Tobu Railway : CORPORATE GOVERNANCE REPORT 2021/07/08

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

CORPORATE GOVERNANCE REPORT

TOBU RAILWAY CO., LTD.

Last Update: July 8, 2021

TOBU RAILWAY CO., LTD. Yoshizumi Nezu President and Representative Director

Contact: +81-3-5962-2067 Securities Code: 9001 https://www.tobu.co.jp

The corporate governance of TOBU RAILWAY CO., LTD. (the "Company") is described below.

1. Basic Views Updated

1. The mission of the Company (management philosophy, etc.), management strategies and management plan The Company has set out "Tobu Group management philosophy" and "Tobu Group management policy" as its mission (management philosophy, etc.). In addition, to realize the sustainable development of society and the Group as a corporate group indispensable for society, the Company has identified "materiality (key issues)" and discloses them together with the "value creation process" on the Company's website, etc. For fiscal 2021, the Company discloses its aims of securing consolidated recurring income and strengthening the management structure through reducing interest-bearing debt at the financial results briefing and on the Company's website, etc.

1. Tobu Group management philosophy
   Tobu Group laid down the concepts of "dedication," "enterprising spirit" and "affinity," as the corner stone for its management.
   Dedication:
   Tobu Group will contribute to materializing an affluent society, based on the profound awareness that all of its businesses are supported by society.
   Enterprising spirit:
   Tobu Group will keep challenging with pioneering spirit to break a pathway to a new era, through constant self-improvement without complacency.
   Affinity:
   Tobu Group will contribute to the evolution of society by promoting its business as well as the welfare of its employees, based on the concept of congeniality among people and harmony with environment.
2. Tobu Group management policy
   Tobu Group will operate diversified and composite businesses on the basis of safety and security, including "transportation," "leisure," "real estate" and "retail distribution", as a corporate group contributing to the development of the areas along its railway lines, through the businesses that closely support customers' daily lives.
   We will provide innovative and inventive services of high quality based on customer's viewpoint, thereby aiming to create attractive destinations full of energy along the Tobu lines, providing

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the residents with comfortable lifestyle.

Tobu Group will fulfill its corporate social responsibility through achieving sustainable growth along with local communities, as a corporate group that supports customers' lives by promoting eco-friendly management while constantly generating profit from its business operations.

Five items identified as materiality (key issues)

1. Sustainable development of local communities
2. Corporate governance contributing to creation of corporate value
3. Improvement of skills and capabilities of diverse employees
4. Reduction of environmental burden through further improvement of environmental advantage, etc.
5. Securing of safety and peace of mind, the backbone of all Group businesses

For details of Tobu Group's approach to sustainability, please refer to the "Tobu Group's approach to sustainability," disclosed on April 30, 2021.

1. Basic views and policy on corporate governance
   In order to earn trust of all its stakeholders including shareholders, and to ensure sustainable growth and enhancement of corporate value over medium to long-term, the Company believes that it is essential to establish fair and transparent management structure. We will further reinforce the Board of Directors, the Executive Officer system, and the Audit & Supervisory Board Members system, and actively make appropriate information disclosure on a timely basis. Furthermore, we will be committed to the enhancement of corporate governance, through conscientious corporate activities based on business ethics and compliance with laws and regulations.
   In addition, under the views mentioned above, the Company will comply with all of the principles set forth in the Corporate Governance Code, respecting the purpose and intention ingrained therein, in an effort to enhance its corporate value.
2. The Company has, based on the awareness about the support it receives from the stakeholders, as well as the appreciation that it is vital to establish and practice code of conduct for its officers and employees, etc., set out "Tobu Group Compliance Basic Policy" (http://www.tobu.co.jp/corporation/policy/) as follows.

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

The Company complies with all principles of the Corporate Governance Code.

