Form 6-K TAKEDA PHARMACEUTICAL For: May 30

FORM 6-K

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

Commission File Number: 001-38757

For the month of May 2019

TAKEDA PHARMACEUTICAL COMPANY LIMITED

(Translation of registrant’s name into English)

1-1, Nihonbashi-Honcho 2-Chome

Chuo-ku, Tokyo 103-8668

Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Information furnished on this form:

EXHIBIT

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

June 2019

Dear Takeda Shareholder,

It is my great pleasure to invite you, on behalf of the Takeda Board of Directors, to our 2019 Annual Shareholders Meeting, to be held on June 27^th 2019. Exceptionally this year, the meeting will take place outside of Osaka, as a consequence of the G20 Summit meeting being hosted for the first time by the Japanese government in Osaka at the end of June. We apologize to any shareholders inconvenienced by this change in location.

During our shareholders meeting, we look forward to updating you on the integration following the Shire acquisition, and the transformation of Takeda into a very competitive values-based, R&D-driven, global biopharmaceutical leader headquartered in Japan.

Since January 8^th 2019, we have been working relentlessly to execute the integration, in order for the New Takeda to operate efficiently as soon as possible. We are pleased to inform you that it is progressing with significant pace. As an example, Day One, when all sites became Takeda and all employees could communicate by e-mail, was executed perfectly without business disruption.

Our strong business momentum was also clearly demonstrated in our excellent FY2018 results, which we disclosed on May 14^{th 1}, along with FY2019 guidance and our mid-term outlook for the combined company. We are confident about the growth prospect for the company, driven by key products in our focus business areas, a lean and innovative R&D engine, and financial strength to realize top-tier margins and quickly reduce our debt level.

Takeda’s values, Takeda-ism: Integrity-Honesty-Fairness-Perseverance, combined with a specific focus on Patient-Trust-Reputation-Business is attractive to and embraced by our employees. As part of the integration, we have been conducting numerous training sessions globally using case studies to ensure a common values-based culture. In fact, our first employee integration survey showed that 79% of our employees are excited by the company’s future, a particularly high score versus benchmarks, in spite of being during a period of uncertainty for many people.

The difficult and sensitive selection process for management positions is on-going with speed, but also with fairness and transparency. This is extremely important as it not only answers our employees’ expectations, but is also very much aligned with our values.

¹ FY2018 Full Year Results (released on May 14th, 2019)

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We are more confident than ever before that the integration is being executed in a way that preserves our long-established identity while creating a more competitive company in a challenging environment.

Indeed, while the pace of innovation is stronger than ever, many healthcare systems around the world are facing significant financial challenges. As a consequence, payers are becoming increasingly selective in determining which innovation will be reimbursed and when to be prescribed. They are also more actively promoting generic and biosimilar alternatives, and are more and more inclined to reduce drug prices.

The new Takeda is well positioned among the large pharmaceutical companies to prevail in this environment.

Our current portfolio is primarily composed of life-saving or life-transforming, highly differentiated medicines which we are aiming to make available to patients throughout the world. Across our five key business areas (GI, Rare Diseases, Plasma-Derived Therapies, Oncology, and Neuroscience), fourteen global innovative medicines will drive the majority of our future growth. The distribution of growth across these innovative therapies allows us to better withstand market uncertainty. Furthermore, our business footprint is now truly global with a leading position now and in the future in Japan, a formidable presence in the U.S.A, and a competitive status in many other countries including China. Indeed, Takeda is now capable of effectively launching our medicines in 80 countries.

We are an R&D-driven company with the aim to discover and develop highly innovative medicines for patients in four therapy areas (Oncology, Gastroenterology, Rare Diseases and Neuroscience). Our willingness and ability to collaborate with innovative partners (e.g. biotech, start-ups, academia, etc.) in these therapy areas is yielding tangible results with approximately 200 partnerships now on-going. Our transformed R&D engine is enriched in key skill sets such as expertise in our core therapeutic areas, in translational medicine and in data sciences. We have an exciting pipeline with multiple innovative new therapies beginning to emerge, some of which offer life-saving potential to patients such as those in our growing cell and gene therapy portfolio. Our R&D organization has been optimized to maximize output by combining internal scientific strength with innovation from our partner network. This unique model will improve our productivity and increase our efficiency. With an extremely lean and agile organization compared to other top 10 pharmaceutical companies, we have the ability to provide new innovative medicines and vaccines to patients and to deliver significantly improved returns on our R&D investment. We indeed aspire to be one of the most productive R&D engines in the industry. We will share with you more details during an R&D day before the end of this calendar year.

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Beyond our core therapeutic areas of Oncology, Gastroenterology, Rare Diseases and Neuroscience, we are dedicated to serving patients with a wide range of rare diseases with our innovative plasma-derived therapies, and hope to soon file regulatory submissions for a dengue vaccine that will serve a massive public health need. The Plasma-Derived Therapy and Vaccine Business Units will ensure dedicated and targeted long-term focus on these specific areas in order to serve patient needs.

Thanks to substantial integration cost synergies and continued cost discipline, we are driving towards margins among the top-tier in the industry. This combined with our growing portfolio will allow us to rapidly reduce the debt on our balance sheet, continue to invest in our growth drivers, and maintain our well-established dividend policy of 180 yen per share annually as a key component of shareholder return. We are committed to deleverage within three to five years driven by strong cash flows, and helped also by a disposal program of non-core assets such as Xiidra^® (lifitegrast ophthalmic solution) and TachoSil^® Fibrin Sealant Patch, announced in early May². Once deleveraged, our financial resilience will be significant and highly competitive which will open further opportunities.

The Takeda Executive Team is comprised of twenty strong, diverse (e.g. eleven nationalities, seven females), extremely experienced leaders, and is poised to lead Takeda through its next stage of growth. Our corporate governance is extremely robust against global standards, with a board of fifteen directors including eleven external directors, an Audit and Supervisory Committee, a Nomination Committee and a Compensation Committee. Every committee is chaired by an external director and is comprised of a majority of external directors. The board meeting is also chaired by an external director.

This is an exciting time for Takeda, the health care providers and their patients treated by our medicines, for our employees and for you our shareholders.

We hope that you will share with us our enthusiasm for the future, and are looking forward to seeing you on June 27^th.

With my best regards,

Christophe Weber

President & CEO

Takeda Pharmaceutical Company Limited

² Press Release: TAKEDA SIMPLIFIES PORTFOLIO AND ACCELERATES DELEVERAGING THROUGH TWO DIVESTITURES (released on May 9^th, 2019).

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Please note that the following is an English translation of the original Japanese version, prepared only for the convenience of shareholders residing outside Japan. In case of any discrepancy between the translation and the Japanese original, the latter shall prevail.

TAKEDA PHARMACEUTICAL COMPANY LIMITED (the “Company” or “TAKEDA”) HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THIS TRANSLATION, WHETHER EXPRESS OR IMPLIED INCLUDING, BUT WITHOUT LIMITATION TO, ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO ACCURACY, RELIABILITY OR COMPLETENESS OF THIS TRANSLATION. IN NO EVENT SHALL TAKEDA BE LIABLE FOR ANY DAMAGES OF ANY KIND OR NATURE INCLUDING, BUT WITHOUT LIMITATION TO, DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING FROM OR IN CONNECTION WITH THIS TRANSLATION.

Better Health, Brighter Future

Notice of Convocation of the 143rd Ordinary General Meeting of Shareholders

Venue of the General Meeting of Shareholders

Please note that the venue for this General Meeting of Shareholders is different from that of last year. Please refer to the map at the end of this notice and ensure that you attend the correct venue. (The map is omitted in this translation.)

No Gifts for Attendees of the General Meeting of Shareholders

Please kindly note that no gifts will be given to attendees at this General Meeting of Shareholders. Thank you very much for your kind understanding.

Dear Shareholders

Notice of Convocation of the 143rd Ordinary General Meeting of Shareholders

This is to inform you that the Company will be holding its 143rd Ordinary General Meeting of Shareholders (the “Meeting”) as follows and invite you to attend.

If you are unable to attend the Meeting, you may exercise your voting rights in writing or via electronic means (e.g., the Internet, etc.). Please kindly go through the Reference Document for the General Meeting of Shareholders and exercise your voting rights no later than 5:30 p.m. on June 26, 2019 (Wednesday).

Details

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Please note that the Company decided to hold the Meeting on June 27, 2019 in Yokohama since the Company prioritized the retention of a venue with a large capacity in other area, as it is expected that the G20 Summit (Summit on Financial Markets and the World Economy) is being held in Osaka in late June.

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Guidance Notes on the Exercise of Voting Rights

Please be so kind as to submit the enclosed Voting Right Exercise Form to a receptionist at the venue as evidence of your attendance. We also ask that you bring this Notice of Convocation with you to the venue. (The Voting Right Exercise Form is omitted in this translation.)

Date: June 27, 2019 (Thursday), 10:00 a.m. (The reception is scheduled to open at 8:50 a.m.)

Please indicate your approval or disapproval of the proposals on the enclosed “Voting Right Exercise Form” and send it back to reach us before the deadline below. (The Voting Right Exercise Form is omitted in this translation.)

Deadline for Exercise (arrival): 5:30 p.m. on June 26, 2019 (Wednesday)

Please refer to the “Guidance Notes on the Exercise of Voting Rights via Electronic Means (e.g., the Internet, etc.)” on page 112, and complete the entry of your approval or disapproval of the proposals in accordance with the instructions on the screen on or before the deadline below.

Deadline for Exercise (completion of entry): 5:30 p.m. on June 26, 2019 (Wednesday)

Guidance Notes on the Treatment of Exercise of Voting Rights

Disclosure of information via the Internet

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The Consolidated Financial Statements and Unconsolidated Financial Statements that the Accounting Auditors and Audit and Supervisory Committee audited include, apart from the documents stated in the list of documents enclosed with the Notice of Convocation of the 143rd Ordinary General Meeting of Shareholders, the Consolidated Statement of Changes in Equity, the Notes on the Consolidated Financial Statements, the Unconsolidated Statement of Changes in Net Assets and the Notes on the Unconsolidated Accounts posted on the Company’s website.

