Keikyu : Corporate Governance

as part of its corporate sustainability strategy set forth in the Keikyu Group Integrated Management Plan, the Company has set the indicators (and targets) of the paternity leave for men with children ratio (100% by the end of FY2025) and the female manager ratio (10% by the end of FY2025). Aside from the above, the Company will ensure the appropriate protection, management and use of its intellectual property and work to prevent damage to the Group's brands.

For details regarding communication with employees, please refer to the Company's website (https://www.keikyu.co.jp/company/csr/employee.html).

[Supplementary Principle 4.2.2 Formulation of Basic Policies on Sustainability]

The Company has formulated the Keikyu Group CSR Vision and the CSR Policy, and aims to further improve value in areas along its railway lines by contributing to solving social issues through the Company's business activities to address the various needs of society. In addition, the Company has set forth a corporate sustainability strategy as one of the strategies in the Keikyu Group Integrated Management Plan and positioned ESG initiatives as a base of management. Furthermore, the Company has designated important sustainability issues for the Company and formulated the value creation model, which is aimed at enhancing corporate value, and disclosed these in the Keikyu Group Integrated Report. Going forward, in order to promote initiatives for sustainability, the Company will establish a system for promoting sustainability and engage in policy creation, etc.

[Disclosure Based on the Principles of Japan's Corporate Governance Code] Update

As well as being discussed in this report, the Company's corporate governance initiatives are disclosed in materials available on the Company's website, including the Corporate Governance Guidelines, the notice of the General Meeting of Shareholders, the Securities Report and the Keikyu Group Integrated Report, for your reference.

Details of disclosure items based on the principles of Japan's Corporate Governance Code are as follows:

[Principle 1.4 Cross-Shareholdings] (Policy on Cross-Shareholdings)

The Company maintains cross-shareholdings in cases where there is a meaningful argument to be made with regard to business cooperation, the building and strengthening of collaborative relationships, or the Company's business strategy, that such cross-shareholdings can contribute to achieving sustainable growth in the business and raising corporate value over the medium- to long-term. In situations where the importance of holding stock has become diluted, cross-shareholding will be gradually reduced. Every year, the rationale for holding each stock is subject to both quantitative and qualitative verification at meetings of the Board of Directors, resulting in an integrated judgment as to whether to maintain a particular cross-shareholding, and as to the number of shares that should be held.

(Standards for Exercising Voting Rights with Regard to Cross-Shareholdings)

The Company exercises its voting rights with regard to cross-shareholdings having first considered, based on internal standards, the business situation of each company, whether there has been major misconduct, and, if necessary, having engaged in dialogue with the issuing company. The details of the proposals are then scrutinized to ascertain whether they contribute to raising the corporate value and shareholder value of the Company over the medium- to long-term, before a comprehensive judgment is formed on their compatibility with the purpose of cross-shareholding.

[Principle 1.7 Related Party Transactions]

Based on the "Accounting Standard for Related Party Disclosures" and the "Guidance on Accounting Standard for Related Party Disclosures," the Company confirms whether transactions with related parties exist, evaluates the importance of any such transactions, and, in the case of transactions that are subject to disclosure, discloses them in materials such as its Securities Report.

In accordance with Articles 356 and 365 of the Companies Act, in the event that a Director intends to conduct a transaction with a competitor, or a transaction that involves a conflict of interest, permission for the content of the transaction shall be obtained in advance from the Board of Directors, and after the transaction in question has been completed, the results shall be reported to the Board of Directors, and disclosed in the notice of a General Meeting of Shareholders.

[Supplementary Principle 2.4.1 Ensuring Diversity When Promoting Core Personnel, Etc.]

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Aside from establishing the indicator (and setting the target) of female manager ratio (10% by the end of FY2025), the Company is actively working to facilitate mid-career hiring in order to address the transforming business portfolio, and acquire diverse viewpoints and values, and mid-career hires are being given similar career path opportunities to management positions as those followed by new graduate hires. As a result of reforms made to the personnel system from 2018, career paths are being established for personnel with specialist knowledge and practical experience in various fields, and a wide range of personnel are being accepted through mid-career hiring.

Moreover, regarding foreign-national employees, the Company practices fair hiring selection unprejudiced by nationality. After joining the Company, the same career paths are established irrespective of nationality, and the Company has not set objectives regarding the placement for core personnel positions specifically for foreign nationals. In the Keikyu Group, many foreign nationals are employed to play active roles at the front line of our service provision.

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

In terms of the operational structure for corporate pension, as for personnel, the person in charge of corporate pension administration attends seminars, training sessions, etc., in order to improve their specialist knowledge in relation to corporate pensions, and as for operations, a Pension Asset Management Committee has been established, composed of members from the Personnel Department and Management Strategy Department, which provides a system that enables monitoring of the state of pension asset management and of the stewardship activities of the managing institution.

