This document has been translated from the Japanese original for reference purposes only. In theevent of any discrepancy between this translated document and the Japanese original, the original
shall prevail. Sosei Group Corporation makes no warranty of any nature as to the accuracy of thisEnglish translation and assumes no responsibility for this translation or for direct, indirect or any otherform of damages arising from the translation.
TSE Securities Code: 4565
March 4, 2022

To Our Shareholders:

2-1 Kojimachi, Chiyoda-ku, Tokyo

Sosei Group Corporation
Chairman of the Board,
Representative Executive
Officer, President and CEO

Shinichi Tamura

Notice of the 32nd Ordinary General Meeting of Shareholders
Sosei Group Corporation (the Company) would like to inform you that the 32nd Ordinary
General Meeting of Shareholders of the Company (the “Meeting”) will be held as follows.
Since voting rights may be exercised in writing (by mail) or on the internet, we strongly ask
shareholders to consider forgoing attending the General meeting of Shareholders to prevent the
spread of COVID-19, and at the same time, exercise voting rights in advance as much as possible,
either by returning the voting form by post or voting on the internet.
Please read the Reference Documents for the Meeting included in this document and exercise
your rights by 5:00 p.m. on Wednesday, March 23, 2022.
Yours sincerely
Date and TimeThursday, March 24, 2022 at 10:00 a.m. (Reception start: 9:30 a.m.)

Venue

Fuji-No-Ma Hall, 4th Floor, Hotel Grand Arc Hanzomon
1-1, Hayabusa-cho, Chiyoda-ku, Tokyo, Japan
Please refer to “Access to Meeting of Shareholders Venue” at the end.

AgendaMatters to bereported:

Matters to beresolved:
Matters relating toInternet
Disclosure

1. Business Report, Consolidated Financial Statements, andReports of Independent Auditor and the Audit Committee on theConsolidated Financial Statements for the 32nd fiscal period (fromJanuary 1, 2021 to December 31, 2021)
2. Report on the Non-Consolidated Financial Statements for the 32nd
fiscal period (from January 1, 2021 to December 31, 2021)
Proposal No1. - Partial amendment of articles of incorporation
Proposal No2. - Election of Eight (8) Directors(1) Of the documents that should be provided with this notice, the following matters
are listed on the Company’s Internet website in accordance with laws andregulations and Article 14 of the Articles of Incorporation of the Company and notprovided with this notice. Therefore, the documents provided within this notice are
only a portion of the documents over which the Audit Committee and Independent
Auditor conducted an audit and prepared audit reports.
1) “Stock acquisition rights (“stock options”), etc.”, “Outline of the systems for
ensuring the appropriateness of operations and their operating status” and“Policy on the conduct of persons influencing decision on the Company's
financial and business policies” in the business report
2) “Consolidated Statement of Changes in Equity” and “Notes to the Consolidated
Financial Statements” in the consolidated financial statements3) “Non-Consolidated Statement of Changes in Equity” and “Notes to the NonConsolidated Financial Statements” in the non-consolidated financial
statements(2) Should any revisions be made to the Reference Documents for the Meeting,Business Report, Non-Consolidated Financial Statements or Consolidated
Financial Statements prior to the date of the Meeting, the Company will post a noticeon its website set forth below.
Website of the Company (https://www.soseiheptares.com/)1

Exercise of Voting Rights
You may exercise your voting rights using one of the following three methods.
Exercising voting rights in writing (by mail)Please indicate your approval or disapproval of each proposal on the enclosed Voting Formand post it without affixing postage stamps.
Exercise due date: To be received no later than 5:00 p.m. on Wednesday, March 23, 2022
Exercising voting rights on the Internet
Please use a personal computer or smartphone to access the voting website designated by
the Company. Please enter the “voting code” and “password” printed on the enclosed Voting
Form and exercise your voting rights by following the instructions displayed on the screen.
Exercise due date: No later than 5:00 p.m. on Wednesday, March 23, 2022
For those attending the Meeting in person
Please submit the Voting Form at the reception desk at the venue. (No seal is necessary.)
Date and Time:Thursday, March 24, 2022 at 10:00 a.m. (Reception start: 9:30 a.m.)
Venue:
Fuji-No-Ma Hall, 4th Floor, Hotel Grand Arc Hanzomon
1-1, Hayabusa-cho, Chiyoda-ku, Tokyo, JapanThe Company designated voting website
https://www.web54.net
You can connect to the voting website via smartphone.
<Smart Vote>
Smartphone users may log in to the voting website without entering the “voting code” and“password” by scanning the QR Code printed on the bottom right of the enclosed Voting
Form. For details, please refer to the enclosed leaflet.
<Cautionary matters>
 Each shareholder shall bear any fees for accessing the voting website (Internet connection
fees, communications fees, etc.).
 If you exercise voting rights multiple times via the Internet, the final vote cast will be
regarded as the effective vote.
 If you exercise voting rights redundantly in writing (by mail) and via the Internet, the votes
cast via the Internet will be regarded as the effective votes.
Inquiries related to exercise of voting rights via the Internet
The Sumitomo Mitsui Trust Bank, Limited, Stock Transfer Agency Web Support Helpline
Telephone: 0120-652-031 (toll-free in Japan only; hours: 9:00 a.m. to 9:00 p.m.)
To institutional investors
You may use the Electronic Voting Platform operated by ICJ Inc., as a method of exercising
your voting rights.

2

Measures to prevent the spread of COVID-19
This General Meeting of Shareholders will give top priority to the health and safety of
Shareholders and the prevention of the spread of COVID-19, and we ask for your understanding
and cooperation as follows.

1.Request to Shareholders
・Shareholders are asked to consider forgoing attending the General meeting of
Shareholders and at the same time, exercise voting rights in advance as muchas possible, either by returning the voting form by post or voting via theinternet.
2.On our response
・Staff shall attend wearing masks.
・Hand sanitizers will be available in the reception area and the venue.
・We will take your temperature at the entrance. Please refrain from entering or we
may ask Shareholders to leave the venue in the following cases;
In the case of Pyrexia is confirmed by taking your temperature.
In the case of coughing or other symptoms are observed.
In the case of the uncooperation in wearing a mask or using hand sanitizers.
・The seats at the venue will be spaced. Since the number of seats are reduced
from the previous year, you may not be admitted if seats are full.
・We will do our best to shorten the meeting time as much as possible.

We are pleased to inform you of any significant changes in the management of the meeting on
our website (https://soseiheptares.com/).

3

Proposal No. 1 Partial amendments to the Articles of Incorporation
1. Reasons for proposal(1) The Act Partially Amending the Companies Act (Act No. 70 of 2019) approves measures forproviding reference documents for shareholder meetings, etc. in electronic format. Once theamendment concerning these measures has been enacted, companies will be obligated totake measures to provide information that constitutes the content of reference documents forgeneral shareholder meetings, etc. in electronic format. Therefore, relevant sections need tobe amended in preparation for this.
(2) Article 15 of the current Articles of Incorporation stipulates that a General Meeting of
Shareholders shall be convened and chaired by a Representative Executive Officer pursuant
to a resolution of the Board of Directors. However, relevant sections shall be amended in order
to allow Directors predetermined by the Board of Directors to convene General Meetings ofShareholders and Directors or Executive Officers predetermined by the Board of Directors to
act as chair pursuant to a resolution of the Board of Directors.
2. Content of the Amendment
The proposed Amendments are as follows.
(The underlined portions show the changes.)
Proposed Amendments
Chapter 3 General Meeting of Shareholders(Measures for Provision of Information inElectronic Format, etc.)

Current Articles of Incorporation
Chapter 3 General Meeting of Shareholders(Disclosure on the Internet and Deemed Deliveryof Shareholder Meeting Reference Documents,
etc.)
Article 14
The Company may, in convening a General
Meeting of Shareholders, deem that the
information required to be stated or displayed inreference documents for shareholder meeting,business reports, and financial statements andconsolidated financial statements shall havebeen provided to shareholders when suchinformation is disclosed on the internet inaccordance with the Ordinance of the Ministry ofJustice.
(Newly established)

Article 14
The Company, in convening a General Meeting of
Shareholders, shall take measures to provide
information that constitutes the content ofreference documents for shareholder meeting,etc. in electronic format.

2 Among items for which the measures forproviding information in electronic format will
be taken, the Company may exclude all orsome of those items designated by the Ministryof Justice Order from statements in the paperbased documents to be delivered toshareholders who requested the delivery of
paper-based documents by the record date ofvoting rights.

4Current Articles of Incorporation
Proposed Amendments(Convocation and Chairperson)(Convocation and Chairperson)
Article 15
Article 15
Unless otherwise provided by law, a General
Unless otherwise provided by law, a General
Meeting of Shareholders shall be convened by a
Meeting of Shareholders shall be convened andDirector predetermined by the Board ofchaired by a Representative Executive Officer
pursuant to a resolution of the Board of
Directors and chaired by a Director or Executive
Officer predetermined by the Board of Directors
Directors.
pursuant to a resolution of the Board of
Directors.
2 If more than one Representative Executive(Deleted)
Officers are in office, the Representative
Executive Officer predetermined by the Boardof Directors shall act as the person toconvene and preside at the meeting as
provided in the foregoing paragraph.
3 If the person who shall preside at the meeting 2 If the person who shall preside at the meeting
pursuant to the foregoing two paragraphs ispursuant to the foregoing paragraph is unable
unable to act, one of the other Executive
to act, one of the other Directors shall
Officers shall convene and preside at aconvene and one of the other Directors or
General Meeting of Shareholders in the order
Executive Officers shall preside at a General
Meeting of Shareholders in the order ofof priority as predetermined by the Board ofpriority as predetermined by the Board of
Directors.
Directors.
Articles 16 – 42

(Omitted)

Articles 16 – 42 (Same as current version)(Newly established)(Supplementary Provisions)
1. The deletion of Article 14 of the current
Articles of Incorporation (Disclosure on theInternet and Deemed Delivery of Shareholder
Meeting Reference Documents, etc.) and the
new establishment of Article 14 (Measures for
Provision of Information in Electronic Format,etc.) in the proposed amendments shall beeffective as of September 1, 2022 (hereinafter
the “Date of Enforcement”).
2. Notwithstanding the preceding paragraph,
Article 14 of the current Articles ofIncorporation shall remain effective regarding
any General Meeting of Shareholders held ona date within six months from the Date of
Enforcement.
3. These supplementary provisions shall bedeleted on the day when six months haveelapsed from the Date of Enforcement or the
day when three months have elapsed fromthe date for the General Meeting of
Shareholders mentioned in the preceding
paragraph, whichever is later.

5

Proposal No.2

Election of Eight (8) Directors

The term of office of all six directors currently in office will expire at the conclusion of the Meeting.
To strengthen the function of the Board of Directors, according to the decision by the Nominating
Committee, the election of total eight directors with two more new directors which includes one
external director shall be proposed. The candidates are as follows:

Candidate
No.

