regarding the number of concurrent Board positions that can be assumed by a director or an Audit & Supervisory Board member of Sumitomo Forestry at other listed companies, the following rules shall apply:
(a) When serving as an executive director at another company:
Can serve only at the company other than Sumitomo Forestry
(b) In cases other than (a):
Can serve up to four companies other than Sumitomo Forestry

（ⅱ）The rate of attendance at Sumitomo Forestry’s Board of Directors or Audit & Supervisory Board meetings shall be at least 75%.

Nomination and Remuneration Advisory Committee

To ensure its transparency and fairness, the Board of Directors has established the Nomination and Remuneration Advisory Committee as an advisory body and asks the committee’s opinions regarding the selection of candidates for directors and Audit & Supervisory Board members, appointment of executive officers, the dismissal of directors, Audit & Supervisory Board members and executive officers, the evaluation of the Chief Executive Officer and executive officers, and the renumeration for directors and executive officers. The Nomination and Remuneration Advisory Committee is composed of the chairman, the president and all outside officers (four outside directors and three outside Audit & Supervisory Board members) of Sumitomo Forestry. A majority of the committee members are outside officers, and one of them chairs the committee.

The Board of Directors determines the directors’ remuneration within the amount specified by the resolution made at the General Meeting of Shareholders, taking into consideration the opinions stated by the Nomination and Remuneration Advisory Committee. The remuneration for executive officers is also determined by the Board of Directors, taking into consideration the opinions of the Nomination and Remuneration Advisory Committee.

List of Nomination and Remuneration Advisory Committee Members

Position*1 Name Nomination and Remuneration Advisory Committee*2
Attendance Frequency (times) Attendance Rate (%)
Committee chairperson Outside Director Mitsue Kurihara 5 100
Member Outside Director Yuko Toyoda 5 100
Outside Director Toshio Iwamoto 5 100
Outside Director Kenji Sukeno*3 4 100
Outside Audit & Supervisory Board Member Yoshimasa Tetsu 5 100
Outside Audit & Supervisory Board Member Takashi Kawachi 5 100
Outside Audit & Supervisory Board Member Naoko Munakata*4 ー ー
Chairman of the Board and Representative Director Akira Ichikawa 5 100
Representative Director, President and Executive Officer Toshiro Mitsuyoshi 5 100

*1Composition and positions of the Nomination and Remuneration Advisory Committee are as of March 27, 2026.

*2Lists the attendance frequency and rate at Nomination and Remuneration Advisory Committee meetings in fiscal 2025.

*3Lists the situation since assuming the position of Director on March 28, 2025.

*4Assumed the position of Audit & Supervisory Board Member on March 27, 2026.

Risk Management Committee

Information regarding the Risk Management Committee is provided in "Risk Management/ Risk Management Framework".

In fiscal 2025, the Risk Management Committee met four times, the Compliance Subcommittee met twice, and the BCM Subcommittee met twice, and relevant reports were made four times to Board of Directors.

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Sustainability Committee

In response to issues including climate change, SDGs and human rights, we established the Sustainability Committee in fiscal 2018 to meet the growing requirements for medium to long-term initiatives and informational disclosure about the environment, society and governance (ESG).

The Sustainability Committee is made up of executive officers who also serve as directors and divisional managers, with the president acting as the committee chairperson. In pursuit of realizing our Corporate Philosophy, the committee formulates and promotes strategies for the Group’s medium- to long-term sustainability challenges including climate change and nature-related matters, manages the progress of the Mid-Term Sustainability Targets including the analysis of risks and opportunities, and monitors the status of implementation and effectiveness. Furthermore, from January 2024, the Sustainability Committee increased the number of times it meets annually from four to six in order to advance initiatives to address issues related to quality and worker safety.
Details of all committee proceedings are reported to the Board of Directors to contribute to the solution of social issues through our business operations.

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Internal Audits

In reference to the results of risk assessments, those in charge at Sumitomo Forestry's Internal Audit Department annually select about 60 business sites from among roughly 200 business sites in the Group every year to conduct internal audits on them. The staff members are certified as internal auditors by the Institute of Internal Auditors Japan, and some of them are also certified internal auditors (CIA). The sites to be audited are selected in order of priority from the two perspectives of “operational risks” (related to business results, size, complexity of business, etc.) and “control risks” (related to risk management framework). In principle, internal auditors visit the sites to be audited, interview the parties concerned, and check the actual documents and other items on-site. We are also promoting digital transformation (DX), including the introduction of AI tools for auditing.

In the internal audits, the department in charge checks how the business site is executing its operations and managing its office work, including its compliance with laws and regulations, and then reports its findings to the President, the head of the Corporate Division, and to Audit & Supervisory Board members, as well as to the manager responsible for the business site and the executive officer or director in charge of the business site. Furthermore, if any issues had been pointed out before, the department checks the improvement efforts made at the business site by examining related documents and conducting quarterly follow-up reviews. Furthermore, the plans and results regarding internal audits are reported directly to the Board of Directors, and a discussion session with outside officers is held at least once a year regarding internal audits.