END OF DOCUMENT

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Reference Document for the General Meeting of Shareholders

Proposals and Reference Matters:

<Company’s proposals (First to Sixth Proposals)>

First Proposal: Appropriation of Surplus

The Company’s policy in the allocation of capital is as follows:

With regard to “Short-range Deleveraging,” the Company is committed to keep the investment-grade rating with the target lowering the net interest-bearing debt adjusted EBITDA to x2 within 3 to 5 years.

With regard to “Investing in the Growth Driver,” the Company strategically makes investments in the internal R&D and new product launches and conducts R&D collaborations focused on the therapeutic areas with discipline.

With regard to “Return to the Shareholders,” the Company keeps annual 180 yen dividends per share as the established policy.

Based on the policy above, the Company submits the following proposal with respect to the appropriation of surplus for this fiscal year:

Year-end dividends

Cash

90 JPY per share of common stock;

Total amount: 140,835,668,220 JPY

(Reference)

Combined with the interim dividend of 90 JPY per share, the annual dividend will be 180 JPY per share (the same amount as in the previous fiscal year).

June 28, 2019

Second Proposal: Election of twelve (12) Directors who are not Audit and Supervisory Committee Members

The term of office of the eleven (11) Directors who are not Audit and Supervisory Committee (ASC) Members, namely, Christophe Weber, Masato Iwasaki, Andrew Plump, Masahiro Sakane, Olivier Bohuon, Ian Clark, Yoshiaki Fujimori, Steven Gillis, Emiko Higashi, Michel Orsinger and Toshiyuki Shiga, will expire at the close of this General Meeting of Shareholders. The Company therefore proposes that the number of Directors be increased by one in order to further reinforce and enhance the Company’s management structure, and proposes the election of these twelve (12) Directors who are not ASC Members, including the eight (8) External Directors.

The candidates for Directors who are not ASC Members are as follows. (The photographs of the candidates are omitted in this translation.):

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[Reason for Election as Director]

Showed strong leadership in transforming Takeda into a sustainable and profitable organization that always puts patients at the center by implementing mid-term key priorities: focusing on key products of Growth Drivers, reinforcing specialty capabilities and pursuing opportunities to divest or acquire assets. Strongly committed to talent development and succession planning; lead the Takeda Executive Team to meet several times per year to discuss talent development and succession planning, launched an international cross-divisional development program to train high potential talents at an early stage of their careers.

The Company believes his competency and experience as CEO are necessary for its success.

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[Reason for Election as Director]

Supervises Takeda’s drug business in Japan.

Showed strong leadership in transforming the Japan Pharma Business Unit’s business model by divesting long-listed products to a joint-venture company and taking advantage of the changing market environment where generic products are rapidly penetrating. The Company believes his competency and experience are necessary for its drug business in Japan to be a best-in-class organization that keeps its leadership position in the market and be trusted by society considering the environmental change in Japan, including in the progress of the Community-based Integrated Care System Model.

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[Reason for Election as Director]

Showed strong leadership in rebuilding the R&D pipeline by implementing key priorities: leveraging therapeutic area expertise to progress innovative assets, enhancing capabilities internally through external collaborations, and strengthening the R&D performance culture.

The Company believes his competency and experience as President, Research and Development are necessary for its success.

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[Reason for Election as Director]

Over 20 years’ experience in both private and public sectors, having held a number of finance leadership positions with financial responsibility for businesses in over 100 countries across Asia-Pacific, Europe, Africa and the Middle East.

Has a long track record of improving operational business profitability and driving performance by combining effective financial stewardship with business partnership. Throughout his career, he has promoted the use of best-practice sharing and talent development to build strong finance business and strategic partners.

The Company believes that his experience and competencies will contribute to the further acceleration of our transformation to create a global, values-based, R&D-driven biopharmaceutical leader.

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[Reason for Election as Director]

Proactively expresses his opinions at the Board of Directors meetings by leveraging his ample experience as company top management.

Facilitates Board of Directors meetings as well as leads meetings by External Directors, which contribute to the making of fair and appropriate decisions and securing sound management within the Company.

Has also contributed as chairperson of the Nomination Committee of the Company to provide objectivity and transparency in the Director candidate selection process.

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[Reason for Election as Director]

He has necessary and sufficient expertise in Legacy Shire’s portfolio and its related therapeutic areas through his experience as an external director of Shire. In addition to his experience at Shire, he has each held key positions, including as CEO, in healthcare companies in Europe and the U.S. and has a deep insight into the management of global healthcare businesses based on their ample experience therein. Among other areas, he has remarkable expertise in the area of marketing in overall healthcare businesses.

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[Reason for Election as Director]

He has necessary and sufficient expertise in Legacy Shire’s portfolio and its related therapeutic areas through his experience as an external director of Shire. In addition to his experience at Shire, he has each held key positions, including as CEO, in healthcare companies in Europe and the U.S. and has a deep insight into the management of global healthcare businesses based on their ample experience therein. Among other areas, he has remarkable expertise in marketing in the area of oncology and the operation of the science and technology division of a healthcare company.

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[Reason for Election as Director]

Proactively expresses his opinions at the Board of Directors meetings by leveraging his ample experience as company top management, which contributes to the making of fair and appropriate decisions and securing sound management within the Company. Actively participates in the discussions at the Compensation Committee based on his experience as top management of a global operating company, providing objectivity and transparency in the Company’s compensation plan for Directors.

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[Reason for Election as Director]

He has necessary and sufficient expertise in Legacy Shire’s portfolio and its related therapeutic areas through his experience as an external director of Shire. In addition to his experience at Shire, he has each held key positions, including as CEO, in healthcare companies in Europe and the U.S. and has a deep insight into the management of global healthcare businesses based on their ample experience therein. Among other areas, he has remarkable expertise with a Ph.D. in Biological Sciences, in the area of immune-related healthcare businesses.

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[Reason for Election as Director]

Proactively expresses his opinions at the Board of Directors meetings by leveraging his ample experience as company top management as well as his expertise in general industries in Japan, which contributes to the making of fair and appropriate decisions and securing sound management within the Company.

As chairperson, he actively led discussions at the Compensation Committee by expressing opinions based on his experience as a top executive of a global operating company, providing objectivity and transparency in the Company’s compensation plan for Directors.

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[Reason for Election as Director]

He has ample experience as top management of major western healthcare companies, which contributes to the making of fair and appropriate decisions and securing sound management within the Company.

He has served as External Director who is an ASC Member of the company since 2016.

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[Reason for Election as Director]

As a lawyer, he has wide-ranging experience and expertise in the area of corporate and international legal affairs although he has never been directly involved in company management. He has also contributed as a member of the Nomination Committee of the Company to provide objectivity and transparency in the Director candidate selection process. He has served as External Corporate Auditor since 2013, and External Director who is the Head of ASC since 2016.

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(Notes)

[Description of the number of Company Shares to be provided under the Stock Compensation Plan, etc.]

The Company introduced a stock compensation plan for Directors (excluding Directors residing overseas who are not External Directors) and a stock grant plan for executives of the Takeda Group in Japan and overseas (collectively, the “Plan”).

The Company shares to be provided under the stock compensation plan for Directors who are not External Directors (excluding Directors who are Audit and Supervisory Committee Members and Directors residing overseas) (“Directors who are eligible for performance-linked compensation”) and the stock grant plan for executives of the Takeda Group in Japan and overseas include the following:

The number of Company shares to be provided to the above candidates in accordance with the Plan includes only the Fixed Portion under (i) above, since such number of Company shares to be provided is already fixed. The number of Company shares relating to the Performance-based Portion under (ii) above is not yet included, since it will vary in the range of 0-200% and is therefore not fixed at this moment. The provision of Company shares under (i) Fixed Portion and (ii) Performance-based Portion to the Directors who are eligible for performance-linked compensation will be made at a certain period during their term of office.

The Company shares to be provided under the stock compensation plan for Directors who are Audit and Supervisory Committee Members and External Directors (“Directors who are not eligible for performance-linked compensation”) are included in the “Number of Company Shares to be provided under the Stock Compensation Plan,” since it is to be provided under (i) Fixed Portion, the number of Company shares to be provided to the above candidates is fixed. The provision of Company shares to the Directors who are not eligible for performance-linked compensation will be made at the end of their term of office.

In addition, with regard to Company shares to be provided under the Plan, (a) the voting rights thereof may not be exercised before such shares are provided to each candidate; and (b) 50% of such shares will be sold in the stock market to secure the necessary funds for tax payments and, thereafter, the proceeds thereof will be provided to each candidate.

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Third Proposal: Election of Two (2) Directors who are Audit and Supervisory Committee Members

The two (2) Directors who are Audit and Supervisory Committee (“ASC”) Members, Shiro Kuniya and Jean-Luc Butel will resign at the close of this General Meeting of Shareholders. Therefore, the Company proposes the election of two (2) Directors who are ASC Members. Please note that the Company proposes that the candidates for the Directors who are ASC Members, Emiko Higashi and Michel Orsinger, will be elected as substitutes for the Directors who are ASC Members, Shiro Kuniya and Jean-Luc Butel. Therefore, their term of office will remain until the expiration of the term of office of the Directors who are ASC Members, Shiro Kuniya and Jean-Luc Butel, who will resign in accordance with the provision of the Articles of Incorporation. This proposal was approved by the ASC.

The candidates for Directors who are ASC Members are as follows (The photographs of the candidates are omitted in this translation.):

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[Reason for Election as Director (ASC Member)]

Proactively expresses her opinions at the Board of Directors meetings by leveraging her ample experience and wide expertise on healthcare, technology and financial industries, which contributes to the making of fair and appropriate decisions and securing sound management within the Company. Has also contributed as a member of the Nomination Committee of the Company to provide objectivity and transparency in the Director candidate selection process.

The Company believes she would contribute in the realization of the mission of ASC: to ensure the sound and continuous growth of the Company, realize the creation of mid- and long-term corporate value, and establish a good corporate governance system that will accommodate society’s trust.

