Daiichi Sankyo : Corporate Governance Repor

Corporate Governance Report

Daiichi Sankyo Co., Ltd.

Last update: June 18, 2024

Hiroyuki Okuzawa, Representative Director and President & COO

Contact: Kentaro Asakura,

Vice President, Corporate Communications Department

Securities Code: 4568

https://www.daiichisankyo.com/

1. Basic Views of Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

Updated

In addition to creating a management structure that can respond speedily and flexibly to changes in the business environment, Daiichi Sankyo (the Company) is working to secure legal compliance and management transparency and to strengthen oversight of management and the conduct of operations. We place great importance on building up a corporate governance structure that is responsive to the trust of our stakeholders, especially our shareholders.

Corporate Governance Structure

• To clarify Directors' management responsibility and reinforce their oversight of management and the conduct of operations, their terms of office are set at one year, and five out of our ten Directors are Outside Directors. Since June 2020, an Outside Director has been appointed as chairperson of the Board of Directors (the Board).
• To ensure management transparency, the Company has established two voluntary committees as advisory bodies to the Board: the Nomination Committee and the Compensation Committee. Both

committees respectively deliberate on selections or dismissals of CEO and COO, the succession plan of CEO, selections of Director and Audit & Supervisory Board Member candidates, the compensation policy for Directors, the individual amounts of compensation of Directors, and other matters.

• Both Committees are composed of five Outside Directors, and one Outside Audit & Supervisory Board Member participates as an observer.

• For audits of legal compliance and soundness of management, the Company has adopted an Audit & Supervisory Board system and established Audit & Supervisory Board comprising five Audit & Supervisory Board Members, including three Outside Audit & Supervisory Board Members.
• The Company prescribes specific criteria on the judgment of independence of Outside Directors and Outside Audit & Supervisory Board Members and basic matters regarding execution of duties by Directors and Audit & Supervisory Board Members.
• Under the global management structure, the Management Executive Meeting with CxOs, Unit Heads, and Heads of Global Corporate Functions as members is held as appropriate to deliberate on important matters related to the strategy, policy, and execution of group management, and to contribute to management decision-making.
• The Company employs a Corporate Officer system which contributes to appropriate and swift management decision-making and the conduct of operations.

• With the aims of ensuring effectiveness and efficiency of operations, ensuring reliability of financial reporting, complying with applicable laws and regulations relevant to business activities, and safeguarding assets, the Company structures its internal control system to consist of self- monitoring carried out by respective organizations which execute its functions (primary controls), policy development and monitoring for respective organizations carried out by the corporate organizations (secondary controls), and internal auditing encompassing monitoring carried out by the Internal Audit Department (tertiary controls).

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[Reason for not implementing each principle of the Corporate Governance Code]

The Company complies and implements all principle of the Corporate Governance Code.

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

Updated

Principle 1.4 Policies Relating to the Reduction of Shares of Other Listed Companies as Cross- Shareholdings and Rationale for Exercise of Voting Rights

The Company in principle shall not hold shares of other listed companies except for the case where it is assumed to contribute to increasing corporate value for the Company in connection with maintaining and strengthening long-term business relationships. The Company has successively sold these shares by comprehensively considering matters such as impact to the market. During fiscal 2023, we sold shares for approximately JPY12.5 billion (9 brands). For the shares of listed companies held, the Board regularly examines profitability and financial benefits of each individual company in reference to certain management indicators, capital cost and the like and reviews rationality of shareholding as appropriate by comprehensively considering their business strategy and business relations.

Concerning the exercise of voting rights on cross-shareholdings, we will check, in accordance with criteria for exercising voting rights established internally, whether the proposals will contribute to increasing the corporate value of the issuing company in the mid to long-term. Based on comprehensive consideration of such matters as non-financial side of the issuing company and contents of dialogue held with the issuing company, we will decide whether to approve or reject the proposal.

