協和キリン（4151） – Corporate Governance Report March 25, 2022

CORPORATE GOVERNANCE REPORT Last Update: March 25, 2022 Kyowa Kirin Co, Ltd. President and Chief Executive Officer: Masashi Miyamoto Inquiries: Corporate Communications Department, +81-3-5205-7206 Securities Code: 4151 https://www.kyowakirin.com/ The corporate governance of Kyowa Kirin Co, Ltd. (the “Company”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views Based on our vision and medium term business plan in accordance with our philosophy that “The Kyowa Kirin Group companies strive to contribute to the health and well-being of people around the world by creating new value through the pursuit of advances in life sciences and technologies” and core values, in order to achieve sustainable growth and increase corporate value over the mid- to long-term, we, as a company responsible for delivering social infrastructure, work on the enhancement of our corporate governance by ensuring transparency and fairness in decision-making, and establishing structures for timely and decisive decision-making and execution of management duties, and for appropriate monitoring and supervisory functions. We believe that cooperation with stakeholders is essential for achieving our medium term business plan, and respect the situation of each stakeholder; and we are committed to making timely disclosures to shareholders and investors on a transparent, fair and continuous manner, proactively having constructive dialogue with shareholders and investors, and ensuring accountability in a cordial manner. We are a consolidated subsidiary of Kirin Holdings Company, Limited, and while respecting the Kirin Group’s management policies, we secure independence for our corporate management. [Reasons for Non-compliance with the Principles of the Corporate Governance Code] This report is prepared based on the Corporate Governance Code revised in June 2021 (including principles for the Prime Market to be applied from April 4, 2022). The Company has complied with all principles of the Corporate Governance Code. [Disclosure Based on the Principles of the Corporate Governance Code] This report is prepared based on the Corporate Governance Code revised in June 2021 (including principles for the Prime Market to be applied from April 4, 2022). [Supplemental Principle 1-2-4: Use of Electronic Voting Platform] – 1 – The Company has been participating in an electronic voting platform for institutional investors operated by ICJ, Inc. [Principle 1.4 Cross-Shareholdings] Unless we consider certain cross-shareholdings are meaningful for the purposes of achieving sustainable growth of our Group and increasing corporate value for the mid- to long-term, we will not hold shares of other companies as cross-shareholdings. The Board of Directors examines rationality of cross-shareholdings on an annual basis; and with respect to stocks of decreasing significance, we will work on reducing such cross-shareholdings, while undertaking dialogue/negotiations with the counter party. With respect to voting rights of cross-shareholdings, we will properly exercise our voting rights, upon making a voting decision on each proposal of the issuing company, considering whether its proposal contributes to increasing its corporate value, and whether the proposal contributes to our Group’s sustainable growth and an increase in corporate value over the mid- to long-term. The above policy is stipulated in Section 3.2.3, Chapter 3 of our Corporate Governance Policy. [Principle 1.7 Related Party Transactions] Policy on transactions between related parties is as follows: We disclose information on transactions with related parties in accordance with the Companies Act, the Financial Instruments and Exchange Act, and other applicable laws, as well as rules established by the Tokyo Stock Exchange. In case there is a significant fact concerning any transaction with Director, Audit & Supervisory Board Member, and their relatives, the fact is reported to the Board of Directors. Competitive transactions and conflict-of-interest transactions involving Directors, whether conducted as the direct party or as an agent or representative of a third party, are matters to be resolved by the Board of Directors in accordance with the Companies Act and the Board’s rules and regulations. With respect to any transactions with a controlling shareholder, a rational decision is to be made in the same manner as general transaction terms and conditions, based on objective information on the market where goods/services provided by or to the Company are mainly traded. The above policy is stipulated in Section 3.2.5, Chapter 3 of our Corporate Governance Policy. [Supplemental Principle 2-4-1 Ensuring Diversity in the Appointment of Core Personnel] As a Global Specialty Pharmaceutical Company, we believe “taking advantage of diversity – in terms of both such surface layers as race, nationality, gender and age, and such deeper layers as values and experience of individuals – brings about further innovations,” and promote diversity & inclusion by hiring/developing human resources with diverse backgrounds, and creating a new corporate culture where employees autonomously take on challenges and overcome barriers. We work toward ensuring diversity as well as having right persons in right jobs, by clarifying qualifications for global leader positions as human resources that support the global management structure, enhancing the pipeline of candidates to be nominated, and developing next-generation – 2 – leaders. Furthermore, in accordance with the Declaration of the Global Diversity, Equity, and Inclusion Statement, we implement cross-regional/cross-functional measures as well as measures for addressing region-specific issues. With respect to the ratio of women in global leadership positions, we aim at achieving 30% in 2025 and 40% in 2030. As for the ratio of women in managerial positions in Japan, the Company aims at achieving 18% in 2025. To create new value, we will actively recruit and promote mid-career hires and foreign nationals with high expertise and diverse perspectives, both in Japan and globally. [Principle 2.6 Roles of Corporate Pension Funds as Asset Owners] The Corporate Pension Fund manages funds for the Company’s pension plan. The Company recruits and assigns qualified persons for investment management at the Fund in a planned manner, helps them increase their expertise by providing opportunities to participate in external training courses or pension investment seminars, and establishes an appropriate operating structure to support the Fund. The investment policy of the reserve fund is based on professional inputs and consultations from outside experts. The Asset Management Committee, in which the Director of the Finance & Accounting Department and the Director of the Human Resources Department also participate, regularly monitors the investment status and reviews the investment policy as necessary, paying attention to maximizing the benefits for the participants and beneficiaries of the Company’s pension plan and the impact on the Company’s financial position. As the actual management of the funds is outsourced to a trustee organization and the Company is not involved in investment instructions or the exercise of voting rights, possible conflicts of interest with corporate pension beneficiaries are appropriately managed. [Principle 3.1 Full Disclosure, Supplementary Principles 3.1.2 Disclosure of Information in English and 3.1.3 Sustainability Initiatives] (i) In line with our philosophy