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[Reason for Election as Director (ASC Member)]

Proactively expresses his opinions at the Board of Directors meetings by leveraging his ample experience as top management of major western healthcare companies, which contributes to the making of fair and appropriate decisions and securing sound management within the Company.

The Company believes he would contribute in the realization of the mission of ASC: to ensure the sound and continuous growth of the Company, realize the creation of mid- and long-term corporate value, and establish a good corporate governance system that will accommodate society’s trust.

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(Notes)

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<Explanation regarding the compensation system for Directors in relation to the Fourth through Sixth Proposals>

Fourth and Fifth Proposals are intended to make the compensation level and compensation structure for Directors the most advanced as a global bio-pharmaceutical company, in order to maximize the Company’s performance and to ensure the successful completion of the integration with Shire.

Among the Directors, the following “(1) the compensation structure for Directors who are eligible for performance-linked compensation” will be carried on in essence in accordance with the compensation structure for Directors (excluding Directors resident overseas and External Directors) which was approved at the 140th Ordinary General Meeting of Shareholders on June 29, 2016. The following “(2) the compensation structure for Directors who are not eligible for performance-linked compensation” consists of Basic Compensation and stock compensation in the appropriate range (non- performance based) based on their roles.

The Sixth Proposal is regarding payment of Directors’ bonuses for fiscal year 2018 (excluding Directors resident overseas and External Directors).

The compensation for Directors who are not Audit and Supervisory Committee Members (excluding External Directors; hereinafter “Directors who are eligible for performance-linked compensation”) consists of “Basic Compensation” which is paid in a fixed amount and “Performance-based Compensation” which is paid in a variable amount based on the achievement, etc. of key performance indicators (KPIs), etc. “Performance-based Compensation” further consists of bonus (Note 1) to be paid based on the consolidated financial results, etc. for each fiscal year, and compensation based on the long-term incentive plan (stock compensation) (Note 2) linked with mid/long-term performance results over 3 years and the Company’s share price. By the Fourth Proposal, the Company proposes to increase the ratio of performance-linked compensation to Basic Compensation to further strengthen the linkage between the Company’s performance and Directors’ compensation and to make other revisions.

The compensation for Directors who are Audit and Supervisory Committee Members and External Directors (hereinafter “Directors who are not eligible for performance-linked compensation”) consists of “Basic Compensation” which is paid in a fixed amount and “non-performance based compensation” whose payout amount is not related to performance results. Taking into consideration their roles, “non-performance based compensation” is a long-term incentive plan (stock compensation) (Note 3) which is not related to performance results but only to the Company’s share price. By the Fourth Proposal and the Fifth Proposal, the Company proposes changing the timing of payment of non-performance based compensation from the resignation/retirement to the elapse of three (3) years after the award date (meaning the date when base points on which the calculation of such compensation is based will be granted; hereinafter the same for the purposes of this Explanation) to align and maintain consistency of the vesting schedule with Internal Directors and to make other revisions.

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(Notes)

The Company has established the Compensation Committee with an External Director as its Chairperson and a majority of external members, to serve as an advisory organization for the Board of Directors to ensure the appropriateness of Director’s compensation, etc. and transparency in the decision-making process thereof. The revision thereof has been reviewed at the Compensation Committee before resolution by the Board of Directors.

Based on the above, the Company proposes to this General Meeting of Shareholders the Fourth and Fifth Proposals.

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As stated above, the compensation plans for Directors who are eligible for performance-linked compensation (excluding Directors who are Audit and Supervisory Committee Members and External Directors) and Directors who are not eligible for performance-linked compensation (Directors who are Audit and Supervisory Committee Members and External Directors) are designed separately but, in the following Fourth Proposal and Fifth Proposal, the Company proposes separately the compensation for Directors who are Audit and Supervisory Committee Members and that for Directors who are not Audit and Supervisory Committee Members.

In the event that the Fourth and Fifth Proposals are approved in the form of the original proposals, the “Director’s Compensation Policy” of the Company will be revised as follows:

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Fourth Proposal: Revisions Pertaining to the Amount and the Contents of Stock Compensation, etc. for Directors who are not Audit and Supervisory Committee Members

The Company received approval at the 140th Ordinary General Meeting of Shareholders on June 29, 2016 regarding the establishment of the stock compensation plan (hereinafter for the purposes of this Proposal, the “Previous Plan”) as compensation, etc. for each fiscal year for the Directors (excluding the Directors who are Audit and Supervisory Committee Members and Directors residing overseas who are not External Directors) as the Company had shifted to Company with Audit and Supervisory Committee. This Proposal requests your approval of the revision to the current stock compensation plan as compensation, etc. for such Directors (hereinafter for the purposes of this Proposal, the “Plan”).

From among this Proposal, the contents of the Proposal for Directors who are not External Directors (excluding Directors who are Audit and Supervisory Committee Members and Directors resident overseas, hereinafter for the purposes of this Proposal, “Internal Directors”) is for the purpose of further enhancing the awareness of contributing to the enhancement of the Company’s mid/long-term achievements as well as the increase of the corporate value of the Company. In addition, with respect to the contents of the Proposal for External Directors (excluding Directors who are Audit and Supervisory Committee Members; the same applies hereinafter for the purposes of this Proposal), in light of the roles of the External Directors and in order to ensure the adequate supervisory functions which judge the validity of the execution of duties from an objective standpoint and to avoid excessive risk-taking activities to achieve performance objectives in the short-term, such Proposal is not linked with the performance achievements, but is for the purpose of further enhancing the awareness of contributing to the increase of our corporate value of the Company. Furthermore, increasing the number of holding shares during their term of office is intended to create unity in sharing the Company’s interests as well as corporate value among shareholders and External Directors. Therefore, the Company considers that such Proposal is appropriate.

In the event that the Second Proposal is approved in the form of the original proposal, the number of Directors (excluding Directors who are Audit and Supervisory Committee Members and Directors resident overseas who are not External Directors) subject to the Plan will be eleven (11) (from among such number of Directors, the number of External Directors will be eight (8)).

With respect to the continuation of the Plan, the Company proposes the following changes to the Plan. To clarify, the changes will only be effective for newly established trust in Fiscal Year 2019 given the condition that this proposal is approved in the form of the original proposal and no changes will be made for that already established under the Previous Plan. (Under the Plan, the plan for Internal Directors is hereinafter for the purposes of this Proposal, referred to as “Plan I”, and the plan for External Directors is hereinafter for the purposes of this Proposal, referred to as “Plan II”. The details are as described in and after 3(2). The Company may also implement an incentive plan under the Plan by creating a Trust with a three (3) year trust period, similarly as the Trust created in Fiscal Year 2019, even for each fiscal year in and after Fiscal Year 2020 (“create” includes continuous use of the preexisting Trust by extending the trust period of the Trust; the same applies hereinafter for the purposes of this Proposal).

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Notwithstanding the above, with respect to Plan II, the Company will provide the External Directors who were elected at the Extraordinary General Meeting of Shareholders (December 5, 2018) and took office as of January 8, 2019 with base points targeting their term of office from the date of taking office to the date before this General Meeting of Shareholders (hereinafter for the purposes of this Proposal, the “Ex-Post Evaluation Base Points”) as well as base points targeting their term of office starting on the date of this General Meeting of Shareholders (meaning base points for annual grant as described in 3(3) below), which are granted on the condition that such External Directors hold office on July 1 of the year of creation of the Trust, under a newly established trust in Fiscal Year 2019, and the Previous Plan is to be applied to the Ex-Post Evaluation Base Points of such External Directors, the share conversion points calculated by the Ex-Post Evaluation Base Points and the delivery of the shares of the Company corresponding to such share conversion points.

1: Change in Maximum Amount to be contributed by the Company

With respect to Plan I (as described in 3(1) below), the Company would like to increase the compensation amount for Internal Directors from an amount within 2,700 million JPY targeting three (3) fiscal years to 4,500 million JPY targeting three (3) fiscal years in order to increase the Performance Share Unit portion as well as introducing a Special one-time Performance Share Unit. This affects the number of shares that Internal Directors can hold accordingly. In the event that this Proposal is approved in the form of the original proposal, the Company will contribute, as compensation, etc. for Directors, monies up to a total of 4,800 million JPY (4,500 million JPY for Plan I and 300 million JPY (including the compensation amount calculated by the Ex-Post Evaluation Base Points; the same applies hereinafter for the purposes of this Proposal) for Plan II) per three (3) consecutive fiscal years. This compensation, etc. does not include the salaries paid as the employee portion for Directors who also work as employees.

2: Introduce Special one-time Performance Share Unit for Internal Directors

With respect to Plan I, the Company would like to introduce a Special one-time Performance Share Unit deeply embedded in the success of the Shire Integration and delivering on the commitments made for the next three (3) years. The established KPI is related specifically to the Integration milestone (KPI is separately determined by review of Compensation Committee and Board of Directors’ resolution). This way, the Company would like to ensure the success of the Integration with fully committed Internal Directors during this important period. Performance against established KPIs for Special one-time Performance Share Unit is determined independently each year over a three-year period, and the shares to be provided will become vested after performance has been determined for the applicable period.

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3: Change in the Calculation Formula of Share Conversion Points for Annual Grant

With respect to Plan I, the Company would like to increase Performance Share awards calculated under the calculation formula of share conversion points using base points for annual grant (as described in 3(3) below and which is substantially the same as the base points calculated under the Previous Plan) among awards granted with a percentage of 60% from 50% so as to be able to strengthen the link between compensation and the Company performance and The Company’s share price, and to reinforce the commitment to increasing corporate value in the mid and long term. Plan II is not subject to such change.

4: Change in Vesting Schedule for External Directors

With respect to Plan II (as described in 3(1) below), the Company would like to change the vesting schedule from resignation/termination of the term of office to the elapse of three (3) years after the award date (meaning the date when base points will be granted, hereinafter the same for the purposes of this Proposal). By implementing this change, the Company seeks to enhance the awareness among External Directors of their contributions to the balance and enhancement of the Company’s mid/long-term achievements as well as the increase of the corporate value. Also, along with the change in the vesting schedule, even in the event of the resignation/retirement of an External Director (excluding resignation due to his/her own convenience or resignation due to dismissal), the share conversion points will be granted similarly as the case that he/she remains in office till the expiry of the Plan Period (as described in 3(2) below) after his/her resignation/retirement, and he/she may receive Deliveries (as described in 3(1) below) from the Trust (as described in 3(2) below) of Company Shares, etc. (as described in 3(1) below) of a number in accordance with the share conversion points.