Name

Current positions andresponsibilities at the Company

1

Shinichi Tamura

Chairman of the Board,
Representative Executive Officer,
CEO
Chair of the Nomination
Committee, Member of theCompensation Committee

2

Christopher Cargill

Executive Officer, CFO
External Director,
Chair of the Audit Committee,
Member of the Compensation
Committee
External Director,
Member of the Nomination
Committee,
Member of the Audit Committee
External Director,
Chair of the Compensation
Committee
Member of the Nomination
Committee,

Number oftimes
attended
Board ofDirectors
Meetings

Attribute

Reappointed

Newly
appointed

26/26
times

－

ReExternal
appointed

Ind

26/26

ReExternal
appointed

Ind

26/26

ReExternal
appointed

Ind

25/26

External Director,
Member of the Audit Committee

ReExternal
appointed

Ind

25/26

Rolf Soderstrom

External Director,
Member of the Audit Committee
Member of the Compensation
Committee

ReExternal
appointed

Ind

25/26

Miwa Seki－

Newly
External
appointed

Ind

－

3

Tomohiro Tohyama

4

Kuniaki Kaga

5David Roblin

6

Noriaki Nagai

7
8

Reappointed

Candidate as Reappointed Director

Newly appointed

Candidates as newly appointed Directors

External
Ind

times

times

times

times

Candidate as External Director
Independent Director designated in accordance with the listing regulations ofstock exchanges

6

times

Notes 1. There is no special conflict of interests between the Director candidates and the Company.
2. Mr. Tomohiro Tohyama, Mr. Kuniaki Kaga, Dr. David Roblin, Mr. Noriaki Nagai, Mr. Rolf Soderstrom, and Ms.
Miwa Seki are candidates for External Directors.
3. Summary of liability limitation agreements with the candidates
In accordance with Article 427, Paragraph 1 of the Companies Act, the Company entered into an agreementthat limits liability for damages under Article 423, Paragraph 1 of the said Act with each of Mr. Tomohiro
Tohyama, Mr. Kuniaki Kaga, Dr. David Roblin, Mr. Noriaki Nagai, and Mr. Rolf Soderstrom. The limit on theliability for damages under the agreements is the minimum amount of liability stipulated in Article 425,
Paragraph 1 of the Companies Act.
4. We have a liability insurance (D&O insurance) policy in which all of our directors are insured. The Company ispaying the full amount of premiums for this policy. To a director who is an insured person being liable for the
execution of his/her duties or a request pertaining to the pursuance of such liability damage that may be causedby such damage is covered. If this proposal is approved by the Meeting, each candidate will be included as aninsured person under the relevant insurance policy. Moreover, we plan to renew D&O insurance with samecontent for the next contract renewal.
5. If this proposal is approved at the Meeting, the Company intends to continue the liability limitation agreementswith Mr. Tomohiro Tohyama, Mr. Kuniaki Kaga, Dr. David Roblin, Mr. Noriaki Nagai, and Mr. Rolf Soderstrom
stated in 3. above. and to conclude the liability limitation agreements equivalent to the agreements stated in 3.
above with Ms. Miwa Seki.
6. The Company has notified Tokyo Stock Exchange, Inc. of Mr. Tomohiro Tohyama, Mr. Kuniaki Kaga, Dr. David
Roblin, Mr. Noriaki Nagai, and Mr. Rolf Soderstrom as Independent Directors in accordance with the regulationsof Tokyo Stock Exchange, Inc.
7. If this proposal is approved at the Meeting, the Company intends to notify the Tokyo Stock Exchangeof the appointment of Ms. Miwa Seki as an Independent Director in accordance with the regulationsof Tokyo Stock Exchange, Inc.

7

CandidateNo.

1
Reappointed

Shinichi Tamura

No. of shares owned:(Born 9/17/1949)

1,145, 237

Term of office as Board Director:

32 years

Attendance at Board Meetings:

26/26 times[Career summary, and positions and responsibilities at the Company]
Apr. 1978
Feb. 1987
Jul. 1989
Jun. 1990
Jun. 2005
Mar. 2012
Jun. 2016

Jan. 2019
Sep. 2021

Joined Fujisawa Pharmaceutical Co., Ltd.
(current Astellas Pharma Inc.)
Joined Genentech Inc.
Representative Director & President, Genentech Limited
Representative Director & CEO of the Company
Board Director, Representative Executive Officer and President, CEO of
the Company
Managing Director, Sosei R&D Ltd.
Chairman of the Board of the Company (to the present)
Representative Executive Officer and Executive Chairman of theCompany
Representative Executive Officer, Chairman, President and CEO of theCompany
Representative Executive Officer, CEO of the Company (to the present)<Committee membership>
Chair of the Nomination Committee; Member of the Compensation Committee[Significant concurrent posts]
N/A
Reason for selection of the candidate as Director
Mr. Shinichi Tamura is the founder of the Company and has led the Company's businessexpansion by utilizing his extensive experience in corporate management in the pharmaceuticalindustry. For the continued development of the Company's business, the Company proposes thathe continue to be elected as a Director.

9CandidateNo.

2
Newly appointed

Christopher Cargill

No. of shares owned:(Born 3/1/1984)

4,358

Term of office as Board Director:-

Attendance at Board Meetings:-[Career summary, and positions and responsibilities at the Company]
Feb. 2009
Apr. 2010
Sep. 2017
Jun. 2018
Jun. 2018
Nov. 2018
Jan. 2019
Apr. 2021
Sep. 2021

Joined KPMG
Joined J.P. Morgan Chase & Co
Head of IR and Corporate Communication Dept of the Company
Interim CFO of the Company
Director, Sosei R&D Ltd.
Executive Officer and Executive Vice President, CFO of the Company
Director, Heptares Therapeutics Ltd. (to the present)
Executive Officer, COO, CFO of the Company
Executive Officer, CFO of the Company (to the present)[Significant concurrent posts]
Director, Heptares Therapeutics Ltd.

Reason for selection of the candidate as Director
Mr. Christopher Cargill has extensive expertise in finance and accounting based on his businessexperience at a major overseas financial institution, etc. Since joining the Company in 2017, hehas been responsible for formulating business strategies as CFO and has demonstrated a highlevel of business management skills as a Director of Heptares Therapeutics Ltd. He understands
the overall management of the Company and is expected to demonstrate a high level ofexpertise, so that the Company proposes that he be newly elected as a Director.

10CandidateNo.

3of shares owned:
Tomohiro Tohyama No.
Term of office as External Director:

Reappointed[Career summary, and positions and responsibilities at the Company]

External
Independent(Born 2/21/1950)

Apr. 1978
Apr. 1980
May 1984
Feb. 1985
Jun. 1985
Aug. 1985
Oct. 1990
Nov. 1999
Jun. 2010
Jun. 2011
May 2016
May 2016
Jun. 2016

Attendance at Board Meetings:

33,86011years
26/26 times

Entered Legal Training and Research Institute, Supreme Court of Japan
Registered with Dai-ichi Tokyo Bar Association
Joined Nishimura & Sanada Law Office
Mason & Sloane LLP., USA
Pollock, Bloom & Dekom, USA
Pryor, Cashman, Sherman & Flynn, USA
Returned to Nishimura & Sanada Law Office as a partner
Partner (one of founders) at TMI Associates (to the present)
External Corporate Auditor, Nippon Shikizai, Inc.
External Director, Avex Group Holdings Inc.
External Director of the Company (to the present)
External Director, Member of the Audit and Supervisory Committee,
Nippon Shikizai, Inc. (to the present)
External Director, Trust Capital Co., Ltd.
Outside Statutory Auditor , WOWOW Inc.

<Committee membership>
Chair of the Audit Committee; Member of the Compensation Committee[Significant concurrent posts]
Partner at TMI Associates
External Director and Audit and Supervisory Committee Member of Nippon Shikizai,
Inc.
Reason for selection of the candidate as External Director and summary of expexted
roles
Mr. Tomohiro Tohyama has extensive experience and expertise in international corporate legal
affairs as a partner at a major law firm in Japan, whilst he has no experience of being involvedin corporate management other than as an External Director and Corporate Auditor. He has
actively provided useful advice and suggestions on overall management by utilizing his expert
perspective on corporate management and legal affairs. It is expected that his performance of
these important roles will further strengthen the supervision to the management and thegovernance system, so that the Company proposes that he continue to be elected as an External
Director.

11

Candidate
No.

4
Reappointed

Kuniaki Kaga

No. of shares owned:
Term of office as External Director:(Born 9/1/1951)

Attendance at Board Meetings:

26,0004 years
26/26 times[Career summary, and positions and responsibilities at the Company]

External

Apr. 1975

Independent

Jun. 2004
Oct. 2005
Jun. 2006

Jun. 2009
Jun. 2010
Apr. 2012

Apr. 2014
Feb. 2015
Jun. 2018
Jan. 2021

Joined Mitsubishi Kasei Kogyo Kabushiki Kaisha (current Mitsubishi
Chemical Corporation)
Deputy Director, Head of Healthcare Planning Department, Mitsubishi
Chemical Corporation
Deputy Director, Mitsubishi Chemical Holdings Corporation
Head of Healthcare Strategy Office
Executive Officer and Head of Healthcare Strategy Office, Mitsubishi
Chemical Holdings Corporation
Executive Officer, Head of Healthcare Business Domain, and General
Manager of Healthcare Planning Office, Healthcare Business Domain,
Mitsubishi Chemical Corporation
Board Director, Mitsubishi Tanabe Pharma Corporation
Representative Director, Managing Executive Officer, General Manager
of International Business Department, Mitsubishi Tanabe Pharma
Corporation
Representative Director, Senior Managing Executive Officer, General
Manager of Research Division and International Business Department,
Mitsubishi Tanabe Pharma Corporation
President and Representative Director, Life Science Institute, Inc.
Board Director, Mitsubishi Tanabe Pharma Corporation
Board Director, The KAITEKI Institute, Inc.
President and Representative Director, The KAITEKI Institute, Inc.
External Director of the Company (to the present)
External Director, SUSMED, Inc (to the present)<Committee membership>
Member of the Nomination Committee; Member of the Audit Committee[Significant concurrent posts]
External Director, SUSMED, Inc
Reason for selection of the candidate as External Director and summary of expexted
roles
Mr. Kuniaki Kaga has held several senior positions at leading Japanese chemical andpharmaceutical companies. He actively provides useful advice and suggestions on overallmanagement by leveraging his expertise in corporate management, technology, research anddevelopment, business strategy and marketing. It is expected that his performance of theseimportant roles will further strengthen the supervision to the management and the governancesystem, so that the Company proposes that he continue to be elected as an External Director.

12

Candidate
No.

5
Reappointed
External
Independent

David Roblin

No. of shares owned:

4 years

Term of office as External Director:(Born 9/25/1966)

Attendance at Board Meetings:

25/26 times[Career summary, and positions and responsibilities at the Company]
Apr. 1991
Apr. 1997
Dec. 2008
Apr. 2011
Sep. 2013
Feb 2014
Jun. 2015
Feb. 2017
Feb. 2017
Jun. 2018
Mar. 2020

Medical practice at St George’s and St Bartholomew’s Hospital, London
Head of Therapy Area for Anti-Infectives, Bayer Pharma AG
Senior Vice President, Head of Research, Site Head, Chief Medical
Officer (CMO), Europe R&D, Pfizer Inc.
CMO, Creabilis
Honorary Professor, Swansea University, School of Medicine (to thepresent)
COO, The Francis Crick Institute
Honorary Professor of Translational Medicine, St George’s Hospital
Medical School (to the present)
Chairman of Scientific Translation, The Francis Crick Institute (to thepresent)
President of R&D, Summit Therapeutics
External Director of the Company (to the present)
COO and CEO JuvRX, Juvenescence Ltd (to the present)<Committee membership>
Chair of the Compensation Committee; Member of the Nomination Committee[Significant concurrent posts]
Honorary Professor, Swansea University, School of Medicine
Honorary Professor of Translational Medicine, St George’s Hospital Medical School
Chairman of Scientific Translation, The Francis Crick Institute
COO and CEO JuvRX, Juvenescence Ltd
Reason for selection of the candidate as External Director and summary of expexted
roles
Dr. David Roblin gained clinical experience as a physician, and later followed with adistinguished career in the pharmaceutical industry, most notably as SVP and Head of R&D in
Europe for a major pharmaceutical company. He has been actively providing useful advice andsuggestions on R&D in general, utilizing his expert perspective on corporate management,
technology, R&D, business strategy and marketing. It is expected that his performance of theseimportant roles will further strengthen the supervision to the management and the governancesystem, so that the Company proposes that he continue to be elected as an External Director.

