Sawai : Corporate Governance Report

Corporate Governance Report

Last Update: June 24, 2022

SAWAI GROUP HOLDINGS Co., Ltd.

Representative Director, President & Group Chief Operating Officer (GCOO) Kazuhiko Sueyoshi Contact: Group Sustainability Management Office General Manager Fumito Kawai Securities Code: 4877

https://global.sawaigroup.holdings

The corporate governance of SAWAI GROUP HOLDINGS Co., Ltd. (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

In order to achieve sustainable growth and increase corporate value over the medium and long term for the Company, its subsidiaries and affiliates (hereinafter referred to as the "Group") as a whole, the Company has positioned the enhancement of corporate governance as an important management issue in order to build a management system that enables decision-making and business execution that responds appropriately and swiftly to changes in the external environment, and to achieve fair and highly transparent management.

In addition, in order to maintain and improve high ethical standards, the Company, which has a life-related company that provides prescription pharmaceuticals as one of its core group companies, will promote corporate activities in accordance with the Sawai code of conduct and various internal regulations to be followed for various stakeholders under the common corporate philosophy of "Always putting healthier lives first."

(1) Ensuring the rights and equality of shareholders

The Company will strive to improve the environment for the exercise of voting rights and take appropriate measures to ensure that the rights of shareholders are substantially secured, and will also strive to ensure that the rights of minority shareholders and foreign shareholders are substantially equal.

(2) Appropriate collaboration with stakeholders other than shareholders

In order to realize the Group's common corporate philosophy of "Always putting healthier lives first," to

achieve sustainable growth and enhance corporate value over the medium to long term, and to contribute to the realization of the Sustainable Development Goals (SDGs) adopted by the United Nations, the Company shall strive to collaborate with not only shareholders but also medical and healthcare professionals, business partners, employees, and other stakeholders including local community. In addition, we will actively fulfill our corporate social responsibility (CSR) in our business processes.

(3) Ensuring appropriate information disclosure and transparency

In accordance with laws and regulations, we will disclose consistent and reliable corporate information to shareholders, investors, and other capital market participants in a timely manner, and strive to ensure that all market participants have equal access to the information we disclose. In addition to financial information, we

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will actively disclose highly useful information on management strategies, management issues, risks, ESG information, etc., through our website and public relations materials, and strive to disclose appropriate and highly transparent information.

(4) Responsibilities of the Board of Directors

Based on its fiduciary responsibility and accountability to shareholders, the Board of Directors of the Company will strive for "proactive governance" that enables us to respond appropriately to changes in the external environment and to make decisions quickly and decisively, under a management oversight function that balances the "autonomy" of internal directors who are familiar with the businesses of the Group and the "heteronomy" of outside directors who are objective and independent from the perspective of the optimal allocation of the Group's overall resources as well as pursuing efficiency and legality in management. In addition, we will strengthen the "defensive functions" expected of Audit & Supervisory Board members by ensuring that they have opportunities to express their opinions appropriately at meetings of the Board of Directors and by fostering a corporate culture that respects free, vigorous and constructive opinions.

(5) Dialogue with shareholders

The President and Representative Director, and the person in charge of information disclosure shall actively participate in dialogue with shareholders and investors, provide substantial information on management strategies, finances, etc., and strive for two-way constructive communication with shareholders and investors. In addition, the results of the dialogue shall be reported to the Board of Directors, etc., and the opinions of shareholders, etc., shall be actively utilized in the management of the Company.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

[Supplementary Principle 2.4.1: Ensuring diversity in the promotion to core human resources] (Updated) Please refer to our website for our approach to ensuring diversity in the appointment of core human resources and our target for the ratio of female managers. We have not set a target for the ratio of mid-career employees in managerial positions, because the majority of our managers are mid-career employees and we believe that we have ensured sufficient diversity in terms of the ratio of mid-career employees in managerial positions. In addition, the Group's main regions of operation are Japan and the U.S. However, we have not set a target for the ratio of non-Japanese managers because the definition of managerial positions differs between our main subsidiaries in Japan and those in the U.S. https://global.sawaigroup.holdings/sustainability/human

[Supplementary Principle 4.1.3: Succession Planning for the CEO, etc.]

The Board of Directors shall provide guidance and supervision through the Nomination, Remuneration and Other Governance Committee to ensure that the succession plan for the CEO and other officers is formulated as early as possible.

[Supplementary Principle 4.11.1: View on the balance of composition, diversity and size of the Board of Directors] (Updated)

The maximum number of members of the Board of Directors of the Company has been set at twelve (12) from the viewpoints of the size of the Company and the realization of substantive discussions and exchange of opinions. Currently, the Company's Board of Directors consists of six directors, two of whom are independent outside directors. Please refer to the description concerning Principle 3.1 (iv) in this report for our view on the balance between all members of the Board of Directors in terms of their fields of knowledge, experience, and ability, and its overall diversity, as well as our policy and procedure for the appointment of Directors. The Company plans to consider appointing independent outside directors with management experience at other companies, taking into account relationships with new businesses. Please refer to the "Notice of Convocation of the General Meeting of Shareholders" and other documents for the Skill Matrix, which lists each director's fields of knowledge, experience, and ability. https://global.sawaigroup.holdings/ir/library/report/pdf/192

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[Disclosure Based on the Principles of the Corporate Governance Code]

[Applicable Code]

The following is based on the June 2021 revision of the code.

