Corporate Governance Report
Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy
between this translated document and the Japanese original, the original shall prevail.

Last updated: June 28, 2024

Qol Holdings Co., Ltd.
Takashi Nakamura
President and Representative Director
Code number: 3034
Phone: +81-3-6430-9060
https://www.qolhd.co.jp/eng/
The state of corporate governance of Qol Holdings Co., Ltd. ("the Company") is described below.

I. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes, and Other
Basic Information
1. Basic Views
The Qol Group recognizes that the Group must continually enhance its corporate value through its corporate
activities based on its Corporate Philosophy, Slogan, Qol Group Vision, and Qol Group Charter of Corporate
Behavior to respond to the expectations of all stakeholders including its shareholders, patients, and employees.
In order to realize this, the Group regards the continuing strengthening of its corporate governance as animportant management issue as a foundation for ensuring the soundness, transparency, and efficiency of its
management, and the Group strengthens its management functions by appointing outside directors that meet therequirements of independent officers. In addition, the Group actively engages in dialogue with shareholders andinvestors, as a dialogue policy with shareholders, and as well as disclosing the information on its businesssituation including the progress of its management plans, quantitative financial information, non-financial
information such as corporate governance and activity towards sustainability in a timely and appropriatemanner. The Group strives to respond to expectations from its stakeholders including shareholders andinvestors by making efforts to develop an appropriate environment for the exercise of shareholders' rights.
[Reasons for Non-compliance with Principles of Japan's Corporate Governance Code]
The Company implements all principle of Japan’s Corporate Governance Code revised in June 2021.
[Disclosure based on Principles of Japan's Corporate Governance Code] (Updated)[Principle 1.4] Cross-Shareholdings(1) The Company will not engage in cross-shareholdings except in cases where such holdings are deemedcapable of sustainably enhancing Qol corporate value due to factors including importance to business strategies
and maintaining and promoting relationships with business partners. Further, with regard to crossshareholdings and disposal, the Board of Directors conducts verifications to review the reason for maintaining
these shareholdings.
(2) The Company determines whether to exercise cross-shareholding voting rights from the perspective of thedegree to which it will lead to an increase in corporate value over the medium to long term, while also
respecting investee company management policies and strategies.
[Principle 1.7] Related Party Transactions
Related party transactions by Company directors are subject to approval by the Board of Directors inaccordance with laws and regulations. Further, the Company annually monitors transactions between Company
directors and/or relatives to the second degree of kinship (including the company issuing the shares held and its

1subsidiaries) and the Company or Qol subsidiaries. Important transactions are described in the Securities
Report.
[Principle 2.3] Social, Environmental and Other Sustainability Issues
To solve social issues, the Company aims to further promote ESG and is engaged in efforts targeting therealization of “a connected, healthy, prosperous and sustainable society.” The Company established Qol
Sustainability Value (QSV) as value that must be provided to society via methods for resolving social issues
through business activities and decarbonization efforts, and is making efforts to visualize the progress ofconcrete value.
[Principle 2.4] Ensuring Diversity, Including Active Participation of Women
To maximize the performance of employees in general and women in particular, in addition to introducing
personnel systems and welfare programs that make it easier for women to work, setting up meetings toencourage the active participation of women, and promoting women to managerial positions and officers, theCompany is working to build a system that makes it easy for employees with diverse experiences, skills andattributes to work, including the establishment of a system enabling store employees to switch to a management
course.
[Supplementary Principle 2.4.1] Concept of ensuring diversity
A female ratio of the Board of Directors is 18.2%. In addition, the most recent female employee ratio of QolCo., Ltd., which is the core company is 22.0% and we aim to raise it to 30% by fiscal 2030, which is the samelevel as the government's target. In addition, the most recent female ratio of chief pharmacist and otherpositions is in high level of 43.3%, and the Company is committed to continue to create a workplace thatfemale workers can work proactively to raise the ratio to 50% by 2030.
The Company is also working on to enhance childcare leave, and the ratio of female employees taking
childcare leave is 100% and 42.9% of male employees taking childcare leave when their spouse gave a birth.
By introducing an easy-to-use system such as shortening regular working hours until the child reaches thesecond grade of elementary school and providing work styles which meet various lifestyles, the Company iscreating an environment to increase diversity and maximize abilities of workers.
At Qol Assist Co., Ltd., a special subsidiary company, employees with severe disabilities are teleworking fromhome actively, and the Company is working to improve the working environment so that employees withvarious values and backgrounds can work.
[Principle 2.6] Roles of Corporate Pension Funds as Asset Owners
The Company introduced a defined contribution pension plan (401K). Asset management education is also
provided on a regular basis.
[Principle 3.1] Full Disclosure(1) The Company established its Corporate Philosophy, Slogan, the Qol Group Vision and Qol Group Charterof Corporate Behavior, which are published on the Company’s website (https://www.qolhd.co.jp/eng/). The
Company proactively discloses and publicizes management strategies and plans through activities including
financial results announcements and briefings, General Meetings of Shareholders, individual investor briefings,
and overseas IR activities.
(2) The Company recognizes that, to meet the expectations of shareholders, patients, employees and all otherstakeholders, it must continuously enhance corporate value through corporate activities based on the
Company’s Corporate Philosophy, Slogan, the Qol Group Vision and Qol Group Charter of Corporate
Behavior. To this end, ongoing corporate governance enhancements are an important management issue as thebasis for ensuring management soundness, transparency and efficiency. The Company is strengthening its
management oversight function by appointing outside directors who meet the requirements for independent
officers. Further, in terms of a policy regarding dialogues with shareholders, the Company is proactively
engaged in dialogues with shareholders and investors, which includes the timely and appropriate disclosure of2

