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Corporate Governance Principles

Chapter 1 General Provisions

• 1.
  The Company’s Corporate Concept is to give first thought to patients and the people in the daily living domain, and to increase the benefits that health care provides to them. Under this Concept, the Company endeavors to become a human health care (hhc) company.
• 2.
  The Company seeks to effectively achieve social good in the form of relieving anxiety　over health and reducing health disparities as an innovative Japanese company.
• 3.
  The Company’s mission is to increase the satisfaction of patients and the people in the daily living domain, and to empower them to realize their fullest life through an hhc ecosystem developed through collaboration with other industries and groups. The Company believes that revenues and earnings will be generated by first fulfilling this mission. The Company places importance on this sequence.
• 4.
  The Company strives to fulfill its social responsibilities by positioning compliance (i.e., the observance of legal and ethical standards) as the basis of all business activities.
• 5.
  The Company’s principal stakeholders are patients and the people in the daily living domain, shareholders, and employees. The Company endeavors to develop and maintain a good relationship with stakeholders and to enhance the value thereof through:

  • (1)
    Satisfying unmet medical needs, providing information and services that contribute to the awareness and prevention of diseases, ensuring a stable supply of high-quality products, and providing useful information on a range of topics, such as drug safety and effectiveness;
  • (2)
    Contributing to a sustainable society with a long-term perspective;
  • (3)
    Enhancing the common interests of shareholders, improving long-term corporate value, providing a positive return to shareholders, and disclosing corporate management information in a timely manner; and
  • (4)
    Ensuring stable employment, respecting human rights and diversity, providing full opportunities for growth in support of self-fulfillment, and creating an employee-friendly environment.

• 1.
  The Company is always aiming for good corporate governance, and strives continually to achieve it.
• 2.
  The core of the Company’s corporate governance is to ensure fair and transparent management and to enhance corporate vitality by clearly separating the supervision of management and the execution of business.
• 3.
  The Company will maximize the role of its Outside Directors, starting with their supervision of management and aiming at good corporate governance.
• 4.
  The Company aims to achieve good corporate governance on the following bases:

  • (1)
    Joint Creation of Value with Stakeholder Relations
    The Company shall:

    • (i)
      Respect the rights of all stakeholders;
    • (ii)
      Work on increasing and creating corporate value with stakeholders;
    • (iii)
      Keep positive and smooth relations and develop trust with the Company’s stakeholders through dialogue;
    • (iv)
      Ensure transparency by timely and properly disclosing Company information; and
    • (v)
      Proactively contribute to realize a sustainable society.
  • (2)
    Corporate Governance System

    • (i)
      The Company has adopted a Company with a Nomination Committee, etc. System.
    • (ii)
      The Board of Directors ("the Board") shall delegate to the Corporate Officers broad powers of decision-making for business execution, to the extent permitted by the laws and regulations, and it shall exercise the function of management oversight.
    • (iii)
      The majority of the Board shall be independent and neutral Outside Directors.
    • (iv)
      The Representative Corporate Officer and CEO shall be the only Director who is concurrently a Corporate Officer.
    • (v)
      To clarify the management oversight function, the positions of the Chair of the Board and the Representative Corporate Officer and CEO shall be separated and performed by different people.
    • (vi)
      The Nomination Committee and the Compensation Committee shall be entirely composed of Outside Directors, and the majority of the Audit Committee shall consist of Outside Directors.
    • (vii)
      Each of the Chairs of the Nomination Committee, the Audit Committee and the Compensation Committee shall be appointed from the Outside Directors.
    • (viii)
      The hhc Governance Committee entirely composed of Outside Directors shall be established.
    • (ix)
      The internal control system and its operation shall be implemented to ensure the credibility of financial reports.