[Principle 1.4: Strategic Shareholdings]

In order to achieve sustainable growth and enhance corporate value over the medium to long term, the Group may hold listed shares as it deems necessary as part of its management strategy, including stable procurement of raw materials, fund procurement, and business alliances. In addition, we believe that strategic shareholdings can be an effective means of strategic alliances. When the Group holds listed shares, the Board of Directors periodically reviews the rationality of holding major strategic shareholdings in line with the purpose of holding the shares, including the consideration of the cost of capital, and reduces its shareholdings when it judges that such shareholdings are not rational.

In exercising voting rights, we have not established uniform standards for the exercise of voting rights, as the content of each agenda item and its background differ from one another. The Company will exercise its voting rights appropriately after examining each proposal individually to determine whether it will contribute to the sustainable growth and medium- to long-term enhancement of the Group's corporate value by conducting dialogue with the companies in which we hold shares and deepening our understanding of their management policies and the contents of their proposals.

[Principle 1.7: Transactions with related parties]

The Company stipulates in the Regulations of the Board of Directors that the approval of competitive transactions, self-dealing, and transactions with conflicts of interest of directors shall be a matter for resolution, and similarly stipulates that directors who have a special interest in such matters may not participate in voting. In addition, to ensure that the interests of general shareholders are not harmed, transactions between the Company and its major shareholders, etc., are also stipulated as a matter for resolution by the Board of Directors. In addition, the Board of Directors appropriately monitors transactions between related parties in accordance with relevant laws and regulations.

[Principle2.6: Roles of Corporate Pension Funds as Asset Owners]

The Company has adopted a defined contribution pension plan, and since the employees, who are the beneficiaries of the plan, are responsible for managing their pension funds, we believe that there is no conflict of interest between employees and the Company in managing the pension funds. On the other hand, since the management of pension funds impacts stable asset formation for employees, we have assigned a person in charge of the corporate pension system to the Group's Human Resources Department to provide our employees education and other services. In addition, the person in charge receives reports on the management status from the administrative management institution through interviews once every six months. In selecting investment products, the Company selects financial products with different profit characteristics from those stipulated in the Defined Contribution Pension Plan Law, and notifies and consults with the labor union in advance when adding or changing investment products.

[Principle 3.1: Enhancement of Information Disclosure]

1. The Company's corporate philosophy, management strategy and management plan (mid-term business plan) are disclosed on the Company's website.
   https://global.sawaigroup.holdings/about/plan
2. Please refer to "I.1. Basic Views" in this report for the Company's basic views and basic policy regarding the Corporate Governance.
3. For the policies and procedures of the Board of Directors of the Company in determining the remuneration of senior management and directors, please refer to "Existence of Policy on Determining Remuneration Amounts and Calculation Methods" in "II.1. Organizational Composition and Operation [Director Remuneration]" of this report.
4. The policy of the Board of Directors of the Company in appointing senior management and nominating candidates for directors who will be responsible for the sustainable growth of the Company and the enhancement of its corporate value over the medium to long term is to consider the size, balance and diversity of the Board of Directors as a whole, while fully respecting the advice and recommendations of the Nomination, Remuneration and Other Governance Committee. Decisions are made based on a comprehensive assessment of the extensive experience and expertise appropriate to the position, the business performance, and the high level of insight and character. The procedures for this are stipulated in the "Regulations of the
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Board of Directors" and the "Regulations of the Nomination, Remuneration and Other Governance Committees. The policy for the dismissal of senior management, including directors, is determined by comprehensively considering the following matters, while fully respecting the advice and recommendations of the Nomination, Remuneration and Other Governance Committee.

• When the requirements for the appointment of senior management are no longer met
• Violations of laws, regulations, the Articles of Incorporation, or other acts that damage the Company's credibility
• Inability to perform duties due to mental or physical loss or other health reasons
• In the event that he or she violates the duty of care of a good manager and causes significant loss to the Company.

These procedures are also stipulated in the "Regulations of the Board of Directors" and the "Regulations of the Nomination, Remuneration and Other Governance Committee."

The policy for nominating candidates for Audit & Supervisory Board members is determined in accordance with the "Auditing Standards for Audit & Supervisory Board members," which includes ensuring independence from executive officers and maintaining a fair and unbiased attitude. The procedures are set forth in the "Regulations of the Audit & Supervisory Board."

1. Based on the above (iv), when nominating candidates for directors and Audit & Supervisory Board members, the explanation of each election, dismissal and nomination shall be included in the "Notice of

Convocation of General Meeting of Shareholders."