information pertaining to business conditions, including management plan progress, quantitative financial
information and non-financial information on corporate governance and activity towards sustainability. The
Company’s policy is to meet the expectations of stakeholders, including shareholders and investors, by striving
to create an appropriate environment for the exercising of shareholder rights.
(3) The total (maximum) amount of compensation for directors is resolved at the General Meeting of
Shareholders after approval by the Board of Directors. Further, regarding individual director compensation, thecompensation system corresponds to the roles and responsibilities of each position, and is decided based onreport content after consulting with the Nomination and Compensation Committee.
(4) Regarding the nomination of candidates for Directors, a variety of factors such as accurate and prompt
decision-making and assigning the right person to the right place are considered, then appointment plans areformulated and consultations are conducted with the Nomination and Compensation Committee in light ofreported content. In accordance with the Companies Act, the Board of Directors then deliberates and makes
resolutions, which are then submitted to the General Meeting of Shareholders.
Reasons for individual appointments are described the Notice on the General Meeting of Shareholders on the
Company’s website (https://www.qolhd.co.jp/eng/).
Further, regarding the dismissal of directors, if the Company discovers an officer to be unfit for duty, such as in
the event of fraud or impropriety, in accordance with the Companies Act, the Board of Directors will deliberate
and make resolutions pertaining to the incident, then submit its conclusions to the General Meeting of
Shareholders.
[Supplementary Principle 3.1.3] Sustainability
At the Board of Directors meeting held in April 2022, the Company established the Sustainability Committee,
chaired by the President and Representative Director to address sustainability issues such as social andenvironmental issues toward the realization of a sustainable society and the materiality was identified at theboard of directors meeting held on the same day.
In addition, the Company announced its support for the recommendations of Task Force on Climate Related
Financial Information Disclosure(TCFD) in December 2022, and the company will take measures for climatechange issues and information disclosure based on the recommendations prepared by the TCFD. The latest
status is disclosed on our website. (https://www.qolhd.co.jp/sustainability/esg/environment.html
In community medical care and long-term care, "continuous medical care" is required as a social security
infrastructure, and the Company is responsible for providing safe pharmaceutical products in a stable manner.
The Company is constantly working on to secure stable inventory at stores and maintain equipment necessary
for store operations considering occurrence of natural disasters and other sudden events. In addition, in order tocontribute to solve global environmental issues, the Company prepares to switch to renewable energy at morethan 900 stores nationwide to reduce CO2 emissions.
Furthermore, regarding human capital investment such as pharmacist and managerial dietician, the Company isproactively promoting to establish a thorough education system and acquisition of a certification system. Since
the experience and skills of pharmacists.is the core of quality of pharmacies, the Company is working on to
improve skills and accumulate human capital through in-house academic conferences have been held since
foundation of the Company.
The Company utilizes intellectual property related to manufacturing methods of pharmaceuticals throughresearch and development to solve social issues.
[Supplementary Principle 4.1.1] Decision on the Scope of Matters Delegated to Management
In addition to items provided for in laws and regulations along with the Company Articles of Incorporation, theCompany’s Board of Directors makes decisions on important management-related matters stipulated in the
Board of Directors rules, including management policies, business plans, investment plans, and subsidiaryestablishment and investment, positioned as a body that supervises business execution.
[Principle 4.8] Effective Use of Independent Directors
3