Principle 1.7 Related Party Transactions

In addition to prescribing in the Directors Regulations the duty of care and the duty of fiduciary of Directors and conflict of interest transactions and competitive transactions, the Company also prescribes in the Board of Directors Regulations the requirement that the consent of the Board shall be received in relation to conflict of interest transactions and competitive transactions of Directors. Moreover, in the Audit Standard for Audit & Supervisory Board Members, it prescribes that Audit & Supervisory Board Members monitor and verify for the existence of violations of the duties of Directors with regard to conflict of interest transactions and competitive transactions.

Matters concerning transactions with major shareholders shall be considered to be "Important Matters Related to Company Management" as prescribed by the matters referred to the Board, and these matters shall require approval by the Board.

Supplementary Principle 2.4.1 Ensuring Diversity in Promotion to Core Human Resources

We have established the People Philosophy to "create an inclusive environment where everyone's voice is valued, and diverse employees collaborate and trust each other to contribute to their fullest ability." Also, Daiichi Sankyo has established "Inclusion and Diversity" as a component of its People Philosophy and "value people for who they are as individuals, and welcome diverse perspectives in our work, which enables us to achieve more as Daiichi Sankyo."

In addition, considering that the acquisition of diverse talent and effective human resource management are sources of competitive advantage, the Company has set one of the core behaviors required for its employees as "Be Inclusive & Embrace Diversity" (understand and accept diversity in nationality, race, gender, and so forth), and aims to achieve mutual sustainable growth of with its employees.

In terms of a specific numerical target, the Company has set a KPI for percentage of female senior managerial employees as 30% globally by fiscal 2025.

In Japan, the Company has set a KPI of increasing the ratio of females in managerial positions* to 15% or more by fiscal 2025 as a Plan of Action for General Employers under the Act on the Promotion of Female Participation and Career Advancement in the Workplace.

(*The Company defines "managerial positions" as the persons in charge of a certain organization, who

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are responsible for the management of business performance and human resources, including heads of divisions, departments and groups.)

As initiatives to promote the active role of women, the Company is advancing wide-ranging efforts including developing female management candidates, supporting work-life balance, and fostering a positive workplace culture.

Going forward, we will promote our initiatives even further, aiming to create an employment environment in which female employees can build long-term careers and play active roles.

For further information, please visit our website shown below. Materiality https://www.daiichisankyo.com/sustainability/our_approach/materiality/ESG Data https://www.daiichisankyo.com/sustainability/performance-reports/esg-data/

In recruiting, we strive to ensure optimal human resources regardless of nationality and genders, and also in promotion to managerial positions, we make appointments based on capability and performance, with no distinction for non-Japanese employees and employees hired from outside. The Company's management is based on its global management structure, and its Executive Management Committee meeting comprises members including non-Japanese and external hires, and achieve active discussion from diverse perspectives and decision-making.

For further information about our initiatives on Inclusion & Diversity, please visit our website shown below.

Inclusion & Diversity

https://www.daiichisankyo.com/sustainability/our_workplace/inclusion_diversity/

Principle 2.6 Roles of Corporate Pension Fund as Asset Owner

The Daiichi Sankyo Group (The Group)'s corporate pension fund has announced that it will accept the "Principles of "Responsible Institutional Investors" "Japanese Stewardship Code" as an institutional investor holding assets. The fund fulfills their stewardship responsibilities to investment trustees that outsource asset management and enhance corporate value and sustainability (mid to long term sustainability including ESG factors) through dialogue with investee companies. By doing so, the funds request that they will take actions to increase the mid to long term investment returns of the fund.

The Group has assigned persons dedicated to the fund, in charge of pension management and administration office respectively for the operation of the fund. The Group has also assigned appropriately qualified persons including executives of human resources and finance divisions of the Company as members of an asset management committee and a delegates committee and a board. Delegates of the labor union also participate in the committees on behalf of the participants of the fund.

The fund has established basic policies to ensure safe and efficient asset management while maintaining robust risk management. The fund develops a strategic asset portfolio at Asset and Liability Management (ALM) while referring to opinions of external professionals. It has also regularly monitored the status of asset management by entrusted asset managers including initiatives of stewardship activities engaged by the asset managers.