[Supplementary Principle 3.1.3: Initiatives on sustainability] (Updated)

The Company recognizes that sustainability is one of the most important management issues. We have thus established the Group Sustainability Committee to work together with our Group companies on sustainability. The progress of our sustainability initiatives and ESG data are disclosed on the websites of the Company and Group companies. Moreover, our Mid-Term Business Plan includes investment in human capital and intellectual property. Please refer to "2. Other Matters Concerning to Corporate Governance System" in "V. Other" in this report, as well as our website, for disclosures based on the TCFD recommendations. https://global.sawaigroup.holdings/sustainability/tcfd

[Supplementary Principle 4.1.1: Outline of the scope of delegation to management]

The Board of Directors makes judgments and decisions on matters stipulated in laws and regulations and the Articles of Incorporation, as well as on matters stipulated in the Regulations of the Board of Directors as being of high managerial importance. In light of the fact that an important duty of the Board of Directors is to supervise management, we have adopted an executive officer system and delegate to executive officers the execution of duties in line with decisions made by the Board of Directors. Discussions and decisions on execution policies are made at the Group Strategy Council, which consists of the Chairman, Deputy Chairman, President, and Executive Officers. For the purpose of efficiency and mobility, the Company executes matters of less than a certain amount of money and deemed less important based on the "Decision-Making Standard List" separately established. In addition, through the development of the Regulations on the Management of Affiliated Companies, we will promote the delegation of authority to each company in the Group to realize prompt and efficient business operations. At the same time, we appoint a supervising officer or an officer in charge for each function of each Group company to provide guidance and supervision to the Group companies, and ensure appropriate supervision by having them regularly report the status to the Board of Directors. In addition, the Company has established the Group Governance Council and other committees that include members from each Group company to share, discuss, and review information, as well as to provide a function for prior deliberation of matters to be resolved or reported to the Board of Directors, thereby strengthening the management supervision system for the entire Group.

[Principle 4.9: Criteria for determining the independence of independent outside directors and their qualifications]

The Company has appointed two independent outside directors who satisfy the requirements for outside directors stipulated in the Companies Act and the independence standards stipulated by the Tokyo Stock Exchange, and who are capable of providing advice and making judgments that contribute to the sustainable growth and medium- to long-term enhancement of the Company's corporate value from an objective perspective. These two independent outside directors serve as key members of the Nomination, Remuneration and Other Governance Committee, which was established to improve the independence, objectivity and transparency of the functions of the Board of Directors and to strengthen accountability, and have been

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appointed as outside directors to provide appropriate involvement and advice in the consideration of important matters related to the Company's governance. In addition, Mr. Masatoshi Ohara has been appointed as the leading independent outside director by mutual election of the outside directors. The leading independent outside director plays a leading role in strengthening the supervisory function by holding regular meetings with the outside directors and the Audit & Supervisory Board members to promote cooperation, and by communicating and coordinating with directors other than the outside directors (including representative directors).

[Supplementary Principle 4.10.1: Independent Nomination and Remuneration Committees

Please refer to "II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" in this report for the voluntarily established committees that deliberate on important governance matters, such as nomination and remuneration, and their members.

[Supplementary Principle 4.11.2: Status of concurrent positions held by directors and Audit & Supervisory Board members]

In order to ensure that the Company's directors and Audit & Supervisory Board members are able to appropriately fulfill their roles and responsibilities, concurrently serving as officers of other companies is limited to a reasonable extent. The status of concurrent positions of directors and Audit & Supervisory Board members at other companies will be described in the "Notice of Convocation of the General Meeting of Shareholders.

[Supplementary Principle 4.11.3: Analysis and Evaluation of the Effectiveness of the Board of Directors] (Updated)

It is the Company's policy to analyze and evaluate the effectiveness of the Board of Directors on a regular basis and to make improvements as necessary. To evaluate the effectiveness of the Board of Directors in fiscal 2021-for the first time after the foundation of Sawai Group Holdings Co., Ltd. as a holding company-we adopted a system of self-assessment based on a questionnaire survey of directors and Audit & Supervisory Board members. The Board's Secretariat compiled, analyzed, and evaluated the survey responses, the results of which were reported to the Board of Directors for discussions. The results of the Board's discussions are summarized as follows.

(Major items in which Sawai Group Holdings Co., Ltd. has been judged to meet the standards for listing on the Prime Market)

・Establishment an environment that supports appropriate risk-taking and full examination of proposals ・Management remuneration systems

・Effective supervision of strategy implementation ・Independent and objective judgment

・Audit & Supervisory Board members' and the board's appropriate expression of their views to management and independent directors' advice from the perspectives of sustainable growth and a medium- to long-term increase in corporate value

・Oversight of management and monitoring of conflicts of interest ・Appropriate representation of the views of stakeholders

(Major item in which Sawai Group Holdings Co., Ltd. has been judged to be short of the standards for listing on the Prime Market)

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