• Corporate & Financial

Notice Regarding Disposal of Own Shares as Restricted Stock Compensation

Subaru Corporation (the “Company”) hereby announces that its Board of Directors, pursuant to Article 370 of the Companies Act of Japan and Article 29 of the Articles of Incorporation (written resolution in lieu of a Board of Directors meeting), resolved to dispose of its own shares as stock compensation as follows (the “Disposal of Own Shares”).

1. Overview of Disposal

(1) Disposal date	August 7, 2024
(2) Class and number of shares to be disposed	85,476 shares of common stock of the Company
(3) Disposal price	¥3,475 per share
(4) Total value of share disposal	¥297,029,100
(5) Grantees of shares and number thereof; number of shares to be granted	The Company’s Directors (excluding Outside Directors) 　5 persons, 34,594 shares Executive Officers 　22 persons, 50,882 shares (including 3 retiring officers, 2,184 shares)
(6) Other	The Disposal of Own Shares is conditioned on the Securities Registration Statement taking effect in accordance with the Financial Instruments and Exchange Act.

2. Purpose and Reasons for Disposal

At its meeting held on March 5, 2024, the Company’s Board of Directors resolved to revise the Restricted Stock Compensation Plan (the “Plan”) introduced in 2017 for the Company’s Directors other than the Outside Directors and executive officers (collectively, the “Eligible Officers”) with the purpose of enhancing the incentives to achieve sustained improvement of the corporate value of the Company and sharing more of that value between the Eligible Officers and the Company’s shareholders. Furthermore, at the 93rd Annual General Meeting of Shareholders held on June 19, 2024, the shareholders approved the introduction of clawback provisions and amendment of the amount on which the amount to be paid in per share is based under the Plan.

Based on the Plan, after considering the purpose of the Plan, the Company’s business performance, the scope and nature of the performance of duties of each of the Eligible Officers, and various other circumstances, as restricted stock compensation the Company has now decided to pay a total amount of ¥188,067,000 in the monetary compensation claim and grant 54,120 shares of the common stock of the Company by way of in-kind contribution of the said monetary compensation claim to 5 Eligible Directors and 19 executive officers. Furthermore, based on the Plan the Company has decided to pay a total amount of ¥108,962,100 in the monetary compensation claim and grant 31,356 shares of the common stock of the Company by way of in-kind contribution of the said monetary compensation claim after evaluating consolidated ROE and employee engagement, which have been adopted as performance indicators, to 5 Eligible Directors and 19 executive officers (including retiring officers) as variable compensation (performance stock units), with the evaluation period being the fiscal year from April 1, 2023 to March 31, 2024.

Since the purpose of the Plan is to provide the management with incentives to achieve sustained improvement of the corporate value of the Company and to share more of that value with the Company's shareholders, the Transfer Restriction Period has been set as the period until the Eligible Officer loses all of his/her status as a director, auditor, officer, executive officer or employee of the Company.

For the Disposal of Own Shares, the Eligible Officers to whom the stock is scheduled to be granted will pay in all the said monetary compensation claim as property contributed in kind, and receive the common stock of the Company to be disposed of by the Company.

3. Overview of the Contract Regarding the Grant

The Company and each of the Eligible Officers will execute the Contract Regarding the Grant individually, and conditions relating to transfer restrictions are summarized below. However, no transfer restrictions or other conditions shall be set for Eligible Officers who have already retired as officers of the Company.

(1)　Transfer Restriction Period

From the date on which the Eligible Officer acquires the granted shares until the date on which the Eligible Officer loses all of his/her status as a director, auditor, officer, executive officer or employee of the Company.

(2)　Conditions for Cancellation of the transfer restrictions

The transfer restrictions for all of the granted shares held by the Eligible Officers will be cancelled at the expiration of the Transfer Restriction Period. Additionally, in cases where any one of the Eligible Officers loses all of his/her status as a director, auditor, officer, executive officer or employee of the Company during the Transfer Restriction Period, due to death, completion of his/her term of office or reaching of his/her retirement age, or any other legitimate reasons approved by the Board of Directors of the Company, the transfer restrictions on all the shares granted to the said one of the Eligible Officers shall be cancelled immediately after such his/her status is lost.

(3)　The Company’s acquisition of the shares at no cost

In cases where any one of the Eligible Officers loses all of his/her status as a director, auditor, officer, executive officer or employee of the Company during the Transfer Restriction Period, the Company shall naturally acquire at no cost all of the granted shares held by the said one of the Eligible Officers at the time of such lost. However, this shall not apply to cases where such losing of his/her status occurs due to death, completion of his/her term of office or reaching of his/her retirement age, or other legitimate reasons approved by the Board of Directors of the Company.

(4)　Administration of shares

To prevent the Eligible Officers from transferring, setting collateral rights for, or otherwise disposing of the granted shares during the Transfer Restriction Period, each of the Eligible Officers opens a dedicated account with Mizuho Securities Co., Ltd. for administration of the granted shares. To enforce the transfer restrictions, etc. on the granted shares, the Company enters into a contract with Mizuho Securities Co., Ltd. for the administration of the accounts of the granted shares held by the Eligible Officers. In addition, the Company has obtained consent from the Eligible Officers as to the details of the said transfer restrictions, etc.

(5)　Treatment in the event of organizational restructuring, etc.

Prior to the expiration of the Transfer Restriction Period, if the General Meeting of Shareholders of the Company approves of any matters with regard to a merger contract under which the Company will become a dissolving company; an absorption-type split agreement or incorporation-type company split plan under which the Company will be a split company (but only if the Company, on the effective date of the company split, delivers to the Company’s shareholders a whole or part of the consideration for the said company split that it acquired); a share exchange agreement or share transfer plan under which the Company will become the wholly owned subsidiary; or any other organizational restructuring, etc. set forth in the Contract Regarding the Grant (or, in cases where the approval at the General Meeting of Shareholders of the Company for the said organizational restructuring, etc. is not necessary, if the Board of Directors of the Company approves), based on a resolution of the Board of Directors, the transfer restrictions shall be cancelled immediately before the business day immediately prior to the effective date of the said organizational restructuring, etc., regarding the number of the granted shares that is reasonably calculated considering the period from the beginning of the Transfer Restriction Period to the approval date of the said organizational restructuring, etc.

4. Basis of calculating the amount to be paid in for the granted shares and other specific details

The Disposal of Own Shares shall be funded by the monetary compensation claim provided as a restricted stock compensation by the Company under the Plan. To eliminate arbitrariness in the disposal price, the closing price of the Company’s common stock on the Tokyo Stock Exchange on the day immediately preceding July 9, 2024 of ¥3,475 (with amounts less than ¥1 truncated) was used as the disposal price. As this is the price for the adjacent period prior to the date of the resolution by the Board of Directors, it is believed to be a reasonable price that appropriately reflects the corporate value of the Company.

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