Moreover, the Pension Asset Management Committee includes members selected from among labor union executives, such that the opinions of employees are incorporated in asset management, and so that conflicts of interest between the Company and employees (the beneficiaries) come under appropriate supervision.

[Principle 3.1 Full Disclosure]

(1) Company objectives (e.g., business principles), business strategies and business plans

In order to achieve sustainable growth and facilitate increase in corporate value over the medium- to long- term, the Company formulates Long-Term Business Strategy, and Medium-Term Business Plan and Long- Term Vision based on the Group Philosophy, and works to enhance provision of information by disclosing these on the Company's website and elsewhere.

For details of the Keikyu Group Integrated Management Plan, please refer to the Company's website (https://www.keikyu.co.jp/ir/policy/vision/index.html).

(2) Basic views and policies on corporate governance

As a corporate entity responsible for a service that is to maintain lifeline, the Group works to ensure the highest level of safety in all aspects of its business, while seeking appropriate cooperation with stakeholders such as customers, shareholders, investors, local communities, suppliers, employees, and society as a whole, as well as working in harmony with the environment. These measures are aimed at achieving sustainable growth and at raising corporate value over the medium- to long-term, in pursuit of which goals the Group continues to implement initiatives to further strengthen corporate governance, based on the Group Philosophy and the Long-Term Vision.

1. Policies and procedures for the Board of Directors when determining remuneration for Directors With regard to remuneration plans, the Company has laid down a "Policy for Determining the Content of Remuneration, etc. for Individual Directors and Executive Officers."
   Taking into consideration the unique nature of the Group's operations, remuneration for Director is determined weighing in, with emphasis, the Director's contribution in raising corporate value and operating performance over the medium- to long-term, and to having shared values with shareholders, in addition to the short-term operating performance.
   Proposals for the remuneration of Directors are prepared by the Representative Director and President, and after undergoing deliberation by the Nomination and Remuneration Advisory Committee, the amount of remuneration is determined by the Board of Directors.
   The contents of the policy for determining remuneration are described in Policy for Determining Remuneration Amounts or Calculation Methods Thereof under [Director Remuneration] in II. 1. Organizational Composition and Operation of this report.

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1. Policies and procedures for the Board of Directors when appointing and dismissing Directors and when nominating candidates for Director and Audit & Supervisory Board Member

When nominating candidates for Director, the Board of Directors takes into account the experience and skills of the individuals in question, and nominates individuals who can, not only as an operative member, recognize the changes in the business conditions in which the Group operates and consider its corporate social responsibility, as well as verify and determine the Group's growth strategy, properly supervise the execution of that strategy and increase the corporate value of the Group over the medium- to long-term. In addition, in cases where the Board of Directors determines that a Director has infringed laws and regulations, the Articles of Incorporation, or internal rules of the Company, or otherwise failed to fulfill the role and responsibilities required of a Director, dismissal of the individual in question shall be proposed at the General Meeting of Shareholders.

Proposals for the election or dismissal of Directors placed on the agenda of a General Meeting of Shareholders shall be prepared by the Representative Director and President in accordance with the "Criteria for Electing and Dismissing Directors" prescribed by the Board of Directors, and determined by the Board of Directors after undergoing deliberation by the Nomination and Remuneration Advisory Committee.

When nominating candidates for Audit & Supervisory Board Member, the Board of Directors nominates individuals who have the knowledge, experience and skills to audit the performance of duties by Directors appropriately, fairly and efficiently.

Proposals or the election or dismissal of Audit & Supervisory Board Members on the agenda of a General Meeting of Shareholders shall be prepared by the Representative Director and President, and determined by the Board of Directors after obtaining approval of the Audit & Supervisory Board.

(5) Explanation of the individual appointment and dismissal of Directors and the individual nomination of candidates for Director or Audit & Supervisory Board Member by the Board of Directors, based on (4) above

Individual reasons for the appointment or dismissal of Directors and nomination of candidates for Director or Audit & Supervisory Board Member are disclosed in the notice of the General Meeting of Shareholders.

[Supplementary Principle 4.1.1 Determination and Disclosure of Scope of Matters Delegated to Management] In order to enable more in-depth discussions at meetings of the Board of Directors that further facilitate the development of the Company, matters not specified in the "Board of Directors Rules" as issues to be resolved by the Board of Directors are discussed and decided by the Group Management Committee so as to speed up decision-making.

[Principle 4.8 Effective Use of Independent Outside Directors]

The Board of Directors shall elect as Independent Outside Directors a number of expert individuals with diverse experience and broad insight, to comprise at least one-third of the Directors.

The Board of Directors receives useful advice derived from the specialized and wide-ranging viewpoints of the Independent Outside Directors, and as well as incorporating this into the management of the Group, it requests suitable opinions and counsel in relation to the performance of duties by Directors, so as to strengthen the supervision of management.