13

Candidate
No.

6
Reappointed
External
Independent

Noriaki Nagai

No. of shares owned:
Term of office as External Director:(Born 12/1/1957)

Attendance at Board Meetings:

16,677
3 year
25/26 times[Career summary, and positions and responsibilities at the Company]
Apr. 1981
Sep. 1998
Jun. 2000
Apr. 2006
Apr. 2010
Apr. 2011
Jun. 2013
Jun. 2013
Apr. 2014
Apr. 2015
Mar. 2019

Joined Nomura Securities, Co., Ltd. (NSC)
Managing Director, Head of European Administration Division of
Nomura International plc
General Manager, Legal Dept., NSC
Executive Officer in charge of Corporate, Nomura Holdings, Inc. (NHI)
Executive Officer in charge of Legal, NSC
Executive Managing Director in charge of corporate planning, legal andsecretary, NSC
Executive Officer and Chief Legal Officer, NHI
Executive Managing Director in charge of legal and secretary, NSC
External Director, Japan Securities Depository Center, Inc.
External Director, Japan Securities Clearing Corporation
Executive Officer in charge of Corporate and Chief Legal Officer, NHI
Executive Managing Director in charge of planning management, NSC
Professor of Law, Doshisha University
External Director of the Company (to the present)<Committee membership>
Member of the Audit Committee[Significant concurrent posts]
N/A
Reason for selection of the candidate as External Director and summary of expexted
roles
Mr. Noriaki Nagai held key positions in the corporate division of a major securities company andwas a university professor at faculty of law. He has been actively providing useful advice andsuggestions to the Company's management in general, utilizing his expertise in businessstrategy and marketing, finance and accounting, and legal affairs. It is expected that his
performance of these important roles will further strengthen the supervision to the management
and the governance system, so that the Company proposes that he continue to be elected as
an External Director.

14

Candidate
No.

7
Reappointed
External
Independent

Rolf Soderstrom

No. of shares owned:
Term of office as External Director:(Born 7/29/1965)

Attendance at Board Meetings:

2,451
2 years
25/26 times[Career summary, and positions and responsibilities at the Company]
Jan. 1988
Dec. 2000
Jun. 2002
Jun. 2004
Aug. 2008
Mar. 2020
May. 2020
Sep. 2020
Jul. 2021

PricewaterhouseCoopers
Corporate Finance Director, Cable & Wireless plc
External Director, MobileOne Ltd. (current M1 Ltd.)
Divisional Finance Director, Cobham plc
Chief Financial Officer, Protherics plc (current BTG plc)
External Director of the Company (to the present)
Senior Independent Director, Ergomed plc
Non Executive Director, BioPharma Credit plc (to the present)
Chief Financial Officer of Healthcare Investment Fund, Syncona plc (tothe present)<Committee membership>
Member of the Audit Committee; Member of the Compensation Committee[Significant concurrent posts]
Chief Financial Officer of Healthcare Investment Fund, Syncona plc
Non Executive Director, BioPharma Credit plc
Reason for selection of the candidate as External Director and summary of expexted
roles
Mr. Rolf Soderstrom is a chartered qualified accountant in the United Kingdom and has extensive
experience and achievements in M&A, risk management and governance as a leader in financerelated matters for companies in Europe, North America and Asia. He actively provides usefuladvice and suggestions on overall management by leveraging his expertise in corporate
management, business strategy and marketing, and finance and accounting. It is expected thathis performance of these important roles will further strengthen the supervision to the
management and the governance system, so that the Company proposes that he continue to beelected as an External Director.

15

Candidate
No.

8
Newly appointed
External
Independent

Miwa Seki(Born 2/25/1965)

No. of shares owned:-

Term of office as External Director:-

Attendance at Board Meetings:-[Career summary, and positions and responsibilities at the Company]
Apr. 1988
Apr. 1989
Sep. 1993
Feb. 1997
Jan. 2003
Apr. 2015
Jun. 2018
Jun. 2020
Apr. 2021
May.2021

Joined DENTSU INC.
Joined Smith Barney
Joined Morgan Stanley
Joined Clay Finlay Limited
General Manager, Tokyo Branch, Clay Finlay Limited
Associate Professor, Faculty of Foreign Studies, Kyorin University
External Director, World Co., Ltd. (to the present)
External Director, DAIWA HOUSE INDUSTRY CO., LTD. (to thepresent)
Specially Appointed Associate Professor, Faculty of Foreign Studies,
Kyorin University (to the present (Scheduled to retire at the end of
March 2022))
General Partner MPOWER PARTNERS FUND (to the present)[Significant concurrent posts]
General Partner MPOWER PARTNERS FUND
External Director, World Co., Ltd
External Director, DAIWA HOUSE INDUSTRY CO., LTD.
Standing Director, Yanai Tadashi Foundation

Reason for selection of the candidate as External Director and summary of expexted
roles
Ms. Miwa Seki served as head of Japan at a foreign capital financial institution and is currently afounding partner of an ESG-oriented investment fund. Based on this experience, the Company
believes that she will be able to provide useful advice and suggestions on overall management
by leveraging her expert perspective on corporate management, business strategy andmarketing, and finance/accounting. It is expected that her performance of these important roles
will further strengthen the supervision to the management and the governance system, so that
the Company proposes that she be newly elected as an External Director.

End

16

Reference

The expertise of each candidate for director and the committees scheduled to take office if
Proposal No. 2 is approved are as follows.Note that the table below does not necessarily show
all the expertises that the Directors have.

Name

Term of office

Soderstrom

Miwa
Seki

Re
appointed

Re
appointed

Newly
appointed

External

External

External

Independent

Independent

Independent

Independent

3 years

2 years

－

●

●

●

●

●

●

●

●

ShinichiTamuraChristopher

CargillTomohiro
TohyamaKuniakiKaga

David
RoblinNoriakiNagai

Reappointed

Newly
appointed

Re
appointed

Re
appointed

Re
appointed

External

External

External

Independent

Independent

32 years－

11 years

4 years

4 years

Corporate
management

●

●

●

●

●

Technology/
R&D

●

●

●

Businessstrategy/Marketing

●

●

●

Rolf

Skill

Finance/
Accounting

●

●

Legal

●

●

Scheduled to take office

the Nomination
Committee
theCompensation
Committee

the Audit
Committee

●

●

●

●

●

●

●

●

●

17

●

●

●

●

●

Reference

the Independence Standards for External Directors
An external director will be determined to be independent if he or she does not fall under any of
the following categories:(1) A person who is or was an executive director, executive officer or other officer or employee (hereinaftercollectively referred to as "Executive") of our Group (the Company and its affiliated companies);(2) A person who is or was in any of the last three business years an Executive at our Group’s principal
business partner (a company with which the annual amount of transaction (the amount of products andservices provided or procured) exceeds 2% of consolidated net sales of the Company or the partner or afinancial institution from which the amount of borrowing outstanding at the end of fiscal year exceeds 2%of the Company’s consolidated total asset) and its parent and subsidiary companies, and subsidiaries ofsuch parent company;(3) A consultant, or accounting or legal expert who has received in any of the last three business years cash
or other property exceeding 10 million yen from our Group other than the remuneration for a director or
officer (or a person who belongs to an organization if the said property has been received by a juridical
person, partnership or any other organization);(4) A person who belongs or belonged to an auditing firm that is an accounting auditor of the Company or its
consolidated subsidiary in any of the last three business years;(5) A major shareholder of the Company (shareholder holding 10% or more on a voting rights basis of theshares in the Company in its own or other's name) at the end of the most recent business year or its
Executive;(6) A spouse or relative within the second degree of kinship of a person who falls under any of the items (1)to (5) above provided that an Executive shall be in an “Important Position.” For the purpose of this item,a person is in an “Important Position" when the person is a director (excluding external director), executive
officer, officer, employee in senior management position of general manager or higher, or other person
who is objectively and reasonably judged to be in a position of equivalent importance; or(7) A person who is reasonably judged to be unable to perform his or her duties as an independent external
director due to a potential conflict of interest with shareholders.

End

18

1

Current State of the Corporate Group(1) Progress and Results of Operations
1) Group Overview
The Group is a science and technology-led company, specializing in drug discovery and earlystage drug development. Our mission is to make a significant contribution to improving the qualityof life and health of people around the world. Our vision is to become one of Japan’s global
biotechnology champions.
During the 12-month period ended December 31, 2021, the Group continued to leverage andadvance its proprietary StaR® (“stabilized receptor”) technology and Structure-based Drug
Design (“SBDD”) platform.
We also continued to focus on expanding our drug discovery business and remain wellpositioned to capitalize on growth opportunities.
Our SBDD platform and highly productive drug discovery engine continues to generate multiple
new exciting drug candidates, and we will continue to take steps to increase partnered and coinvestment activity to ensure all programs are rapidly advanced in a capital efficient manner. At
the same time, we will invest in new technologies, tools and capabilities to maintain ourcompetitive edge and bring forward an exciting pipeline of next-generation programs in areas ofhigh unmet medical need.
Our business model is focused across three core areas to create value; (i) supporting ourexisting partnerships with major global pharmaceutical companies, (ii) advancing R&D with
innovative technology companies and venture funds, and (iii) signing new high-value partnerships
based on successful in-house drug discovery and early-stage development of new candidates.
As of December 31, 2021, the Group had over 20 programs in total ongoing in discovery, withmultiple in-house and partnered programs currently in preclinical/clinical studies.
Our existing partnerships with major pharmaceutical companies continue to progress very well.
During the year, the Group entered into a strategic collaboration and licensing agreement with
Neurocrine Biosciences to develop novel muscarinic receptor agonists, of which the Groupregained worldwide rights from AbbVie in January 2021. The Group received US$100 million
upfront and is eligible to receive up to $2.6 billion in future milestones. The strategic multi-target
drug discovery collaboration with Pfizer Inc. continued to demonstrate progress, having generated
its third new drug candidate to enter Phase 1 clinical trials last year. Furthermore, the Groupinitiated Phase 1 clinical trial with CGRP antagonist under collaboration with Biohaven. The Groupalso received milestone from GSK for progress associated with the GPR35 agonist.
In the area of collaborations with innovative technology companies, the Group continued to makesignificant progress. The Group entered agreements with InveniAI, which has AI-powered
platform for target discovery, and with Twist, which has proprietary synthetic antibody libraries
and sophisticated bioinformatics expertise, respectively. In line with our commitment to futureproof and enhance our drug discovery capabilities and expand beyond our traditional focus in
GPCRs, the Group entered into a new strategic technology collaboration with Metrion to apply its
SBDD expertise and platform to ion channels for the first time.