To contribute to long-term growth and development, four outside directors with specialized knowledge andinsight were appointed.
[Principle 4.9] Independence Standards and Qualifications for Independent Directors
Regarding the independence of outside directors, assuming they meet independence standards set by financial
instruments exchanges, the Company requires abundant experience and knowledge in specialized fields such as
corporate management, legal affairs and accounting, as well as the ability to proactively offer a diverse array ofrecommendations, proposals and opinions on Company management issues.
[Supplementary Principle 4-10-1] Establishment of Nomination and Compensation Committee withindependent outside directors as the main members
The Company has established the Nomination and Compensation Committee as a committee for thenomination and compensation of directors.
The Nomination and Compensation Committee consists of three or more directors, the majority of which are
independent outside directors, and the members and chairperson are elected by a resolution of the Board of
Directors.
As an advisory body to the Board of Directors, the Nomination and Compensation Committee deliberates fromthe perspectives of fairness, transparency, and objectivity, and reports to the Board of Directors.
[Supplementary Principle 4.11.1] View on Balance of Knowledge, etc., Diversity, and Scale of the Board of
Directors as a Whole and a Policy and Procedures for Appointment of Directors
The Company appoints candidates for the Board of Directors so that discussions and decisions can be madebased on diverse knowledge and experience. In order to realize our corporate philosophy “We support qualityof life for everyone. There for you. Anywhere, anytime,” the Company appoints candidates for directors withethics, ability of execution, personality, and insight in high levels that will contribute to improve corporate
value in the future and achieve sustainable growth of society.
[Supplementary Principle 4.11.2] Concurrent Positions of Independent Directors
In light of their fiduciary responsibilities, Company directors make an effort to maintain activities within areasonable range when concurrently serving as an officer of a listed company other than Qol Holdings.
Additionally, significant concurrent positions held by each director are described in the Notice on the General
Meeting of Shareholders.
[Supplementary Principle 4.11.3] Analysis and Evaluation Results Concerning Effectiveness of Board of
Directors
Regarding the effectiveness of the Board of Directors, the Company working on to raise awareness of directors
by utilizing the abundant experience and wide-range of insights of diverse internal and outside directors.
Regarding the effectiveness of the Board of Directors, we conduct a self-evaluation questionnaire once a year,
analyze and evaluate based on the results, and review operations to improve effectiveness.
The results of the questionnaire conducted in fiscal 2022 are above the average, indicating that effectiveness isgenerally appropriate. Therefore, the Board of Directors evaluated that effectiveness is ensured and fulfills its
role. The Board of Directors will continue to review operations and improve the functions of the Board of
Directors.
[Supplementary Principle 4.14.2] Training Policy for Directors
In order to deepen understanding of the Company’s business, explanations are provided as necessary, such as
regular Board of Directors reports. Additionally, each director participates diligently, attending outside
seminars and meetings to exchange opinions with external organizations and other companies to acquire theknowledge and information necessary to fulfill their roles and responsibilities as directors. Directors (Audit &Supervisory Committee members) and outside directors (Audit & Supervisory Committee members) also join
the Japan Audit & Supervisory Committee Members Association, attending seminars and other meetings whenappropriate.
[Principle 5.1] Policy for Constructive Dialogue with Shareholders

4The Company promotes constructive dialogues with shareholders, makes sincere efforts to provide highly
transparent information disclosure and communications, and aims to build positive relationships through theproactive implementation of IR activities. In terms of specific opportunities to communicate with shareholders
and investors, financial results briefing videos are provided for analysts and institutional investors two or moretimes each year, and one-on-one meetings are held with institutional investors overseas in an effort toproactively explain financial results and management strategies.
2. Capital Structure
Percentage of foreign shareholders (Updated)[Status of Major Shareholders]

10% or more but less than 20%(Updated)
Name

Number of shares
owned (shares)

Percentage(%)

MEDIPAL HOLDINGS CORPORATION

7,582,800

20.11

Master Trust Bank of Japan, Ltd. (Trust account)

3,397,200

9.01

Qol Group Employee Stock Ownership Association

1,789,466

4.74

Takashi Nakamura

1,641,000

4.35

Shin Takahashi

1,590,400

4.21

Okasan Securities Co., Ltd.

1,310,000

3.47

DAIICHI SANKYO COMPANY, LIMITED

1,304,000

3.45

Medipal Insurance Service Co., Ltd.

1,104,000

2.92

Custody Bank of Japan, Ltd. (Trust account)

974,400

2.58

Nakamura Shoji Co., Ltd.

775,700

2.05

Controlling shareholder (except for parent company)—

Parent company

None

Supplementary Explanation―
3. Corporate Attributes
Listed exchange and market divisionTokyo Stock Exchange, Prime Section

Fiscal year-end

MarchCategory of industry

Retail Trade

Number of employees (consolidated) as of the end of theprevious fiscal year

1,000 or more

Net sales (consolidated) in the previous fiscal year

JPY100 billion or more but less than JPY1 trillion

Number of consolidated subsidiaries as of the end of the
10 companies or more but less than 50
previous fiscal year
4. Guideline for Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholder, etc.
―5

5. Other Special Circumstances which may have Material Impact on Corporate Governance―

II. Business Management Organization and Other Corporate Governance Structures
regarding Decision Making, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation, etc.
Organizational form

Company with an Audit & Supervisory Committee[Directors]
Maximum number of Directors stipulated in Articles
of Incorporation

