Corporate Governance Report (Last Update: July 3, 2023)

Corporate Governance Report

Last Update: July 3, 2023

TOHO HOLDINGS CO., LTD.

Representative Director and CEO: Atsushi Udoh

Contact: Corporate Communications and Investor Relations Division 03-6838-2803 Securities Code: 8129 https://www.tohohd.co.jp/en/

The corporate governance of TOHO 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

The Company and the Group are committed to enhancing the corporate governance as one of the most important managerial tasks, because we recognize that it is important to enhance the auditing and supervisory functions concerning corporate management, achieve full compliance, and improve the transparency of management so that we can sincerely fulfill our responsibilities towards various stakeholders, including customers, business partners, shareholders, employees, and government entities, and enhance our corporate value as sustainable companies.

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

The Company implements all of the principles in the Corporate Governance Code.

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

[Principle 1-3 Basic Capital Policy]

The Company intends to enhance shareholder value by increasing corporate value over the medium to long term with sustained growth. To this end, we will continue to invest for growth while striving to improve capital efficiency and enhance shareholder returns.

Please also refer to the Medium-term Management Plan for specific indicators and measures. https://www.tohohd.co.jp/en/assets/data/Medium-term-plan23-25_E.pdf

[Principle 1-4Cross-shareholdings]

Based on comprehensive consideration of management strategy and of establishing, maintaining, and strengthening relationships with business partners, the Company holds stocks which are considered to contribute to the enhancement of the Group's corporate value over the medium to long term.

Regarding these stocks, the Company reviews them regularly, while taking measures such as reducing the number of the stocks when it is deemed that the appropriateness of holdings cannot be recognized according to changes in situations. In verifying the appropriateness of holding such cross-shareholdings,the Company carefully reviews whether the benefits, etc., associated with holdings are in line with the above policy for each stock held, and continuously reduces our cross-shareholdings after sufficient dialogue with our business partners, and with the immediate goal of reducing our holdings to less than 20% of consolidated net assets, we are proceeding to sale shares.

The Company exercises its voting rights after comprehensively judging various viewpoints including impacts on the Company, while taking into account whether exercising such voting rights will lead to

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the enhancement of the corporate value of the invested companies over the medium to long term and conducting dialogues with counterparties in cases where it is deemed that there is sluggish business performance or serious compliance violation, etc.

[Principle 1-7 Related Party Transactions]

Based on the Board of Directors rules, the Company obtains approval from the Board of Directors concerning competing transactions by a director and transactions involving any conflict of interest between the Company and a director. The Board of Directors conducts appropriate supervision in accordance with relevant laws and regulations.

[Supplementary Principle 2-4(1) Ensuring diversity at the time of appointing core human resources] Based on the belief that employees are the Company's assets, or "human capital," the Group is committed to maximizing the value of its human capital by developing the human resources needed by the Group, improving its personnel system, and promoting work style reforms, while carefully passing on its history of growth through human capital and its corporate culture that respects the free-thinking of employees. The Group has placed no restrictions on the promotion of women, foreign nationals, and mid-career hires to management positions and has been striving to ensure diversity.

Currently, the rate of female employees is 41.7% and that of female managers is 16.5% at the Company. As of the end of June 2023, one female director and three female corporate officers were appointed. Further, at TOHO PHARMACEUTICAL CO., LTD., a subsidiary of the wholesale business, three female corporate officers are appointed, and the rate of female employees is 23.2%. In addition, at operating dispensing pharmacy business PharmaCluster Co., Ltd., there is one female director. The rate of female employees at the subsidiaries of the dispensing pharmacy business is 79.4%. The Group will, through initiatives such as promotion of the advancement of women, continue to endeavor to maintain an environment where women can work comfortably and fully demonstrate their abilities, and expand opportunities for women, while promoting acceptance of diverse human resources in order to actively assign persons with disabilities, foreign nationals, mid-career hires, and human resources with specialized knowledge.

・Proportion of female managers at the Company: 30% (as soon as possible in the 2020s) *Proportion of female managers at the Company as of the end of March 2023: 16.5%

The Group has not set the measurable goal on appointing foreign personnel as most of its business fields are limited in Japan. However, with evaluation and allocation of personnel corresponding to their ability and aptitude regardless of nationality and gender it has appointed employees with foreign nationals to managers. In addition, the Group has not set the measurable goal on mid-career hires due to its policy to hire personnel with diverse backgrounds as necessary taking into account the business environment.

in-house environment improvement policy to ensure diversity, and their implementation status>

(i) Human resources development policy

With the corporate slogan "Total Commitment to Good Health" as a compass, the Group will develop the human resources necessary for the Group by (1) strengthening career development and training, (2) improving the personnel system, and (3) promoting work style reforms.