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

1. The mission of the Company (management philosophy, etc.), management strategies and management plan (Principle 3-1(i))
   These are stated in "I. 1. Basic Views" of this report.
2. Basic views and policy on corporate governance (Principle 3-1(ii)) These are stated in "I. 1. Basic Views" of this report.
3. The Company has, based on the awareness about the support it receives from the stakeholders, as well as the appreciation that it is vital to establish and practice code of conduct for its officers and employees, etc., set out Tobu Group Compliance Basic Policy (http://www.tobu.co.jp/corporation/policy/) as follows (Principle 2-2).
4. The Company appreciates that it must take appropriate measures to gain the understanding and trust of shareholders who are the providers of capital, with a view to achieving sustainable growth and enhancement of corporate value over medium to long-term. For such purpose, we are engaged in constructive dialogue with shareholders/investors as follows, in order to promote the understanding among, and support from shareholders/investors, in addition to securing the rights and equal treatment of shareholders (Principle 5-1).
5. 1. Dialogue with shareholders/investors in general is promoted jointly by the Executive Officer in charge of General Affairs and Legal Department and the Executive Officer in charge of Finance and Accounting Department.
   2. To facilitate constructive dialogue with shareholders/investors, a framework has been established in which general affairs and legal division, finance and accounting division, corporate planning division, public relations division, etc. collaborate and share information.
   3. The Company is engaged in dialogue with shareholders through offering thorough explanation in response to queries from shareholders at the General Meeting of Shareholders, while organizing a tour of our business establishments for individual shareholders once a year, financial results briefings for institutional investors twice a year, and a tour of our business establishments along the Tobu railway lines also for institutional investors once a year. The Company posts on its corporate website, timely and as appropriate, IR information such as financial results and materials for timely disclosure, information for shareholders on the matters such as General Meeting of Shareholders and shareholder special benefits, and transmission of business information in the form of news release, in an effort to provide outgoing information flow as the basis for the dialogue with shareholders.
   4. As for dialogue with individual shareholders, staff in charge shall report on each dialogue to the Executive Officer in charge of General Affairs and Legal Department, which may, depending on the nature of dialogue, be shared among the management. Certain contents of the dialogue can also be reported to management as appropriate through a meeting body, etc. As for dialogue with institutional investors, implementation results of the financial results briefings for institutional investors shall also be reported to management through a meeting body, etc., while contents of individual interview with each institutional investor shall be reported, on a monthly basis, to management, Audit & Supervisory Board Members and the concerned division, in an effort to share information.
   5. To prevent leakage of insider information in the course of dialogue with shareholders and investors, we implement thorough management of and training on insider information. Moreover, we arrange "silent period" from the day after the closing date up to the announcement of the financial results, during which no comment shall be made in response to any inquiries, including interviews.

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1. Policy for strategic holdings and standards for exercise of voting rights thereof (Principle 1-4)
   The Company retains strategic holdings in comprehensive consideration of the smooth running of business through maintenance and reinforcement of relationships with business partners of the Company, and of synergy effects on the businesses of the Group. Our basic policy is to gradually reduce strategic holdings when they are no longer justified by an adequate rationale from a medium- to long-term perspective, based on the following verifications.
   Regarding each listed stock held as strategic holdings, the Board of Directors annually conducts careful examinations to check progress regarding the achievement of the initial objectives of the acquisition of such holdings, and to verify whether the benefits and risks associated with such holdings are in line with profitability based on capital costs, etc., considering whether the initial objectives, such as "maintenance and reinforcement of business transactions" and "synergy effects on the businesses of the Group" have been met as the primary criteria. The Board also verifies listed stock held as strategic holdings by comprehensively taking into account the economic rationality, necessity and future prospects associated with continuing such holdings from a medium- to long-term perspective.
   Voting rights for strategic holdings are exercised based on the consideration whether or not such exercise contributes to a medium- to long-term increase in the corporate value of both the Group and the investees. Thus, with respect to proposals that are likely to impair the increase in corporate value of the Group and the investees over the medium- to long-term, we shall conduct a careful review regarding the exercise of voting rights, based on dialogue with the investees.
2. Related Party Transactions (Principle 1-7)
   Competing transactions and conflict of interest transactions conducted by Directors shall, in accordance with the laws and regulations as well as internal rules, be subject to prior approval by, and post-transaction report about their outcome to, the Board of Directors. At present, there are no main shareholders holding 10% or more of the total number of voting rights of the Company. However, even when such shareholders exist, the Company shall conduct transactions appropriately and in a fair and transparent manner, so as not to harm the interest of the Company and the common interest of its shareholders.
3. The following is the outline of the framework of the Board of Directors and the Audit & Supervisory Board Members to realize its management philosophy.
4. 1. Principle for the balance of knowledge, experience and competence, as well as diversity and scale of the Board of Directors as a whole, and the policy and procedure for nominating candidates for Directors and the Audit & Supervisory Board Members (Supplementary Principle 4-11-1, Principle 3-1 (iv))
      The Company believes in "safety as the foundation of all businesses operated by the Tobu Group," and thus is aware that ensuring safety in all businesses including railway business which provides social infrastructure, is the basis for earning trust from stakeholders as well as for achieving sustainable growth into the future. On such basis, the Company believes that it is desirable to have the Board of Directors composed of Directors promoted internally, who are not only well acquainted with the characteristics of the Company business, but also familiar with the indirect divisions that support each business and its operation, along with Independent Outside Directors who can contribute to enhancing supervisory function of the Board, as well as to ensuring fairness and transparency of management, as part of an effort to increase its corporate value. Maximum number of Directors is set at 15 on a combined basis of Inside/Outside Directors. Currently, the Board of Directors comprises 12 Directors including four Independent Outside Directors who have a wealth of experience and insight as corporate executives and as outside directors of other listed companies, or as academics, having served important positions such as Commissioner General of National Police Agency, in an effort to attain a well-balanced mix of knowledge, experience and competence, as well as diversity of the Board.
      In order to strengthen the independence and objectivity of the functions of the Board of Directors, the Company has established the "Nomination and Remuneration Committee," comprising two Independent Outside Directors and one Representative Director, as an advisory body to the Board of Directors. The chair of the Committee is selected from among the Independent Outside Directors.
      The "Nomination and Remuneration Committee" shall review proposals for the nomination of candidates for Directors based on the Criteria for Nominating Candidates for Directors, etc., taking into consideration the balance between knowledge, experience and competence and the diversity of the Board of Directors as a whole, and report the results thereof to the Board of Directors.