15 persons

Term of office of Directors stipulated in Articles ofIncorporation

One year

Chairman of the Board of Directors

President

Number of Directors

11 persons

Appointment of Outside Director (s)Appointed

Number of Outside Directors

4 persons

Number of Independent Directors designated fromamong Outside Directors

4 personsRelationship with the Company (1)NameAttributeToshiko Kuboki

LawyerYukiharu YamamotoTax accountant

Yasutoshi MoriTax accountant

Motoyuki Miyazaki

Certifiedpublic accountant(Updated)
Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

k

〇

〇

* Categories for "Relationship with the Company"• "〇" indicates that the Director currently falls under the category, or did so recently, and "△" indicates that the Director fell
under the category in the past.
• "●" indicates that a close relative of the Director falls under the category, or did so recently, and "▲" indicates that a close
relative of the Director fell under the category in the past.
a. Executive of a listed company or its subsidiaryb. Non-executive director or executive of the parent company of a listed company
c. Executive of a fellow subsidiary of a listed company
d. A party whose major client or supplier is a listed company or an executive thereof
e. Major client or supplier of a listed company or an executive thereof
f. Consultant, accountant or legal professional who receives a large amount of money or other property from a listed company
other than officer remuneration
g. Major shareholder of a listed company (or in cases where the major shareholder is a corporation, an executive of suchcorporation)h. Executive of a client or supplier of a listed company (which does not correspond to any of d., e., or f.) (the Director
him/herself only)
i. Executive of a company that has its outside officer(s) appointed by the Company and appoints the Company's outside
officer(s) (the Director him/herself only)6

j. Executive of a company or organization that receives a donation from a listed company (the Director him/herself only)
k. Others

Relationship with the Company (2)NameMember of
Audit &
Supervisory
Committee

ToshikoKubokiYasutoshi
Mori

Designationas
Independent
Officer〇

Yukiharu
Yamamoto〇〇(Updated)〇

Supplementary
explanation oftherelationship

Reasons for appointment—

The Company appointed Ms. Toshiko Kuboki
based on the expectation that she will reflect
her substantial expertise as a lawyer in
Company management. will contribute tocontinue fulfilling the role of supervising themanagement from an objective andprofessional standpoint independent ofbusiness execution, as she has a wealth ofexpertise and practical knowledge incorporate legal affairs as a lawyer. It has been
determined that there are no conflicts ofinterest with general shareholders and no
problems with independence. Although theCompany has consignment transactions with
the Kuboki Law Office, headed by Ms.
Kuboki, transactions with said office amountto less than 0.01% of the consolidated net
sales of the Company. It has been determinedthat there are no problems with independence.

—

The Company appointed Mr. Yukiharu
Yamamoto based on the expectation that hewill reflect his substantial expertise as a tax
accountant in Company management. It has
been determined that there are no conflicts ofinterest with general shareholders and no
problems with independence.

—

The Company appointed Mr. Yasutoshi Mori
based on the expectation that he will reflect
his substantial expertise as a Tax accountant
in Company management.
It has been determined that there are no
conflicts of interest with general shareholders
and no problems with independence.
Although the Company has signed anadvisory agreement and has consignmenttransactions with Kojimachi Certified Public
Tax Accountant’s Corporation, with which
Mr. Mori is affiliated, the transaction amountwith the corporation accounts for less than
0.01% of the consolidated net sales of theCompany. It has been determined that there
are no problems with independence.

7

Motoyuki
Miyazaki〇〇

The Company appointed Mr. Motoyuki
Miyazaki based on the expectation that hewill reflect his substantial expertise incorporate management as a representative
director at other companies and his extensive
experience and knowledge as a certified
public accountant in Company management.
It has been determined that there are no
conflicts of interest with general shareholders
and no problems with independence.

—[Audit & Supervisory Committee]
Committee’s Composition and Attributes of Chairperson
Total No. ofCommittee
Members
Audit &
Supervisory
Committee

No. of Full-timeMembers3

No. of Inside
Directors

No. of Outside
Directors

Committee Chair(Chairperson)

1

2

Outside Director

1

Appointment of Directors and/or Employees to Support
the Audit & Supervisory Committee

Not adopted

Reasons for adopting current system―
Cooperation among Audit & Supervisory Committee, Accounting Auditor and Internal Audit Department
To ensure the Audit & Supervisory Committee and the Internal Audit Department carry out effective andefficient audits, each other cooperates and confirm that information and opinions are exchanged and issues
identified as necessary in an effort to appropriately conduct auditing and confirm the status of improvements
for identified issues.
[Voluntary Committees]
Optional Committees such as Nominating Committee
and Compensation Committee

EstablishedEstablishment of voluntary committee, composition of members and attributes of chairman

Name ofcommittee

Allcommittee
members(persons)

Full-timemembers(persons)

InsideDirectors(persons)

OutsideDirectors(persons)

Outsideexperts(persons)

Other(persons)

Chairman

Voluntary
Nominationcommittee&
corresponding toCompensation
nomination
Committee
committee