that “The Kyowa Kirin Group companies strive to contribute to the health and well-being of people around the world by creating new value through the pursuit of advances in life sciences and technologies” and core values, we formulated Vision 2030 and the 2021-2025 Medium Term Business Plan, aiming at realizing the successful creation and delivery of life-changing value that ultimately makes people smile, as a Japan-based Global Specialty Pharmaceutical Company built around the diverse team of experts with a shared passion for innovation. The 2021-2025 Medium Term Business Plan is available at the following website: (ii) Our Basic Views on Corporate Governance are as described in the first section of this report. According to the Basic Views, we established the Corporate Governance Policy, and continuously work on realizing an optimal corporate governance system. Our Corporate Governance Policy is available at our website as below. (iii) The Nomination and Remuneration Consultative Committee deliberates and determines the remuneration for senior management from an objective and fair perspective, and then reports the results to the Board of Directors. The relevant policy is stipulated in Section 2.6.3, Chapter 2 of our Corporate Governance Policy. – 3 – (iv) With respect to the appointment/removal of senior management and nomination of candidates for Directors and Audit & Supervisory Board Members, the Nomination and Remuneration Consultative Committee deliberates and determines such matters from an objective and fair perspective, and then reports the results to the Board of Directors. The relevant policy is stipulated in Section 2.6.1, Chapter 2 of our Corporate Governance Policy. (v) We proactively disclose sustainability-related information as an initiative under the 2021-2025 Medium Term Business Plan. With respect to our climate-related initiatives, we disclose the progress in accordance with the framework of the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In November 2021, we declared support for the TCFD Recommendations for realizing a decarbonized society. The following website provides information on TCFD (vi) We consider human capital and intellectual capital as important elements for continuously creating life-changing value, so we steadily and dynamically allocate resources to them, and make appropriate disclosures as necessary. The following websites provide information on our human resource development and intellectual property initiatives. (vii) In principle, disclosure documents related to Investor Relations are provided in English under a certain rationality. [Principle 4-1 The Role and the Responsibility of the Board of Directors, Supplementary Principle 4.1.1 Scope and Content of the Matters Delegated to the Management] Roles and responsibilities of the Board of Directors are as follows. The details are stipulated in Section 2.2.1, Chapter 2 of our Corporate Governance Policy. Taking into account its fiduciary duties and accountability to shareholders, the Board of Directors aims at realizing our corporate philosophy, and achieving sustainable growth and increased corporate value of our Group over the mid- to long-term, by establishing effective and efficient corporate governance. The Board of Directors makes decisions on matters stipulated by law and the execution of the Group’s important operations, which include long-term management visions, medium term business plans and annual business plans of the Group and key Group companies. The Board is also responsible for monitoring the directors’ execution of their duties, developing and overseeing the basic policy on sustainability and initiatives thereunder, and for developing appropriate internal control systems across the Group by collaborating with the internal audit department. In addition to the matters stipulated in the laws and regulations as well as the Articles of Incorporation, the Board of Directors specifies matters to be resolved by the Board in the Regulations for the Board of Directors. Authorities pertaining to other business execution are delegated to Executive Officers in charge of relevant businesses, and the details are defined in the Group Rule for Authorization. – 4 – [Principle 4.8 Effective Use of Independent Directors, Supplementary Principle 4.8.3 Actions to Take as a Listed Company with Controlling Shareholders] In order to enhance fairness and transparency of corporate governance, and achieve sustainable growth of our Group and increased corporate value over the mid- to long-term, we appoint at least one third of the Board members as independent directors who satisfy the Criteria for Independence of Outside Officers. In case independent directors do not make up a majority of the Board, when conducting a significant transaction with the controlling shareholder, Kirin Holdings Company, Limited, we establish the Supervisory Committee for Conflict of Interests in Transactions between Group Companies, which is comprised of independent directors, as an advisory body to the Board. [Principle 4.9 Independence Standards and Qualification for Independent Directors] Candidates for our independent Directors are selected from those who meet our Criteria for the Independence of Outside Directors, which was separately established based on the requirements of the Companies Act as well as the Tokyo Stock Exchange (TSE)’s criteria of independent directors/auditors. The standards for appointing independent Directors and the Criteria for the Independence of Outside Directors are provided in Section 2.6.2, Chapter 2 and Appendix 1 of our Corporate Governance Policy, respectively. [Supplementary Principle 4.10.1 Independence of Voluntary Committees] Although we did not adopt the organization form of “Company with Committee(s),” we established the Nomination and Remuneration Consultative Committee as an advisory body to the Board of Directors. The Committee deliberates and makes decisions on nomination and remuneration of our Company from an objective and fair standpoint, and reports the results to the Board of Directors. The Nomination and Remuneration Consultative Committee consists of 10 members, and 7 members, which is a majority, are independent officers. The Committee Chair is selected from independent directors. [Supplementary Principle 4.11.1 Diversity of the entire board of directors] According to the Articles of Incorporation, the maximum number of Directors, who comprise our Board of Directors, is 10. We established a transparent governance system, which is well-balanced as a whole, ensuring knowledge, experience, skills and insights necessary as a Global Specialty Pharmaceutical Company as well as diversity. The details are stipulated in Section 2.2.2, Chapter 2 of our Corporate Governance Policy. We disclose on our website a skills matrix, which enumerates knowledge, experience, skills, etc. of Directors and Audit & Supervisory Board Members, as well as the policy and procedures for nominating them. [Supplementary Principle 4.11.2 Information about Outside Directors, Outside Audit & Supervisory Board Members, and Other Directors and Audit & Supervisory Board Members who also Serve as Directors, Audit & Supervisory Board Members, or the Management at Other Companies] We disclose information on significant concurrent positions held by Directors and Audit & Supervisory Board Members every year in the convocation notice of the ordinary general meeting of shareholders and the Securities Report. [Supplementary Principle 4.11.3 Analysis and Evaluation of Effectiveness of