19

In the area of in-house drug discovery and early-stage development of new candidates for futurehigh-value partnerships, the Group continued to make the necessary investments in its pipeline,
to advance multiple discovery candidates through and into early-stage development. The Group
received grant funding from Wellcome to advance the development of oral anti-viral small
molecules to treat COVID-19.
We will continue to promote growth in our platform technology, discovery and early-stage
development businesses. We are making investments to enhance our capabilities in drug
discovery and early-stage development, and to drive further improvements to our industry-leading
rates of productivity. These investments will support growth across the business, as we focus on
executing on existing partnered projects, as well as forming new high-value collaborations withworld-leading partners. At the same time, we will continue to rigorously manage costs and remain
flexible to all value-creating opportunities.
Financial results for the year ended December 31, 2021 were revenue of 17,712 million yen (anincrease of 8,870 million yen vs. the prior year), operating profit of 3,775 million yen (an increaseof 2,847 million yen vs. the prior year) and net profit of 1,017 million yen (a decrease of 462 million
yen vs. the prior year).
The 31st Term
January 1, 2020 December 31, 2020

The 32nd Term
January 1, 2021 December 31, 2021

Value

Value

vs. the prior year
Value

Rate of change

Revenue(JPY
millions)

8,842

17,7128,870

100.3%

Operating profit(JPY
millions)

928

3,775

2,847

306.8%Net profit(JPY
millions)

1,479

1,017

(462)

(31.2)%Net earnings per
share - basic

(Yen)

18.77

12.53

(6.24)(33.2)%The principal management indicators are as follows.
Revenue
Revenue in the year under review totalled JPY 17,712 million (an increase of JPY 8,870 million
vs. the prior year).
Revenue related to upfront fees and milestone income in the year under review totalled JPY
14,667 million (an increase of JPY 9,314 million vs. the prior year). Upfront fees and milestone
income can vary considerably year on year and depend on the achievement of defined milestone
events and the commencement of new partnership agreements within that year. In 2021, theGroup received two upfront fees, including a fee of $100m from Neurocrine which wassubstantially larger than all four of the upfront fees received in 2020 combined. In 2021, the Groupalso received eight development milestone related fees compared to seven in 2020.Revenue
related to royalties in the year under review totalled JPY 2,311 million (a decrease of JPY 233
million vs. the prior year). The Group’s royalty revenue relates to sales of Ultibro® Breezhaler®,
Seebri® Breezhaler® and Enerzair® Breezhaler® by Novartis .

20

(Note) Glycopyrronium bromide and certain use and formulation intellectual property were
exclusively licensed to Novartis in April 2005 by Sosei and Vectura. Seebri®, Ultibro®,
Enerzair® and Breezhaler® are registered trademarks of Novartis AG.
Cash cost of sales
Cost of sales comprises the fully loaded cost of those employees providing research anddevelopment services to specific customers under contracts (including other costs directly
associated with these activities such as lab consumables and an allocated share of depreciationof lab equipment) and the cost of pharmaceutical products sold to customers. Cost of sales in theyear under review totalled JPY 784 million (an increase of JPY 177 million vs. the prior year). This
increase is primarily due to the higher number of partnered programs in 2021 in which the Groupwas contracted to supply R&D services to customers.
Cash research and development expenses
Cash research and development (“R&D”) expenses in the year under review totalled JPY 5,511
million yen (an increase of JPY 2,100 million vs. the prior year). The increase in R&D spend
reflects higher activity levels on in-house programs, participation in new co-development
collaborations and the impact of a stronger GBP vs. JPY. In particular, the Group made increased
R&D investments in the year to date in the preclinical and clinical advancement of its portfolio oflead muscarinic agonist compounds for schizophrenia and other neurological disorders, following
their reversion to in-house programs from AbbVie in January 2021. It is noted that the muscarinic
program was outlicensed to Neurocrine Biosciences in November 2021 and they will be
responsible for future pre-clinical and clinical trial costs. In addition, costs in the priorcorresponding period were lower than normal due to the slowdown in expenditure that followed
the declaration of the COVID-19 global pandemic in March 2020. Furthermore, the priorcorresponding period also included a one off credit relating to the successful resolution of disputed
costs charged by one supplier. In the period under review, 98% of R&D spend related to our UK
operations.
Cash general and administrative expenses
Cash general and administrative (“G&A”) expenses in the year under review totalled JPY 2,518
million (an increase of JPY 523 million vs. the prior year). The increase in G&A spend is primarily
due to an increase in personnel related expenses and professional advisory fees as the Group
continued to evaluate strategic growth opportunities. In addition, personnel related expenses in
the prior corresponding period were lower than normal as a result of a reduction in the UK sharebased payment related National Insurance liability which was driven by share price movementsin that particular period.
Non-cash expenses
Non-cash expenses primarily consist of depreciation on property, plant and equipment,
amortization of intangible assets, stock-based compensation expense and impairment loss. Noncash expenses in the year under review were JPY 5,129 million (an increase of JPY 3,153 million
vs. the prior year). In total, depreciation amounted to JPY 541 million (an increase of JPY 34
million vs. the prior year). Amortization for the year under review totalled JPY 737 million (adecrease of JPY 106 million vs. the prior year). Stock-based compensation expense for the year21was JPY 713 million (an increase of JPY 87 million vs. the prior year). Impairment loss for theyear was JPY 3,138 million. This was mainly due to an intangible asset impairment charge
associated with a partner’s decision not to progress certain out-licensed drug candidates inclinical trials.
Operating profit
Operating profit in the year under review totalled JPY 3,775 million (an increase of JPY 2,847
million vs. the year). The main reason for the increase in the operating profit is the increase inrevenue.
Net finance income (costs)
Net finance costs in the year under review totalled JPY 3,598 million (a decrease of JPY 4,648
million vs. the prior year). The increase is primarily due to recording a contingent consideration
charge relating to the Neurocrine Biosciences licensing transaction . The contingent consideration
liability is a fair value estimate by management of the amount payable to the former shareholders
of Heptares Therapeutics Limited under the 2015 Share Purchase Agreement. It should be notedthat a major component of the 2015 Share Purchase Agreement governing contingent
consideration payments to former shareholders of Heptares Therapeutics Limited expired as of
the financial year ended, 31 December 2021.
Net profit
Net profit in the year under review totalled JPY 1,017 million (a decrease of JPY 462 million vs.
the prior year). The main reason for the decrease in net profit is the increase in non-cash costs
and finance costs for the reasons stated above.

2) Capital Expenditures
There were no significant capital expenditures during this fiscal year.

3) Significant Organizational Restructuring, etc.
Not applicable.

22(2) Assets and Profit/Loss in the previous three fiscal years
Item
Revenue
Operating proft or(loss)Net profit or (loss)
Net earnings or(loss) per share basic
Total assets
Total equity(JPY
millions)(JPY
millions)(JPY
millions)
(Yen)
(JPY
millions)(JPY
millions)

The 29th Term
As of December
31, 2018

The 30th Term
As of December
31, 2019

The 31st Term
As of December
31, 2020

The 32nd Term(current term)
As of December
31, 2021

2,872

9,726

8,842

17,712(5,734)

384

928

3,775

(5,978)

1,432

1,479

1,017

(78.40)

18.70

18.77

12.53

58,98756,68076,46596,98541,58045,07852,381

57,468(Notes)1. The Company changed the end of the fiscal year from March 31 to December 31 at the 28th
ordinary general meeting of shareholders and it will continue to have a December fiscal year end.
The 29th term is a nine-month irregular term.
2. Effective July 1, 2018, the Company executed a stock split at a ratio of 4 shares per common share.
Earnings per share have been calculated as if the stock split had occurred at the beginning of the
29th consolidated fiscal year.

(3) Issues to be addressed
1) Business advancement and strategy
The Group is focused on expanding its leadership position in its chosen technologies and
SBDD platform, to drive novel drug discovery and early-stage development against diseases
with high unmet medical need – its core competencies.
The Group has a clear strategic focus on out licensing and co-investing with partners on
programs that emerge from its drug discovery and early-stage development activities; theGroup also engages in selected in-house discovery and early-stage development in order tosustainably initiate new out license and co-investment partnerships in the future. Late-stage
clinical development programs are currently only undertaken if a partner funds the development
costs and bears the risk.
The Group will continue to invest in its technologies, platform and capabilities to maintain its
leading position as a drug discovery and early-stage development business. Strategic
objectives of the Group are as follows: Maintain technology and platform leadership in our chosen field, and take steps to expand
into new drug target classes
 Enter into new high-value discovery and/or early-stage development partnerships withpharma/biotech
 Achieve important milestones on existing partnered programs Seed multiple new in-house novel discovery candidates for potential future partnering Advance selected in-house programs in early-stage clinical studies Create new long-term co-investment companies majority funded by venture partners
 Seek out revenue-generating opportunities, including via acquisition, that will support the planfor corporate value creation and expansion

232) Risk recognition
The Group is exposed to a range of risks consistent with the industry in which it operates. The
business, financial condition and results of the Group may be adversely impacted by any ofthese risks. In 2020, the Group established an Enterprise Risk Management Program to better
monitor and mitigate business specific risks in both Japan and the United Kingdom. The Group
has summarized its most important risks into the following categories: industry; commercial;strategic; financial; legal and compliance; and takes necessary measures to deal with theserisks.
INDUSTRY RISKS
Risks inherent to drug discovery and early-stage development
The Group’s business strategy is focused on drug discovery and early-stage development.
The Group has established an unrivalled platform of technologies and tools, as well as skillful
employees to seamlessly manage its discovery and early-stage development capabilities. We
work closely with our partners to ensure success on all high-value partnered programs andlong-term ventures. However, there are increasing challenges for the industry which generally
include productivity, complexity and cost of research and development, innovative
developments, changing relationships due to rapid consolidation in the industry, patent
expirations, and regulatory changes. Large pharma and biotech companies regularly re-assess
their business strategies to remain competitive in the industry. Drug discovery and early-stage
development always carries inherent risk. There is no guarantee that the Group, together with
its partners will successfully develop and commercialize potential drugs. It is possible economic
returns may not be achieved, or an impairment to the carrying value of the Group’s intangible
assets may be required and that may impact the Group’s statement of financial performanceand financial position. It is also possible that the Group could be responsible for liabilities
resulting from its research, discovery or early-stage development activities, and therefore theGroup is covered by liability insurance to help mitigate these risks.
COMMERCIAL RISKSThe Group continues to be engaged in multiple active drug discovery and early-stage
development programs that it intends to license to large pharma or biotech for clinicaldevelopment andcommercialization, however the Group may not be able to achieve this goal.
Additionally, the commercial environment for licensing might change during the lifetime ofindividual projects. The actual timing and commercial values of individual projects, or thefinancial proceeds from licensed partnering programs can change significantly from initial
estimates.
The Group’s reliance on partners is subject to additional risks. For example, the Group’s
partners may not devote sufficient time and resources to the Group’s future products or may
not pursue further development and commercialization of the products resulting from thepartnership. We mitigate both of these risks by ensuring we have a diverse balance of partner
types across the drug discovery and development continuum.
STRATEGIC RISKS
Execution of business strategy
The Group continues to focus its in-house activities on leveraging its platform to create drug candidates,
adding to its broad pipeline with the aim to achieve important value inflection points that will enable new
out-licensing and co-investment agreements. It is possible that investments might be allocated to thedevelopment of unsuccessful drug candidates, or failed technologies.