The human resources that the Group considers necessary are as follows. ・A person who has a high sense of ethics and always takes basic actions

・A person who thinks and learns by himself/herself and is not afraid of failure but is willing to take on challenges through free-thinking

・A person who can make high-quality proposals and communicate well with others

• A person who can collaborate with business partners (customers, municipalities, etc.) and other departments in the company

・A person who can work globally

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With broad utilization of human resources regardless of gender, nationality, age, etc. and respecting individualities, capabilities and teamwork of employees, we nurture a free-spirited corporate culture.

1. In-houseenvironment improvement policy
   (1) Human resources development and training
   ・Enhancing training programs by level and job type
   ・Providing opportunities to take on challenges, such as participating in projects or being seconded outside the company
   ・Support for reskilling and personal qualification ・Development of professionals

1. Improving the personnel system ・Diversity and inclusion
   ・Use of senior employees and mid-career hiring of outstanding human resources ・Strengthening career development
   ・Staffing with the right people in the right places
2. Promoting work style reforms

・Going paperless by promoting DX

・Outsourcing routine business operations

・Enhancement of work arrangements to accommodate employees'life events ・Further improvement of the workplace environment

(iii) Major Initiatives in the Current Fiscal Year

・Monthly compliance training for all employees: 100% attendance

・Monthly training on the Antimonopoly Act for sales reps: 100% attendance

• TOHO PHARMACEUTICAL CO., LTD.'s reskilling training for marketing specialists: 751 participants

・Training for new managers and new senior sales managers: 85 participants

・Training for branch managers: 134 participants

・Promote internal project MAXIS 2021: 63 project participants

・Collaborative research with AIST: 24 participants (8 seconded and 16 in-house researchers)

・Proactive promotion of female employees to management positions: Ratio of female managers at TOHO HOLDINGS CO., LTD., 16.5% (11% in FY2021)

・Promotion of health management: TOHO HOLDINGS CO., LTD., TOHO PHARMACEUTICAL CO., LTD., J.MIRAIMEDICAL, and Nextit Research Institute, Inc. certified as an "Excellent Health Management Corporation 2023"

[Principle 2-6 Roles of Corporate Pension Funds as Asset Owners]

The Company's pension fund is entrusted to, and managed and exercised by the Tokyo Pharmaceutical Industry Corporate Pension Fund established in the industry. Policies and plans, etc. related to the management of pension assets are decided after submission of proposals to and deliberations by several conference bodies such as the governing board and the delegation board, which are the executive bodies, and the appropriateness of asset management is secured.

Board member of the Company who has knowledge related to asset management assumes office as a member of the governing board of the said fund, which guarantees that the monitoring of the asset management will be implemented, and personnel with appropriate qualifications are allocated to the secretariat of the fund.

[Principle 3-1 Enhancing Information Disclosure]

1. Management Philosophy, Management Strategy, etc.
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The Management Philosophy and Management Strategy are disclosed on the Company's website and in its CSR Report, and specific business strategies and management plans are disclosed in its Financial Results Briefing Documents and the Medium-termManagement Plan.

To achieve sustainable growth and increase the medium- to long-term value of the Group through the realization of this Mission Statement, we have formulated the Medium-term Management Plan as a management strategy and management plan for the Group.

Please refer to the Company's website for details.

The Management Philosophy "Mission Statement" is posted on the Company's website. https://www.tohohd.co.jp/en/company/philosophy

The Management Strategy is posted on the Company's website. https://ir.tohohd.co.jp/en/management/strategy.html

The CSR Report is posted on the Company's website (Japanese only). https://www.tohohd.co.jp/csr/report

The Financial Results Briefing Documents are posted on the Company's website.

https://ir.tohohd.co.jp/en/irfiling/presentation.html

The Medium-term Management Plan Document is posted on the Company's website. https://www.tohohd.co.jp/en/assets/data/Medium-term-plan23-25_E.pdf

(ii) Policy on Corporate Governance

The basic policy on corporate governance is disclosed on the Company's website, and in the report concerning corporate governance and the CSR report.

The Company's basic policy on corporate governance and the report concerning corporate governance are posted on the Company's website https://ir.tohohd.co.jp/en/management/corporategovernance.html

The CSR report is posted on the Company's website as described in the above 3-1(i) (Japanese only).

(iii) Policy and Procedure on Compensation for the Senior Management and Directors

Compensation for the senior management and directors of the Company (excluding those who are Audit and Supervisory Committee Members) consists of monthly compensation made up of a basic salary and executive compensation based on performance, stock price and other factors, as well as restricted stock compensation and executive bonuses.