the Board of Directors as a whole] – 5 – The evaluation method for Board effectiveness in 2021 To identify gaps between expected roles and responsibilities of the Board of Directors set forth in the “Kyowa Kirin Corporate Governance Policy” and the actual state of the Board of Directors in 2020-2021, we conducted an evaluation on the effectiveness of the Board of Directors. With respect to the evaluation of the Board effectiveness, from the perspective of ensuring the effectiveness of governance, we identified wide-ranging issues, not limited to operational issues of the Board of Directors. Based on the evaluation score, comments in the survey and interviews, external advisor’s opinion, and exchange of opinions at the Board, we concluded that the effectiveness of the Board of Directors was secured. This year, we added questions for the members of the Nomination and Remuneration Consultative Committee, an advisory body to the Board of Directors, and concluded that the appropriateness of access to information as well as agenda/deliberation are ensured. I. Since 2020 when the current mid-term business plan was formulated, for the purpose of identifying issues from the mid- to long-term perspective, in addition to a survey, we have conducted interviews with some officers. This year, we interviewed the chairperson of the Board of Directors and the chairperson of the Nomination and Remuneration Consultative Committee, both of who are independent officers. Furthermore, taking into account the results of the survey and interviews, we organized a meeting where only independent officers exchange their opinions, followed by the exchange of opinions among all Directors and Audit & Supervisory Board Members; and then made an evaluation.

1) Growth Strategy/Mid-Term Business Plan; 2) Global Governance System; 3) Governance System as a Listed Subsidiary; 4) Ensuring Diversity of the Board of Directors, etc.; 5) Capital Strategy; 6) Risk Management (improvement of the system); 7) Use of Optional Approach (deliberation on remuneration); 8) Use of Optional Approach (deliberation on nomination); 9) Dialogue with Shareholders; 10) Topics of Deliberations; and 11) Training for Directors and Audit & Supervisory Board Members II. Based on the evaluation results of the Board effectiveness, we plan to implement the following measures for improvement in 2022: 1) Advancing discussion on capital strategy Reporting on the long-term product portfolio will be regularly made to the Board of Directors as a Board meeting agenda, and the Board will have more opportunities to discuss investment priorities, etc. from the mid- to long-term perspective. 2) Discussion for further strengthening risk management The Board will share information on risk management, including what was implemented, the current risk management structure and issues, and the future plans, and have more opportunities to discuss matters from the mid- to long-term perspective. 3) Advancing discussion on sustainability Under the theme of updating non-financial KPIs and materiality, the Board will have more opportunities to discuss priorities, relationship with the business strategy, etc. Furthermore, we will increase opportunities for regularly monitoring the progress of individual activities related to sustainability and exchanging opinions. 4) Discussion of diversity on the Board of Directors, etc. Issues in this year and initiatives to be taken in 2022 – 6 – Achievements in addressing issues identified in 2020-2021 evaluation We will increase opportunities for the Nomination and Remuneration Consultative Committee to discuss the Board composition and required skills for a Global Specialty Pharmaceutical Company. We will arrange opportunities for the Committee to report such discussions to the Board of Directors, and opportunities for the Board to discuss the matters. 5) Further improving operation of the Board of Directors to increase its effectiveness The Board of Directors will appropriately delegate its authority to business executives, and strive to secure sufficient time for deliberations at Board meetings on important matters including various strategies. Furthermore, we will arrange opportunities outside the boardroom to exchange opinions, thus increasing opportunities for discussions with the business executives. III. Issue #1. Mid- to long-term global governance system [What was implemented] Upon sharing information from the global viewpoint, we increased opportunities for discussion from the global and mid- to long-term perspectives, including Board meetings involving outside officers and special management meetings. Participants discussed a governance system that is suitable for a Global Specialty Pharmaceutical Company, and reviewed the existing global governance system. It resulted in the transition to the structure that places regions, functions and products at the core in J [Evaluation] Many respondents appreciated that sufficient discussions were made with the participation of outside officers on the following topics: issues from the global perspective taking into account the globalization of businesses; and a global governance system taking into account mid- to long-term issues. Some pointed out that the Board should further deepen and enrich such discussions. Issue #2. Training for Directors and Audit & Supervisory Board Members [What was implemented] We conducted online training for officers on corporate governance, DX, ESG, etc. which are relevant to our business challenges. Even though we could not provide opportunities for physically visiting frontlines of production, research and sales due to the COVID-19 situation, we enhanced opportunities for providing information through online presentation of training and attendance to training to develop next generation managers for the purpose of strengthening information sharing within the Company. [Evaluation] Many respondents made positive evaluations to the enhancement of online training opportunities in 2021, even though we could not provide opportunities to visit the frontlines due to COVID-19 similarly to the previous year. Some pointed out that we should further contrive ways for providing necessary information to the officers in a manner that suits the situation. Issue #3. Strategic dialogue with shareholders [What was implemented] The Board members discussed the policy for disclosure of the Mid-Term Business Plan as well as opinions from stakeholders including shareholders and investors. Consequently, the Company held an ESG Briefing, with the participation of outside directors, as a new opportunity for dialogue with shareholders. [Evaluation] Multiple respondents appreciated that feedback about opinions from stakeholders were appropriately provided to the Board of Directors in a timely manner, and the Board members discussed the feedback. Some pointed out that we should further contrive ways to further enhance dialogue with shareholders and others. IV. Issue #4. Strengthening governance system as a listed subsidiary Continued efforts as a listed subsidiary to strengthen governance – 7 – [What was implemented] In order to ensure the effectiveness in objective oversight of corporate management, the Company currently appointed 5 independent directors, and the percentage of independent directors exceeds half of all directors. Since 2020, Mr. Akira Morita, an independent director, has assumed the position of the Board chair, and worked on further improving governance. Furthermore, as for the evaluation of the Board effectiveness, we used a third party