3

1

1

2

0

0

InsideDirector

Voluntary
Nominationcommittee&
corresponding toCompensation
remuneration
Committee
committee

3

1

1

2

0

0

InsideDirector8

Supplementary explanation(Updated)

The Nomination and Compensation Committee, which functions as both a Nomination Committee and aCompensation Committee, deliberates and reports on the nomination and remuneration of directors in response
to consultations with of the Board of Directors to enhance the fairness, transparency and objectivity of
nomination and compensation procedures.
The Nomination and Compensation Committee comprises three or more members who are directors, themajority of whom are independent outside directors.
The Nomination and Conpensation Committee met once in the fiscal year ended March 31, 2024. The
attendance rates of each member are as follows:
Takashi Nakamura, President and Representative Director: Attendance rates 100% (1 out of 1 times).
Toshiko Kuboki, Outside Director: Attendance rates 100% (1 out of 1 times).
Yukiharu Yamamoto, Outside Director: Attendance rates 100% (1 out of 1 times).
Activity Details:
The activity details in the fiscal year ended March 31, 2024, are as follows.
(1) Deliberation regarding the selection of Representative Director and Directors with specific titles.
(2) Deliberation regarding the determination of remuneration for directors (including directors who areauditors and supervisory committee members).

[Independent Officers]
Number of Independent Officers

4 persons

Other matters related to Independent Directors―[Incentives]
Implementation of measures to provide incentives to Directors

Not implemented

Supplementary explanation
The Company’s director compensation is determined based on comprehensive consideration for the scale,content, performance, duties, responsibilities and other factors pertaining to the Company.

Recipients of stock options

Supplementary explanation―[Remuneration for Directors]
Disclosure of individual Directors' remuneration

Supplementary explanation

Remuneration is not disclosed on an individual basis.

(Updated)

Executive compensation paid in the fiscal year ended March 31, 2024, was as follows:9Director excluding directors who are Audit & Supervisory Committee Member (8people) compensation amounted to
338 million yen (of which, 10million yen was paid to outside directors)
Director who are Audit & Supervisory Committee Member (5people) compensation amounted to 18 million yen (ofwhich, 8million yen was paid to outside directors)
Policy on determining amount or calculation
method of remuneration

Established

Disclosure of policy on determining amount or calculation method of remuneration
Director compensation is monthly basic compensation decided by comprehensively considering salary levels atother companies, Company performance, employee salary levels and compensation commensurate withposition, responsibility and years in office.
[Support System for Outside Directors]
Currently, as there are no dedicated staff assisting outside directors, the Audit & Supervisory Committee
Secretariat and the Business Management Department are in charge of supporting clerical work including
communications and other duties.
2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination, Remuneration Decisions,etc. (Overview of Current Corporate Governance Structure) (Updated)<Corporate governance system>
a. Board of Directors
The Board of Directors consists of eight directors (six men and two women) excluding those who are Audit &Supervisory Committee members and three directors (three men) who are Audit & Supervisory Committee
members. The Board holds meetings in principle once per month to make decisions on important management
matters as well as to manage and supervise the status of business execution. The term of office for directors(excluding those who are Audit & Supervisory Committee members) is one year to clarify management
responsibilities each fiscal year.
b. Audit & Supervisory Committee
The Audit & Supervisory Committee consists of three members, two of whom are outside directors (Audit &Supervisory Committee members) and one of whom is a director (Audit & Supervisory Committee member),
The Committee audits the legality and validity of the execution of duties by directors (excluding those who are
Audit & Supervisory Committee members) in accordance with the Audit & Supervisory Committee Rules andAudit & Supervisory Committee Directors Auditing Standards. Moreover, to avoid a situation where thenumber of outside directors who are Audit & Supervisory Committee members and directors who are Audit &Supervisory Committee members falls short of legal requirements, the Company appointed one substituteoutside director (Audit & Supervisory Committee member) and one substitute director (Audit & Supervisory
Committee member).
c. Management Committee
Management Committee consists of directors designated as representative directors that, in principle, meet
every week to consider management challenges, deliberate important matters and determine policies in an
attempt to hasten decision making.