The Plan is a stock compensation plan in which the shares of the Company are acquired through trust, sourced from the money amount contributed by the Company, and the shares of the Company and the monies equivalent to the cash conversion amount of the shares of the Company (hereinafter for the purposes of this Proposal, collectively, “Company Shares, etc.”) are delivered and provided (hereinafter for the purposes of this Proposal, “Deliveries”) to the Directors (excluding Directors who are Audit and Supervisory Committee Members and Directors resident overseas who are not External Directors; the same hereinafter for the purposes of this Proposal) through such trust.

<Plan I> Internal Directors

<Plan II> External Directors

<Plan I> Total of 4,500 million JPY targeting three (3) fiscal years

<Plan II> Total of 300 million JPY targeting three (3) fiscal years

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<Plan I>

The maximum number of shares is the number obtained by dividing 4,500 million JPY, the maximum monetary amount to be contributed to the Trust as Plan I by the Company, by the closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year in which such Trust was established targeting three (3) fiscal years.

<Plan II>

The maximum number of shares is the number obtained by dividing 300 million JPY, the maximum monetary amount to be contributed to the Trust as Plan II by the Company, by the closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year in which such Trust was established targeting the first of three (3) fiscal years.

Under both Plans I and II, the shares of the Company are scheduled to be acquired from the stock market.

Therefore, there will be no dilution of the share value of the issued shares.

<Plan I> Fluctuate depending upon the degree of achievement, etc. in relation to consolidated revenue, free cash flow, indicators on earnings, R&D target, integration success factors, etc. of every fiscal year or over the three (3) fiscal years ending (in either case, as of the end of March) during the Plan Period.

<Plan II> Not linked to performance results (fixed)

<Plan I>

With respect to annual grant;

With respect to Special one-time Performance Share Unit;

<Plan II> (only for annual grant)

To be delivered three (3) years after the award date and External Directors are required to hold 75% of their vested share portion until they leave the Company.

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The Company will contribute, as compensation, etc. for Directors, monies up to a total of 4,800 million JPY (4,500 million JPY for Plan I and 300 million JPY for Plan II) per three (3) consecutive fiscal years (initially the three (3) fiscal years from the fiscal year ending on the last day of March 2020 to the fiscal year ending on the last day of March 2022; hereinafter, the “Plan Period” for the purposes of this Proposal), and create a trust (hereinafter for the purposes of this Proposal, the “Trust” which is created respectively for Plan I and Plan II.) for a three (3) year trust period with the beneficiaries being the Directors meeting the beneficiary requirements. The Trust will acquire the shares of the Company from the stock market, sourced by monies subject to trust, in accordance with the instructions of the trust administrator. During the trust period, the Company will grant share conversion points and make Deliveries of Company Shares, etc. towards the Internal Directors every year during the trust period, and grant share conversion points towards the External Directors and make Deliveries of Company Shares, etc. towards External Directors three (3) years after the award date.

The Company creates a Trust initially in Fiscal Year 2019, but the Company may also implement an incentive plan under the Plan by creating a Trust with a three (3) year trust period, similarly as the Trust created in Fiscal Year 2019, even for each fiscal year in and after Fiscal Year 2020.

For Plan I and Plan II, respectively, the number of the Trust capable of being created in one (1) fiscal year will be one (1), and in the event a Trust is created in every fiscal year, a maximum of three (3) Trusts will coexist. (Notwithstanding the above, in the case that the Plan is to be applied to Directors who are not Audit and Supervisory Committee Members appointed after July 1 of each year, etc. the Company may create more than one Trust in one (1) fiscal year. Even in this case, the total amount of contribution made by the Company to the Plan does not exceed 4,800 million JPY (4,500 million JPY for Plan I and 300 million JPY for Plan II).)

The Trust may be continued by changing the trust agreement and adding trust in place of creating a new Trust at the time of the expiry of the trust period of the Trust. In that case, the trust period will be extended for a three (3) fiscal year period, and the Company will grant base points and share conversion points, and make Deliveries of Company Shares, etc., in the same manner as indicated above, within such extended three (3) fiscal year period of the Plan Period. In the case that additional contribution is made upon the extension of the trust period, the maximum monetary amount which may be additionally contributed when the shares of the Company (excluding, from among Company Shares, etc. equivalent to share conversion points granted to the Directors, those for which the Deliveries are not yet made) and monies (hereinafter for the purposes of this Proposal, “Remaining Shares”) remain within the trust property on the last day of the trust period prior to the extension, will be 4,800 million JPY (4,500 million JPY for Plan I and 300 million JPY for Plan II) minus the amount of the Remaining Shares.

If, at the time of the expiry of the trust period and the extension above is not made, and in the case that an External Director possibly meeting the beneficiary requirements holds office, points will not be granted thereafter to such External Director, but the trust period of the Trust may be extended until the completion of the Deliveries of Company Shares, etc. towards such External Director.

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The Company will grant, for the Internal Directors, “share conversion points” calculated in accordance with the degree of achievement, etc. of the performance objectives of the Company, and for the External Directors, “share conversion points” of a fixed number irrespective of the degree of achievement, etc. of the performance objectives of the Company, respectively, in accordance with the base points to be granted in accordance with the nature of the duties and responsibilities, etc. of each Director. The number of shares of the Company to be delivered to each Director through the Plan is determined to be one (1) share per share conversion point granted to each Director. In the event that the shares of the Company subject to the Trust increase or decrease due to share split, share allotment without contribution, share consolidation, etc., the Company will adjust, in accordance with a reasonable method, the number of shares of the Company to be delivered for each share conversion point.

Concretely, first of all, base points will be granted to a Director holding office on July 1 of the year of creation of the Trust in accordance with the following formula; however, base points for Special one-time Performance Share Unit are to be provided only to Internal Directors. Ex-Post Evaluation Base Points will be granted to the External Directors who were elected at the Extraordinary General Meeting of Shareholders (December 5, 2018) and took office as of January 8, 2019.

(Calculation formula of base points)

Basic annual compensation amount X target ratio of annual grant / closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year of creation of the Trust (if there is no closing price on such date, then the closing price on the date on which a transaction was performed immediately prior to such date)

Basic annual compensation amount X target ratio of Special one-time Performance Share Unit / closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year of creation of the Trust (if there is no closing price on such date, then the closing price on the date on which a transaction was performed immediately prior to such date)

The Ex-Post Evaluation Base Points shall be calculated under the Previous Plan.

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<Calculation formula of share conversion points in Plan I>

Share conversion points will be granted to an Internal Director, who are granted the base points based on the above, holding office on June 1 of each year from the year following the creation of the Trust until three (3) fiscal years thereafter, in accordance with the following formula.

(Calculation formula of share conversion points to be granted to Internal Directors)

In the event of the resignation/retirement of an Internal Director (excluding resignation due to his/her own convenience or resignation due to dismissal), the share conversion points will be granted similarly as the case that he/she remains in office till the expiry of the Plan Period after his/her resignation/retirement, and he/she may receive Deliveries from the Trust of Company Shares, etc. of a number in accordance with the share conversion points.

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<Calculation of share conversion points in Plan II>

For an External Director, who are granted the base points based on the above, holding office on June 1 of the year following the creation of the Trust, share conversion points will be granted in accordance with the following formula. In addition to such share conversion points below, share conversion points which will be calculated by Ex-Post Evaluation Base Points under the Previous Plan will be granted to the External Directors who were elected at the Extraordinary General Meeting of Shareholders (December 5, 2018) and took office as of January 8, 2019.

(Calculation formula of share conversion points to be granted to External Directors) Initial base points for annual grant × 100%

In the event of the resignation/retirement of an External Director (excluding resignation due to his/her own convenience or resignation due to dismissal), the share conversion points will be granted similarly as the case that he/she remains in office till the expiry of the Plan Period after his/her resignation/retirement, and he/she may receive Deliveries from the Trust of Company Shares, etc. of a number in accordance with the share conversion points.

The maximum of the total number of Company Shares, etc. for which Deliveries are to be made to the Directors from the Trust during the trust period of the Trust under Plans I and II will be the number (fractions after the decimal point are to be disregarded) obtained by dividing (i) 4,800 million JPY (4,500 million JPY for Plan I and 300 million JPY for Plan II), the maximum monetary amount to be contributed to such Trust by the Company, by (ii) the closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year of creation of the Trust (if there is no closing price on such date, then the closing price on the date on which the transaction was performed immediately prior to such date), for each Plan Period.

An Internal Director meeting the beneficiary requirements may, by performing the prescribed beneficiary determination procedures every year during the trust period, receive, after a certain period after being granted share conversion points, the delivery of 50% (the number of shares less than one (1) share unit will be disregarded) of the shares of the Company corresponding to such share conversion points, and in addition, may convert the remainder (including those equivalent to the number of shares less than one (1) share unit described above) within the Trust and receive monies equivalent to such cash conversion amount.

An External Director meeting the beneficiary requirements may, by performing the prescribed beneficiary determination procedures, three (3) years after the award date, receive the delivery of 50% (the number of shares less than one (1) share unit will be disregarded) of the shares of the Company corresponding to the share conversion points, and in addition, may convert the remainder (including those equivalent to the number of shares less than one (1) share unit described above) within the Trust and receive monies equivalent to such cash conversion amount. However, the External Directors who were elected at the Extraordinary General Meeting of Shareholders (December 5, 2018) and took office as of January 8, 2019 may, at the time of their resignation/retirement, receive delivery of the shares of the Company and monies corresponding to the share conversion points calculated by the Ex-Post Evaluation Points under the Previous Plan.