for the evaluation, and arranged opportunities for independent officers to exchange opinions, for ensuring the transparency of the evaluation, where independent officers play a main role. [Evaluation] The Board of Directors secures the structure and mechanism to ensure the independence from the parent company, and gives full considerations to the protection of minority shareholders as well as measures to manage conflicts of interest, etc. The Board is also fully aware of the roles and importance of independent officers. Accordingly, the self-evaluation result remained high similarly to the last year. [Supplementary Principle 4.14.2 Training Policy for Directors and Audit & Supervisory Board Members] We provide training and information necessary for Directors and Audit & Supervisory Board Members to fulfill their roles and responsibilities, as appropriate. When they come into office, we provide them with lectures and training by experts and relevant departments concerning the Companies Act, corporate governance, risk management and other necessary matters; and thereafter, hold training or study sessions on legal changes and management issues, as necessary. Furthermore, when Outside Directors and Outside Audit & Supervisory Board Members come into office, we explain businesses of our Group, and conduct a tour to our key business locations. The details are stipulated in Section 2.6.5, Chapter 2 of our Corporate Governance Policy. [Principle 5.1 Policy for Constructive Dialogue with Shareholders] The basic policy on dialogue with our shareholders is as follows. This policy is stipulated in Section 4.2, Chapter 4 of our Corporate Governance Policy. We believe that constructive dialogue with shareholders contributes to further enhancement of corporate governance, and, eventually, helps increase corporate value over the mid- to long-term. Therefore, while accepting requests for dialogue, we proactively create opportunities for constructive dialogue, based on the shareholding structure, which we identify on a regular basis. In case of shareholders’ requests for individual meetings, under the command of Investor Relations (IR) Officer, mainly IR Group of the Corporate Communications Department meets the shareholders. In case IR Officer considers that the presence of President and/or other Directors (including Outside Directors) or Executive Officers is appropriate for meetings with certain shareholders, we will provide opportunities for such dialogue, where reasonably possible. We work on ensuring fulfilling dialogue with shareholders by collaborating with mainly the IR Officer and finance, corporate planning, legal and other relevant departments, as appropriate for purposes of dialogue. We plan and hold briefing sessions and visit shareholders and investors, in order to explain our long-term management vision, medium term/annual business plans, management strategy, financial results, R&D, sustainability, etc., aiming at facilitating their understanding of the Company and promoting dialogue. – 8 – When we have dialogue with shareholders, we strive to have two-way communications: we sincerely provide explanations, taking into account timeliness, appropriateness and fairness, and also listen to shareholders’ opinions. IR Officer, regularly or as necessary, reports on shareholders’ opinions and questions to President and other Directors, Audit & Supervisory Board, and Executive Officers. Foreign Shareholding Ratio From 10% to less than 20% 2. Capital Structure [Status of Major Shareholders] Name / Company Name Kirin Holdings Company, Limited The Master Trust Bank of Japan, Ltd. (Trust Account) Custody Bank of Japan, Ltd. (Trust Account) State Street Bank and Trust Company 505223 (Standing Proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division) SMBC Nikko Securities Inc. Custody Bank of Japan, Ltd. (Securities Investment Trust) State Street Bank and Trust Company 505234 (Standing Proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division) JPMorgan Chase Bank, N.A. 385780 (Standing Proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division) State Street Bank and Trust Company 505103 (Standing Proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division) JPMorgan Chase Bank, N.A. 385781 (Standing Proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Division) Number of Shares owned Percentage (%) 288,819,000 53.75 56,173,500 20,312,300 7,638,701 5,362,500 4,954,300 4,893,597 10.45 3.78 1.42 1.00 0.92 0.91 4,040,800 0.75 3,457,133 0.64 3,316,947 0.62 Controlling Shareholder (except for Parent Company) —- Parent Company Kirin Holdings Company, Limited (Listed: Tokyo, Nagoya, Sapporo and Fukuoka/ Code: 2503) – 9 – Supplementary Explanation Nil 3. Corporate Attributes Listed Stock Market and Market Section Fiscal Year-End Type of Business Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Tokyo Stock Exchange, First Section December Pharmaceutical More than 1000 From ¥100 billion to less than ¥1 trillion From 10 to less than 50 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder Transactions with the controlling shareholder, Kirin Holdings Company, Limited (“Kirin Holdings”), whether those be of goods and services provided by the Company or to the Company, are based on objective market information and other data, and as with ordinary transactions, rational terms are agreed, and the transaction is conducted appropriately. In case of conducting a transaction with Kirin Holdings, in order to address risks of conflicts of interest, when making a decision at the Board of Directors, officers who also work for the controlling shareholder, Kirin Holdings, do not participate in deliberation and resolution of such an agenda, and do not participate in our discussion and negotiations with Kirin Holdings. With respect to a significant transaction, etc. among transactions with Kirin Holdings, in case the Company’s Board does not have a majority of independent directors, the Company establishes the Supervisory Committee for Conflict of Interests in Transactions between Group Companies comprising independent directors, which serves as an advisory body to the Board of Directors and deliberates/considers the matter, for the purposes of securing the fairness and rationality of such a transaction and contributing to an improvement of the corporate value of the Company and the protection of interest of its minority shareholders. 5. Other Special Circumstances which may have Material Impact on Corporate Governance The Company is a consolidated subsidiary of Kirin Holdings Company, Limited (“Kirin Holdings”), a non-operating holding company that holds 53.75% of the total number of the Company’s issued shares as of December 31, 2021. While Kirin Group aims at becoming a global leader in CSV, creating value across our world of Food & Beverages to Pharmaceuticals, Kyowa Kirin is the only company in charge of the Pharmaceuticals domain, which is a core business of Kirin Group. While the Company aims at realizing ‘the creation a of life-changing value’, we consider that management resources owned by Kirin Holdings and its Group companies are useful for our Company and our Group companies. Kirin Group’s knowledge and know-how in the domains of production management and engineering contribute to building our business foundation. – 10 – In order to fulfill its social responsibility in the future, the Company will further utilize Kirin Group’s knowledge and know-how in the domains of environmental conservation and stable supply of pharmaceutical products. In addition, in