Chapter 2 Joint Creation of Value with Stakeholders

• (1)
  Relations with Patients and Customers

  • (i)
    The Company will respect the various rights of patients and customers.
  • (ii)
    The Company will give first thought to improvement of the benefits to patients and customers and make efforts to provide high quality solutions matching their needs.
  • (iii)
    Directors and Corporate Officers will make use of “knowledge” obtained from ‘empathy” with patients and customers in executing their duties and making decisions.
• (2)
  Relations with Shareholders

  • (i)
    The Company will protect shareholders’ rights guaranteed by law and the Articles of Incorporation and ensure equality of treatment.
  • (ii)
    The Company will take measures to increase the common interests of shareholders on a long-term basis to make it possible for shareholders to hold the Company’s shares with a sense of assurance for the long term.
  • (iii)
    The Company will make efforts to obtain trust from shareholders through dialogue. The Board will properly reflect the voice of shareholders to management and the Directors will respond to shareholders’ expectations as a fiduciary.
• (3)
  Relations with Employees

  • (i)
    The Company will recognize the dignity and value of each employee and respect human rights and diversity.
  • (ii)
    The Company will make efforts to enrich the opportunities of employees’ human resource development and demonstration of ability, and to facilitate sound management based on the recognition that employees are stakeholders who can proactively create corporate value.
  • (iii)
    The Company will respect proposals and opinions from employees working together and handle them properly and fairly. The Board will proactively work on dialogue with employees and reflect the results of such interaction in supervising management.

• 1.
  The General Meeting of Shareholders is the supreme decision-making body, which consists of shareholders with voting rights, and must appropriately reflect their views.
• 2.
  The Company shall determine the method, date and venue so that as many shareholders as possible will be able to vote their rights on matters brought before the General Meeting of Shareholders, so that resolutions adopted by the General Meeting of Shareholders will reflect the views of shareholders.
• 3.
  Exercising voting rights at the General Meeting of Shareholders is a fundamental shareholder right and the Company will establish an environment where not only shareholders present at the General Meeting of Shareholders but all other shareholders can exercise their voting rights properly.
• 4.
  In order to enable shareholders to exercise their voting rights appropriately, the Company shall include sufficient information in the Notices of Convocation of the General Meeting of Shareholders and reference documents and other materials, and will send such information to shareholders at an early stage, so as to ensure that there is enough time for shareholders to consider the information.
• 5.
  In order to develop a relationship of trust with shareholders, Directors and Corporate Officers shall provide sufficient explanations and a question and answer session at the General Meeting of Shareholders.

• 1.
  The Company will treat each shareholder equally based on each shareholder’s equity stake and not provide any special benefits, including profits from assets, to any particular shareholder.
• 2.
  The Company will give sufficient consideration to the rights of minority shareholders, including rights related to the enjoinment of illegal acts, derivative actions and similar matters.
• 3.
  In order to protect shareholders’ interests, the Company will endeavor to prevent any Company-related persons, such as Directors, Corporate Officers and employees, from abusing their position or conducting any transaction in conflict with the interests of the Company and the shareholders.
• 4.
  Directors and Corporate Officers shall not engage in any transactions that have a conflict of interest or are in competition with the Company unless approval of the Board pursuant to the Companies Act has been obtained. Material facts concerning said transactions approved by the Board shall be appropriately disclosed.
• 5.
  In order to prevent insider transactions by Company-related persons, the Company will adopt rules relating to the treatment of material facts that have not yet been publicly announced, and will strictly apply such rules.

• 1.
  The Company will decide on and announce its basic guidelines for capital policy, including shareholder returns.
• 2.
  Decisions on distribution of retained earnings will be the subject of resolutions at Board Meetings in accordance with the Articles of Incorporation, and such decisions are to be implemented efficiently.
• 3.
  When the Company (i) allocates new shares to particular third parties and changes the Company’s shareholder composition or (ii) implements a capital policy which will affect corporate value, such as issuing stock acquisition rights, the Company will have the Board oversee such actions appropriately and disclose relevant information in order not to unfairly harm shareholders.