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In the event that a Director dies during the trust period, the inheritor of such Director will convert into cash within the Trust any and all of the shares of the Company corresponding to the share conversion points granted to such director, and receive such monies.

With respect to the shares of the Company within the Trust, voting rights will not be exercised during the trust period in order to ensure neutrality towards management.

Other contents regarding the Plan will be determined by the Board of Directors each time the Trust is created.

Fifth Proposal: Revisions Pertaining to the Contents of Stock Compensation, etc. for Directors who are Audit and Supervisory Committee Members

The Company received approval at the 140th Ordinary General Meeting of Shareholders on June 29, 2016 regarding the establishment of the stock compensation plan as compensation, etc. for each fiscal year for the Directors who are Audit and Supervisory Committee Members. This Proposal requests for your approval of the revision in current stock compensation plan as compensation, etc. for the Directors who are Audit and Supervisory Committee Members (hereinafter for the purposes of this Proposal, the “Plan”).

This Plan, targeting the Directors who are Audit and Supervisory Committee Members (hereinafter for the purposes of this Proposal, “Audit and Supervisory Committee Members”), is for the purpose of further enhancing the awareness of contribution to the increase of the corporate value of the Company, without linking it to the performance results in light of the roles of the Audit and Supervisory Committee Members, in order to ensure the adequate supervisory functions which judge the validity of the execution of duties from an objective standpoint and to avoid excessive risk taking activities to achieve performance results in the short-term. Therefore, the Company considers that such Proposal is appropriate.

In the event that the Third Proposal is approved in the form of the original proposal, the number of Directors who are Audit and Supervisory Committee Members and who are subject to the Plan will be four (4).

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With respect to the continuation of the Plan, the Company proposes the following changes to the Plan. To clarify, the changes will only be effective for newly established trust in 2019 given the condition that this proposal is approved in the form of the original proposal and no changes will be made for that already established under the Plan. The Company may also implement an incentive plan under the Plan by creating a Trust with a three (3) year trust period, similarly as the Trust created in Fiscal Year 2019, even for each fiscal year in and after Fiscal Year 2020 (“create” includes continuous use of the preexisting trust by extending the trust period of the trust; the same applies hereinafter for the purposes of this Proposal).

1: Change in Plan Period for Directors who are Audit and Supervisory Committee Members

With respect to Plan III (as described in 3(1) below), the Company would like to change the Plan Period (as described in 3(2) below) from two (2) fiscal years to three (3) fiscal years. In the event that this Proposal is approved in the form of the original proposal, the Company will contribute, as compensation, etc. for Audit and Supervisory Committee Members, monies up to a total of 200 million JPY per three (3) consecutive fiscal years.

2: Change in Vesting Schedule

With respect to Plan III, the Company would like to change the vesting schedule from resignation or termination of the term of office to the elapse of three (3) years after the award date (meaning the date when base points will be granted, hereinafter the same for the purposes of this Proposal). By implementing this change, the Company seeks to enhance the awareness among Audit and Supervisory Committee Members of their contributions to the enhancement of the Company’s mid/long-term achievements as well as the increase of the corporate value. Also, along with the change in the vesting schedule, even in the event of the resignation/retirement of an Audit and Supervisory Committee Member (excluding resignation due to his/her own convenience or resignation due to dismissal), the share conversion points will be granted similarly as the case that he/she remains in office till the expiry of the Plan Period after his/her resignation/retirement, and he/she may receive Deliveries (as described in 3(1) below) from the Trust (as described in 3(2) below) of Company Shares, etc. (as described in 3(1) below) of a number in accordance with the share conversion points.

3: Abolition of Additional Base Points

With respect to Plan III, the Company would like to abolish additional base points to be granted to Audit and Supervisory Committee Members.

The Plan is a stock compensation plan in which the shares of the Company are acquired through trust, sourced from the money amount contributed by the Company, and the shares of the Company and the monies equivalent to the cash conversion amount of the shares of the Company (hereinafter for the purposes of this Proposal, collectively, “Company Shares, etc.”) are delivered and provided (hereinafter for the purposes of this Proposal, “Deliveries”) to the Directors who are Audit and Supervisory Committee Members through such trust. (The plan for the Directors who are Audit and Supervisory Committee Members is hereinafter for the purposes of this Proposal, referred to as “Plan III”.)

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<Plan III> Audit and Supervisory Committee Members

<Plan III> Total of 200 million JPY targeting three (3) fiscal years

<Plan III>

The maximum number of shares is the number obtained by dividing 200 million JPY the maximum monetary amount to be contributed by every targeting fiscal year to the Trust as Plan III by the Company, by the closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year in which such Trust was established targeting three (3) fiscal years.

Under Plan III, the shares of the Company are scheduled to be acquired from the stock market.

Therefore, there will be no dilution of the share value of the issued shares.

<Plan III> Not linked to the performance results (fixed)

<Plan III> To be delivered three (3) years after the award date and Audit and Supervisory Committee Members are required to hold 75% of their vested share portion until they leave the Company.

The Company will contribute, as compensation, etc. for the Audit and Supervisory Committee Members, monies up to a total of 200 million JPY per three (3) consecutive fiscal years (initially the three (3) fiscal years from the fiscal year ending on the last day of March 2020 to the fiscal year ending on the last day of March 2022; hereinafter, the “Plan Period” for the purposes of this Proposal), and create a trust (hereinafter for the purposes of this Proposal, the “Trust”) for a three (3) year trust period with the beneficiaries being the Audit and Supervisory Committee Members meeting the beneficiary requirements. The Trust will acquire the shares of the Company from the stock market, sourced by monies subject to trust, in accordance with the instructions of the trust administrator. During the trust period, the Company will grant share conversion points and make Deliveries of Company Shares, etc. towards the Audit and Supervisory Committee Members and make Deliveries of Company Shares, etc. towards Audit and Supervisory Committee Members three (3) years after the award date.

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The Company creates a Trust initially in Fiscal Year 2019, but the Company may also implement an incentive plan under the Plan by creating a Trust with a three (3) year trust period, similarly as the Trust created in Fiscal Year 2019, even for each fiscal year in and after Fiscal Year 2020.

For Plan III, the number of the Trust capable of being created in one (1) fiscal year will be one (1), and in the event a Trust is created in every fiscal year, a maximum of three (3) Trusts will coexist. (Notwithstanding the above, in the case that the Plan is to be applied to Directors who are Audit and Supervisory Committee Members appointed after July 1 of each year, etc. the Company may create more than one Trust in one (1) fiscal year. Even in this case, the total amount of contribution made by the Company to the Plan does not exceed 200 million JPY.)

The Trust may be continued by changing the trust agreement and adding trust in place of creating a new Trust at the time of the expiry of the trust period of the Trust. In that case, the trust period will be extended for a three (3) fiscal year period, and the Company will grant base points and share conversion points, and make Deliveries of Company Shares, etc., in the same manner as indicated above, within such extended three (3) fiscal year period of the Plan Period. In the case that additional contribution is made upon the extension of the trust period, the maximum monetary amount which may be additionally contributed when the shares of the Company (excluding, from among Company Shares, etc. equivalent to share conversion points granted to the Audit and Supervisory Committee Members, those for which the Deliveries are not yet made) and monies (hereinafter for the purposes of this Proposal, “Remaining Shares”) remain within the trust property on the last day of the trust period prior to the extension, will be 200 million JPY minus the amount of the Remaining Shares.

If, at the time of the expiry of the trust period and the extension above is not made, and in the case that an Audit and Supervisory Committee Member possibly meeting the beneficiary requirements holds office, points will not be granted thereafter to such Audit and Supervisory Committee Member, but the trust period of the Trust may be extended until the completion of the Deliveries of Company Shares, etc. towards such Audit and Supervisory Committee Member.

The Company will grant, for the Audit and Supervisory Committee Members, “share conversion points” of a fixed number irrespective of the degree of achievement, etc. of the performance objectives of the Company, in accordance with the base points to be granted in accordance with the nature of the duties and responsibilities, etc. of each Audit and Supervisory Committee Member. The number of shares of the Company to be delivered to each Audit and Supervisory Committee Member through the Plan is determined to be one (1) share per share conversion point granted to each Audit and Supervisory Committee Member. In the event that the shares of the Company subject to the Trust increase or decrease due to share split, share allotment without contribution, share consolidation, etc., the Company will adjust, in accordance with a reasonable method, the number of shares of the Company to be delivered for each share conversion point.

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Concretely, base points will be granted to a Director holding office on July 1 of the year of creation of the Trust in accordance with the following formula.

(Calculation formula of base points)

Basic annual compensation amount × target ratio / closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year of creation of the Trust (if there is no closing price on such date, then the closing price on the date on which a transaction was performed immediately prior to such date)

<Calculation of share conversion points in Plan III>

For an Audit and Supervisory Committee Member who is granted base points in accordance with the calculation above and who is holding office on June 1 of the year following the creation of the Trust, share conversion points will be granted in accordance with the following formula.

(Calculation formula of share conversion points to be granted to Audit and Supervisory Committee Members)

Initial base points × 100%

In the event of the resignation/retirement of an Audit and Supervisory Committee Member (excluding resignation due to his/her own convenience or resignation due to dismissal), the share conversion points will be granted similarly as the case that he/she remains in office till the expiry of the Plan Period after his/her resignation/retirement, and he/she may receive Deliveries from the Trust of Company Shares, etc. of a number in accordance with the share conversion points.

The maximum of the total number of Company Shares, etc. for which Deliveries are to be made to the Audit and Supervisory Committee Members from the Trust during the trust period of the Trust under Plan III will be the number (fractions after the decimal point are to be disregarded) obtained by dividing (i) 200 million JPY, the maximum monetary amount to be contributed to such Trust by the Company, by (ii) the closing price of the shares of the Company on the Tokyo Stock Exchange on July 1 of the year of creation of the Trust (if there is no closing price on such date, then the closing price on the date on which a transaction was performed immediately prior to such date), for the Plan Period.