10

<Status of audits>a. Internal audits
Internal audits are the responsibility of the Internal Audit Department under the direct control of the president.
The Internal Audit Department head conducts an audit to secure legitimate, appropriate and efficient operations
and makes suggestions for improvement to relevant departments as necessary. In principle, the results of theaudit are reported once a month at the internal audit meeting attended by directors and business execution
departments. The results of the audit are reported to the directors who are Members of the Audit & Supervisory
Committee twice a year at the Audit & Supervisory Board. In addition, the head of the Internal Audit
Department cooperates with directors who are Members of the Audit & Supervisory Committee and accounting
auditors as necessary to improve the efficiency of auditing work.
b. Audit & Supervisory Committee audits
In addition to attending Board of Directors and other important meetings in line with auditing policies and thedivision of duties established by the Audit & Supervisory Committee, directors who are members of the Audit& Supervisory Committee conduct hearings on the execution of duties by directors (excluding those who are
Audit & Supervisory Committee members), view important approval documents, investigate the status ofoperations and assets and request business reports from Group companies as necessary to strictly monitor the
execution of duties by directors (excluding those who are members of the Audit & Supervisory Committee). In
addition, the Audit & Supervisory Committee monitors and verifies the maintenance and operational status ofinternal control systems while the accounting auditor audits the legality and appropriateness of the execution ofduties by directors (excluding those who are Audit & Supervisory Committee members) through explanations
and reports on plans and results related to audits.
c. Status of accounting audit
For the accounting audit, the Company has concluded an audit contract with KPMG AZSA LLC and has
undergone Companies Act law audits and Financial Instruments and Exchange Act audits. The Company
provides the necessary information in a timely and appropriate manner in order to provide an environment thatfacilitates quick and accurate audits. The names of the certified public accountants who executed theaccounting audit work at the Company and the affiliated audit corporations that they belong to are as follows.
Appointed limited liability employee (Managing Partner) Jyunichi Tanaka KPMG AZSA LLC
Appointed limited liability employee (Managing Partner) Takashi Watanabe KPMG AZSA LLC
In addition to the above certified public accountants, there are five certified public accountants and 21others.
3. Reasons for Selection of Current Corporate Governance Structure
The Company has adopted a Company with an Audit & Supervisory Committee. Of the 11-member total, theBoard of Directors has appointed four outside directors to ensure management transparency. The Audit &Supervisory Committee appoints two outside directors (Audit & Supervisory Committee members), all ofwhom are present on the Board of Directors. The Audit & Supervisory Committee meets regularly andconducts audits of all business activities by exchanging information and reviewing important documents.
Thus, from the perspective of strengthening the oversight function expected of outside directors anddemonstrating effective compliance, as well as the perspective of ensuring the objectivity and neutrality of the
management monitoring function the current system is deemed to be functioning sufficiently.

11III. Implementation of Measures for Shareholders and Other Stakeholders
1. Efforts to Vitalize the General Meeting of Shareholders and Smooth Exercise of Voting Rights
Supplementary explanation
Early dispatch of convocation notice of General Convocation notices are disclosed early on the Company’s
website before shareholder meetings.
Meeting of Shareholders
Exercise of voting rights by electronic means

Voting rights are exercised via the Internet.

Provision of convocation notice (summary) in
EnglishPosted on the Company’s website.

OthersConvocation notices are posted on the Company’s website.

2. IR Activities
Supplementary explanation

Explanation byrepresentative

Preparation and publication
Posted on the Company’s website (in Japanese and English).
of disclosure policy
Regular briefings foranalysts and institutional
investors

Interim and year-end results presentation videos are posted on theInternet.

Yes

Content: Company profile (in Japanese and English), results
announcements, financial statements (in Japanese and English),
Posting of IR materials on
Securities Reports, business reports, briefing materials (in Japanesewebsiteand English), timely disclosures, monthly reports (in Japanese andEnglish) and other materials.
Establishment of
department and/or person
in charge of IR

Department in Charge of IR: Public Relations Department
Person in Charge of IR: Hiromoto Shirakuni, General Manager,
Public Relations Department

3. Efforts to Respect Stakeholders' Standpoint
Supplementary explanation
Stipulations on respecting
the standpoint of
stakeholders in internal
regulations, etc.

Respect for stakeholders is described in the Company’s Corporate Philosophy, Slogan,
the Qol Group Vision and the Qol Group Charter of Corporate Behavior. Throughout
the Company and Group, management themselves convey this spirit to officers andemployees whenever they have the opportunity to inculcate these ideals in each officer
and employee.

Other

As part of its social contribution activities, the Group supports Make-A-Wish Japan in
its aim to fulfill the dreams of children fighting intractable diseases and participates inhealth fairs providing easy health checks for local residents. The Company is also
implementing various initiatives that contribute to community healthcare, such as achildrearing college providing lectures on child health and childrearing for parents.