• 1.
  The Company will actively, and in a timely and appropriate manner, disclose material information related to management, regardless of whether the content is positive or negative.
• 2.
  The Company will determine its policy for disclosing material information related to management, etc. and create a structure to implement it.
• 3.
  The Company shall disclose information in a way that is easy to understand and through a variety of methods that are easy to access it.
• 4.
  The Company will make efforts to communicate with stakeholders by establishing an inquiries contact system for shareholders and patients and through other methods.
• 5.
  The Company recognizes that dialogue with stakeholders is an opportunity for creative mutual understanding which will mutually produce empathy and changes in consciousness and behavior, and the Directors and Corporate Officers will proactively engage in this dialogue and contribute to ensure the gaining of trust and the transparency of management.

• 1.
  The Company will consistently pursue the best corporate governance and proactively work on solving issues related to the environment and society.
• 2.
  The Company will carefully monitor trends of global activities which aim at the realization of a sustainable society, and will strengthen the effectiveness of the Company’s efforts and endeavor to disclose information proactively.
• 3.
  The Company will respect various stakeholders worldwide and make efforts to maintain positive and smooth relations with them, and will contribute to the creation of social value with stakeholders through the Company’s business.
• 4.
  The Directors and Corporate Officers will respect stakeholders’ rights and provide leadership to develop a corporate culture of creating value together with its stakeholders based on the Corporate Concept of the Company.

Chapter 3 Corporate Governance System

• 1.
  The Company has chosen to be a Company with a Nomination Committee, etc. System. The function of management oversight shall be carried out by the Board, and the function of business execution shall be carried out by the Corporate Officers. Through this, the Company will clearly separate the functions of management oversight and business execution, increase the vitality of its management and ensure the fairness and transparency of its management.
• 2.
  The Board will be composed of diverse Directors with differing backgrounds of specialized knowledge, experience, etc. and an appropriate number of Directors shall be maintained so that the Board can exercise its functions most effectively and efficiently.
• 3.
  The majority of the Board shall be composed of independent and neutral Outside Directors.
• 4.
  The Representative Corporate Officer and CEO shall be the only Director who is concurrently a Corporate Officer.
• 5.
  To thoroughly separate the functions of management oversight and business execution, the positions of the Chair of the Board and the Representative Corporate Officer and CEO shall be separated and performed by different people.
• 6.
  The Company will establish the Nomination, Audit and Compensation Committees in accordance with the Companies Act. In addition, the Board will establish, as needed, Committees of the Board other than the Nomination, Audit and Compensation Committees.
• 7.
  The Company shall establish an hhc Governance Committee comprised of Outside Directors only for continued enhancement of corporate governance.
• 8.
  The Nomination Committee and the Compensation Committee shall be entirely composed of Outside Directors, and the majority of the Audit Committee shall be composed of Outside Directors.
• 9.
  The Chairs of the Nomination Committee, the Audit Committee and the Compensation Committee shall be Outside Directors.
• 10.
  Outside Directors who are the Audit Committee members shall be appointed from those with expertise in finance, accounting, legal affairs, management, etc., and Internal Directors shall be appointed from those with abundant experience within the Company.
• 11.
  In order to ensure the independence of audits, members of the Audit Committee shall not concurrently be members of the Nomination Committee or the Compensation Committee.
• 12.
  A Board of Directors Secretariat shall be established to act as the secretariat of the Board, the Nomination Committee and the Compensation Committee. A Management Audit Department shall be established to act as the secretariat of the Audit Committee.