In addition, the fund has striven to ensure that conflicts of interest which could arise between the Group and the beneficiaries are appropriately managed by having the delegates committee, the board and the auditors consisting of the same number of delegates elected by the employers and delegates elected through mutual election of the participants and regularly reporting the fund's financial condition, performance results, stewardship activities of entrusted asset managers and others to beneficiaries.

Principle 3.1 Enhancing information disclosure

1. Company objectives (e.g., business principles), business strategies and business plans
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The corporate philosophy, vision, 5-year business plan and measures to realize management with an awareness of capital cost and share price are disclosed on the Company's Integration report (Value Report) and the Company's corporate website. Please refer to the following:

Value Report:https://www.daiichisankyo.com/investors/library/annual_report/

The Company's corporate website:https://www.daiichisankyo.com/investors/

1. Basic views and guidelines on corporate governance (Basic views on corporate governance)
   In addition to creating a management structure that can respond speedily and flexibly to changes in the business environment, the Company is working to secure legal compliance and management transparency and to strengthen oversight of management and the conduct of operations. We shall place great importance on building up a corporate governance structure that is responsive to the trust of its stakeholders, especially its shareholders.

Corporate Governance Structure

• To clarify Directors' management responsibility and reinforce their oversight of management and the conduct of operations, their terms of office are set at one year, and five out of our ten Directors are Outside Directors. Since June 2020, an Outside Director has been appointed as chairperson of the Board.
• To ensure management transparency, the Company has established two voluntary committees as advisory bodies to the Board: the Nomination Committee and the Compensation Committee. Both committees respectively deliberate on selections or dismissals of CEO and COO, the succession plan of CEO, selections of Director and Audit & supervisory Board Member candidates, the compensation policy for Directors, the individual amounts of compensation of Directors, and other matters.
• Both Committees are composed of five Outside Directors, and one Outside Audit & Supervisory Board Member participates as an observer.
• For audits of legal compliance and soundness of management, the Company has adopted an Audit & Supervisory Board system and established Audit & Supervisory Board comprising five Audit & Supervisory Board Members, including three Outside Audit & Supervisory Board Members.
• The Company prescribes specific criteria on the judgment of independence of Outside Directors and Outside Audit & Supervisory Board Members and basic matters regarding execution of duties by Directors and Audit & Supervisory Board Members.
• Under the global management structure, the Management Executive Meeting with CxOs, Unit Heads, and Heads of Global Corporate Functions as members is held as appropriate to deliberate on important matters related to the strategy, policy, and execution of group management, and to contribute to management decision-making.
• The Company employs a Corporate Officer system which contributes to appropriate and swift management decision-making and the conduct of operations.
• With the aims of ensuring effectiveness and efficiency of operations, ensuring reliability of financial reporting, complying with applicable laws and regulations relevant to business activities, and safeguarding assets, the Company structures its internal control system to consist of self-monitoring carried out by respective organizations which execute its functions (primary controls), policy development and monitoring for respective organizations carried out by the corporate organizations (secondary controls), and internal auditing encompassing monitoring carried out by the Internal Audit Department (tertiary controls).

(Basic guidelines on corporate governance)

While giving importance to the basic views on corporate governance, the Company shall understand and respect the gist and spirit of the Corporate Governance Code, and shall continue to make efforts to further improve corporate governance based on this code.

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(iii) Policies and Procedures in Determining the Compensation of Directors and Audit & Supervisory Board Members

• Please refer to "Disclosure of Policy on Determining Compensation Amounts and Calculation Methods," [Matters Related to Compensation to Directors] on Ⅱ.1. Organizational Composition and Operation.

(iv) Policies and Procedures for Appointment /Selection of Directors, Audit & Supervisory Board Members and CEO, etc.