12IV. Matters Related to the Internal Control System, etc.
1. Fundamental Views on Internal Control System and the Progress of System Development[Basic Approach]
The Company established and operates the following internal control system in order to ensure theeffectiveness and efficiency of operations, the reliability of financial reporting, compliance with related laws
and regulations, and the preservation of assets.
[Implementation Status](1) System for ensuring that the execution of duties by directors and employees complies to laws andregulations and the Articles of Incorporationa. The Company aims to steadily carry out its Corporate Philosophy, and it is promoting corporate activities
based on high ethical standards that comply with the "Qol Group Charter of Corporate Behavior," "Executive
Officer and Employee Code of Ethics," and "Compliance Management Regulations" in accordance with laws,
regulations, the Articles of Incorporation and internal regulations.
b. At the Company, regarding transactions that represent conflicts of interest or that are suspected of doing so,
directors constantly monitor to ensure that transactions are fair and reasonable in terms of both transaction ratio
and transaction conditions without restriction on business promotion.
c. The Company appoints outside directors. Outside directors monitor whether a system for the execution ofduties by the directors is established, secured, and practiced.
d. The Company has set up an Internal Audit Section independent of the operating departments, whichmonitors the appropriateness and efficiency of our business activities.
e. The Compliance Subcommittee is established within the Risk Management Committee as a supervisory bodyto ensure compliance with laws and regulations, thorough corporate ethics, and thorough compliance for theCompany and its group companies.
f. The Internal Control Subcommittee is established within the Internal Control Committee as a supervisory
body for internal control. This subcommittee conducts the prescribed procedures to monitor and evaluate
internal control, and after review by the Internal Control Committee, reports to the president, with final
decisions being made by the Board of Directors.
(2) System relating to the storage and management of information pertaining to the execution of duties bydirectors
Information concerning the execution of duties by directors is appropriately stored and managed based on theseparately prescribed "Document Management Rules" and other internal regulations. The Audit & Supervisory
Committee or its members are free to view the documents as necessary.
(3) Regulations and other systems concerning management of the risk of loss
a. Regarding matters concerning regulations and other systems concerning the risk of loss, the Company
ensures continuity and stable development of its business through the practice of risk management based on theseparately prescribed "Risk Management Regulations" and other internal regulations.
b. An Emergency Headquarters is established as quickly as possible to cope appropriately with risks arisingfrom large-scale disasters or accidents, etc. Detailed information on risks, authorities, activities, etc. to behandled by the Emergency Headquarters is stipulated in the " Risk Management Detailed Regulations."(4) System for ensuring efficient execution of duties by directors
a. In principle, the Board of Directors will hold a Board Meeting once a month as a basis for ensuring efficient
execution of the duties of the directors. The progress status of the annual budget will be reported, measures will
be decided, and if necessary, an extraordinary board meeting will be held to respond appropriately to individual
deliberation items.
b. The Company aims for quick and efficient business operations based on the separately prescribed "Job
Authority Regulations."13

(5) System to ensure the appropriateness of operations in the corporate group consisting of the Company, its
parent company, and its subsidiaries
a. The "Qol Group Charter of Corporate Behavior," "Executive Officer and Employee Code of Ethics" and"Compliance Management Regulations" are used as ethical and operational guidelines for business operationsin the Company and its group companies.
b. Regarding business management, the Company manages affiliated companies through a settlement andreporting system to the Company in accordance with the "Regulations on the Management of AffiliatedCompanies", ensuring that the work of the entire group is done efficiently. In addition, the Company has
established a system whereby reports are made to the Company each time an important business matter occurs.
c. The Internal Audit Department audit affiliated companies on items such as personnel or financial impacts
and the appropriate implementation of consolidated results on a regular or extraordinary basis from theviewpoint of group control, based on the separately prescribed "Internal Audit Regulations."
d. If a group company violates business management, management guidance contents from the Company orlaws and regulations, or when it is recognized that there is a problem with compliance, it will be reported to thebusiness administration Department that is the secretariat of the Risk Management Committee Compliance
Subcommittee. The Compliance Subcommittee can immediately report to directors who are Members of the
Audit & Supervisory Committee and state its opinions. In addition to giving comments, directors who areMembers of the Audit & Supervisory Committee can request improvement measures at the Board of Directors.
e. The Company manages the risk of loss including for group companies within the scope of the risk
management system through the " Risk Management Detailed Regulations."(6) Matters concerning the employee in the case where the Audit & Supervisory Committee request theplacement of an employee to assist in duties, matters concerning the independence of the employee fromdirectors (excluding those who are Members of the Audit & Supervisory Committee), and matters concerning
ensuring the ability to execute the instructions by the employee
a. In cases where it is necessary to appoint an employee to assist in the Audit & Supervisory Committee' duties,
an assistant for the Audit & Supervisory Committee is appointed from Qol group's employees. In the casewhere the assistant employee is serving concurrently as an audit assistant, he/she will not receive instructions
from his/her superiors (directors and below) in the organization to which he/she belongs with regard to
instructions given to him/her by the directors (excluding those who are Members of the Audit & Supervisory
Committee. The directors who are Members of the Audit & Supervisory Committee) evaluate the Audit &Supervisory Committee assistant and the Board of Directors make decisions after gaining consent from theauditors and ensure independence from the directors (excluding those who are Members of the Audit &Supervisory Committee).
b. The Audit & Supervisory Committee assistant does not concurrently hold a position related to the executionof duties.
(7) System for reporting to the Audit & Supervisory Committee by directors (excluding those who areMembers of the Audit & Supervisory Committee) and employees, other systems for reporting to the Audit &Supervisory Committee, and system for ensuring that persons who report do not receive unfavorable treatment
due to reportinga. Directors (excluding those who are Members of the Audit & Supervisory Committee) and employees of theCompany and Group companies can report important matters regarding the business or performance of theGroup to the Company’s Members of the Audit & Supervisory Committee. Notwithstanding the foregoing, theMembers of the Audit & Supervisory Committee may request reports from directors (excluding those who areMembers of the Audit & Supervisory Committee) and employees of the Company and Group companies at any
time as necessary.
b. A system is in place to ensure that persons who report to the Members of the Audit & Supervisory
Committee do not receive unfavorable treatment due to the report.