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An Audit and Supervisory Committee Member meeting the beneficiary requirements may, by performing the prescribed beneficiary determination procedures, three (3) years after the award date, receive the delivery of 50% (the number of shares less than one (1) share unit will be disregarded) of the shares of the Company corresponding to the share conversion points, and in addition, may convert the remainder (including those equivalent to the number of shares less than one (1) share unit described above) within the Trust and receive monies equivalent to such cash conversion amount.

In the event that an Audit and Supervisory Committee Member dies during the trust period, the inheritor of such Audit and Supervisory Committee Member will convert into cash within the Trust any and all of the shares of the Company corresponding to the share conversion points granted to such Audit and Supervisory Committee Member, and receive such monies.

With respect to the shares of the Company within the Trust, voting rights will not be exercised during the trust period in order to ensure neutrality towards management.

Other contents regarding the Plan will be determined by the Board of Directors each time the Trust is created.

Sixth Proposal: Payment of Bonuses to Directors who are not Audit and Supervisory Committee Members

The Company proposes to pay bonuses up to the total amount of 730 million JPY (excluding bonuses paid to the relevant Directors for their work as employees) to the two (2) Directors (excluding Directors residing overseas and External Directors) in office as of the end of this fiscal year, in keeping with the achievement of the key performance indicators such as the consolidated revenue, Core Earnings and Core EPS set forth for this fiscal year.

<Shareholders’ proposal (Seventh Proposal and Eighth Proposal)>

The Seventh Proposal and Eighth Proposal are proposed by 13 shareholders, the total number of whose voting rights is 20,937.

Note that the “Summary of the Proposal” and the “Reasons for the Proposal,” both of which are proposed by such shareholders, are described as the originals (in Japanese) which we received as of April 24, 2019.

Seventh Proposal: Partial Amendment to the Articles of Incorporation (Individual disclosure of the directors’ compensation)

Addition of the following clause as Article 20, paragraph 2 to the current Articles of Incorporation (revised on June 28, 2018):

(2) The amount and substance of the directors’ compensation shall be individually disclosed irrespective of the amount, the method to determine the compensation shall be specifically indicated, and all compensation shall be individually evaluated and disclosed in Japanese yen in the business report and the annual securities report each year.

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It is highly necessary to clearly indicate the amount of individual directors’ compensation in order for shareholders to determine, for each director, whether the director’s compensation is suitable for the duties delegated thereto, as the shareholders, being the beneficial owners of a company, elect or dismiss directors through general shareholders meetings. Further, it stands to reason that shareholders encourage the directors to exhibit their abilities and ask them to fully perform their functions. It is also in the interest of society at large to request that the respective directors perform greater functions by the shareholders being aware of the amount of their compensation, having specified by whom and how their compensation is determined, and retaining their right to voice opinions on the propriety of the amount. Accordingly, adopting the individual disclosure of officers’ compensation should be considered also in light of revitalizing the corporate activities. In fact, individual disclosure of officers’ compensation by public companies has already been widely implemented in the U.S., the U.K., and other developed countries. Also, given the globalization of investment activities, Takeda, in its undertaking to become a more internationalized company, must demonstrate to the Japanese and global investors its strict compliance with the internal rules that are on a par with those of first-class companies in developed countries.

The Board of Directors objects to this Proposal.

With respect to the disclosure of the compensation of each Director, the Company discloses the amount of the compensations of the Directors whose total compensation paid by the Company and its consolidated subsidiaries is 100 million yen or more in the Securities Report in accordance with applicable laws. Moreover, the Company discloses the total amount of the compensation paid to Directors and the number of Directors who received the compensation, specifying the numbers of Internal Directors who are not Audit and Supervisory Committee members, Directors who are Audit and Supervisory Committee members, and External Directors.

With regard to the disclosure of the Directors’ compensation, the Board of Directors puts weight on showing how the Directors’ compensation effectively works as an incentive for the Directors to increase corporate value over the mid-to-long term. From this perspective, the Company specifies the levels of the compensation, the compensation mix, the contents of performance-based compensation, clear establishment of mid-to-long term KPIs, the procedures for ensuring the appropriateness of the compensation and the existence of transparency in the process for determining the compensation, etc., in the “Directors’ Compensation Policy,” and discloses these matters to shareholders and investors. We believe that the Company has provided shareholders and investors with sufficient and appropriate information to enable them to review the appropriateness of the compensation levels and the relationship between performance and compensation levels through the disclosures described above. In addition, the Company considers that the compensation system for the Directors is one of the important matters with regard to corporate governance. The Company has established the Compensation Committee as an advisory body to the Board of Directors, which serves to ensure the appropriateness of the Directors’ compensation and the existence of transparency in the decision-making process related thereto. The majority of the Compensation Committee members are external members and the Compensation Committee is chaired by an External Director. The Compensation Committee deliberates the Directors’ compensation levels, compensation mix, and the targets of performance-based compensation (i.e., the Long-Term Incentive Plan and bonuses) and gives advice to the Board of Directors; thereafter the Board of Directors determines these matters. In addition, the authority to determine the compensation of the Internal Directors who are not Audit and Supervisory Members is delegated to the Compensation Committee by resolution of the Board of Directors, which makes the process of determining the compensation of each Director more transparent.

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Based on the Company’s situation as described above, we believe that the amendment to the Articles of Incorporation related to disclosure of the Directors’ compensation, as proposed by the shareholders, is not necessary and not reasonable; thus, we object to this proposal.

Eighth Proposal: Partial Amendment to the Articles of Incorporation (Adoption of a clawback clause)

Addition of the following clause as Article 20, Paragraph 3 of the current Articles of Incorporation (revised on June 28, 2018), and addition of the following descriptions at the end of Article 27, Paragraphs 1 and 2 respectively:

Article 20 (Compensation, Etc. for Directors)

(3) If the performance indicators and other figures that serve as the basis for calculating the compensation amount under the performance-based compensation plan are erroneous, or if the compensation amount under the long-term incentive plan (stock compensation) is inflated in proportion to the share price that is unduly inflated by reflecting erroneous information (for example, if impairment loss has arisen on excessive investment in the past or if the correction of previous years’ financial results has been made), the compensation amount shall be recalculated based on correct indicators and other figures, and the difference in the compensation amount arising from the recalculation shall be either returned to the Company or shall be reduced (or unpaid). Details of this arrangement shall be prescribed in the Company’s internal rules, and shall be described in the mandate agreement between each of the directors and the Company.

Article 27 (Exemption of Directors’ Liability)

At the end of Paragraphs 1 and 2 respectively

However, the above shall not apply to the return or reduction (or non-payment) of compensation pursuant to Paragraph 3, Article 20.

In Europe and the United States, there is a strong prevailing logic that if the fixed compensation proportion is high, the management tends to be conservative; accordingly, the performance-based compensation proportion is set high. Meanwhile, adoption of the clawback clause has already become common practice, from the perspective of deterring executives’ coercive management styles that involve excessive risks or reckless management. Specifically, incorporation of clauses is increasingly prevailing which provide that compensation paid in previous years shall be returned or reduced upon the occurrence of a significant profit correction, unjustifiable conduct, or a huge amount of loss. In Japan, too, Nomura Holdings, Inc. and the Sumitomo Mitsui Financial Group, Inc. have already adopted these types of clause. Takeda, aiming to be a Japan-based global company, deems it necessary to establish this clause in order to deter excessive risk-taking by the Company’s executives, including foreign executive officers. For your information, recently, adoption of the clawback clause is also recommended in the “Guidelines on Executive Compensation (4th edition)” issued by the Japan Association of Corporate Directors.

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The Board of Directors objects to this Proposal.

We understand that the background of this proposal is the argument that, in cases where amendments to the accounting are required due to inappropriate accounting or financial losses are caused by excessively risky investments, the Company should request the return of the Directors’ compensation regardless of whether or not the Directors breach their duty of due care as prudent managers. In this regard, the Company’s compensation system for Directors has been established, based on the role and responsibility of each Director, so as to enhance the awareness of contributing to the enhancement of the Company’s mid/long-term achievements as well as the increase of the corporate value of the Company and to align with the incentives of Directors with the interest of the Company’s shareholders. Also, the stock compensation system for Internal Directors is reasonably appropriate to deter the executives’ coercive management styles that involve excessive risks or reckless management, which are pointed out in the shareholders’ proposal, since (i) it occupies the majority of the total compensation for Internal Directors, (ii) vesting thereof is divided and made for 3 years, and (iii) two (2) year stock holding requirement after the vesting date has been introduced for the annual grant, which further promotes management from long-term perspective. In addition, in order to ensure the objectivity and transparency of the content and process of deliberations in the Board of Directors, the majority of the Company’s Board of Directors consists of highly independent External Directors (11 of 15 members as of March 31, 2019). These External Directors proactively engage in deliberations, have exhaustive discussions at the time of rendering judgments, and make business decisions which they consider the best possible, based on the shareholders’ interests. The Compensation Committee, the majority of the members of which are external members and is chaired by an External Director also review the company’s performance against approved KPIs, review and approve Cash Bonus (STI) and Equity (LTI) awards for each Internal Director relative to their performance against their approved KPIs. Moreover, the amendment to the Articles of Incorporation proposed by the shareholders, will, without due consideration, place absolute liability on the Directors in cases where misconduct, including inappropriate accounting, has occurred and where the Directors did not breach their duty of due care as prudent managers with respect to the misconduct. As a result, the Directors will be unnecessarily cautious or reluctant to make business decisions which will be detrimental to shareholders.

However, because the Board of Directors must fulfill its duty of due care as a prudent manager, as well as its duty of loyalty, in determining the amount of the compensation of each Director, in a case where a Director actually received an inappropriately high performance-based compensation as a result of misconduct, including an inappropriate accounting, the Company would appropriately exercise its rights in a timely manner, based on the internal rules, mandate agreements, and/or applicable laws, as the case may be, and to request the return of such inappropriate performance-based compensation by considering individual and specific situations such as the content of the actual misconduct. Regardless of whether or not the provision proposed by the shareholders is added to the Articles of Incorporation, the Company believes that it must request the return of the Director’s compensation in a case as described above.

