#Japan #Tokyo #Shareholder Return #Dividend Policy #governance update

Changes in Shareholder Return Policy

In a recent board meeting, our company announced an important update regarding its shareholder return policy, emphasizing the need for sustainable growth and effective cash management. This article will delve into the details of this significant change and what it means for shareholders.

Rationale Behind the Change

The decision to amend the shareholder return policy stems from our recognition of its importance within our management priorities. The company aims to not only recognize the need for profitability but also to implement a strategy that ensures consistent growth. Previously, we had stated our commitment to stable dividends based on a mid-term management plan released on May 12, 2025, which included an increase in the dividend payout ratio.

However, it has come to our attention that the Price-to-Book Ratio (PBR) remains below one. Given the current uncertainties in the market, we are making proactive moves towards sustainable growth, which includes a comprehensive overhaul of our governance structure via group reorganization. This update plans to appoint a Chief Risk Officer (CRO) from our board of directors, reflecting a focused shift towards risk management.

Additionally, we will enhance our risk management framework through the introduction of a Risk Appetite Framework (RAF). This initiative aims to strike a sustainable balance between recognizing appropriate risks and maximizing returns. In circumstances where unexpected losses may occur, we are adopting a new measure—the Dividend on Equity (DOE)—ensuring that our returns remain stable and predictable, regardless of profit fluctuations.

Key Changes in the Shareholder Return Policy

The modifications to our policy consist of two main facets:
1. Priority of Shareholder Return: We continue to recognize shareholder return as one of our top priorities.
2. Dividend Payment Decisions:
- Previous Approach: We maintained a dividend payout ratio of 35-40%, ensuring that dividends would not fall below 21 yen per share in subsequent years.
- New Approach: The new guidelines stipulate that dividends will be determined by the higher of a payout ratio of 35-40% or a DOE of 3.5%. We will also continue to guarantee that dividends do not drop below 21 yen per share in the second term and beyond.

Implementation Timeline

These changes will come into effect from the end of the fiscal year 2026. Importantly, there are no alterations to our previously announced dividend forecast for this period.

In summary, this revamped shareholder return policy underscores our commitment to delivering stable and predictable returns while embracing a governance framework that promotes sustainable growth. We believe that these strategic updates will not only enhance shareholder confidence but also drive long-term value for our company in an increasingly volatile market. As we navigate through these changes, our primary focus will remain on progressive investment opportunities that bolster our corporate value sustainably.