24

Risks from investment strategy
In the past, the Group has made equity investments in companies with highly promising yet unproventechnologies. These investments may enable the Group to accelerate its business model as they provide
a beneficial risk-reward profile through to a significant value inflection. However, unproven technologies
also carry the risk of failure which may lead to impairment of the intangible asset which may impact theGroup’s statement of financial performance and financial position. To mitigate this risk, the Group, in 2020,
established a new Investment Committee that is responsible for conducting diligence and making
recommendations to the Group’s Board of Directors, who are in turn responsible for approving strategic
investments. The Group’s approach to investments is to balance risk and reward appropriately, ensuringexcessive capital is not put at risk.

FINANCIAL RISKSThe Group’s financial risk management focuses on liquidity and currency risks.
Liquidity risks
Revenue timing, external events and changes in the business environment might negatively
impact the Group’s profitability and cash. The Group is currently well-financed and able to deal
with these risks. To mitigate this risk, the Group regularly reviews options for capital increases
and for the use of other refinancing tools and in 2019 the Group maintains a commitment line
to enhance liquidity.
Currency risks
The Group is impacted by fluctuations in foreign exchange rates mainly between theJapanese Yen, Pound Sterling and US dollar. The Group mitigates this exposure via closemonitoring to manage the Group’s current and upcoming currency requirements which isintended to reduce the exchange rate risks in the future.
LEGAL & COMPLIANCE RISKSThe Group operates in a global industry where legal compliance, contractual agreements andintellectual property rights are crucially important. Moreover, there is a trend towards greater
regulatory compliance in the pharma industry. The Group ensures regulatory as well as internal
compliance and employees are obliged to immediately report any incidents they suspect of
having breached regulatory or compliance rules to their manager or to the Chief Compliance
Officer.

3) Value creation
The pharmaceutical industry is undergoing rapid change due to numerous pressures facedby large companies, such as patent expiries, higher burden of approval and ever-increasing
costs. This has led to a reduction in the number of research-based businesses taking the full
financial and commercial risk of drug development.
New strategies across the industry are focused on securing external innovation in an efficientway. Furthermore, ageing populations in many developed countries are driving the need for
differentiated and better treatments. As a result, large pharma and biotech companies are
increasingly seeking innovative solutions to their R&D challenges, and therefore increasingly
executing collaborations across research, discovery and development activities with mid--sized
science and technology-led companies. The Group is positioned to take advantage of thisgrowth trend. The Group regularly identifies and evaluates opportunities for businessexpansion and value creation and is pursuing a capital efficient business model that willsustainably create new commercial opportunities in an evolving industry landscape.

254) Corporate Governance
The Group has business activities in multiple jurisdictions and takes corporate governance very seriously.
The Group is continuously evaluating ways to enhance its systems and processes, to ensure it strictly
complies with all national regulations. Furthermore, the Group will continue to promote a corporate culturethat is committed to the highest standards of openness, integrity and accountability.
The Group’s Board of Directors is responsible for overseeing management and conducting
risk management and compliance activities to maintain standards and accountability and amajority of members are independent external directors. Executive Officers work closely with
the Board of Directors to achieve long-term and sustainable growth for the Company and tocreate shareholder value. They agree on the Company’s strategy and on business transactions
that are significant.

26

(4) Main Business Activities (as of December 31, 2021)
The Group’s main business is the research, development and sale of pharmaceutical products.
The Group companies are engaged in the following business activities.
Company NameBusiness Description

Sosei Group Corporation

Responsible for setting the strategy of Sosei Group, andperforming centralized administrative activities on behalf of groupcompanies

Sosei Co. Ltd.

Research and development, sales of pharmaceutical drugs

Heptares Therapeutics Ltd.

Structural analysis of GPCRs, generation of initial leadcompounds, discovery of drug candidates through proprietary
StaR® technology(5) Principal Parent Company and Subsidiaries(as of December 31, 2021)

1) Parent company
Not applicable.

2) Subsidiaries
Company Name

CapitalRatio of Voting

Sosei Co. Ltd.

JPN90 million

100.0%

Heptares Therapeutics Ltd.

GBP 416
thousand

100.0%Key BusinessResearch and development, sales ofpharmaceutical drugs
Structural analysis of GPCRs,
generation of initial lead compounds,
discovery of drug candidates throughproprietary StaR® technology3) Other significant information
Not applicable.

(6) Main Offices and Factories(as of December 31, 2021)

1) Main Sites of the Company
OfficeLocation

Head Office

Chiyoda-ku, Tokyo

London OfficeLondon, UK

2) Main Sites of Subsidiaries
OfficeLocation

Sosei Co. Ltd.

Chiyoda-ku, Tokyo

Heptares Therapeutics Ltd.

Cambridge, UK27

(7) Employee Information (as of December 31, 2021)
1) Group Employees
Business Segment

Number of Employees

Change from the End of thePrevious Fiscal Year

Pharmaceutical business

168

(7.9)

+1

Group administration

30

(2.9)

+7

Total

198

(10.8)+8(Note) 1. The number of employees does not include the number of temporary employees, which is listed in parentheses
as the average for the year.
2. Pharmaceuticals business has increased by 1 compared with the end of the previous year, mainly due to thestrengthening of the research and development department.
3. Group administration has increased by 7 compared with the end of the previous year, mainly due to thestrengthening of the organisation.

2) Company Employees
Number of Employees

Change from the End of
the Previous Fiscal Year

Average Age

Average Service Years

30 (2.9)+745.3 years old

2.9 years(Note) The number of employees is the number of people employed full-time and does not include the number of
temporary employees, which is listed in parentheses as the average for the year.

(8) Financing
The Company raised JPY 30,000 million by issuing Euro-yen Denominated Convertible Bonds
due 2026 on July 27, 2021.

(9) Principal Lenders(as of December 31, 2021)

Not applicable.
The Company has entered into a (JPY 5,000 million) commitment line contract with Mizuho Bank,
Ltd. and 3 other financial institutions in order to finance working capital more efficiently. The
Company had no outstanding borrowings related to the commitment line contract at the end of
this fiscal year.

(10) Other Significant Matters on the Current Status of the GroupNot applicable28

2 Current Status of the Company(1) State of Shares(as of December 31, 2021)

1) Total number of authorized shares

149,376,000 shares2) Total number of outstanding shares

81,518,316 shares(Notes)1. The number of outstanding shares increased by 136,312 shares to exerciseof stock acquisition rights of Euro-yen denominated convertible bonds due
2025.
2. The number of outstanding shares increased by 584,000 shares to execize
stock acquisition right.
3. The number of outstanding shares increased by 201,876 shares to issue
new shares by a post-hoc granted stock-based compensation (RSU) plan.

3) Number of shares constituting one unit

100 shares

4) Number of shareholders

29,4965) Major shareholders (Top 10)
Shareholdings(shares)

Ownership Stake

Daisuke Gomi

6,390,000

7.84 %TAIYO FUND, L.P.

3,491,200

4.28 %

Custody Bank of Japan, Ltd. (trust account 9)2,934,000

3.60 %

Custody Bank of Japan, Ltd. (trust account)

2,715,800

3.33 %The Master Trust Bank of Japan, Ltd. (trust account)

2,538,700

3.11 %

Pfizer Japan Inc.

1,885,136

2.31 %TAIYO HANEI FUND, L.P.

1,872,000

2.30 %SSBTC CLIENT OMNIBUS ACCOUNT

1,860,000

2.28 %

STATE STREET BANK AND TRUST COMPANY 505227

1,421,800

1.74 %

Shinichi Tamura

1,145,237

1.40 %

Shareholder’s Name

(Notes) 1. Ownership stakes have been rounded off to two decimal places.
2. Ownership stakes are calculated deducting 213 treasury shares which the Company owns.

6) Status of Shares Issued as Consideration for the Execution of Duties to Directors andexecutive officers during FY2021
SharesNumber of
grantees

Directors(Excluding External Directors) and Executive officers

368,901

7

External Directors

95,047

6(Notes) 1. Directors(Excluding External Directors) and Executive officers include one retired executive officer.
2. External Directors include one retired external Director.
3. The contents of the Company's share remuneration are described「Policy concerning decisions on thecontent of individual remuneration for Executive Officers, etc. by the Compensation Committee」

29

(2) Directors and executive officers(as of December 31, 2021)

1) Directors
Title

Name

Chairman of
the Board

ShinichiTamuraDirector*

Tomohiro
TohyamaDirector*

KuniakiKaga

Responsibility

Significant Concurrent Posts

Chair of Nomination
Committee;
Member ofCompensation
Committee
Chair of Audit
Committee;
Member ofCompensation
Committee
Member of
Nomination
Committee;
Member of Audit
Committee

Partner at TMI Associates
External Director and Audit and Supervisory
Committee Member of Nippon Shikizai, Inc.

Honorary Professor, Swansea University, Schoolof Medicine
Honorary Professor of Translational Medicine, St
George’s Hospital Medical School
Chairman of Scientific Translation, The Francis
Crick Institute
COO and CEO JuvRX, Juvenescence Ltd–

External Director of SUSMED, Inc

Director*

David Roblin

Chair ofCompensation
Committee;
Member of
Nomination
Committee

Director*

Noriaki
Nagai

Member of Audit
Committee–

Rolf
Soderstrom

Member of Audit
Committee;
Member ofCompensation
Committee

Investment Fund, Syncona plc
Non Executive Director, BioPharma Credit plc
Chief Financial Officer of Healthcare

Director(Notes) 1.

2.
3.
4.

5.

*

The directors listed above with an asterisk (*) are external directors. The Company designates Director
Tomohiro Tohyama, Director Kuniaki Kaga, Director David Roblin, Director Noriaki Nagai and Director Rolf
Soderstrom as independent directors in accordance with the regulations of Tokyo Stock Exchange andhas notified the Exchange accordingly.
Noriaki Nagai has long-term experience at a major security company, being in charge of corporate
planning as an officer, and has considerable financial and accounting knowledge.
Rolf Soderstrom is a qualified UK accountant, has experience as a head of finance, and has considerable
financial and accounting knowledge.
The Audit Committee has conducted audits in close coordination with the internal audit department andemployees who assist in the performance of duties of the Committee, and believes it is not essential thata full-time committee member be selected. Accordingly, a full-time committee member has not been
selected.
The Company has no special relationships with the companies at which the external directors concurrently
serve the offices.

302) Executive officers
Title

Name

Responsibility

ShinichiTamuraPresident & CEO–

Executive Officer

Malcolm Weir

Vice President

Director, Heptares Therapeutics Ltd.

Executive Officer

Christopher
Cargill

CFO

Director, Heptares Therapeutics Ltd.

Executive Officer

Tim Tasker

CMO (Chief Medical
Officer)

Director CMO, Heptares Therapeutics Ltd.

Executive Officer

Kazuhiko
Yoshizumi

CCO (Chief
Compliance Officer )–Executive Officer

Tadayoshi
Yasui–

Representative Director President, Sosei
Co. Ltd.