• Directors shall meet the requirement of being personnel of excellent character and insight who contribute to maximizing the corporate value of the Group.
• Directors shall meet the requirements of being appropriate persons with respect to term of office and age, and of being suitably competent of performing timely and accurate judgment, looking at the changes in the business environment while giving importance to the continuance of management policies, etc.
• Directors shall meet the requirements that they are the individuals with expertise, experience, and insight in one or more of the following fields: corporate management and management strategy, finance and accounting, science and technology, business strategy and marketing, global business, human resources and HR development, legal and risk management, sustainability and ESG, and DX and IT.
• Directors shall meet the requirements that there shall always be Outside Directors included to strengthen the decision-making and supervisory functions, based on various perspectives.
• It is required that Outside Directors have, in principle, no more than three concurrent positions as officers of listed companies, excluding the Company.
• The Company recognizes that ensuring the diversity of Directors particularly in terms of gender, nationality, race, etc. as well as incorporating diverse opinions into management are important for strengthening the decision-making and supervisory functions of the Board. The Company will continue to discuss the selection of candidates for Directors with such aspects in mind.
• When appointing the candidates for Directors, the Board shall appoint the candidates after they have been sufficiently deliberated by the Nomination Committee, of which Outside Directors form a majority.
• Directors should attend the Board unless there are unavoidable circumstances and maintain an attendance rate of at least 75% or more.
• Audit & Supervisory Board Members shall meet the requirement of whether they can fulfil their duties and ensure their independence from the representative directors, Directors, and corporate officers.
• When selecting the candidates for Audit & Supervisory Board Members, the Board shall select the candidates after they have been deliberated by the Nomination Committee, and agreed by Audit & Supervisory Board.
• Outside Directors and Outside Audit & Supervisory Board Members shall be confirmed to have no problems according to specific criteria on the judgment of independence.
• The selected candidates for Directors and Audit & Supervisory Board Members shall be proposed for appointments at General Shareholders Meeting.
• Candidates for CEO shall be selected based on the succession plan and defined eligibility requirements, etc. that have been discussed at the Nomination Committee.
• Selection of CEO and COO (including reelection) shall be determined by resolution of the Board over a recommendation from the Nomination Committee that the Committee submits after sufficient deliberation.

(v)Policies and Procedures for Dismissal of Directors and CEO, etc.

• If any Director is found not meeting eligibility requirements or requirements for execution of duties defined in the Companies Act or the Directors Regulations, following deliberation at the Nomination Committee and the Board, General Shareholders Meeting shall deem that it meets criteria for dismissal

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of Directors, and resolve dismissal of such Director after the relevant proposal.

• Dismissal of CEO and COO shall be called into account in light of the Companies Act, defined CEO eligibility requirements or requirements for execution of duties, and determined in the same manner as appointment, by resolution of the Board over a recommendation from the Nomination Committee that the Committee submits after sufficient deliberation.

(ⅵ) Disclosure of Reasons for Nomination of Candidates for Directors and Audit & Supervisory Board Members

The Company shall disclose matters considered important for nomination of candidates for Directors and Audit & Supervisory Board Members, and career history and reasons for nomination of each of them in the Reference Documents for General Shareholders Meeting.

(ⅶ)Disclosure of Reason for dismissal of CEO, Directors or Audit & Supervisory Board Members and CEO, etc.

The Company shall disclose reasons for dismissal in the Reference Documents for General Shareholders Meeting and others when the Company dismisses CEO, etc., any Director or Audit & Supervisory Board Member during their terms of office.

For Convocation Notice of General Shareholders Meeting,

please visit the following URL:https://www.daiichisankyo.com/investors/shareholders/meetings/

Supplementary Principle 3.1.3 Initiatives on Sustainability

The Group defines ESG management as "management based on a long-term perspective that enhances both financial and non-financial value by reflecting ESG elements in business strategies," and is implementing this management. Under ESG management, we newly established our 2030 Vision of being an "Innovative global healthcare company contributing to the sustainable development of society." To realize our purpose of "Contribute to the enrichment of quality of life around the world," the Group will leverage its strengths, "Science & Technology," to provide innovative solutions and contribute to society.