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Executive Remuneration

In accordance with related laws and regulations, Sumitomo Forestry discloses information about the remuneration paid to officers (directors and Audit & Supervisory Board members) each fiscal year.

Total Remuneration Paid to Directors and Audit & Supervisory Board Members

(Fiscal 2025)

Classification Total amount of remuneration and other
(¥ million)		 Total amount of remuneration and other by type
(¥ million)		 Number of eligible Officers
Monthly remuneration Performance-based remuneration
(bonus)		 Non-monetary remuneration
(performance-based restricted stock remuneration)
Directors
(excluding Outside Directors)		 522 313 129 80 6
Audit & Supervisory Board Members
(excluding Outside Audit & Supervisory Board Members)		 54 54 － － 2
Outside Directors 59 59 － － 5
Outside Audit & Supervisory Board Members 43 43 － － 3

*1The names and amounts of remuneration for officers whose remuneration is ¥100 million or more are disclosed in the Annual Securities Report.

*2The above includes one outside director who retired at the conclusion of the 85th Ordinary General Meeting of Shareholders held on March 28, 2025.

*3The performance indicator selected as the basis for calculating the performance-based bonus is standard profit, and the actual result for the current fiscal year is ¥140.6 billion.

*4The amount of non-monetary remuneration includes the amount expensed in the current fiscal year, including ¥61 million in the expected payment of monetary compensation receivables based on the expected number of shares to be delivered after the three-year evaluation period.

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Executive Remuneration

    [Remuneration for Directors]

    Basic policies

    The remuneration of Directors of the Company is designed in accordance with the following policies:

    • The remuneration plan should be highly linked not only to short-term performance but also to medium- to long-term performance and improvement of corporate value
    • The plan should be linked to the value to be newly created and provided in the course of promoting the sustainability integrated management;
    • The plan should be designed to be linked to the shareholder value of the Company;
    • The remuneration level should be such that the Company can secure and maintain the human resources necessary to achieve its long-term vision; and
    • The plan should ensure transparency and objectivity in the remuneration determination process.

    Remuneration level

    From the perspective of ensuring objectivity and appropriateness of the executive remuneration, the level of remuneration for Directors of the Company will be set with reference to the levels of other companies as surveyed by outside professional organizations, with the aim of achieving the mid-to-high level of remuneration in companies of similar size. The Company will revise the remuneration levels as necessary in response to changes in the external environment.

    Composition of remuneration

    Renumeration for Directors of the Company is composed of three types: (i) fixed remuneration commensurate with the Director’s responsibilities and roles, (ii) annual performance-based bonus as a short-term incentive, and (iii) performance-based restricted stock remuneration as a medium- to long-term incentive. Thus, the remuneration plan is designed to encourage management efforts from a short-term, and medium- to long-term perspective and to appropriately reward the results of such efforts. Remuneration for Outside Directors, who are responsible for management supervision from an independent standpoint and not in a position to execute business, is composed solely of fixed remuneration.
    A summary of each type of remuneration is as follows:

    • Fixed remuneration
    • The Company will determine the amount of fixed remuneration for each position of Director in accordance with their responsibilities and roles. The fixed remuneration will be monthly, and a fixed amount will be paid in cash on a fixed date of each month.
    • The amount of remuneration for Outside Directors, consisting only of monthly remuneration as fixed remuneration, will be determined in accordance with their responsibilities and roles.
    • Annual performance-based bonus
    • The amount of annual performance-based bonus will be judged comprehensively and determined by multiplying the standard bonus amount stipulated for each position with a payout ratio that fluctuates (lower limit 0%~upper limit 180%) in proportion to the base profit for each business year (the amount obtained by deducting actuarial differences regarding employees’ retirement benefit obligation and net income attributable to non-controlling interests from consolidated recurring income for the relevant fiscal year).
    • The Company has adopted the method of amortizing actuarial differences regarding employees’ retirement benefit obligation as a lump sum in a single business year. Accordingly, any significant fluctuation in actuarial differences due to stock price fluctuations, interest rate conditions, or other at the end of the business year will have a significant impact on business performance. Therefore, to calculate base profit, the Company uses consolidated recurring income after deducting actuarial differences regarding employees’ retirement benefit obligation.
    • Payment of annual performance-based bonus to each eligible Director will be decided upon by the Board of Directors taking into consideration the opinions of the Nomination and Remuneration Advisory Committee, which is chaired by an Outside Director and in which a majority of its members are Outside Officers.
    • Performance-based restricted stock remuneration

    • Performance-based restricted stock remuneration is structured to reflect the Company’s performance during each period (three years) of the Medium-Term Management Plan. The standard stock remuneration amount prescribed for each position consists of (i) a portion linked to the growth rate of the Company’s market capitalization relative to TOPIX (one-third of the standard stock remuneration amount by position), and (ii) a portion linked to the achievement rate of SBT (Science Based Targets) greenhouse gas emission reduction targets (two-thirds of the standard stock remuneration amount by position), each during the relevant period.