Representative
Executive Officer*

Significant Concurrent Posts(Note) 1. The executive officer listed above with an asterisk (*) serves concurrently as a director.
2. The changes in the responsibilities of Executive Officers during the current fiscal year are as follows:

Name

FormerNew

Date of change effective

Shinichi Tamura

Chairman, President& CEO

President & CEO

September 15, 2021

Malcolm Weir

Vice Chairman

Vice President

September 15, 2021

Vice President, CFO

COO, CFO

April 1, 2021

COO, CFO

CFO

September 15, 2021

Tim Tasker

Vice President, CMO(Chief Medical Officer)

CMO (Chief Medical
Officer)

September 15, 2021

Kazuhiko Yoshizumi

Vice President, GCCO
(Group Chief Compliance
Officer)

CCO (Chief Compliance
Officer)

September 15, 2021

Tadayoshi Yasui

Vice President－

September 15, 2021

Christopher Cargill313) Symmary of liability limitation agreements
In accordance with Article 427, Paragraph 1 of the Companies Act (the “Act”) and theprovisions of the Articles of Incorporation, the Company and external directors have enteredinto agreements that limit liability for damages as provided in Article 423, Paragraph 1 of theAct.
The limit on liability for damages applicable to each external director under the agreements isthe minimum amount of liability stipulated in Article 425, Paragraph 1 of the Act4) Outline of the directors and execctive officers, etc. liability insurance policy, etc.
The Company has concluded a directors and officers liability insurance (“D&O insurance”)
policy with an insurance company as provided for in Article 430-3, Paragraph 1 of theCompanies Act with all Directors, Executive Officers, and Corporate Auditors of the Company
and its subsidiaries as insured parties. The Company is paying the full amount of premiums forthis policy.
Regarding the details of this insurance policy, it covers losses arising from the liability borneby the insured party in the course of the execution of his/her duty or claims pertaining to the
pursuit of such liability.

5) Policy concerning decisions on the content of individual remuneration for Executive
Officers, etc. by the Compensation Committee
The Company’s Compensation Committee has set policy on decisions of the contents ofindividual remuneration for Executive Officers, etc. Also, regarding the individual remuneration,etc., of Executive Officers, etc. during the fiscal year under review, as the method for deciding
the content of remuneration, etc., and the content of remuneration, etc. that was decided areconsistent with this policy, it is judged by the Compensation Committee to be in line with policy.
i. Basic Policies
・ The basic policy regarding officer compensation is to provide incentives for securing
talented personnel, raising the corporate value of the Group, and implementing
management strategies aimed at sustainable growth.
・ Policy regarding Directors’ remuneration is to secure excellent personnel as Directorsof the Company from a global perspective to strengthen the oversight function ofGroup management and, in addition to fulfilling the oversight function, enableproactive contribution to the enhancement of corporate value by sharing the benefits
and risks of stock price fluctuations with shareholders. Director’s remuneration shallconsist of a fixed amount of base salary and a post-hoc granted stock-based
compensation (RSU).
・ Executive Officers’ remuneration is determined to further increase motivation to realize
the Company’s vision and strategy, promote management that focuses on themedium-to long-term enhancement of corporate value and shareholder value, andreflect individuals’ roles and achievements. Executive Officer’s remuneration shallconsist of a fixed amount of base salary, a bonus determined according to theaccomplishment of the individual’s business objectives, retirement allowances, and a
post-hoc granted stock-based compensation (RSU).
・ The Compensation Committee, of which a majority comprises external rectors,
determines compensation fairly and appropriately, ensuring transparency under thechairmanship of an external director.

32

ii. Policy for determining the amount or the method of calculation of individual remuneration,etc. (excluding non-monetary remuneration outlined in iii. below)
a. Directors’ remuneration
The amount of base salary (annual salary), which is a fixed remuneration, shall be
the same for all Directors except for the Chairperson, and the remuneration level ofthis base salary shall be determined by taking into consideration the situation at othercompanies, etc. using the available databases of external research organizations asa reference. Directors who also concurrently serve as Executive Officers shall not be
paid Directors’ compensation.
b. Executive Officers’ remuneration
・ Base salary (annual salary), which is a fixed remuneration, shall be determinedbased on the individual’s performance in the previous fiscal year and anevaluation of contribution to the Company, taking into consideration factors suchas the remuneration level of comparable companies in the country where theindividual is acting or resides, using the available databases of external researchorganizations as a reference.
・ For bonuses, a base amount shall be the amount obtained by multiplying theamount of base salary by a certain percentage determined for each individual
according to factors such as his/her responsibilities and performance, and the
difficulty in securing persons fit for the role. The amount of this base amount paid
shall be determined in accordance with the accomplishment of the individual’sbusiness objectives.
・ Retirement allowances shall be equivalent to the sum of the bonus and the annual
salary for the previous business year. However, retirement allowances shall not
be paid to Executive Officers who are not re-appointed or are dismissed due tomisconduct, violation of laws, regulations and the Articles of Incorporation of theCompany, breach of trust, gross negligence, incompetence or inability to execute
duties, disqualification as an Executive Officer under the Companies Act, or any
other justifiable reason. Furthermore, in cases where the law stipulates that adismissal notice allowance is payable following a contract termination, only thedifference between the amount of the annual salary of the previous year and thedismissal notice allowance shall be paid.
iii. Contents of non-monetary remuneration, etc., and policy for determining the amount or
number or the method of calculating the amount or number of non-monetary remuneration
The Company has introduced a post-hoc granted stock-based compensation (RSU) as
non-monetary remuneration, etc. An overview of this post-hoc granted stock-based
compensation (RSU) is as follows.
a. Conditions for allotment
Shares of the Company will be allotted on the condition that an individual has served
continuously in the position of Director or Executive Officer of the Company
throughout a performance period. However, in cases where a Director or Executive
Officer ceases to hold office due to the expiration of his/her term of office, othergrounds deemed by the Board of Directors to be justifiable, or death during theperformance period, a number of shares calculated by the Company under theapplicable share-based compensation regulations will be allotted.
b. Maximum number of the Company’s shares to be delivered
The number of shares of the Company to be delivered under the plan, together with
the number of shares to be issued under other share compensation plans, shall not
exceed 10% of the total number of issued and outstanding shares of the Company.
c. Performance period and number of allotted shares
・ The performance period for Directors (excluding Directors who concurrently
serve as Executive Officer) is one year, and after the expiration of said
performance period, a number of shares shall be allotted which shall becalculated by dividing an amount equivalent to 130% of the amount of base salary

33

d.

by the stock price at the start of the performance period.
・ The performance period for Directors who concurrently serve as Executive Officer
and Executive Officers shall be two years and three years from the first day of theperformance period respectively. After the expiration of said performance period,
one-half of a number of shares shall be allotted respectively and said number
shall be calculated by dividing an amount equivalent to the amount of basic
compensation multiplied by certain ratio (97.5% to 195%) set according toposition by the stock price at the start of the performance period.
Method for the allotment of shares
The allotment of shares shall be a payment of a monetary compensation claim to an
officer to whom the shares are scheduled of an amount obtained by multiplying thenumber of allocated shares by the amount to be paid per share determined bydecision of the Board of Directors or a Representative Executive Officer authorized
thereby. Said monetary compensation claim shall be delivered as properties
contributed in kind.

iv. Policy for determining the composition of officer compensation
The composition ratio of the amount of individual remuneration, etc. shall be as follows:

Base salary

Bonus

Stock
compensation
Restricted
Stock Units(RSU).

Director

1

-

1~2

-

Representative
Executive Officer
& CEO

1

0.75

2

1.75

Executive Officer

1

0.4~0.61

1.4~1.6

Retirement
allowances

In the above table, the model for the amount of bonus to be paid is a payment of standard
amount determined by the Company. This ratio may change in accordance with factors
such as the Company’s business results and share price.
v. Policy on determining the timing or conditions for granting remuneration, etc. to officers
・ One twelfth of base salary will be paid monthly.
・ Bonuses will be paid in February every year.
・ Post-hoc granted stock-based compensation (RSU) will be granted in April of eachyear, and shares will be allotted after the end of the performance period.

346) Total amount of remuneration paid to directors and executive officers
Item

Total
remuneration

Directors(External
directors)

Amount of remuneration

Total number of
directors/executi
ve officers

BasesalaryBonus

Non-monetary
remuneration¥134 million(¥134 million)¥60 million(¥60 million)(-)¥74 million(¥74 million)

5(5)

Executive
officers¥617 million¥179 million¥162 million¥276 million

3

Total

¥751 million(¥134 million)¥239 million(¥60 million)¥162 million(-)¥350 million(¥74 million)

8(5)(Notes) 1. Renumeration of Shinichi Tamura, Director and Executive Officer is excluded in Derectors.
2. Renumeration of Shinichi Tamura, Director and Executive Officer is included in Executive officers.
3. Non-monetary remuneration includes the Company's shares. The terms of allocation are as described in " iiiContents of non-monetary remuneration, etc., and policy for determining the amount or number or the methodof calculating the amount or number of non-monetary remuneration". In addition, details of the allocation
during the current fiscal year are described in "2 (1) 6) Status of Shares Issued as Consideration for the
Execution of Duties to Directors and executive officers during FY2021”.
4. The table above does not include the following:
Salary of ¥117 million, bonuses of 52 million paid in February 2022 in accordance with the resolution of theRemuneration Committee held in January 2022, a post-hoc granted stock-based compensation (RSU) plan
and a performance-linked stock-based compensation (PSU) plan of ¥136 million paid to three executive
officers by subsidiaries

7) Attendance of external directors at meetings of the Board of Directors and Committees
during the fiscal year under review and the status of their remarks and activities
Name

Tomohiro Tohyama

Kuniaki Kaga

Remarks/Activities/Summary of duties performed inrelation to the role expected of an external director

Attendance
Board ofDirectors
meetings

26 out of 26(100%)

Compensation
Committee
meetings

8 out of 8
(100%)

Audit
Committee
meetings

14 out of 14(100%)

Board ofDirectors
meetings

26 out of 26(100%)

Nomination
Committee
meetings

3 out of 3
(100%)

Audit
Committee
meetings

14 out of 14(100%)

35

Makes statements at the Board meetings as necessary
for deliberations on agenda items from a professional
viewpoint as an attorney, leads audits as the chair of the
Audit Committee, and asks questions and gives opinions
and other statements as appropriate at each Committee
meeting.

Makes statements at the Board meetings as necessary
for deliberations on agenda items from a professional
viewpoint based on the experience of management ofleading chemical and pharmaceutical companies inJapan and asks questions and gives opinions and otherstatements as appropriate at each Committee meeting.

David Roblin

Board ofDirectors
Meetings

25 out of 26(96%)

Nomination
Committee
meetings

2 out of 3
(67%)

Compensation
Committee
meetings

8 out of 8
(100%)

Board ofDirectors
Meetings

25 out of 26
(96%)

Audit
Committee
meetings

14 out of 14(100%)

Board ofDirectors
Meetings

25 out of 26(96%)

Compensation
Committee
meetings

8 out of 8
(100%)

Audit
Committee
meetings

13 out of 14(93%)

Noriaki Nagai

Rolf Soderstrom

Makes statements at the Board meetings as necessary
for deliberations on agenda items from a professional
viewpoint based on the clinical experience as aphysician and R&D experience of pharmaceuticalcompanies, and asks questions and gives opinions andother statements as appropriate at each Committee
meeting.

Makes statements at the Board meetings as necessary
for deliberations on agenda items from a professional
viewpoint based on his legal knowledge and his career
experience in important positions in corporate
departments at major securities companies and as aprofessor of law, and asks questions and gives opinions
and other statements as appropriate at each Committee
meeting.

Makes statements at the Board meetings as necessary
for deliberations on agenda items from a professional
viewpoint based on his financial knowledge and his
career experience in the field of finance at companies in
Europe, North America, Asia, etc., and provides
opinions and other statements as appropriate at eachCommittee meeting.