• 1.
  Through developing good corporate governance, the Board shall fulfill its oversight functions, take the best possible decisions by exercising fair judgment and aim to realize the Corporate Concept.
• 2.
  The Board shall determine the material matters required by law, the Articles of Incorporation and the Rules of the Board, including basic management policies, the appointment and dismissal of Corporate Officers and surplus dividends.
• 3.
  In order to accelerate the speed and increase the flexibility of business execution and to enhance the vitality of management, the Board shall delegate the decision-making function on business execution, except for items provided for in the preceding clause, to the Corporate Officers.
• 4.
  The Board will make efforts to apply a multi-dimensional risk management approach to the business execution by the Corporate Officers, and will oversee the system design and operation of internal control measures by the Corporate Officers.
• 5.
  The Board shall oversee the execution of duties by the Directors and Corporate Officers on the basis of reports from the Nomination Committee, Audit Committee, the Compensation Committee and the Corporate Officers.
• 6.
  The Board will strive to realize the Corporate Concept, to increase the Company's corporate value and to enhance the long-term interests of the shareholders. It shall have the duty of judging fairly any conduct that may damage these goals and of taking appropriate action.
• 7.
  In order for the Representative Corporate Officer and CEO to be appointed by the Board, all of the Directors shall share information related to the succession plan for the future Representative Corporate Officer and CEO.
• 8.
  The Board, together with the Nomination, Audit and Compensation Committees, shall not violate or interfere with their respective authorities when executing their duties and shall maintain mutual understanding.
• 9.
  The Board and the Corporate Officers shall maintain mutual understanding while fulfilling their respective responsibilities of executing duties.

• 1.
  The Chair of the Board shall be appointed from the Outside Directors.
• 2.
  In addition to determining the annual agenda to be deliberated by the Board, the chair of the Board shall specify the date, location, and agenda and convene the Board Meeting.
• 3.
  The chair of the Board shall provide the Directors with the information necessary to consider the items for deliberation prior to the holding of the Board Meeting.
• 4.
  The Chair of the Board shall enhance the quality of the discussions among the Directors and manage the Board Meetings effectively and efficiently.

• 1.
  The term of office of Directors shall be one (1) year. Directors shall be elected every year at the General Meeting of Shareholders.
• 2.
  Directors shall assume the duty of care and the duty of loyalty.
• 3.
  Directors shall request explanations at Board Meetings, actively express their opinions, conduct thorough discussions, and exercise their voting rights, as well as collect sufficient information to execute their duties.
• 4.
  Through the timely and appropriate exercise of their right to propose agenda items and to call for Board Meetings to be convened, the Directors shall seek solutions to issues concerning the management of the Company of which they become aware.
• 5.
  In responding to the trust placed in them by all shareholders, Directors shall spend sufficient time on the execution of their duties and demonstrate the competence expected of them.
• 6.
  The Directors will receive sufficient information and request additional information if necessary concerning the status of adherence to the Corporate Concept of the Company and the current management environment in order to fully perform their duties. The Company will provide the Directors with various training and opportunities for information sharing which will aid in the Board’s duty of oversight of management.

• 1.
  Outside Directors shall be personally and financially independent from the Company.
• 2.
  Outside Directors must not only meet the requirements for Outside Directors stipulated in the Companies Act, but must also satisfy the “Requirements for the Independence and Neutrality of Outside Directors” established by the Nomination Committee, and must continue to satisfy those requirements after their appointment as Outside Directors.
• 3.
  Outside Directors shall take the initiative to increase the fairness of the decisions and actions of the Board and of each Committee and to achieve good corporate governance.

• 1.
  The Nomination Committee shall determine the content of the proposals to be submitted to the General Meetings of Shareholders related to the nomination and dismissal of Directors.
• 2.
  The Nomination Committee shall determine the “Requirements for the Independence and Neutrality of Outside Directors” in order to appoint independent and neutral Outside Directors based on the recognition that it is the fact that Outside Directors hold a majority of the Board representation that supports the effectiveness of the Company’s corporate governance.
• 3.
  The Nomination Committee shall select Director candidates with diverse backgrounds in order for the Board to meet the various expectations of stakeholders and to fully perform its oversight function.
• 4.
  The Nomination Committee shall establish the basic policies, rules, procedures, etc., necessary for the execution of its duties.
• 5.
  The Nomination Committee shall report on the status of execution of its duties to the Board.