order to ‘meet healthcare needs of the society across the entire patient care pathway’, we consider that opportunities to solve issues facing people confronted with diseases exist at the intersection with Health Science domain, which Kirin Holdings focuses on. In the Integration Agreement dated October 22, 2007, it was agreed by both companies that while observing core group management policies, the Company operates as an autonomous company with independence and flexibility, ensures management independence as a listed company, strives to maximize value for all shareholders and achieves consistent growth of its corporate value. Both companies follow through the Agreement. From the perspective of protecting minority shareholders, the Company appoints outside directors and outside Audit & Supervisory Board Members who have no concern about conflicts of interest with general shareholders. The Company established the Nomination and Remuneration Consultative Committee, which consists of a majority of outside officers. The Board of Directors is chaired by an independent director, and conducts an evaluation on the Board effectiveness by utilizing an external advisor. II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organization Form Company with Audit & Supervisory Board [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation Term of Office Stipulated in Articles of Incorporation Chairperson of the Board Number of Directors Number of Outside Directors Number of Independent Directors 10 1 year Outside Director of the Board 9 5 5 Outside Directors’ Relationship with the Company (1) Name Attribute Akira Morita Yuko Haga Jun Arai Takashi Oyamada Academic Academic From another company From another company Relationship with the Company* a b c d e f g h i j k – 11 – Yoshihisa Suzuki From another company * Categories for “Relationship with the Company” * “○” when the director presently falls or has recently fallen under the category; * “△” when the director fell under the category in the past “●” when a close relative of the director presently falls or has recently fallen under the category; “▲”when a close relative of the director fell under the category in the past a. Executive of the Company or its subsidiaries b. Non-executive director or executive of the parent company of the Company c. Executive of a fellow subsidiary company of the Company d. A party whose major client or supplier is the Company or an executive thereof e. Major client or supplier of the listed company or an executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as a director/audit & supervisory board member g. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) h. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (the director himself/herself only) i. Executive of a company, between which and the Company outside directors/ audit & supervisory board member are mutually appointed (the director himself/herself only) j. Executive of a company or organization that receives a donation from the Company (the director himself/herself only) k. Others Outside Directors’ Relationship with the Company (2) Name Reasons of Appointment Designation as Independent Director Supplementary Explanation of the Relationship Mr. Akira Morita has many years of academic background and extensive knowledge as a researcher of public administration, as well as experience in assuming various positions, including a council member, in central and local governments. We appointed Mr. Morita as Outside Director, expecting that his expertise and experience will be reflected in the Company’s management. He satisfies all requirements of our Criteria for the Independence of Outside Directors as well as the TSE’s criteria for independent directors/auditors, and we judged there is no concern about Akira Morita Yes — – 12 – conflicts of interest with general shareholders. Ms. Yuko Haga has many years of academic background and extensive knowledge as a researcher of corporate strategies, experience as a business consultant, and wealth of experience in medical care, caregiving, and health care. We appointed Ms. Haga as Outside Director, expecting that her expertise and experience will be reflected in the Company’s management. She satisfies all requirements of our Criteria for the Independence of Outside Directors as well as the TSE’s criteria for independent directors/auditors, and we judged there is no concern about conflicts of interest with general shareholders. Mr. Jun Arai has experience in corporate management as President & Representative Director of Showa Shell Sekiyu K.K. (former name) after leading its Accounting & Finance division for many years. We believe that he is fully capable of making important management decisions and overseeing business execution, and therefore, appointed him as Outside Director. He satisfies all requirements of our Criteria for the Independence of Outside Directors as well as the TSE’s criteria for independent directors/auditors, and we judged there is no concern about conflicts of interest with general shareholders. Mr. Takashi Oyamada has a high level of management expertise from his experience in the bank management in the Bank of Tokyo-Mitsubishi UFJ, Ltd. (former name), and has knowledge and insights of wide-ranged industries based on his wealth of experience in the financial industry. Therefore, we believe that he is qualified for making important management decisions and overseeing business execution, and appointed him as Outside Director. He satisfies all requirements of our Criteria for the Independence of Outside Directors as well as the TSE’s criteria for independent directors/auditors, and we Yuko Haga Yes — Jun Arai Yes — Takashi Oyamada Yes — – 13 – judged there is no concern about conflicts of interest with general shareholders. Mr. Yoshihisa Suzuki has experience in corporate management as President & Representative Director of ITOCHU Corporation, as well as president of its overseas subsidiary and its manufacturing company. We believe that he is fully capable of making important management decisions and overseeing business execution, and therefore, appointed him as Outside Director. He satisfies all requirements of our Criteria for the Independence of Outside Directors as well as the TSE’s criteria for independent directors/auditors, and we judged there is no concern about conflicts of interest with general shareholders. Yoshihisa Suzuki Yes — Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson Committee’s Name All Committee Members Full-time Members Inside Directors Outside Directors Outside Experts Other Chairperson Supplementary Explanation Committee Corresponding to Nomination Committee Nomination and Remuneration Consultative Committee 10 3 3 5 0 2 Outside Director Committee Corresponding to Remuneration Committee Nomination and Remuneration Consultative Committee 10 3 3 5 0 2 Outside Director Although we did not adopt the organization form of “company with committee(s),” we established the Nomination and Remuneration Consultative Committee, consisting of the above-mentioned members, as an advisory committee for the Board of Directors. The Committee deliberates and makes decisions on the following matters from an objective and impartial viewpoint, and reports the results to the Board of Directors: policies for appointing/removing Directors, Executive Officers, and Audit & Supervisory Board Members of the Company as well as proposals on candidates for such positions; appointment and removal of Executive Directors; duties of each – 14 – Director; policy for selecting a successor to CEO; proposals on candidates for Presidents and key management positions of main Group companies; remuneration system/level, amounts, etc. for Directors, Executive Officers, and Audit & Supervisory Board Members as well as Presidents and key management positions of main Group companies. The Nomination and Remuneration Consultative Committee consists of 10 members, and 7 members, which is a majority, are independent officers. The Committee Chair is selected from independent Directors. 