The compensation structure for Directors who are Audit and Supervisory Committee Members consists of monthly compensation made up of basic salary and executive compensation based on performance, stock price, and other factors, as well as executive bonuses.

(iv) Policy and Procedure on Appointment of the Senior Management and Director

The Company expects to take advantage of their extensive experiences to contribute to the sustainable growth and the enhancement of corporate value of the Company and appoints them at the Board of Directors after taking into consideration whether they have sufficient knowledge on the Company business and consulting with the Group's Management Committee.

The Nomination and Compensation Committee deliberates before a Board of Directors resolution.

1. The Company discloses the reason for the appointment of director candidates and candidates for directors who are the Audit and Supervisory Committee members in the Notice of Convocation of General Meeting of Shareholders. Upon the nomination of director candidates and candidates for directors who are the Audit and Supervisory Committee members, explanations for each appointment and nomination are disclosed in the Notice of Convocation of General Meeting of Shareholders. The appointment and dismissal of directors is determined at the General Meeting of Shareholders in accordance with the Articles of Incorporation of the Company.
   The Notice of Convocation of General Meeting of Shareholders is posted on the Company's website. https://ir.tohohd.co.jp/en/stock/meeting.html

[Supplementary Principle 3-1(3) Enhancement of information disclosure regarding sustainability]

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Based on its Mission Statement of "We shall live in harmony with society and our customers; together, we shall create new values through the provision of original services; and we shall contribute to the medical care and well-being of people around the world," we, as a corporate group engaged in the medical, health and nursing care fields, strive to solve social issues through business operations and to contribute to the realization of a sustainable society.

In addition, the Company describes on the Company's website our sustainability initiatives based on the three materialities (important issues) of the environment (E), society (S), and governance (G), and disclose quantitative data and specific examples of such initiatives.

Detailed policies on sustainability can be found on the Company's website. https://www.tohohd.co.jp/en/csr

Furthermore, the Company has positioned efforts to address climate change as one of our key issues, and the Sustainability Promotion Committee is playing a central role in identifying climate change-related risks and opportunities, assessing their impact on the Company, and considering specific measures to deal with them. The necessary data are being collected and analyzed, and the content thereof are being disclosed in accordance with the information disclosure framework recommended by the Task Force on Climate-related Financial Disclosures (TCFD).While we strive to enhance disclosure from now on, the current status is posted on the Company's website (Japanese only). https://www.tohohd.co.jp/csr/activity/climatechanges

[Supplementary Principle 4-1(1) Scope of Delegation to Management]

The Company, according to the Board of Directors rules, specifies matters to be decided and those to be reported at the Board of Directors concerning legally required matters or important management matters. The Company also specifies matters to be decided and those to be reported by executive persons from Representative Director down, according to the authority rules and the decision-making rules.

[Principle 4-9 Independence Standards and Qualification for Independent Outside Directors]

The Company appoints independent outside directors according to the requirements for outside directors as prescribed in the regulation and to the Independence Standards stipulated by the financial instruments exchanges. The independent outside directors make comments at meetings of the Board of Directors from their respective professional positions, and active discussions, which contribute to the enhancement of the Company's corporate value over the medium to long term, are being held.

[Supplementary Principle 4-10(1) Establishment of Nomination and Compensation Committee]

In order to strengthen the independence and objectivity, the voluntary Nomination and Compensation Committee consisting mainly of outside directors have been established as advisory committees to the Board of Directors. Committee is chaired by an outside director and the majority members of committee are outside directors.

[Supplementary Principle 4-11(1) The concept of diversity of Board of Directors]

In order to achieve efficient and prompt Group operations, the Company appoints as its directors the representative directors of major subsidiaries and appoints outside directors with different viewpoints, including those managing a business, experiences, and high-level skills.

At the Board of Directors, these members hold discussions based on their individual knowledge, experiences, and abilities, make legal and managerial decisions, and supervise business execution. Skills and the skill matrix required for Directors in light of the Company's management strategy are posted on the Company's website.

https://www.tohohd.co.jp/en/company/directors

[Supplementary Principle 4-11(2) The information on the Company's directors with concurrent duties at other companies ]

The information on the Company's directors with concurrent duties at other companies is included in the Business Report and Reference Documents attached to Notices of Convocation of General Meeting of Shareholders and in the Annual Securities Reports, and is disclosed every year.

Notices of Convocation of General Meeting of Shareholders are posted on the Company's website. https://ir.tohohd.co.jp/en/stock/meeting.html

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