• 1.
  The Audit Committee shall audit the execution of the Directors’ and Corporate Officers’ duties, prepare audit reports, and conduct accounting audits and other matters required by laws and regulations.
• 2.
  The Audit Committee shall determine the contents of proposals related to the election, dismissal and non-reappointment of the Accounting Auditors to be submitted to the General Meeting of Shareholders.
• 3.
  The Audit Committee shall confirm that the Accounting Auditors’ independence is assured and the quality control of audits is managed systematically, and shall make efforts to collect relevant information regarding an audit corporation other than the Company’s Accounting Auditors.
• 4.
  The Audit Committee shall endeavor to achieve efficient and higher quality auditing, e.g., (i) by receiving timely and appropriate reports from the officers and employees of the Company and the ENW Entities and the Accounting Auditors of the Company related to the execution of their duties, (ii) by conducting relevant research on the status of the business and assets of the Company and the ENW Entities and (iii) by sharing necessary information with the Accounting Auditors and internal audit department.
• 5.
  The Audit Committee shall establish the basic policies, rules, procedures, etc., necessary for the execution of its duties.
• 6.
  The Management Audit Department executes its duties based on the resolutions of the Audit Committee and the instructions of the members of the Audit Committee, and its independence from the Corporate Officers regarding work instructions and orders, personnel evaluations, etc. shall be secured in order to ensure the objectivity of audits.
• 7.
  The Audit Committee shall report on the status of execution of its duties to the Board.

• 1.
  The Compensation Committee shall determine both the policies for deciding the compensation of Directors and Corporate Officers, and their individual compensation, with fairness and transparency.
• 2.
  The Compensation Committee shall determine the remuneration of Directors, to appropriately compensate them for their performance of management oversight, and the remuneration of Corporate Officers, to provide them with strong motivation for their responsibilities of business execution and which takes into consideration the level of achievement measured against their performance benchmark(s).
• 3.
  When deciding the compensation of the Directors and Corporate Officers, the Compensation Committee shall make decisions after making active use of external research data in order to ensure the objectivity of its decisions and deliberating the appropriateness of the decision-making process on compensation.
• 4.
  The Compensation Committee shall establish the basic policies, rules, procedures, etc. necessary for the execution of its duties.
• 5.
  The Compensation Committee shall report on the status of execution of its duties to the Board.

• 1.
  The hhc Governance Committee shall be composed of all of the Outside Directors.
• 2.
  The hhc Governance Committee shall engage in proactive dialogue with the Company’s stakeholders and use the insights gained to enhance discussions by the Board.
• 3.
  The hhc Governance Committee shall share information about the succession plan for a future Representative Corporate Officer and CEO proposed by the Representative Corporate Officer and CEO, and provide relevant advice. The hhc Governance Committee shall reasonably ensure impartiality in the selection of the CEO by the Board by having Outside Directors take part in the process.
• 4.
  The hhc Governance Committee shall evaluate the effectiveness of the supervision function of the management of the Board every year. If there are issues related to the operation of the Board, etc., the hhc Governance Committee may make proposals to the Board for addressing such issues.
• 5.
  The hhc Governance Committee is held to discuss a broad range of matters related to the Company’s corporate governance and business, and thereby strive for continued enhancement of corporate governance.
• 6.
  The matters discussed at the hhc Governance Committee shall be reported to the Board or notified to the Corporate Officers as necessary.

• 1.
  Every year, the Board shall evaluate the state of the Company’s corporate governance and shall seek to enhance the effectiveness of corporate governance in accordance with the Board’s review of Board resolutions relating to these Principles, the Board’s review of the internal control system, and the evaluation by each Director of the Board of Directors.
• 2.
  The Board will ensure the appropriateness of the results of the annual evaluation of corporate governance, and will maintain and seek to improve the objectiveness and reasonableness of its evaluation methods by implementing a periodic review by an outside organization.