2 committee members who fall under “Other” category represent Outside Audit & Supervisory Board Members. [Audit & Supervisory Board] Establishment of audit & supervisory board member Board Maximum Number of audit & supervisory board member Stipulated in Articles of Incorporation Number of audit & supervisory board member 5 Established Unlimited Cooperation among Audit & Supervisory Board Members, Accounting Auditors, and Internal Audit Departments In accordance with the audit policy formulated by the Audit & Supervisory Board and division of duties, Audit & Supervisory Board Members collaborate with our accounting auditor（KPMG AZSA LLC ） and Internal Audit Department through exchange of information/opinions and discussions. Audit & Supervisory Board Members and the accounting auditor regularly exchange opinions on the audit plan, audit policy, and progress in auditing. Audit & Supervisory Board Members and Internal Audit Department exchange opinions on the audit plan, and key audit matters, etc.; and Audit & Supervisory Board Members regularly receive reports on audit results from Internal Audit Department. Appointment of Outside audit & supervisory board member Number of Outside audit & supervisory board member Number of Independent audit & supervisory board member 3 2 Appointed Outside Audit & Supervisory Board Members’ Relationship with the Company (1) Name Attribute Relationship with the Company* a b c d e f g h i j k l m – 15 – Masaki Ueno Tomomi Yatsu Mayumi Tamura From another company Lawyer From another company △ △ * Categories for “Relationship with the Company” * “○” when the director presently falls or has recently fallen under the category; * “△” when the director fell under the category in the past “●” when a close relative of the director presently falls or has recently fallen under the category; “▲”when a close relative of the director fell under the category in the past a. Executive of the Company or its subsidiary b. Non-executive director or accounting advisor of the Company or its subsidiaries c. Non-executive director or executive of the parent company of the Company d. Audit & supervisory board members of the parent company of the Company e. Executive of a fellow subsidiary company of the Company f. A party whose major client or supplier is the Company or an executive thereof g. Major client or supplier of the Company or an executive thereof h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company besides compensation as an audit & supervisory board member i. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal entity) j. Executive of a client or supplier company of the Company (which does not correspond to any of f, g, or h) (the audit & supervisory board member himself/herself only) k. Executive of a company, between which and the Company outside directors/ audit & supervisory board member are mutually appointed (the audit & supervisory board member himself/herself only) l. Executive of a company or organization that receives a donation from the Company (the audit & supervisory board member himself/herself only) m. Others Outside Audit & Supervisory Board Member’s Relationship with the Company (2) Name Reasons of Appointment Designation as Independent Audit & Supervisory Board member Supplementary Explanation of the Relationship Masaki Ueno — Mr. Masaki Ueno has been selected as an outside Audit & Supervisory Board Member because the Company has judged that, having long served in legal departments in the Kirin Group, he has a high level of insight and experience regarding corporate legal affairs including global M&A; and thus, together with his experience in the Corporate Strategy & Planning Department of Kirin Holdings – 16 – Tomomi Yatsu Yes — Mayumi Tamura Yes — Company, Limited, that he is a suitably qualified person with the ability of providing broad supervision of the Group and giving audit opinions based thereon. Ms. Tomomi Yatsu is both a certified public accountant and an attorney at law. She has wealth of experience in serving as an outside audit & supervisory board member as well as an outside director. Therefore, we judged that, with her significant insights as an expert of accounting and law as well as profound insights in auditing companies, she is capable of overseeing the Company and expressing independent audit opinions. Ms. Mayumi Tamura has served as an outside director/audit & supervisory board member of several companies, and also has experience in promoting Diversity & Inclusion as Director of a non-profit organization. Furthermore, she has a high level of knowledge and experience as a professional in finance/accounting and corporate planning at various global companies over many years, and has deep insights gained from serving as CFO. Therefore, we judged that, with her knowledge, experience, and insights, she is capable of overseeing the Company and expressing independent audit opinions, and is qualified for the position. [Independent Directors/ Audit & Supervisory Board Member] Number of Independent Directors/ Audit & Supervisory Board Member 7 Matters relating to Independent Directors/ Audit & Supervisory Board Members The Company designates all Directors and Audit & Supervisory Board Members who meet the qualification for independent officers as Independent Directors and Audit & Supervisory Board Members. The Company appoints Outside Directors and Outside Audit & Supervisory Board Members with diverse backgrounds, expertise, and experience, and thus secures the system capable of objectively and fairly supervising and auditing the Company’s management from an independent standpoint. We believe it results in increasing transparency of the corporate management and strengthening the function of monitoring the management. – 17 – With respect to the requirements for securing independence, we established our own “Criteria for the Independence of Outside Directors and Outside Audit & Supervisory Board Members” to secure the independence from our Group, with reference to the provision on independent officers stipulated in the “Enforcement Rules for Securities Listing Regulations” of the Tokyo Stock Exchange (TSE), as well as the “Model standards for appointing independent directors in rules of the Board of Directors” developed by the Japan Association of Corporate Directors in 2011. According to the Criteria, as of March 25, 2022, we designated 7 persons (5 Outside Directors: Mr. Akira Morita, Ms. Yuko Haga, Mr. Jun Arai, Mr. Takashi Oyamada, and Mr. Yoshihisa Suzuki / 2 Outside Audit & Supervisory Board Members: Ms. Tomomi Yatsu, and Ms. Mayumi Tamura) as independent officers defined in the “Securities Listing Regulations” of the TSE, and notified the TSE of the matter. In order for outside Directors and outside Audit & Supervisory Board Members of the Company to be judged as being independent, such outside Directors and outside Audit & Supervisory Board Members must not fall under any of the following items, in addition to satisfying requirements stipulated in the Companies Act with respect to outside Directors and outside Audit & Supervisory Members: 1. Executive director (gyomushikko torishimariyaku), executive officer (shikkoyakuin), manager (shihainin) or other employee of the Company or its subsidiary 2. Director (torishimariyaku), audit & supervisory board member (kansayaku), executive officer (shikkoyakuin), manager (shihainin) or other employee of the parent company or fellow subsidiary of the Company “Fellow subsidiary” refers to another company that has the same parent company as the Company 3. Director, audit & supervisory board member, corporate officer (shikkoyaku), executive officer, manager or other employee of a major shareholder of the Company (excluding the parent company of the Company) “Major shareholder” refers to a shareholder who holds 10% or more of voting rights. 