The Company evaluated material issues based on two perspectives: "impact on the business of Daiichi Sankyo Group" and "expectations from society" which incorporates the ESG approach, and identified eight material issues. The Company also set long-term targets and KPI targets linked to the 5-year business plan.

In our value creation business model with "Science & Technology" as the source of competitive advantage, we recognize human capital as the most important capital. Materiality KPI targets are defined and disclosed as investments in or results of important capital.

・Materiality on Business

Creating innovative pharmaceuticals, Providing a stable supply of top-quality pharmaceutical products, Providing the highest quality medical information, and Improving access to healthcare

・Materiality on Business Foundations

Promoting compliance management, Corporate governance aimed at fulfilling our mission, Promoting the success and development of a diverse range of people who create our competitive advantages, and Promoting environmental management

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The Company strives to disclose ESG-related information through Value Report, corporate website, responses to ESG research institutions, and ESG meetings.

Daiichi Sankyo Value Creation Process https://www.daiichisankyo.com/sustainability/our_approach/process/Materiality https://www.daiichisankyo.com/sustainability/our_approach/materiality/Value Report https://www.daiichisankyo.com/investors/library/annual_report/

In achieving sustainable business and growth, the Group recognizes that the preservation of the global environment, which is the basis of life activity and people's lifestyles, is important management issue. Under the 5-year business plan(fiscal 2021-fiscal 2025), the Company has established three long-term targets for 2050: carbon neutral, 100% recycling, and minimize environmental risk. The Company will take on various initiative to reduce environmental burden throughout the entire value chain, from research and development to sales and contribute to society and the environment. Daiichi Sankyo endorses the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD), which aims to encourage companies to disclose information on the "risks and opportunities" of business activities affected by climate change, and discloses relevant information including scenario analysis. The results of the scenario analysis are also reflected in the Environmental Management Target (fiscal 2021-fiscal 2025). Furthermore, based on the revised TCFD recommendations in October 2021, we have conducted a reassessment and business impact evaluation considering the 5-year business plan (fiscal 2021-fiscal 2025) and external environmental changes related to climate change. We have disclosed the information on Value Report and corporate website.

Promotion of Environmental Management https://www.daiichisankyo.com/sustainability/the_environment/Response to TCFD https://www.daiichisankyo.com/sustainability/the_environment/climate_strategy/

Supplementary Principles 4.1.1 Roles and Responsibilities of the Board (1)

The Company prescribes in the Board of Directors Regulations the matters referred to, and reported to the Board by the management team. In the Daiichi Sankyo Group Management Committee Policy, and the approval policy, the decision-making scope entrusted to the management team is clearly prescribed. Important matters related to management (business plans, personnel and organization, financing, etc.) shall be referred to the Board, and the decision of other business execution allowable under laws and regulations shall be ultimately entrusted to Representative Director, Executive Chairperson and Representative Director, President.

Principle 4.8 Roles and Responsibilities of Independent Outside Directors

Aiming to strengthen the decision-making function of the Board and the supervising function based on various perspectives, the Company prescribes in the Directors Regulations that Directors must include Outside Directors whose independence from the Company has been secured. Currently five of ten Directors are appointed as Independent Outside Directors, and they provide proactive opinions and pertinent observations in the Board.

Principle 4.9 Independence Standards for Outside Directors

Concerning the independence of the Outside Directors, the Company judges this independence based on the precondition that the independence criteria set by the Tokyo Stock Exchange and the Company's

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criteria for independence of Outside Director are satisfied and on the viewpoint of whether the Company can expect the proactive opinions and pertinent observations about issues concerning the Company's business.

In line with the criteria for independence of Outside Director prescribed by the Directors Regulations, the Company nominates Outside Directors of excellent character and insight who possess specialist knowledge.