Furthermore, as mentioned above, with regard to a request for return of a Director’s compensation, we believe that this is a matter which must be discreetly examined by the appropriate bodies, such as the Board of Directors, Compensation Committee, and Audit and Supervisory Committee, by considering individual and specific situations. On the other hand, the addition of the unnecessary provision to the Articles of Incorporation relating to the return of Directors’ compensation in certain cases has a possibility of excessively decreasing and limiting the authority and agility of the decision-making of the Board of Directors, the Compensation Committee, and the Audit and Supervisory Committee, thereby interfering with the decisions made by such bodies, and could also distort the Directors’ compensation system.

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Based on the Company’s situation and policy as described above, we believe that the amendment to the Articles of Incorporation proposed by the shareholders relating to the return of Directors’ performance-based compensation is not necessary and not reasonable; thus, we object to this proposal.

END OF DOCUMENT

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(Enclosed Documents)

Business Report

(From April 1, 2018 to March 31, 2019)

(1) Business Overview

We are a global, values-based, R&D-driven, biopharmaceutical company with an innovative portfolio, engaged primarily in the research, development, production and marketing of pharmaceutical products. We have a geographically diversified global business base operating in approximately 80 countries, and our prescription drugs are marketed in approximately 100 countries, which are recognized brands in major countries worldwide.

We have grown both organically and through acquisition, completing multiple transactions that have brought growth to our areas of therapeutic, geographic, and pipeline focus; especially through the acquisition of Shire plc (“Shire”) in January 2019 for 6.2 trillion JPY. The acquisition of Shire strengthened our presence in GI and neuroscience, while providing us with a leading position in rare diseases and plasma derived therapies. It also enhanced our R&D engine creating a highly complementary, robust, modality-diverse pipeline. Commercially, the acquisition significantly strengthened our presence in the United States.

We are focused on four core therapeutic areas of oncology, gastroenterology, rare diseases, neuroscience along with targeted R&D investments in plasma-derived therapies and vaccines.

Our business and results of operations are impacted by many factors, including acquisitions and divestitures, changes in the global pharmaceutical industry, and other economic conditions. Examples of these factors include, but are not limited to:

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(2) Business Performance for Fiscal 2018

(i) Consolidated Financial Results (April 1 to March 31, 2019)

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Fiscal Year Ended March 31, 2019 compared with the Fiscal Year Ended March 31, 2018

The consolidated financial results for the fiscal year ended March 31, 2019 include the impact of acquisition of Shire and Shire operations for the period from January 8 to March 31, 2019, which significantly impacted on our results of operation. The following summarizes the impact on our results of operations in the year end March 31, 2019 and on the change in our results between years.

Revenue. Revenue increased 326.7 billion JPY, or 18.5%, to 2,097.2 billion JPY for the fiscal year ended March 31, 2019, including 309.2 billion JPY resulting from the Shire Acquisition.

The remaining increase of 17.5 billion JPY, or 1.0%, results from the continued expansion from three business areas (Gastroenterology, Oncology, and Neuroscience), which was partially offset by the divestitures and the unfavorable impact of foreign currency movements. Change in revenue in the three core business areas was primarily attributable to the following products:

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Sales of TAKECAB (for acid-related diseases) were 58.2 billion JPY in the fiscal year ended March 31, 2019, an increase of 9.8 billion JPY, or 20.1%, versus the previous year. The increase was driven by the expansion of new prescriptions in the Japanese market due to TAKECAB’s efficacy in reflux esophagitis and the prevention of recurrence of gastric ulcers during low-dose aspirin administration.

The decrease in revenue resulting from divestitures was primarily due to a 18.7 billion JPY decrease resulting from sale of seven long-listed products in Japan to Teva Takeda Yakuhin Ltd. in May 2017, 11.6 billion JPY decrease from the disposition of Guangdong Techpool Bio-Pharma Co in May 2018, and a decrease of 11.0 billion JPY from terminating Takeda’s co-promotion and distribution of Xeljanz in Japan in March 2018.

Shire contributed 309.2 billion JPY to our revenue from the date of acquisition. As part of the integration, this included the application of Takeda’s distribution channel policies to Shire’s portfolio, and a one-time effect resulted in significantly lower days-on-hand of commercial product at wholesalers. Days-on-hand in commercial stock was decreased significantly across various products. The sales were primarily from the following products:

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We generated revenue from sales in the following geographies:

Cost of Sales. Cost of Sales increased 163.8 billion JPY, or 33.0%, to 659.7 billion JPY for the fiscal year ended March 31, 2019. This includes 101.6 billion JPY related to the sale of Shire products and the impact of purchase price allocation of a 81.7 billion JPY mainly due to non-cash charge from the unwinding of the fair value step up on the inventory from the Shire Acquisition. This increase was offset by a decrease in remaining Cost of Sales 19.6 billion JPY, or 3.9%, primarily due to a more favorable product mix.

Selling, General and Administrative (SG&A) expenses. SG&A expenses increased 89.5 billion JPY, or 14.2%, to 717.6 billion JPY for the fiscal year ended March 31, 2019, primarily due to acquisition of Shire’s operations in our results of 98.5 billion JPY and related acquisition costs of 23.8 billion JPY. This increase was partially offset by a decrease of remaining SG&A expenses of 33.4 billion JPY due to a favorable impact of the Global Opex Initiative as well as lower long-term share-based incentive payments to management.

Research and Development (R&D) expenses. R&D expenses increased 42.9 billion JPY, or 13.2%, to 368.3 billion JPY for the fiscal year ended March 31, 2019, primarily resulting from the acquisition of Shire. The remainder of our R&D expenses remained steady compared to the previous year.

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Amortization and Impairment Losses on Intangible Assets Associated with Products. Amortization and Impairment Losses on Intangible Assets Associated with Products increased by 81.2 billion JPY, or 66.5%, to 203.4 billion JPY for the fiscal year ended March 31, 2019. This represents an increase of 99.2 billion JPY related to amortization of intangible assets recorded in the Shire Acquisition and a 22.6 billion reversal of the COLCRYS impairment recorded in the previous year. This increase was offset by lower amortization expense of 36.7 billion JPY, which related to the VELCADE intangible asset fully amortized within the previous year.

Other Operating Income. Other Operating Income decreased 9.5 billion JPY, or 5.6%, to 159.9 billion JPY for the fiscal year ended March 31, 2019. The decrease was primarily due to the net impact of a 106.3 billion JPY gain on the sale of Wako Pure Chemical Industries, Ltd. recorded in the previous year, whereas we recorded a 50.3 billion gain on sale of Property, Plant & Equipment and Investment Property including Takeda’s old headquarter building in Tokyo as well as a 38.2 billion JPY gain on sale of shares of the subsidiary, to which respective real estate businesses were transferred in the current year.

Other Operating Expenses. Other Operating Expenses decreased 23.4 billion JPY, or 18.5%, to 103.2 billion JPY for the fiscal year ended March 31, 2019, which was a decrease of 88.0 billion JPY partially offset by 59.6 billion JPY of Shire integration costs. The decrease was primarily due to a decrease of 22.8 billion JPY in restructuring expense such as R&D transformation costs, and other costs incurred in the prior year that did not reoccur in the current fiscal year such as a 41.5 billion JPY loss on the liquidation of a foreign subsidiary.

Operating Profit. As a result of the above factors, Operating Profit decreased by 36.8 billion JPY, or 15.2%, to 205.0 billion JPY for the fiscal year ended March 31, 2019.

Net Financial Income / (Expense). Net Financial Expense was a 66.4 billion JPY in the current year, an increase of 74.1 billion JPY compared to the previous year, which includes 41.3 billion JPY mainly related to interest on borrowings used to partially fund the Shire Acquisition. The remaining increase is primarily due to the exclusion of a 30.4 billion JPY gain from the adoption of a new accounting standard related to accounting for equity securities that was recorded in the prior year.

Shares of Loss of Associates Accounted for Using the Equity Method. Shares of Loss of Associates Accounted for Using the Equity Method were 43.6 billion JPY, an increase of 11.4 billion JPY from the previous year. This primarily relates to Takeda’s share of an impairment charge recognized by Teva Takeda Pharma Ltd. Teva Takeda Pharma Ltd. operates a business of long-listed products and generics, and conducted a revaluation of its assets in response to changes in the business environment.

Income Tax expenses. Income Tax Expenses decreased 44.6 billion JPY, or -146.3% from 30.5 billion JPY for the fiscal year ended March 31, 2018 to tax benefit of 14.1 billion JPY for the fiscal year ended March 31, 2019. This decrease was mainly due to tax benefit of 58.7 billion JPY from the Shire acquisition. Excluding the Shire acquisition impact, the remaining Income Tax Expenses increased 14.1 billion JPY mainly due to an increase in Profit Before Tax, as well as the impacts from the enactment of the Tax Cuts and Jobs Act (Tax Reform) in the U.S. in the previous year. These factors were partially offset by capital loss related to restructuring of subsidiaries in the current year.

Net Profit for the Year. Net Profit for the Year decreased 86.5 billion JPY, or 46.3%, to 100.2 billion JPY for the fiscal year ended March 31, 2019.

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(ii) Underlying Growth (April 1, 2018 to March 31, 2019)

Takeda uses the concept of “Underlying Growth” for internal planning and performance evaluation purposes. For the year ended March 31, 2019, the impact of Shire acquisition has been excluded from our Underlying measures to allow comparison to prior year Underlying measures.

Underlying Growth compares two periods (quarters or years) of financial results under a common basis and is used by management to assess the business. These financial results are calculated on a constant currency basis and excludes the impacts of divestitures and other amounts that are unusual, non-recurring items or unrelated to our ongoing operations. Although these are not measures defined by IFRS, Takeda believes Underlying Growth is useful to investors as it provides a consistent measure of our performance.

Takeda uses “Underlying Revenue⁽¹⁾ Growth”, “Underlying Core Earnings⁽²⁾ Growth”, and “Underlying Core EPS⁽³⁾ Growth” as key financial metrics.