• 1.
  The Representative Corporate Officer and CEO is the Chief Executive Officer and shall hold the powers delegated by the Board in relation to business execution. The Representative Corporate Officer and CEO shall make decisions concerning the best execution of business and shall implement measures with the aim of realizing the Company's Corporate Concept, increasing corporate value, and enhancing the long-term interests of the shareholders.
• 2.
  The Representative Corporate Officer and CEO shall provide sufficient explanation to the Board regarding business execution, and shall concurrently be a Director for this purpose.
• 3.
  The Representative Corporate Officer and CEO shall establish a succession plan for the Representative Corporate Officer and CEO and develop relevant candidates.
• 4.
  The Representative Corporate Officer and CEO shall establish, prepare and operate an internal control system, including a legal compliance system and risk management system, and continually evaluate its effectiveness and strive to improve it.
• 5.
  The Representative Corporate Officer and CEO shall in a timely and appropriately provide to the Audit Committee sufficient information for the Audit Committee's audits.

• 1.
  The term of office of Corporate Officers shall be one (1) year. The Representative Corporate Officer and CEO shall propose candidates for Corporate Officers by providing a sufficient explanation, and Corporate Officers shall be appointed by the Board.
• 2.
  Corporate Officers shall assume the duty of care and the duty of loyalty.
• 3.
  Corporate Officers shall undertake the important responsibility of managing the business with the aim of realizing the Corporate Concept, increasing corporate value and enhancing the long-term interests of shareholders.
• 4.
  Corporate Officers shall be delegated from the Representative Corporate Officer and CEO the authority to decide on the specific execution of business in the assigned business/area, and establish, prepare and operate an internal control system within the scope of their assigned division of duties, and take responsibility to execute business with the aim of achieving the targets in addition to developing capable human resources who will manage the Company in the future.
• 5.
  Corporate Officers shall make efforts to obtain necessary knowledge and to enhance their skills continuously in order to perform their duties. The Company will provide relevant knowledge related to compliance and risk management as well as educational opportunities for Corporate Officers so that they may efficiently execute their duties in compliance with applicable laws, regulations and the Articles of Incorporation.
• 6.
  Corporate Officers shall, on the basis of the Companies Act, report to the Board at least once every three months on the overall state of the execution of their business based on their assigned division of duties, and at the same time, they shall also provide as required information on those matters requested by the Board or Director(s).
• 7.
  An appropriate number of Corporate Officers shall be maintained so that their duties concerning business execution with which they have been entrusted by the Board can be performed most effectively/efficiently.

• 1.
  The achievement of thorough internal control of the whole Company group is an important element in obtaining the trust of shareholders. Based on the Companies Act, the Board shall determine the "Rules Concerning Items Necessary for the Execution of Duties by the Audit Committee" and the "Rules for Preparing Necessary Systems for Ensuring the Suitability of the Execution of Duties by Corporate Officers."
• 2.
  In order to ensure the compliance with applicable laws, regulations and ethical standards, the Company shall establish and maintain an internal whistle blowing reporting system, and will develop this system to ensure that it appropriately and fairly handles information from whistle blowers and that a whistle blower will never be subject to unfair treatment.
• 3.
  Based on the resolutions of the Board related to internal control, the Corporate Officers shall maintain a system that is necessary for compliance with laws and ethics, the efficacy and efficiency of business and the reliability of financial reports, and shall make such a system work effectively, and shall report the operative situation to the Board.

• 1.
  The Accounting Auditors shall ensure the reliability of financial statements through their audits of such statements, and they bear an important role in realizing better corporate governance.
• 2.
  The independence of the Accounting Auditors from the Company shall be ensured.
• 3.
  The Accounting Auditors shall conduct systematic management for the quality control of audits.

• March 23, 2001: Established (Corporate Governance Regulations)
• September 21, 2001: Revision made
• April 25, 2002: Revision made
• June 27, 2002: Revision made
• June 24, 2003: Revision made
• May 11, 2004: Revision made
• October 29, 2004: Revision made (Corporate Governance Guidelines)
• July 29, 2005: Revision made
• April 26, 2007: Revision made
• February 27, 2012: Revision made
• June 20, 2014: Revision made
• June 19, 2015: Revision made
• March 31, 2016: Revision made
• June 21, 2017: Revision made
• June 20, 2018: Revision made
• April 24, 2020: Revision made
• March 1, 2021: Revision made (Corporate Governance Principles)
• June 17, 2022: Revision made