Criteria for Independence as Outside Directors/Audit & Supervisory Board Members https://www.daiichisankyo.com/about_us/governance/criteria_for_independence/

Supplementary Principle 4.10.1 Approach, Authority, and Roles, etc. regarding Independence of the Composition of the Nomination Committee and the Compensation Committee

The Company has established the Nomination Committee and the Compensation Committee as voluntary committees that function as advisory bodies for the Board. The committees respectively deliberate upon selections or dismissals of CEO and COO, the succession plan of CEO, selections of Director and Audit & Supervisory Board Member candidates, the compensation policy for Directors, the individual amounts of compensation of Directors, and other matters. Both Committees are composed of five Outside Directors (one Outside Audit & Supervisory Board Member participates as an observer) and chaired by Outside Directors. At the both Committees, discussions, decision-making, and supervision sufficiently reflect external viewpoints, and the Committees reports to the Board. The compositions and roles of both Committees and the numbers of their meetings and agenda items for each fiscal year are disclosed in the Convocation Notice of the Company's Ordinary General Shareholders Meeting, its Corporate Governance Report, and its Value Report.

Convocation Notice of General Shareholders Meetinghttps://www.daiichisankyo.com/investors/shareholders/meetings/Value Report https://www.daiichisankyo.com/investors/library/annual_report/

Supplementary Principle 4.11.1 View on Appropriate Balance between Knowledge, Experience and Skills of the Board as a Whole, and on Diversity and Appropriate Board Size

The Company prescribes the requirements for Directors in the Directors Regulations. Among the current ten Directors, five are Outside Directors who are not engaged in business execution, and we believe that the composition of the Board is well balanced.

The Company considers it important to secure diversity of Directors, including gender, internationality and race, etc. and embrace various opinions to the management to reinforce the decision-making function of the Board and the supervisory function. The Company will continue to consider nominating candidates of Directors based on this perspective.

In light of the Company's medium- to long-term management direction and business strategy, it has identified the skills (knowledge, experience, and abilities) that the Board of the Company should have in order to properly exercise its decision-making and management oversight function. The current status of skills possessed by all Directors and Audit & Supervisory Board Members are listed in a skill matrix, which is presented in the Convocation Notice of General Shareholders Meeting and Value Report, along with the policies and procedures for appointment of Directors. The three Outside Directors have management experience at other companies.

For information about the policies and procedures for appointment/selection of Directors, please refer to "Principle 3.1 (iv) Policies and Procedures for Appointment of Directors, Audit & Supervisory Board Members and CEO, etc." above, and to the Convocation Notice of General Shareholders Meeting. For information about the skill matrix, please refer to the Convocation Notice of General Shareholders Meeting and Value Report.

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Convocation Notice of General Shareholders Meetinghttps://www.daiichisankyo.com/investors/shareholders/meetings/Value Report https://www.daiichisankyo.com/investors/library/annual_report/

Supplementary Principle 4.11.2 Concurrent Positions of Directors and Audit & Supervisory Board Members Held at Other Listed Companies

For matters concerning the fulfillment of duties of Directors and Audit & Supervisory Board Members, the Company prescribes these duties, the required mindset, etc. in the Directors Regulations and the Audit Standard for Audit & Supervisory Board Members. With respect to concurrent positions as Director or Audit & Supervisory Board Member held at another company, Directors and Audit & Supervisory Board Members excluding Outside Directors and Outside Audit & Supervisory Board Members, in principle shall not hold concurrent positions (Directors, Audit & Supervisory Board Members or Executive/Corporate Officer) held at listed companies outside the Group. It is required that Outside Directors have, in principle, no more than three concurrent positions as officers of listed companies, excluding the Company. Moreover, if Outside Directors and Outside Audit & Supervisory Board Members intend to accept a request to assume an appointment as a Director or an Audit & Supervisory Board Member at a listed company, Outside Directors are required to contact the Chairperson of the Board, the Chairperson and the President this beforehand and Outside Audit & Supervisory Board Members are required to contact the Chairperson of Audit & Supervisory Board this beforehand.

As of the date of this document, there are no cases of concurrent positions having an influence on the Company's business operations.