(3) Independent Auditors
1) NameErnst & Young ShinNihon LLC

2) Amounts of remuneration, etc.
Ernst & Young
ShinNihon LLC
Amount of remuneration, etc. payable to the independent auditors for services
related to this fiscal period
Total amount of cash and other property benefits payable to the independent
auditors by the Company and its subsidiaries¥ 64 Million¥ 81 Million(Notes) 1. In the audit agreement between the Company and the Independent Auditors, there is no clear distinction
between the remuneration for audits based on the Companies Act and the remuneration for audits based on
the Financial Instruments and Exchange Act, and no distinction can be made in practice, so amounts ofremuneration, etc. for the Independent Auditors for this fiscal year are the total of these remunerations.
2. The Audit Committee has confirmed the audit plan of the independent auditors, the state of execution of duties
for accounting audits, and the basis of remuneration estimates, etc. and considered whether audit
remuneration is adequate for the implementation of appropriate audits and as a result has found that
remuneration is appropriate. Therefore, it has given consent to remuneration, etc. of the Independent Auditorsin accordance with Article 399, Paragraph 1 of the Companies Act.
3. One of the Company’s significant subsidiaries, Heptares Therapeutics Ltd. has been audited by an auditing
firm that belongs to a member firm of Ernst & Young LLC., Which is a member of our accounting auditor, andthe audit fee is ¥43 million.
4．¥2 million of remuneration excluded on the table above has been incurred for the services related to theprevious consolidated financial year.

363) Contents of non-audit services
The Company paid to Ernst & Young ShinNihon LLC fees for production of comfort letter in
relation to the issuance of new shares in the international offering which is a work other than
the work under Article 2, Paragraph 1 of the Certified Public Accountants Act.

4) Policy for dismissal or non-reappointment of the independent auditors
If circumstances arise that would interfere with the appropriate execution of the duties of the
independent auditors or cause the Audit Committee to deem it appropriate to dismiss or not toreappoint the independent auditors, the Audit Committee will make a proposal for dismissal or
non-reappointment of the independent auditors for submission to the Ordinary General Meetingof Shareholders. Also, when it deems that any cause stipulated in each item of Article 340,
Paragraph 1 of the Companies Act applies to the independent auditors, the Audit Committee
can dismiss the independent auditors by agreement of all committee members.

5) Summary of liability limitation agreements
The Company has not entered into an agreement with the Independent Auditors to limit their
liability for damages under Article 423, Paragraph 1 of the Companies Act.

(4) Policy on determination of Dividends, etc.
The declaration and payment of any dividends in the future will depend on the results ofoperations, financial conditions, cash requirements, future prospects, profits available for
distribution and other factors deemed by the Board to be relevant at the time.
At present, the Group is making prudent investments to build a globally competitive
biotechnology business and, therefore, does not expect to pay any dividends in the near to
medium term. The Board will continue to reassess this position based on the factors above.

37

Consolidated Balance Sheet(Millions of yen)Item

The 32nd term
At December 31,2021

Item

The 32nd term
At December 31,2021

Non-current assets

34,177 Non-current liabilities

32,326

Property, plant andequipment

3,817 Deferred tax liabilities

2,706

GoodwillContingent consideration in
15,095business combinations

Intangible assets

9,120 Corporate bonds

27,440Investments accounted forusing the equity method

3,479 Lease liabilities

1,638

Other financial assets

2,564 Other non-current liabilities

Other non-current assets

47

495

102
Current liabilities

7,191

Trade and other payables

1,176

Contingent consideration inbusiness combinations

4,048

Current assets

62,808Trade and other receivables

2,138 Income taxes payable279

Income taxes receivable

70 Lease liabilities

Other financial assets

86 Other current liabilities

1,495

Other current assets

427 Total liabilities

39,517

Cash and cash equivalents

Total assets

193

60,087 Equity
Capital stock

41,036

Capital surplus

29,100Treasury stock(0)

Retained earnings(9,768)Other components of equity(2,900)Equity attributable toowners of the parent
company

57,468

Total equity

57,46896,985 Total liabilities and equity

Note: Amounts less than ¥1 million have been rounded38

96,985

Consolidated Statement of Profit or loss andother Comprehensive Income(Millions of yen)
The 32nd term
Financial year ended December 31, 2021

Item
Revenue

17,712

Cost of sales(933)

Gross Profit

16,779Other income and expenses
Research and development expenses(5,931)

Selling, general and administrative expenses(3,940)

Other income

8

Other expenses(3,141)

Operating income(13,004)
3,775

Finance income

199

Finance costs
Share of gain of associates accounted for using theequity method
Gain on reversal of impairent loss for investments
accounted for using the equity method
Profit before income taxes(3,797)50
206
433

Income tax benefit

584

Net profit for the year

1,017

Other comprehensive income
Items that will not be reclassified subsequently to profit or
loss
Financial assets measured at fair value through othercomprehensive loss
Items that may be reclassified subsequently to profit orloss
Exchange differences on translating foreign operations

760

3,846

Total comprehensive income for the year

4,606
5,623

Net profit for the year attributable to
Owners of the parent

1,017

1,017

5,623

5,623

Total comprehensive income for the year attributable to:
Owners of the parent
Note: Amounts less than ¥1 million have been rounded39Non-Consolidated Balance Sheet(Millions of yen)Item

The 32nd term
At December 31, 2021

AssetsCurrent assets

44,138Cash and deposits

44,064

Prepaid expenses

30

OthersNon-current assets
Property, plant andequipment

44

50,211Long-term loans
receivable fromsubsidiaries andassociates

31

Accrued expenses

89

Income taxes
payable63

Deposit
Provision for bonuses
Provision for
directors’ bonuses
Allowance for stockbased compensation
OthersNon-current liabilities

19
53

11
30,876

Corporate bonds

30,685

165
455

13
178

Total liabilities

35,87914
2
2
0

Net Assets
Shareholders’ equity
Capital stock
Capital surplus

58,20641,03629,15350,156

Capital reserve

29,15349,973Retained earnings(11,983)

Other retained
earnings(11,983)

2,418

125

Others58

Total assets

5,003
15
4,133

8

Investments in capital
Allowance for doubtful
debts

Liabilities
Current liabilities
Lease liabilities
Accounts payable

Asset retirement
obligation
Allowance for stockbased compensation

53

Buildings
Tools, furniture andfixtures
Leased assets
Intangible assets
Software
OthersInvestments and othernon-current assets
Shares of subsidiaries
and associates

Item

The 32nd term
At December 31, 2021

Retained earnings
brought forward(11,983)

Treasury stock
Subscription rights toshares(0)264(2,418)

Total net assets

58,47094,349Total liabilities and net
assets

94,349Note: Amounts less than ¥1 million have been rounded40

Non-Consolidated Statement of Profit or Loss
(Millions of yen)

The 32nd term
Fiscal period ended December 31,2021

Item
Operating revenue

823

Operating expenses(1,981)

Operating loss

(1,158)Non-operating profit
Interest income

66

Net foreign exchange gain

555

Miscellaneous income

0621

Non-operating expenses
Interest expenses(1)

Commission fee(22)

Bond issuance costs(895)

Loss on redemption bonds(2,895)

Provision of allowance for doubtful accounts foraffiliated companies(350)

Miscellaneous loss

(20)

Ordinary loss

(4,183)(4,720)Extraordinary profit
Gain on sale of shares of subsidiaries andassociates
Gain realized on contingent consideration
receivable relating to business disposals

194
266

Gain on reversal of subscription rights to shares

1

Net loss before tax

461(4,259)Corporate tax, residential tax and enterprise tax
Net loss for the year

(1)

(1)
(4,260)Note: Amounts less than ¥1 million have been rounded41

Accounting Audit Report on the Consolidated Financial Statements
Audit Report of the Independent Auditors
February 16, 2022
Sosei Group Corporation
To the Board of Directors
Ernst & Young ShinNihon LLC
Tokyo Office
Designated limited
Certified public
liability employee
accountant
Managing partner
Designated limited
liability employee
Certified public
accountant
Managing partner

Hironao Yazaki

Hiroshi Mishima

Audit Opinion:
In accordance with the Article 444 (4) of Companies Act, the Auditors have audited the consolidated
financial statements, which are the consolidated statements of financial position, consolidated
statements of comprehensive income, consolidated statements of change in equity, and notes on the
consolidated financial statements of Sosei Group Corporation for the consolidated fiscal period fromJanuary 1, 2021 to December 31, 2021.
The Auditors find that the aforementioned financial statements, which have been prepared excluding
some disclosure items required by International Financial Reporting Standards in accordance with thestipulations of the latter part of Paragraph 1, Article 120 of the Corporate Accounting Rules, appropriately
present on all major points the status of assets and income of the corporate group comprised of Sosei
Group Corporation and its consolidated subsidiaries for the period of the consolidated financial
statements.
Ground of the Opinion:
The Auditors performed the audit in conformance with generally accepted auditing standards inJapan. Responsibilities of the Auditors under audit standards are listed in " Auditor's Responsibility in an
Audit of Consolidated Financial Statements". The Auditors are, in accordance with the relevenat
regulations of professional ethics, independent from Sosei Group Corporation and its consolidated
subsidiaries, and perform the duty of ethics as an auditor. The Auditors believe that audit evidence has
been obtained on a sufficient and appropriate basis and which serves as the basis for expressing an
opinion.
Responsibility of Management and Audit Committee for the Cnsolidated Financial Statements:
Management is responsible for the preparation and appropriate presentation of the consolidated
financial statements in accordance with the stipulations of the latter part of Paragraph 1, Article 120 of
the Corporate Accounting Rules, which allows the statements to be prepared excluding some of thedisclosure items required under International Financial Reporting Standards. This responsibility includes
the design and operation of internal controls judged to be necessary by management for the preparation
and appropriate presentation of consolidated financial statements that are free of material misstatements
due to fraud or error.
In preparing the consolidated financial statements, management has to assess whether it isappropriate to prepare the consolidated financial statements on the going concern assumption, and incase of disclosing matters as to going concern in accordance with the latter part of Paragraph 1, Article
120 of the Ordinance on Accounting of Companies, which permits the preparation of consolidated
financial statements by omitting some of the disclosure items required under International Financial
Reporting Standards, management has to disclose such matters.
The responsibility of the Audit Committee is to monitor the execution of duties by the Executive Officers
and Directors in the development and operation of the financial reporting process.
Auditor's Responsibility in an Audit of Consolidated Financial Statements:
The auditor's responsibility is to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free of material misstatement due to fraud or error based on the audit
conducted by the Auditors, and to express an opinion on the consolidated financial statements from an
independent position in the auditor's report. A misstatement may occur due to fraud or error and is42