      To promote management that emphasizes medium- to long-term enhancement of shareholder value, performance-based restricted stock remuneration is a plan to grant restricted stocks to eligible Directors after the final fiscal year of the three-year Medium-Term Management Plan “Mission TREEING 2030 Phase 2” as an incentive to increase corporate value during the period of the Medium-Term Management Plan, in accordance with the achievement status of the Medium-Term Management Plan. The applicable period of the plan is the three years from January 1, 2025 to December 31, 2027 (hereinafter, the applicable period).

      The amount of performance-based restricted stock remuneration is calculated using two indices and the method for calculation is as follows.

      Remuneration linked to market capitalization growth rate
      The aim of this system is to compare the Company’s market capitalization growth rate with the TOPIX growth rate to objectively measure and reflect the Company’s relative stock market valuation in the remuneration amount.
      ＜Calculation formula＞ Amount equivalent to one-third of the standard stock compensation amount by position x payout ratio (growth rate of Company’s market capitalization during the period of the Medium-Term Management Plan/TOPIX growth rate during the same period)*

      *The payout ratio range will be from 0% (lower limit) to 140% (upper limit)

      Remuneration linked to sustainability indices achievement rate
      By setting a payout ratio upper limit of 100%, if the Company fails to achieve its SBT (Science Based Targets*1) greenhouse gas emission reduction targets*2, the amount of remuneration will be reduced from the standard stock remuneration amount in accordance with the status of target achievement, thereby creating a strong incentive to achieve the targets.
      ＜Calculation formula＞ Two-thirds of the standard stock remuneration amount by position x payout ratio (percentage of achievement of Medium-Term Management Plan SBT greenhouse gas emission reduction targets).*3

      *1Refers to the emission reduction targets set by companies and to be achieved in five to fifteen years to comply with the level required by the Paris Agreement that was adopted at the 21st Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) and took effect in 2016 (which sets a goal of limiting global warming to well below 2℃ above pre-industrial levels and pursuing efforts to limit the increase to 1.5℃)

      *2The (Scope 1 and 2) emission reduction target for the coverage period has been set at –31.4% compared to the Company’s figures in fiscal 2021.

      *3The payout ratio range will be from 0% (lower limit) to 100% (upper limit)

    • The stock remuneration amount to be paid to each eligible Director will be determined by the Board of Directors after the end of the subject period by calculating the cumulative amount of stock remuneration during the subject period based on the actual value of each evaluation index and considering the views of the Nomination and Remuneration Advisory Committee.

    Remuneration composition ratio

    The plan has been designed so that the ratio of fixed remuneration to variable remuneration for Directors should be 60 to 40 when the base profit is 150 billion yen. Specifically, fixed remuneration accounts for 60%, annual performance-based Bonus (variable) accounts for 25%, and performance-based restricted stock remuneration (variable) accounts for 15% of the total remuneration, respectively. The remuneration for Outside Directors consists solely of fixed remuneration.

    Remuneration governance

    The matters regarding executive remuneration, such as the amount of individual remuneration for Directors, will be determined by the Board of Directors taking into account the views of the Nomination and Remuneration Advisory Committee chaired by an Outside Director, in which Outside Officers constitute a majority.

    Forfeiture of remuneration

    If the Board of Directors confirms any wrongdoing or other misconduct by a Director, the Company may demand a payment restriction or return of the performance-based restricted stock remuneration paid to such Director.

    [Remuneration for Audit & Supervisory Board Member]

    Compensation for Audit & Supervisory Board Member consists only of monthly compensation as basic compensation. In addition, we use results of a survey conducted by a third party for directorship remuneration at domestic corporations in order to set an appropriate remuneration level from the perspective of ensuring objectivity and appropriateness of executive remuneration.

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Strategically-held Shares

Article 5 of Sumitomo Forestry's Basic Policy on Corporate Governance provides for cross-shareholding as follows.

1. The Company may acquire and hold shares in its business partners and counterparties when the Company determines that such shareholdings will contribute to mid- to long-term enhancement of the Company’s corporate value from the perspective of, among others, maintenance and reinforcement of long-term and stable business relationships with those partners and counterparties as well as expansion of the Company’s business as a result of such closer ties with those parties.

2. At meetings of the Board of Directors, the Company will regularly examine whether the holdings of the shares under the preceding paragraph (the "Strategically-held Shares") lead to the improvement of its corporate value through analyzing the relationship between the profits/risks associated with such holdings and the cost of capital, and will verify the purpose and rationale of such holdings. When the Company judges that the rationale and necessity of such holdings cannot be confirmed, it will reduce the number of such Strategically-held Shares.

3. The Company will appropriately exercise its voting rights pertaining to the Strategically-held Shares in accordance with its voting criteria and based on its comprehensive judgment from the perspective of the improvement of its corporate value.

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