May 25, 2020

TDK Corporation’s (the “Company”) Board of Directors today passed a resolution to revise the stock-linked compensation stock option plan to a post-delivery type stock remuneration plan (the “Plan”) after reviewing a part of its remuneration plan for Directors. In particular, the Company decided to revise the current stock-linked compensation stock options with no performance achievement conditions attached to restricted stock units (“RSU”) and those with performance achievement conditions attached to performance share units (“PSU”), respectively, and submit an agenda on the Plan (the “Item”) to the 124th Ordinary General Meeting of Shareholders (the “Genera Meeting of Shareholders”) scheduled to be held on June 23, 2020. Detail are as follows.

1. Purpose of the introduction of the Plan

   The Company has decided to introduce the Plan to ensure that Directors of the Company (excluding Outside Directors, “Eligible Directors”) share the benefits and risks of stock price fluctuation with shareholders of the Company and enhance their willingness to contribute to improvements in financial results in the medium term and corporate value.

2. Overview of the Plan

   (1)

   RSU RSU is a type of stock remuneration which is issued based on continuous service. In case of RSU, subject to continuous service for a period of three years from the first day of the first year to the last day of the last year of the Medium-Term Plan (or a period of three years or more as determined by the Board of Directors of the Company, the “Target Period”), a pre-determined amount of the Company’s shares and money is delivered after the end of the Target Period.

   (2)

   PSU PSU is a type of stock remuneration which is issued based on performance. In case of PSU, an amount of the Company’s shares and money calculated in accordance with the degree of achievement of performance targets set by the Medium-Term Plan is delivered after the end of the Target Period.

3. Eligibility for the grant

   (1)

   RSU Directors excluding Outside Directors shall be eligible for the grant and the number of such Directors will be four in the event that the proposal for the appointment of Director, which will be submitted to the General Meeting of Shareholders, is approved as originally proposed.

   (2)

   PSU Only Directors who also serve as Corporate Officers shall be eligible for the grant (Directors who do not concurrently serve as Corporate Officers and Outside Directors shall not be eligible for the grant) and the number of such Directors will be three in the event that the proposal for the appointment of Director, which will be submitted to the General Meeting of Shareholders, is approved as originally proposed.

4. Upper limit of total amount of monetary remuneration claims and total number of shares

   At the 119th Ordinary General Meeting of Shareholders held on June 26, 2015, it was approved that the upper limit of the amount of remuneration for stock-linked compensation stock options for Directors of the Company shall be 457 million yen per year, and that approval has been effective to date. After the revision, the upper limit of the total amount of monetary remuneration claims for RSUs and PSUs shall be 457 million yen per year (no change from the current amount) and the upper limit of the total number of common shares of the Company to be issued or disposed of otherwise to Eligible Directors shall be 39,000 shares per year.
   Please note that the above-mentioned total amount and total number of shares are in essence equivalent to the total amount of up to 196 million yen and total number of up to 16,700 shares per fiscal year, since PSUs for the Target Period will be delivered in a lump sum after the end of the Target Period.

5. Method of calculating the number of shares to be delivered, the amount of money to be paid, and the amount of monetary remuneration claims

   (1)

   RSU The Company will calculate the number of common shares of the Company to be provided and the amount of money to be paid to each Eligible Director based on the following formula: (ⅰ) Number of common shares of the Company to be provided to each Eligible Director. (Base Amount (*1) ÷ Stock Price at Grant (*2)) × 50% Any fraction of less than 100 shares resulting from the calculation will be rounded up to the nearest 100 shares. (ⅱ) Amount of money to be paid to each Eligible Director {(Base Amount (*1) ÷ Stock Price at Grant (*2)) - Number of common shares of the Company as calculated in (i) above} × Stock Price at Delivery (*3) Any fraction of less than one yen resulting from the calculation will be rounded up to the nearest one yen.

   (2)

   PSU The Company will calculate the number of common shares of the Company to be provided and the amount of money to be paid to each Eligible Director in accordance with the Degree of Achievement of Performance Targets (*4) set out in the Medium-Term Plan, based on the following formula: (ⅰ) Number of common shares of the Company to be provided to each Eligible Director. (Base Amount (*1) ÷ Stock Price at Grant (*2)) × Degree of Achievement of Performance Targets (*4) x 50% Any fraction of less than 100 shares resulting from the calculation will be rounded up to the nearest 100 shares. (ⅱ) Amount of money to be paid to each Eligible Director {(Base Amount (*1) ÷ Stock Price at Grant (*2)) × Degree of Achievement of Performance Targets (*4) - Number of common shares of the Company as calculated in (ⅰ) above} × Stock Price at Delivery (*3) Any fraction of less than one yen resulting from the calculation will be rounded up to the nearest one yen. The Company will calculate the amount of monetary remuneration claims to be paid to each Eligible Director based on the following formula: 〈Common to RSU and PSU〉 Amount of monetary remuneration claims = (ⅰ) above × Stock Price at Delivery (*3) + (ⅱ) above ※1 The Base Amount shall be determined by the Board of Directors of the Company for each Eligible Director in accordance with the level of responsibility of each Eligible Director. ※2 The Stock Price at Grant shall be the average of closing prices of common shares of the Company on the Tokyo Stock Exchange during the one-month period preceding the day immediately before the date of the Ordinary General Meeting of Shareholders in the year of grant. ※3 The Stock Price at Delivery shall be the closing price of common shares of the Company on the Tokyo Stock Exchange on the business day immediately preceding the date of resolution by the Board of Directors of the Company in relation to the issuance or disposition of shares to be provided under the Plan (or if no trades are executed on the same day, the closing price of the most recent trading day prior to the date of resolution). ※4 The Degree of Achievement of Performance Targets shall vary from 100% to 0% depending on the degree of achievement of performances with respect to the Medium-Term Plan. Consolidated operating income and ROE will be used as performance indicators for the number of PSU to be provided in fiscal 2021.

6. Delivery requirements

   Under this Plan, if the Target Period ends and the following requirements are met, the Company will deliver common shares of the Company and pay money to each Eligible Director. The delivery of common shares of the Company will be made by way of an issuance of shares or disposal of treasury shares by the Company, and the actual recipients of the shares to be delivered among the Eligible Directors and the subscription requirements in connection with such issuance of shares or disposal of treasury shares will be determined at a meeting of the Board of Directors of the Company after the expiration of the Target Period.

   (ⅰ)	The Eligible Director shall have continuously held the position of Director or Corporate Officer of the Company or any of its subsidiaries during the Target Period.
   (ⅱ)	The Eligible Director shall not have committed any of the illegal acts determined by the Board of Directors of the Company.
   (ⅲ)	Other requirements determined by the Board of Directors of the Company as necessary to achieve the purpose of this Plan.

7. Other

   The Company starts to provide RSU and PSU in the fiscal year ending March 2021 and the fiscal year ending March 2022, respectively, and abolish the stock-linked compensation stock option plan, excluding options that have already been granted.
   In addition, the Company will continue to implement the Plan each time a new medium-term plan is formulated, subject to conditions approved by the General Meeting of Shareholders.
   In the event that the proposal in this Item is approved as originally proposed, the Company plans to introduce a similar post-delivery type stock remuneration plan for Corporate Officers in addition to Directors, but the ratio of the total number of shares to be delivered to the total number of issued and outstanding shares of the Company is expected to be no more than 0.1% per year.

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