considered to be material if it is reasonably expected to affect the decisions of users of the consolidated
financial statements, either individually or in the aggregate.
The auditor performs the audit in accordance with auditing standards generally accepted in Japan,
and throughout the course of the audit, the auditor shall exercise professional judgment and maintainprofessional skepticism in performing the following:* Identify and assess the risks of material misstatement due to fraud or error. Also plan and perform
audit procedures that address the risks of material misstatement. Select and applly audit procedures atthe discretion of the auditor. In addition, obtain sufficient and appropriate audit evidence as a basis forexpressing an opinion.
* The purpose of an audit of consolidated financial statements is not to express an opinion on theeffectiveness of internal control. However, in making those risk assessments, the auditor considers
internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances.
* Evaluate the appropriateness of accounting policies adopted by management and the method of
their application, as well as the reasonableness of accounting estimates made by management and therelevance of related notes.
* To conclude whether it is appropriate for management to prepare the consolidated financial
statements on the going concern basis and, based on the audit evidence obtained, whether there is any
material uncertainty regarding events or conditions that may cast significant doubt on the entity's ability
to continue as a going concern. If there is a material uncertainty about the entity's ability to continue asa going concern, the auditor is required to draw attention to the notes to the consolidated financial
statements in the auditor's report or, if the notes to the consolidated financial statements regarding thematerial uncertainty are not appropriate, to express an opinion with qualifications on the consolidated
financial statements. Although the auditor's conclusions are based on audit evidence obtained up to thedate of the auditor's report, it is possible that future events or circumstances may make it impossible forthe entity to continue as a going concern.
* Evaluate whether the presentation and notes to the consolidated financial statements comply withthe latter part of Paragraph 1, Article 120 of the Ordinance on Accounting of Companies, which permits
the preparation of consolidated financial statements by omitting some of the disclosure items requiredby International Financial Reporting Standards, as well as the presentation, organization and content of
the consolidated financial statements, including the related notes, and whether the consolidated financial
statements present fairly the underlying transactions and accounting events.
* Obtain sufficient appropriate audit evidence regarding the financial information of the Company andits consolidated subsidiaries in order to express an opinion on the consolidated financial statements. The
auditor is responsible for the direction, supervision and implementation of the audit of the consolidated
financial statements. The auditor is solely responsible for the audit opinion.
The auditor shall report to the Audit Committee on the scope of the planned audit and the timing of theplanned audit, significant findings of the audit, including significant deficiencies in internal control
identified in the course of the audit, and other matters required by auditing standards.
The auditor shall report to the Audit Committee on the auditor's compliance with the Japanese rules ofprofessional ethics regarding independence, as well as any matters that could reasonably be considered
to affect the auditor's independence and any safeguards in place to remove or mitigate any disincentive.
Interest Relationships:
There are no interest relationships that must be disclosed under the provisions of the Certified Public
Accountants Act between the Company or its consolidated subsidiaries and the Auditors or the managing
partners.

43

Accounting Audit Report on the Financial Statements
Audit Report of the Independent Auditors
February 16, 2022
Sosei Group Corporation
To the Board of Directors
Ernst & Young ShinNihon LLC
Tokyo Office
Designated limited liability employee
Managing partner
Designated limited liability employee
Managing partner

Certified public
accountant
Certified public
accountant

Hironao Yazaki
Hiroshi Mishima

Audit Opinion:
In accordance with the Article 436 (2) (i) of Companies Act, the Auditors have audited the financial
statements, which consist of the balance sheet, income statement, statement of changes inshareholders’ equity and notes to the non-consolidated financial statements, and the supplementaryschedules of Sosei Group Corporation ("Financial Statements") for the 31st fiscal period from January
1, 2021 to December 31, 2021.
The Auditors find that the aforementioned Financial Statements appropriately present on all major
points the status of assets and income for the period of the Financial Statements in conformance withcorporate accounting standards generally accepted in Japan.
Ground of the Opinion:
The Auditors performed the audit in conformance with generally accepted auditing standards inJapan. Responsibilities of the Auditors under audit standards are listed in " Auditor's Responsibility in an
Audit of Financial Statements". The Auditors are, in accordance with the relevenat regulations ofprofessional ethics, independent from Sosei Group Corporation, and perform the duty of ethics as anauditor. The Auditors believe that audit evidence has been obtained on a sufficient and appropriate basis
and which serves as the basis for expressing an opinion.
Responsibility of Management and Audit Committee for the Financial Statements:
Management is responsible for the preparation and appropriate presentation of the Financial
Statements in conformance with generally accepted auditing standards in Japan. This responsibility
includes the design and operation of internal controls judged to be necessary by management for the
preparation and appropriate presentation of Financial Statements that are free of material misstatements
due to fraud or error.
In preparing the Financial Statements, management has to assess whether it is appropriate to prepare
the Financial Statements on the going concern assumption, and is responsible for disclosing, whenrequired, matters related to going concern in accordance with accounting principles generally acceptedin Japan.
The responsibility of the Audit Committee is to monitor the execution of duties by the Executive Officers
and Directors in the development and operation of the financial reporting process.
Auditor's Responsibility in an Audit of Financial Statements:
The auditor's responsibility is to obtain reasonable assurance about whether the Financial Statements
as a whole are free of material misstatement due to fraud or error based on the audit conducted by the
Auditors, and to express an opinion on the Financial tatements from an independent position in theauditor's report. A misstatement may occur due to fraud or error and is considered to be material if it isreasonably expected to affect the decisions of users of the Financial Statements, either individually or in
the aggregate.
The auditor performs the audit in accordance with auditing standards generally accepted in Japan, andthroughout the course of the audit, the auditor shall exercise professional judgment and maintainprofessional skepticism in performing the following:* Identify and assess the risks of material misstatement due to fraud or error. Also plan and perform
audit procedures that address the risks of material misstatement. Select and applly audit procedures atthe discretion of the auditor. In addition, obtain sufficient and appropriate audit evidence as a basis forexpressing an opinion.
* The purpose of an audit of Financial Statements is not to express an opinion on the effectiveness of44

internal control. However, in making those risk assessments, the auditor considers internal control
relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
* Evaluate the appropriateness of accounting policies adopted by management and the method of
their application, as well as the reasonableness of accounting estimates made by management and therelevance of related notes.
* To conclude whether it is appropriate for management to prepare the Financial Statements on thegoing concern basis and, based on the audit evidence obtained, whether there is any material uncertainty
regarding events or conditions that may cast significant doubt on the entity's ability to continue as a going
concern. If there is a material uncertainty about the entity's ability to continue as a going concern, theauditor is required to draw attention to the notes to the Financial Statements in the auditor's report or, if
the notes to the Financial Statements regarding the material uncertainty are not appropriate, to express
an opinion with qualifications on the Financial Statements. Although the auditor's conclusions are basedon audit evidence obtained up to the date of the auditor's report, it is possible that future events orcircumstances may make it impossible for the entity to continue as a going concern.
* Evaluate whether the presentation and notes to the Financial Statements are in conformance withcorporate accounting standards generally accepted in Japan, as well as the presentation, organizationand content of the Financial Statements, including the related notes, and whether the Financial
Statements present fairly the underlying transactions and accounting events.
The auditor is responsible for providing direction, supervision and performance of the audit of the
Financial Statements. The auditor is solely responsible for the audit opinion. The auditor shall report to
the Audit Committee on the scope of the planned audit and the timing of the planned audit, significant
findings of the audit, including significant deficiencies in internal control identified in the course of theaudit, and other matters required by auditing standards.
The auditor shall report to the Audit Committee on the auditor's compliance with the Japanese rules ofprofessional ethics regarding independence, as well as any matters that could reasonably be considered
to affect the auditor's independence and any safeguards in place to remove or mitigate any disincentive.
Interest Relationships:
There are no interest relationships that must be disclosed under the provisions of the Certified Public
Accountants Act between the Company and the Auditors or the managing partners.

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Audit Report of the Audit Committee
Audit Report
The Audit Committee of Sosei Group Corporation (the “Company”) has audited the performance of duties bydirectors and executive officers for the 32nd fiscal period from January 1, 2021 to December 31, 2021. The
methods and findings are reported as follows.
1. Methods and Content of the Audit
The Audit Committee received reports from directors, executive officers and employees, etc. on a regular basisof the content of resolutions of the Board of Directors related to items provided in Article 416, Paragraph 1, Item
1 (b) and (e) of the Companies Act and of the structures and operation of the systems established in accordancewith the resolutions (internal control systems), requested explanations and expressed opinions as necessary,and conducted an audit as follows.
1) In accordance with the audit policy and the division of responsibilities, etc. determined by the Audit Committee,
each member of the Committee attended meetings of the Board of Directors and other important meetings,
received reports from directors, executive officers and others on the performance of their duties, etc., andrequested additional explanations as necessary, and reviewed the documents relating to the important
decisions, and investigated the state of the business and assets of the Company in cooperation with theInternal Audit Department. Regarding subsidiaries, the Audit Committee sought to achieve a mutual
understanding of subsidiaries, exchanged information with the directors and corporate auditors, etc. of
subsidiaries and received business reports from subsidiaries as necessary.
2) The Audit Committee monitored and verified whether the Independent Auditors maintained independence andconducted appropriate audits, received reports from the Independent Auditors on the performance of theirduties, etc., and requested explanations as necessary. Also, the Audit Committee received notification fromthe Independent Auditors that they had established the “Structure for Ensuring Appropriate Operation” (mattersprovided in each item of Article 131 of the Regulation on Accounting of Companies) in accordance with the“Quality Control Standards for Audits” (Business Accounting Council, October 28, 2005).
Based on the aforementioned methods, the Audit Committee examined the business report andsupplementary schedules thereof, non-consolidated financial statements (non-consolidated balance sheet, nonconsolidated statement of profit or loss, non-consolidated statement of changes in equity and notes thereto) andsupplementary schedules thereof, and consolidated financial statements (consolidated balance sheet,consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes inequity, and notes thereto) for the fiscal period under review.
2. Results of Audit(1) Results of audit of business report, etc.
1) The Committee found that the business report and supplementary schedules accurately present the statusof the Company in accordance with laws, regulations and the Articles of Incorporation.
2) The Committee did not find any inappropriate conduct related to the execution of duties by directors or
executive officers or any material facts indicating violation of laws and regulations or the Articles ofIncorporation.
3) The Committee found that the contents of resolutions of the Board of Directors related to the system ofinternal control to be appropriate. In addition, the Committee did not find any matter requiring it to commenton the contents of the business report or execution of duties by directors or executive officers regarding thesystem of internal control.
(2) Results of audit of non-consolidated financial statements and supplementary schedules
The Committee found that the methods and results of the audit performed by the Independent Auditors, Ernst& Young ShinNihon LLC were appropriate.
(3) Results of audit of consolidated financial statements
The Committee found that the methods and results of the audit performed by the Independent Auditors, Ernst& Young ShinNihon LLC were appropriate.
February 16, 2022
Sosei Group Corporation Audit Committee
Chair of Audit
Tomohiro Tohyama*
Committee
Member of Audit
Kuniaki Kaga*
Committee
Member of Audit
Noriaki Nagai*
Committee
Member of Audit
Rolf Soderstrom
Committee
Note: All members of the Audit Committee are external directors as stipulated in Article 2, Item 15 and Article 400,
Paragraph 3 of the Companies Act.

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Access to Meeting of Shareholders Venue
Shareholders are asked to consider forgoing attending the General meeting of
Shareholders and at the same time, exercise voting rights in advance as much as
possible, either by returning the voting form by post or voting on the internet.

Venue

Fuji-No-Ma Hall, 4th Floor, Hotel Grand Arc Hanzomon
1-1, Hayabusa-cho, Chiyoda-ku, Tokyo, Japan
TEL: 03-3288-0111

Access2-min. walk from Hanzomon Station (Exit 1) and3-min. walk from Hanzomon Station (Exit 6) on Hanzomon Line
8-min. walk from Kojimachi Station (Exit 1) on Yurakucho Line* We kindly ask you to refrain from coming by car since parking lots are not available.

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