Nippon Shinyaku : (Delayed) Corporate Governance Report

Note: This document has been translated from the Japanese original for reference purpose only.

In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

Corporate Governance Report

Last Update: June 30, 2021

Nippon Shinyaku Co., Ltd.

Toru Nakai, President & Representative Director Contact: Masahiko Okano, Department Manager, Corporate Communications Department (Tel: [phone])

Securities Code: 4516 https://www.nippon-shinyaku.co.jp

The corporate governance of Nippon Shinyaku Co., Ltd. (the "Company") is described below.

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

Other Basic Information

1. Basic Views

At Nippon Shinyaku, we recognize that it is a critical management priority to fulfill our accountability to all stakeholders, by securing the transparency of management in order to raise our corporate value through social contributions. This makes it essential for our corporate governance to function effectively, and we are committed to further enhancing corporate governance structure.

The basic views and basic policies on corporate governance of the Company have been compiled and posted on our website in the "Corporate Governance Basic Policy." https://www.nippon-shinyaku.co.jp/english/company_profile/governance.php

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

[Supplementary Principle 4.2.1]

Remuneration for the Current Executive Directors of the Company is detailed under "[Director Remuneration] Policy on Determining Remuneration Amounts and Calculation Methods" in "II. 1. Organizational Composition and Operation" of this report.

While we have not yet introduced a remuneration system linked to mid-term and long-term results or an employee stock ownership plan, we recognize that the introduction of these systems is an issue to be considered in the future.

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

[Principle 1.4]

The Board of Directors will inspect and confirm the rationality and economic significance regarding the purpose of holding each individual cross-shareholding, taking into consideration the capital requirements, the market environment, etc., and the Company will in turn proceed to reduce cross-shareholdings in which the significance of retention is immaterial.

- 1 -

Regarding the exercise of voting rights pertaining to cross-shareholdings, we will judge the situation based on whether or not it contributes to improving the corporate value of the Company or the issuing company, and will respond appropriately.

[Principle 1.7]

"Basic Policy on Transactions with Related Parties" is detailed in the "Corporate Governance Basic Policy" (see Article 7).

[Principle 2.6]

We fully recognize that management of our corporate pension funds has influence on the stable asset formulation of our employees as well as our own financial condition, and Nippon Shinyaku Corporate Pension Fund have established an Asset Management Committee composed of internal experts, including members from the financial division and the planning division, to decide on management policy and formulate an appropriate management system.

[Principle 3.1]

1. Our business philosophy, management policy, guidelines for action, the 6th Five-yearMedium-term Management Plan, etc., have been disclosed on our website, the Integrated Report (Annual Report), etc. https://www.nippon-shinyaku.co.jp/english/ir/ir_library/annual_report.php
2. Our basic views and basic policies on corporate governance have been compiled in the "Corporate Governance Basic Policy" mentioned above, and have been disclosed on our website, the Integrated Report, and elsewhere. https://www.nippon-shinyaku.co.jp/english/company_profile/governance.php
3. The policy, procedures, etc., that the Board of Directors follows upon determining the remuneration of Directors is detailed in the "Corporate Governance Basic Policy" (see Article 34).
4. The policy, procedures, etc., that the Board of Directors follows upon nominating candidates for Directors and Corporate Auditors and appointing or dismissing Directors and Corporate Auditors is detailed in the "Corporate Governance Basic Policy" (see Article 14, Article 19, and Article 20).
5. Regarding the appointment and nomination of candidates for Directors and Corporate Auditors, their individual careers and reasons for appointment are detailed in the Reference Documents for the General Meeting of Shareholders.

[Supplementary Principle 4.1.1]

At the Company, resolutions by the Board of Directors and matters delegated to management are clearly defined in the Rules of the Board of Directors and other internal rules, etc.

The Board of Directors carries resolutions on matters that require resolution by the Board of Directors provided for in laws, regulations or the Articles of Incorporation, matters delegated to be determined by the Board of Directors at the General Meeting of Shareholders, important matters related to management, and other matters deemed necessary by the Board of Directors. Furthermore, the Company has established a Management Policy Review Group and adopted a corporate officer system to perform swift and smooth decision-making and business operations.

[Principle 4.9]

The "criteria for judgment of independence" used when appointing Independent External Directors and Independent External Auditors is detailed under Attachment 2 "Criteria for Judgment of Independence" of the "Corporate Governance Basic Policy."

[Supplementary Principle 4.11.1]

Our views on the diversity of the Board of Directors are detailed in the "Corporate Governance Basic Policy" (see Article 19, Paragraph 2).

[Supplementary Principle 4.11.2]

The status of concurrently held positions by Directors and Corporate Auditors are disclosed every year in the Notice of the General Meeting of Shareholders and securities reports.