4. Director, audit & supervisory board member, accounting advisor (kaikeisanyo), corporate officer, executive officer, manager, or other employee of a company of which the Company is a major shareholder (excluding a subsidiary of the Company) 5. Person whose major business counterparty is the Company or its subsidiary “Person whose major business counterparty is the Company or its subsidiary” refers to a person who received payments from or made payments to the Company or a subsidiary of the Company of 2% or more of that person’s annual total net sales in the most recent fiscal year. 6. Executive director, corporate officer, executive officer, manager, or other employee of a company whose major business counterparty is the Company or its subsidiary, or a subsidiary of such a company “Company whose major business counterparty is the Company or its subsidiary, or a subsidiary of such a company” refers to a company which received payments from or made payments to the Company or its subsidiary of the Company of 2% or more of that company’s annual consolidated net sales in the most recent fiscal year, or a subsidiary of such a company. 7. Major business counterparty of the Company or its subsidiary “Major business counterparty of the Company or its subsidiary” refers to a person who received payments from or made payments to the Company or its subsidiary of 2% or more of the Company’s annual consolidated net sales in the most recent fiscal year. – 18 – 8. Executive director, corporate officer, executive officer, manager, or other employee of a company which is a major business counterparty of the Company or its subsidiary, or a subsidiary of such a company “A company which is a major business counterparty of the Company or its subsidiary, or a subsidiary of such a company” refers to a company which received payments from or made payments to the Company or a subsidiary of the Company of 2% or more of the Company’s annual consolidated net sales in the most recent fiscal year, or a subsidiary of such a company. 9. Certified public accountant (or certified public tax accountant), or member, partner, or employee of audit corporation (or tax accounting firm), that is the accounting auditor or accounting advisor of the Company or a subsidiary of the Company 10. Attorney-at-law, certified public accountant, certified public tax accountant or consultant, etc. who, excluding the remuneration received as a director or audit & supervisory board member, receives 10 million yen or more per year on average during the past three years of monetary consideration or other property benefits from the Company or a subsidiary of the Company 11. Member, partner or employee of a corporation, association, or other organization such as law firm, audit corporation, tax accounting firm, or consulting firm that receives monetary consideration or other property benefits of more than a certain amount from the Company or a subsidiary of the Company. In this item, a corporation, association, or other organization above receives “more than a certain amount” when such organization, etc. receives 2% or more on average of the total net sales (total revenue) of the organization, etc. per year during the past three years. 12. Director, audit & supervisory board member, accounting advisor, corporate officer, executive officer, manager or other employee of a financial institution or other large creditor that is essential to the financing of the Company or its subsidiary and that the Company or its subsidiary is dependent on to a degree that there is no substitute 13. Director or other person who executes business in a corporation, association or other organization which receives donations or subsidies from the Company or a subsidiary of the Company more than a certain amount In this item, a corporation, association, or other organization receives “more than a certain amount” when such organization, etc. receives, during the past three years, more than (i) 10 million yen per year on average or (ii) 30% on average of the annual total expenses of the organization, etc., whichever is higher. 14. Director, audit & supervisory board member, accounting advisor, corporate officer, or executive officer of a company or its subsidiary that has accepted a person from the Company or a subsidiary of the Company as a director (serving at that company on either a full-time or part-time basis) 15. Person who has come under a category listed in either of items 1 or 2 in the past ten years 16. Person who has come under a category of item 3 in the past five years 17. Person who has come under a category listed in any of items 5 through 13 in the past three years 18. Spouse or first- to second-degree relative, or other relative sharing same residence of any person who has come under a category listed in any of items 2 through 17; provided, however, that any mention of “manager or other employee” in items 2 through 17 shall be deemed to be replaced with “manager or other important employee.” 19. Spouse, first- to second-degree relative, or other relative sharing same residence of director, executive officer, manager or other important employee of the Company or its subsidiary – 19 – 20. Spouse, first- to second-degree relative, or other relative sharing same residence of a person who served as director, executive officer or other important employee of the Company or its subsidiary in the past five years 21. Other person who may give rise to conflict of interest with general shareholders and is rationally deemed to have reasons for being unable to perform duties of an independent officer Incentive Policies for Directors Performance-linked Remuneration / Other [Incentives] Supplementary Explanation Basically, remuneration for Directors is paid for the purposes of raising their awareness of contributing to the Company’s sustainable growth and further increase in corporate value, securing human resources appropriate for a Global Specialty Pharmaceutical Company, and motivating them to contribute to the Company through execution of their duties; and the remuneration is determined through a transparent and appropriate process, by adopting an objective perspective. The remuneration system for Executive Directors consists of three parts: (1) base compensation, (2) performance-linked annual bonus, and (3) share-based remuneration as a mid- to long-term incentive. Elements to be assessed for performance-linked remuneration include annual targets of revenue and profit (for performance-linked annual bonus); and targets in the medium term business plan (for performance-linked share-based remuneration called “Performance Share Unit”). Non-Executive Directors (Outside Directors) receive only base compensation, which is fixed compensation, to ensure they