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Underlying Revenue. Legacy Takeda Underlying Revenue growth was +5.3% compared to the same period of the previous year, driven by the strong performance of Takeda’s Growth Drivers and more specifically products such as ENTYVIO (for ulcerative colitis and Crohn’s disease) +34.8%, NINLARO (for multiple myeloma) +36.1%, ICLUSIG (for leukemia) +24.6%, TAKECAB (for acid-related diseases) +20.1% and TRINTELLIX (for major depressive disorder) +19.4%. The Underlying Revenue of Takeda’s Growth Drivers grew by +11.1%, which is 63.3% of total revenue.

Underlying Core Earnings. Legacy Takeda Underlying Core Earnings growth was +38.7%, reflecting strong Underlying Revenue growth and the positive impact of the Global Opex Initiative ⁽⁴⁾. Underlying Cost of Sales as a percentage of sales improved by +1.4pp driven by a more favorable sales mix. Underlying Operating Expenses as a percentage of sales improved by +3.9pp driven by the impact of the Global Opex Initiative. The combination of the above factors led to an improvement in the Core Earnings Margin by 5.4pp to 22.3%.

Underlying Core EPS. Legacy Takeda Underlying Core EPS growth was +29.0% compared to the same period of the previous year reflecting strong Underlying Core Earnings growth of +38.7%.

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(iii) Activities and Results of Research & Development

Research and development expenses for the period ending March 31, 2019 were 368.3 billion JPY.

Takeda initiated a five year R&D Transformation program in July 2016, to re-invigorate the pipeline and build an agile, global R&D organization driven by innovative science. A significant component of the change has been an intensive focus in the following three key areas:

Upon completion of the Shire Acquisition, Takeda now has focused R&D efforts in four therapeutic areas (Oncology, Gastroenterology, Rare Diseases, and Neuroscience) and two targeted R&D Business Units (Plasma Derived Therapies and Vaccines).

Major progress on R&D events and business development contracts occurring within the period ending March 31 2019, including events and development activities related to Legacy Shire’s products and pipeline for periods after the Shire Acquisition, are listed as follows:

R&D pipeline

Oncology

In oncology, Takeda endeavors to deliver novel medicines to patients with cancer worldwide through the commitment to breakthrough innovation, and a passion for improving the lives of patients. Takeda focuses in 3 key areas in oncology; (1) building on the foundational expertise in hematologic malignancies through continued investment in lifecycle management programs for marketed products NINLARO, ADCETRIS, and ICLUSIG, as well as in pipeline assets in Multiple Myeloma, Acute Myeloid Leukemia, Myelodysplastic Syndromes, and other blood cancers; (2) further developing its portfolio in lung cancer; and (3) pursuing novel immuno-oncology targets and next-generation platforms with external partners as well as exploring innovative cell therapies.

[NINLARO/Generic name: ixazomib]

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[ALUNBRIG/Generic name: brigatinib]

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[Generic name: cabozantinib]

Gastroenterology

In gastroenterology (GI), Takeda is focused on delivering innovative, life-changing therapeutics for patients with GI and liver diseases. Takeda is expanding its position in specialty GI with ENTYVIO and progressing a pipeline built through partnerships that are exploring opportunities in motility disorders, celiac disease, liver disease, and the microbiome.

[ENTYVIO/Generic name: vedolizumab]

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Rare Diseases

Takeda added Rare Diseases to its therapeutic area focus after the acquisition of Shire on January 8, 2019, focusing on 3 key areas of deep Shire expertise: (1) Rare Immunology (e.g. Hereditary Angioedema (HAE)), through the recent launch of TAKHZYRO to transform the treatment paradigm; (2) Rare Hematology; with the broadest portfolio across its competitors in Hematology and (3) Rare Metabolic diseases.

[NATPARA/Generic name: Parathyroid hormone]

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Neuroscience

In neuroscience, Takeda aims to bring innovative medicines to patients suffering from neurologic and psychiatric diseases for whom there are no treatments available. Takeda is expanding its presence in psychiatric diseases through continued investment in Trintellix for Major Depressive Disorder, and the Attention Deficit Hyperactivity Disorder portfolio acquired from Shire. Takeda is also building its pipeline in neurology (e.g. Alzheimer’s disease, Parkinson’s disease) and selected rare CNS diseases through a combination of in-house expertise and collaboration with partners.

[TRINTELLIX/Generic name: vortioxetine]

[VYVANSE/Generic name: lisdexamfetamine]

Plasma Derived Therapies

Takeda added a new global business unit to focus on Plasma-Derived Therapies (PDT) after the acquisition of Shire on January 8, 2019. PDT will focus on meeting the growing demand for plasma-derived products, which are essential for effectively treating patients with a variety of rare, life-threatening, chronic and genetic diseases across the world.

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[FLEXBUMIN /Generic name: Albumin (Human)]

Vaccine

In vaccines, Takeda is applying innovation to tackle some of the world’s most challenging infectious diseases such as dengue, zika, norovirus, and polio. To support the expansion of our pipeline and the development of our programs, we have entered partnerships with government organizations (in Japan, the U.S., and Singapore) and leading global institutions, such as the Bill & Melinda Gates Foundation. Such partnerships have been essential towards building the critical capabilities necessary to deliver on our programs and realize their full potential.

Building a sustainable research platform / Enhancing R&D collaboration

Takeda has successfully built a distinct research and development strategy based on therapeutic area focus, a robust research engine, and a comprehensive, differentiated partnership model of collaborations with academia, biotech firms and startups. The research and development program aims to leverage a combination of internal and external expertise to deliver a sustainable pipeline.

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(3) Facility Investment (Tangible assets) / Fund Procurement

The total amount of investment in tangible assets during the year was 188.4 billion JPY mainly for expansion and renewal of manufacturing facilities as well as enhancement of the headquarters function and R&D facilities.

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As regards fund procurement, in order to finance funds necessary for the Shire acquisition, Takeda issued unsecured US dollar dominated senior notes and unsecured Euro dominated senior notes and financed 1,580.4 billion JPY in November, 2018. In addition, on January, 2019, Takeda drew down 1,715.5 billion JPY by exercising the Term Loan Credit Agreement executed on June, 2018, Senior Short Term Loan Facility Agreement executed on October, 2018, and Loan Agreement with the Japan Bank for International Cooperation executed on December, 2018. As a result, the consolidated outstanding balances of bonds and loans as of the end of March 2019 were 3,196.4 billion JPY and 2,554.6 billion JPY respectively.

(4) Issues for the Company to Address

This discussion and analysis contains forward-looking statements based on the current assumptions as of the fiscal year ended March 31, 2019.

Takeda’s stated mission is to “strive towards Better Health and Brighter Future for people worldwide through leading innovation in medicine.” Our culture is based on the achievement of this mission by acting with Integrity, Fairness, Honesty, and Perseverance and prioritizing the Patient (putting the patient at the center), Trust (building trust with society), Reputation (reinforcing our reputation), and Business (developing the business).

Over the past four years, Takeda has been on a transformation journey, focused on becoming an agile, research and development (R&D) driven, global biopharmaceutical company that is well positioned to deliver innovative medicines and transformative care to patients around the world. Takeda has continued to strengthen its reputation through its products and innovation, while remaining true to its values.

Takeda has a strong track record of cross-border merger and acquisition activities and post-acquisition integration, including the acquisition of TiGenix NV in 2018, ARIAD Pharmaceuticals in 2017, Nycomed in 2011 and Millennium Pharmaceuticals in 2008.

Most recently, in January 2019, we completed our acquisition of Shire plc. With the acquisition of Shire, we have taken the next major step in our transformation into a global, values-based, R&D driven biopharmaceutical company, with an attractive geographic footprint. The Shire acquisition strengthens Takeda’s presence in gastroenterology (GI) and neuroscience, which are two of its three core therapeutic areas, and provides leading positions in rare diseases and plasma-derived therapies. It also creates a highly complementary, robust, modality-diverse pipeline and a strengthened R&D engine focused on innovation. The Shire acquisition delivers compelling financial benefits for the combined group, enhancing Takeda’s cash flow profile, with management committed to delivering substantial synergies and generating returns for shareholders.

Takeda’s management team is experienced and diverse and has a proven track record of executing complex business integrations and large-scale transformations. Takeda is dedicated to carrying out integration efforts in a manner consistent with Takeda’s core values.

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The following three clear strategic priorities are set to drive sustainable mid- to long-term growth of Takeda.

Focus on five key business areas: GI, rare diseases, plasma-derived therapies, oncology, and neuroscience.

Strengthen the R&D engine based on the therapeutic area focus, a leading partnership model, and patient-centric, science-driven culture of innovation. In particular, we focus our research and development efforts on our four key therapeutic areas: Oncology, GI, rare diseases, neuroscience, plus plasma derived therapies and vaccines, and we continue to transform our research and development structure. In order to deliver values in areas of high unmet medical needs, we strive to progress our pipelines with the focus on innovative medicines.

Takeda’s financial strength involves a focus on driving margin expansion in mid-to long-term and generating cash flow to invest in the business, de-leverage and return cash to shareholders. We also continue selected disposal of non-core assets to generate cash in order to accelerate the pace of deleveraging.

The acquisition of Shire has expanded our geographic footprint, especially in the United States, an important and innovation-driven market. We have organized our operations into four regions: United States, Japan, Europe & Canada, and a Growth and Emerging Market region comprising China, Latin America, Middle East, Asia Pacific, Russia and the Commonwealth of Independent States in order to manage the execution of our strategy in each region. The execution of our integration plan is underway and we expect the integration will have relatively minimal disruption on the business and our pipeline due to the strong strategic and geographic fit of the two companies. Throughout our integration we will continue to follow our three guiding principles: (i) Patient-Centric (developing more innovative medicines supported by services and support capabilities), (ii) Agile & Simple (minimizing complexity and empowering local leaders to make local decisions), and (iii) Lean & Focused (concentrating our efforts on the five key business areas).

Basic Policy for Profit Distribution

Takeda’s priorities for capital allocation are as follows:

De-leverage rapidly

Invest in growth drivers

Shareholder returns

Dividend

Takeda is strongly committed to shareholder returns with the dividend as a key component.

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Financial Forecast for Fiscal 2019

FY2019 Reported Forecast