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Further, ESPPs in the U.S. are often provided by competitors in a ‘tax-advantaged’ manner, in
accordance with U.S. Tax Code. By providing the same tax-advantaged feature, our U.S. ESPP will
become competitive and attractive enough to encourage more employees’ participation. The benefit
of a tax-advantaged ESPP in the U.S. is that, provided certain conditions are met, participating
employees who purchase shares under the ESPP may receive favourable tax treatment, such as
favourable tax rates and the deferral of taxation until the sale of the shares.
2. Protection of Shareholders’ Interests
We have carefully considered the necessary framework to protect shareholders’ interests as much as
possible. We have conducted research and analysis on potential concerns regarding the shareholders’ interests
and necessary countermeasures to address those concerns including reviewing major proxy advisors’ voting
guidelines regarding the U.S. ESPP.
We believe that our U.S. ESPP addresses shareholders’ possible concerns and protects shareholders’
interests as much as possible, as detailed below.
(1) No Concern of Dilution
To directly address the concern of dilution of existing shareholders by issuance of treasury shares or new
shares, unlike typical U.S. ESPPs, we clarify that our U.S. ESPP plans to use shares to be purchased on the
open market as primary source of shares.
(2) Limited Scale of Potential Purchase under U.S. ESPP
In addition to dilution, to also avoid excessive impact on the Company’s financials, we set a conservative
limit to the scale of potential purchase under our U.S. ESPP.
We set the maximum purchase price per year per employee as USD 25,000, as required under the U.S.
Tax Code (but additionally limit employee contributions of up to 10% of base salary in any case).
Consequently, even assuming that all of the eligible employees participate and purchase up to their
respective purchase price limits, the total number of shares to be purchased per year at maximum is
estimated to be approximately 8,500,000 shares, which is approximately 0.48% of the total number of
outstanding shares as of January 31, 2023.
Although this number does not mean the dilution impact on the Company’s shares and there should not
be a substantial dilutive effect since shares will primarily be purchased on the open market under our
U.S. ESPP, we will set (i) 8,500,000 shares as the maximum number of shares to be purchased per year
under the U.S. ESPP as well as (ii) 85,000,000 shares (approximately 4.8% of the total number of
outstanding shares as of January 31, 2023) as the maximum number of shares to be purchased for the
entire 10 year effective period under the U.S. ESPP as required under U.S. Tax Code, and we will seek
our shareholders’ approval if we need to increase these limits.
(3) Moderate Benefits to Employees (Purchase Price & Offer Period)
To avoid resulting in giving excessive benefits to employees that are inappropriate and against
shareholders’ interests, we set necessary limitations on the benefits of employees. These limitations are in