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(Criteria for Nominating Candidates for Directors) Candidate for Inside Director

• Well acquainted with the characteristics of the Company's business, and familiar with the indirect divisions that support each business and its operation
• Possessing the personality, knowledge, experience and initiative that can lead and contribute to an increase in corporate value

Candidate for Outside Director

• Possessing a broad-based insight into management, and capable of providing opinions and advice regarding the business execution of the Directors from a standpoint that is independent from the management and from an objective point of view, thereby contributing to ensuring the efficiency and fairness of management
• Possessing a career background, experience and expertise that differs from those of the Directors elected from within the Company

The nomination of candidates for Directors shall be resolved by the Board of Directors, while respecting the content of the report obtained from the "Nomination and Remuneration Committee."

Any member of the "Nomination and Remuneration Committee" may convene the Committee meeting as necessary, in order to enable the Committee to deliberate whenever a Director is deemed to be inadequately performing his/her role, or to have failed to meet the Criteria for Nominating Candidates for Directors.

The nomination of candidates for Audit & Supervisory Board Members is proposed at the General Meeting of Shareholders, following the deliberation at the Board of Directors, subject to the consent of the Audit & Supervisory Board.

The election and removal of Executive Officers shall also be deliberated and resolved at the Board of Directors meetings, which are attended by outside officers including Independent Outside Directors.

In the event that an Executive Officer is found to have committed a fraudulent act, wrongdoing or breach of faith, or there are concerns over his/her suitability for the position, such Executive Officer shall be removed based on the resolution of the Board of Directors.

1. Independence Standard and Qualification for Independent Outside Directors (Principle 4-9)
   The Company elects as Independent Outside Directors persons with broad insight into management, who can contribute to ensuring the efficiency and fairness of management, through offering opinions and advice on Directors' business execution, from an objective point of view, being independent from the management of the Company.
   The standards for independence from the management are presented in "II. [Independent Directors/Audit & Supervisory Board Members] Matters relating to Independent Directors/Audit & Supervisory Board Members" of this report.
2. Explanation about the nomination, election and removal of individual Directors and the Audit & Supervisory Board Members, as well as the status of concurrent positions of officers (Principle 3-1(v), Supplementary Principle 4-11-2)
   The reasons for the election of each candidate for Director or Audit & Supervisory Board Member, as well as the status of their concurrent positions, are presented in the form of career summary, positions, significant concurrent positions, and reasons for nomination in the "Notice of the Annual General Meeting of Shareholders." The "Notice of the Annual General Meeting of Shareholders" is posted on the Company's website for your reference.
   We believe that the current number of their concurrent position is within a reasonable range, in view of their attendance to the Board of Directors meetings and the Audit & Supervisory Board meetings.
3. Policy for Training of Directors/Audit & Supervisory Board Members (Supplementary Principle 4-14-2)
   In order to help Directors/Audit & Supervisory Board Members to understand and carry out the roles and duties expected of them, the Company organizes lecture presentations as appropriate, while arranging for them to attend external seminars and symposiums, etc., if necessary, that can help them to carry out their duties, by actively providing support including payment of associated expenses.
   Newly appointed Directors/Audit & Supervisory Board Members shall be offered opportunities to have better understanding about the roles and duties expected of them and other relevant matters, while newly appointed Outside Directors/Outside Audit & Supervisory Board Members shall be offered opportunities to receive explanations about the corporate information including its management environment, etc.

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