The details on the material concurrent positions of each Director and Audit & Supervisory Board Member are disclosed each year in the "Convocation Notice of General Shareholders Meeting" and the "Annual Securities Report."

Please view this information at the following URL:

Convocation Notice of General Shareholders Meeting: https://www.daiichisankyo.com/investors/shareholders/meetings/Annual Securities Report (Japanese report): https://www.daiichisankyo.co.jp/investors/library/securities_reports/

Supplementary Principle 4.11.3 Ensuring Effectiveness of the Board as a Whole

The Company utilizes the Board evaluation in order for the Board themselves to assess their current status and identify issues to be addressed, continuously making efforts to improve the functions and effectiveness of its the Board.

The Company has conducted the Board evaluation every fiscal year and addressed the issues identified for improvement through the Board evaluation. In the subsequent Board evaluation, the Company assesses the latest status and confirms the status of improvement from the previous fiscal year.

The Company determines the Board evaluation items including the items to be evaluated by the Directors themselves in addition to the evaluation of the Board as a whole as the contents and items for evaluation relating to the effectiveness of the Board as a whole with reference to the principle and supplementary principle associated with the general principle 4, "Roles and Responsibilities of the Board" of Japan's Corporate Governance Code.

The major evaluation items in the questionnaire are as follows:

1. Roles and responsibilities of the Board
2. Operation of the Board
3. Composition of the Board

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1. Functions of the Nomination Committee and the Compensation Committee
2. Issues and matters for improvement regarding effectiveness of the Board
3. Resolution of issues identified in the previous fiscal year's Board evaluation, and improvement measures
4. Overall corporate governance

All Directors and Audit & Supervisory Board Members self-evaluated the above matters by selecting grades and answering free descriptions, and the analysis results and the details are reported to the Board. The latest round of self-evaluation generated quite a few candid opinions by selecting grades and using a free-description format. Based on these results, the Company has identified the issues and matters which leads to improvements in the Board's functions and effectiveness.

The result of the Board evaluation for fiscal 2023, concluded that in terms of its roles, responsibilities, operation and composition, the Board of the Company, as well as the Nomination Committee and the Compensation Committee, which are advisory bodies to the Board, are functioning appropriately, and that the effectiveness of the Board as a whole has been ensured.

In addition, the Company confirmed that improvements are being made in (1) through (3) below, which were identified as items that need further improvements in the evaluation of the previous fiscal year, with the following efforts.

1. Enhancement of discussions on key matters to strengthen the oversight function of the Board

• In the Board meeting and the meetings for Outside Directors and Outside Audit & Supervisory Board Members, and others, the Board especially focused on the discussions regarding long-term strategies, globalization, materiality, ESG, and risk management.

1. Strengthening in terms of operation to strengthen the Board' decision-making and oversight functions

• The Company discussed the optimal balance between oversight and execution for the Company and operated the Board based on revised optimizing matters for deliberation and reported matters of the Board.
• The Company revised the optimizing matters for deliberation and reported matters of the Nomination Committee and Compensation Committee which were advisory boards of the Board from the perspective of the optimal balance between oversight and execution for the Company,

revised "Nomination Committee Regulations" and "Compensation Committee Regulations" and operated these Committees.

• The Company has continued to set up opportunities for discussion, including occasions other than the Board meeting (e.g. meetings to exchange views among Directors and Audit & Supervisory Board Members, meetings for Outside Directors and Outside Audit & Supervisory Board Members, briefing sessions for Outside Directors and Outside Audit & Supervisory Board Members).

1. Further considerations for optimizing the Board composition

• In the Board and Nomination Committee, the members discussed the optimal composition of members of the Board for the Company with the objective of enhancing corporate governance and further strengthening the oversight functions of the Board.
• The additional appointment of one Outside Director was resolved on the Board.

Drawing on the evaluations of fiscal 2023, the Company endeavors to ensure and improve the functions and effectiveness of its Board. To such end, the Company will continuously implement the following priority measures in fiscal 2024:

1. Enhancement of discussion on key matters for further strengthening the oversight functions of the
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