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(8) System to ensure that audits by the Audit & Supervisory Committee are carried out effectively
a. The Company and Group company directors (excluding those who are Members of the Audit & Supervisory
Committee) periodically exchange information with the Audit & Supervisory Committee.
b. The Internal Audit Department periodically reports the audit results to the Audit & Supervisory Committee.
c. The Audit & Supervisory Committee instruct the accounting auditor to explain and report on the results ofaccounting audits from time to time and exchange information on a regular basis.
d. With regard to the procedures for prepayment or redemption of expenses arising from the execution of duties
by directors who are Members of the Audit & Supervisory Committee (limited to those related to the executionof duties by the Audit & Supervisory Committee)or other processing of expenses or obligations arising fromthe execution of duties, processing is carried out smoothly at the request of the directors who are Members of
the Audit & Supervisory Committee.
(9) System to ensure the reliability of financial reporting
In order to ensure the reliability of financial reporting, the Company has established the "Basic Plan for the
Establishment, Operation and Evaluation of Internal Control Related to Financial Reporting," and establishes,develops, and operates a system whereby internal control related to financial reporting functions effectively.
2. Fundamental Approach to and Preparedness for Eliminating Anti-Social Forces[Basic Approach]
The Qol Group Charter of Corporate Behavior stipulates as basic policy that the Company will immediately
sever relationships with any antisocial forces threatening the order safety of civil society. Further, the Qol Codeof Ethics for Officers and Employees stipulates a firm response policy of refusing to provide profits toantisocial forces.
[Implementation Status]
The Company formulated Antisocial Forces Countermeasure Regulations in order to maintain its system foreliminating antisocial forces. In response to antisocial forces that threaten social order and the healthy businessactivities, the Company coordinates with outside agencies such as the police and advisory law firms to ensure
this system can respond in a systematic and resolute manner.

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V. Other
1. Adoption of Anti-Takeover Measures
Adoption of anti-takeover measures

Not adopted

Supplementary explanation―
2. Other Matters Concerning Corporate Governance Structure, etc.
(1) Timely disclosure policy
The Company’s basic stance is to disclose company information necessary for investors to accurately judge thevalue of their investment in the Company in a timely and appropriate manner utilizing a system created toenable prompt disclosure.
(2) Internal system for timely disclosure
As the organization in charge of timely disclosure, the Disclosure Secretariat was established under the person
in charge of handling information to clarify the management of information related to timely disclosure and thedivision of practical roles.
The departments in charge of Corporate Planning, Business Management and Public Relations and IR collectinformation on decision-making and incident details, then prepare the relevant disclosure documents. The
department in charge of Business Management collects information on financial results and prepares disclosure
documents. The department in charge of Corporate Planning collects information on decision-making andincident details related to its subsidiaries, then prepare the relevant disclosure documents.
As this information affects the investment decisions of investors, the Company takes measures to prevent
information leakage and prohibit insider trading based on regulations to prevent insider trading.
Additionally, to ensure shareholders have opportunities to fairly and easily obtain key information about theGroup, the Company posts summaries of quarterly and full-year income statements and other information thatmay directly affect shareholder interests as necessary.
In addition to timely disclosure based on Tokyo Stock Exchange and other rules and regulations, the Company
makes an effort to quickly and simply disclose information on the Company website even regarding matters forwhich there are no requirements under the timely disclosure system.

16

<The expertise and experience expected of each Director>
1
2
Corporate
management

Finance andaccounting

3

4

5

Sales

Corporate strategy
and marketing

Takashi Nakamura

●

●

●

Takayoshi Ishii

●

●

●

Kiyonobu Fukumitsu

●

●

●

7

Legal affair andcompliance

HR andlabor affairs

●

●

●
●

●

●
●

●

Kei Imai

8
Development of Qualification
human
resources/Education●

Yukari Onchi
Yutaka Togashi

Pharmaceutical
Affairs Law*

6

●

●
●

Toshiko Kuboki●

Pharmacist●
Pharmacist●

LawyerYukiharu Yamamoto●Taxaccountant

Yasutoshi Mori●Taxaccountant

Motoyuki Miyazaki●

Kazuo Ishii●

Certifiedpublicaccountant
Certifiedpublicaccountant*Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices

Note: The above list does not represent all the knowledge and experience of each person.

17