In addition, important information on positions concurrently held by External Directors and External Auditors as of the publishing of this report is detailed under "[Directors] External Directors' Relationship with the

- 2 -

Company (1)" in "II. 1. Organizational Composition and Operation" and "[Corporate Auditors] External Auditors' Relationship with the Company (1)" in the same section of this report.

[Supplementary Principle 4.11.3]

Our policy on the analysis and evaluation of the effectiveness of the Board of Directors is detailed in the "Corporate Governance Basic Policy" (see Article 33).

In order to analyze and evaluate the overall effectiveness of the Board of Directors in FY2020, we implemented a self-evaluation survey for all Directors. As a result, we were able to confirm that within the Board of Directors, each Executive Director and External Director continued to actively make remarks, that open-minded and constructive discussion was pursued from a wide-angle perspective, and that appropriate judgment was being performed by the management, whereby we determined that the overall effectiveness of the Board of Directors was properly maintained.

Based on the results of this analysis and evaluation, the Board of Directors will focus on further invigorating and enhancing the discussions at the meetings of the Board of Directors, and continue to ensure and improve the effectiveness of the Board of Directors moving forward.

[Supplementary Principle 4.14.2]

Our policy on the education and training of Directors and Corporate Auditors is detailed in the "Corporate Governance Basic Policy" (see Article 29 and Article 30).

[Principle 5.1]

Our policy on promoting constructive dialogue with shareholders is detailed in Attachment 3 "Policy for Constructive Dialogue with Shareholders" of the "Corporate Governance Basic Policy."

2. Capital Structure UPDATED

		Foreign Shareholding Ratio			20% or more, less than 30%
[Status of Major Shareholders]	UPDATED
		Name / Company Name				Number of Shares				Percentage (%)
					Owned
		The Master Trust Bank of Japan, Ltd. (trust account)	6,523,300		9.69
		Meiji Yasuda Life Insurance Company		6,486,000		9.63
		Custody Bank of Japan, Ltd. (trust account)		4,486,700		6.66
		MUFG Bank, Ltd.				3,315,450		4.92
		The Bank of Kyoto, Ltd.				3,090,050		4.59
		STATE STREET BANK AND TRUST COMPANY 505001	2,696,805		4.00
		Nippon Life Insurance Company		2,082,670		3.09
		GOVERNMENT OF NORWAY		982,220		1.46
		Tokio Marine & Nichido Fire Insurance Co., Ltd.	979,500		1.45
		Custody Bank of Japan, Ltd. (trust account 9)			928,200			1.38
		Controlling Shareholder (except for Parent	-
		Company)
		Parent Company			None

- 3 -

Supplementary Explanation UPDATED

Wellington Management Company LLP was recorded to hold shares as listed below as of July 31, 2020 in the Report of Possession of Large Volume (Amended Report) that was submitted for public inspection on August 6, 2020. However, as the Company could not confirm the number of shares held as of March 31, 2021, they are not included in the above list on the status of major shareholders.

The shareholding status presented in the Report of Possession of Large Volume (Amended Report) is as follows.

Name / Company Name	Number of Shares Held	Percentage (%)
(Thousand shares)
Wellington Management	2,551	3.63
Company LLP
Wellington Management Japan	91	0.13
Pte Ltd
Total	2,643	3.76

Artisan Investments GP LLC was recorded to hold shares as listed below as of November 13, 2020 in the Report of Possession of Large Volume (Amended Report) that was submitted for public inspection on November 18, 2020. However, as the Company could not confirm the number of shares held as of March 31, 2021, they are not included in the above list on the status of major shareholders.

The shareholding status presented in the Report of Possession of Large Volume (Amended Report) is as follows.

Name / Company Name	Number of Shares Held	Percentage (%)
(Thousand shares)
Artisan Investments GP LLC	3,451	4.91

Asset Management One Co., Ltd. was recorded to hold shares as listed below as of December 15, 2020 in the Report of Possession of Large Volume (Amended Report) that was submitted for public inspection on December 22, 2020. However, as the Company could not confirm the number of shares held as of March 31, 2021, they are not included in the above list on the status of major shareholders.

The shareholding status presented in the Report of Possession of Large Volume (Amended Report) is as follows.

		Name / Company Name	Number of Shares Held	Percentage (%)
		(Thousand shares)
		Asset Management One Co., Ltd.	2,783	3.96
		Asset Management One	92	0.13
		International Ltd.
		Total	2,876	4.09
3. Corporate Attributes
		Listed Stock Market and Market Section		Tokyo Stock Exchange
			First Section
		Fiscal Year-End		March
		Type of Business		Pharmaceuticals

Number of Employees (consolidated) as of

the End of the Previous Fiscal Year

More than 1,000

Sales (consolidated) as of the End of the

Previous Fiscal Year

From ¥100 billion to less than ¥1 trillion

Number of Consolidated Subsidiaries as of

the End of the Previous Fiscal Year

Less than 10

- 4 -

1. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder
   -
2. Other Special Circumstances which may have Material Impact on Corporate Governance

-

- 5 -