[Principle 4.9 Independence Standards for Independent Outside Directors]

When nominating candidates for Independent Outside Director and Independent Outside Audit & Supervisory Board Member, in order to effectively ensure the candidates' independence, the Board of Directors nominates candidates that fulfill the Company's "Independence Criteria for Outside Officers," prescribed by the Board of Directors, which are based on the independence criteria laid down by financial instruments exchanges.

[Supplementary Principle 4.11.1 Views on Total Balance of Knowledge, Diversity and Size of the Board of Directors]

In accordance with the prescriptions of the Articles of Incorporation, the Board of Directors shall consist of up to 19 individuals, with a composition that takes into account the balance of knowledge, experience, ability and area of expertise, as well as diversity in gender and other aspects, for the Board of Directors as a whole.

The Company shall in principle select at least two individuals from among the Inside Directors to be Representative Directors, and shall elect a number of Independent Outside Directors that comprise at least one-third of the Directors in order to ensure a highly effective management supervision function.

The Company determines the required skills (knowledge, experience, capabilities) of Directors based on the

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medium- to long-term management strategies and management issues. Inside Directors are required to have skills relating to business divisions or administrative divisions along with a deep understanding of the Company's business. Outside Directors, meanwhile, are required to have expertise, abundant experience and broad insight that can be applied to the supervision of business execution.

For a skill matrix showing the major expertise, experience and insights for each Director, Audit & Supervisory Board Member and Executive Officer, please refer to the Company's website (https://www.keikyu.co.jp/ir/policy/governance.html) and the "Skill Matrix" at the end of this report.

[Supplementary Principle 4.11.2 Concurrent Positions of Outside Officers]

Directors and Audit & Supervisory Board Members, including Independent Outside Directors and Independent Outside Audit & Supervisory Board Members, shall devote the time and effort necessary to appropriately fulfill their roles and responsibilities to perform the duties of Director and Audit & Supervisory Board Member. Concurrent positions shall be limited to a reasonable extent, with important concurrent positions being disclosed in notices of General Meeting of Shareholders, etc.

[Supplementary Principle 4.11.3 Analysis and Evaluation of the Effectiveness of the Board of Directors] (Outline)

In order to improve the effectiveness of the Board of Directors, each Director shall perform an annual assessment of the Board of Directors. Based on the results of this assessment, the issues raised shall be deliberated and utilized in the management of the Board of Directors going forward. In order to obtain straight and honest opinions from the interviewees, since FY2018, the task of collecting and tabulating the results of the questionnaire survey has been consigned to an external party.

(Overview of Results of FY2020 Effectiveness Evaluation)

In FY2020, each Director was aware that an increasing higher standard of corporate governance is being demanded from stakeholders, etc. and confirmed that the standards for evaluating effectiveness in the questionnaires they each completed are becoming more stringent. Furthermore, while examining for responses to issues confirmed in the FY2019 effectiveness evaluation, discussion on the importance of risk management was given greater attention at the Board of Directors meetings. As a result, a decision was made to revise the system for proposing agenda items for Board of Directors meetings and the composition and subject matter of proposals made to the Board of Directors in order to facilitate suitable operation of risk management. In future, it will be necessary to further enhance the system and its operation for examining the content and frequency of submitting items to the agenda in order to enable deeper discussion.

(Future Issues)

In addition to the issues already mentioned above, the following issues have been newly recognized from the FY2020 effectiveness evaluation.

・Narrow down the number of examination items.

・Enhance discussion on management plans, management risks and ESG.

・Active involvement in formulating and implementing the successor-development plan for CEO. ・Enhance monitoring function through construction and operation of internal control system.

・Strengthen cooperation between the Internal Audit Department and the Board of Directors.

The Board of Directors has confirmed that it will strive to maintain and improve the effectiveness of the Board of Directors by continuously working on these matters in the future.

[Supplementary Principle 4.14.2 Training Policy for Directors and Audit & Supervisory Board Members] In order to facilitate sustainable growth for the Group and increase its corporate value over the medium- to long-term, the Company implements training to assist in enhancing the skills of officers. The Company works to strengthen the managerial capabilities of Directors and Executive Officers through officer training which is also enlightened by the business environment and external affairs. In addition, Audit & Supervisory Board Members are active participants in external training events, etc., and work diligently to master the knowledge required to fulfill their responsibilities as Audit & Supervisory Board Members. Moreover, when Outside Directors and Outside Audit & Supervisory Board Members assume office, they are provided with summary information on the Group that covers its businesses, finances, and organization, in addition to which measures such as tours of Group facilities are taken as necessary, to further deepen their understanding of the Group.

[Principle 5.1 and Supplementary Principle 5.1.1 Policy for Constructive Dialogue with Shareholders] Management of the Company (including Outside Directors), beginning with the President, actively promotes

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