fulfill their management supervision function from an objective and independent standpoint. Base salary The Company has established suitable standards for compensation based on the category of the Company’s business and its scale, and data from surveys of other companies conducted by external survey organizations. At the 98th Ordinary General Meeting of Shareholders held on March 24, 2021, it has been approved that the Company introduces the above-mentioned performance-linked share-based remuneration system (Performance Share Unit). Recipients of Stock Options Other Supplementary Explanation “Other” indicates Executive Directors and Executive Officers of the Company, and certain Directors of the Board of the subsidiaries at the time of granting. At the Ordinary General Meeting of Shareholders held on March 19, 2020, the Company terminated the stock option system, and, instead, introduced the share-based remuneration plan (shares with restriction on transfer), yet the stock options granted as remuneration by that time remain in full force and effect. [Director Remuneration] – 20 – Disclosure of Individual Directors’ Remuneration Selected Directors Supplementary Explanation Compensation to Directors and Audit & Supervisory Board Members (January – December 2021) Directors (excluding Outside Directors): Total compensation 331 million yen (base compensation: 181 million yen, performance-linked annual bonus: 66 million yen, share-based remuneration with restriction on transfer: 64 million yen, and performance-linked share-based remuneration: 19 million yen), 3 persons Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members): Total compensation 29 million yen (base compensation: 29 million yen), 1 person Outside Directors: Total compensation 62 million yen (base compensation: 62 million yen), 5 persons Outside Audit & Supervisory Board Members: Total compensation 60 million yen (base compensation: 60 million yen), 4 persons In accordance with laws and regulations, we have disclosed individual remuneration amounts for selected Directors in the Securities Report. Note 1. The above information includes one Outside Director and one Outside Audit & Supervisory Board Member who retired at the end of the Ordinary General Meeting of Shareholders held last year. Note 2. The amounts of performance-linked annual bonuses, share-based remuneration with restriction on transfer, and performance-linked share-based remuneration were recorded as expenses for the current fiscal year. As for the performance-linked share-based remuneration, both cash and non-cash portions are to be paid/provided after the relevant performance evaluation period. Note 3. The number of restricted shares provided to Executive Directors in the current fiscal year was 20,364 shares (the paid-in amount per share was 3,145 yen, which is the closing price on March 23, 2021). Note 4. The above information does not include one Director and one Audit & Supervisory Board Member who have served without pay. Policy on Determining Remuneration Amounts and Calculation Methods Established Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods – 21 – Basically, the Company’s remuneration for Directors is paid for the purposes of raising their awareness of contributing to the Company’s sustainable growth and further increase in corporate value, securing human resources appropriate for a Global Specialty Pharmaceutical Company, and motivating them to contribute to the Company through execution of their duties; and remuneration should be determined through a transparent and appropriate process by adopting an objective viewpoint. In order to realize this basic policy, investigations and deliberations on officers’ remuneration are conducted by the Nomination and Remuneration Consultative Committee, which consists of a majority of outside officers, and is chaired by an independent Director. The Company’s remuneration for Executive Directors consists of three parts: (1) base compensation in a fixed amount, (2) performance-linked annual bonus as a short-term incentive, and (3) share-based remuneration as a mid- to long-term incentive. Remuneration for Non-Executive Directors and Audit & Supervisory Board Members is only base compensation in a fixed amount, in order to ensure they fully perform their oversight functions from the objective and independent standpoint. Base compensation is paid monthly in a fixed amount based on each officer’s position or job responsibility. Amounts are determined upon considering the company size, using officers’ remuneration data from an external research institution, and conducting an objective comparison/examination of compensation levels or compensation structures of other companies in industry sectors relevant to the Company, and after deliberations of the Nomination and Remuneration Consultative Committee. Performance-linked annual bonus is monetary compensation, where amounts change according to business performance for the purpose of providing Executive Directors with incentives to contribute to improving business performance in each fiscal year. The amounts are calculated according to the degree of achievement of performance targets which were set for the applicable fiscal year, and paid to Executive Directors at a certain point of time (usually in April) every year. Amounts of performance-linked annual bonus, which are calculated according to performance indicators, targets, and the degree of achieving the targets, are determined after deliberations of the Nomination and Remuneration Consultative Committee. As for share-based remuneration, the Company introduced the share-based remuneration with restriction on transfer in 2020, and the performance-linked share-based remuneration plan called “Performance Share Unit” in 2021. The share-based remuneration with restriction on transfer is intended for Executive Directors to share benefits and risks of stock price fluctuations with shareholders, and to become more motivated to contribute to an increase in share price and corporate value. Such shares are subject to a restriction period, and allotted to Executive Directors at a certain point of time (usually in April) every year in accordance with a resolution of the Board of Directors. The restriction period is three years. Performance-linked share-based remuneration plan is intended to clarify the linkage between Executive Directors’ compensation and the Company’s business performance and share price, and thereby provide them with incentives for achieving the Medium Term Business Plan and sustainable growth of corporate value, as well as to facilitate their sense of sharing value with shareholders. The performance evaluation period is three consecutive fiscal years, and pay rates vary depending on the achievement of performance targets. The “reference number of shares to be delivered” is determined by a resolution of the Board of Directors at the beginning of each performance evaluation period. After the end of the performance evaluation period for 3 fiscal years, the compensation is calcuertain point of time (usually in April) every year. Performance indicators are ROE, average annual growth rate of revenue and core operating profit margin, which are the indicators used in the Medium Term Business Plan. The degree of achievement of performance targets is calculated in accordance with the degree of achieving each target. – 22 – With respect to the remuneration table showing directors’ base compensation and performance-linked annual bonus by job rank and other related matters, the Board o