Tobu Railway : CORPORATE GOVERNANCE REPORT 2021/11/24

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: November 24, 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

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 the residents with comfortable lifestyle.
   Tobu Group will fulfill its corporate social responsibility through achieving sustainable growth along

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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] Updated

[Applicable code]

These are stated based on the Code following the revisions in June 2021.

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

[Applicable code]

These are stated based on the Code following the revisions in June 2021.

[Principle 1-4 Strategic Shareholdings]

The Company retains strategic shareholdings 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 shareholdings 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 shareholdings, 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 shareholdings 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 shareholdings are exercised based on the consideration on 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.

[Principle 1-7 Related Party Transactions]

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.

[Supplementary Principle 2-4 (1) Ensuring Diversity in the Promotion, etc. of Core Human Resources]

In order for the Tobu Group to achieve sustainable growth, it is necessary to enhance the creativity of the Group and create new value and business opportunities by developing and promoting human resources with diverse knowledge and values, and to this end, we are promoting diversity, including encouraging women to play an active role.

We are promoting female Executive Officers through internal promotions in regard to the appointment of managerial positions that play a central role in management.

Going forward, we aim to further increase the ratio of females among candidates for managerial positions (assistants to Managers) by 50% from the current level and increase the ratio of females among new graduate hires to around 50% by fiscal 2025, in order to improve the ratio of females in managerial positions.

The Company recruits foreign nationals and encourages them to play an active role in order to provide a comprehensive response to measures aimed at foreign tourists visiting Japan in our Tourism business.

We are promoting mid-career hires to Executive Officer positions as management personnel capable of responding to drastic changes in the business environment and creating business.

In addition to further strengthening the promotion of diversity, including encouraging women to play an active role, we are striving to develop human resources in order to ensure diversity through measures such as providing opportunities for creative employees to grow, and drawing on the skills and capabilities of diverse employees to the utmost.

Furthermore, we are promoting health management so that employees can engage in business activities in good health and with vitality, and we are striving to improve productivity and secure human resources by improving the internal environment, including by enhancing the system to support employees in balancing work with childcare and nursing care activities.

Our basic views on human resources, and support, etc. for active participation of diverse human resource and diverse workstyles are disclosed on the Company's website and in other publications.

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[Principle 2-6 Roles of Corporate Pension Funds as Asset Owners]

In order to ensure constant pension payments to each participant in the years to come, the Company has developed the "Basic Policy for Pension Asset Management," which shall serve as the basis for managing and investing pension assets.

For the investment of pension assets, the Company holds the "Asset Management Committee" in which the Executive Officers in charge of the Finance and Accounting Department and Human Resources Department, along with the General Managers of these Departments serve as Committee members, in order to ensure the safe and efficient management of pension assets. This Committee develops and reviews basic asset management policies, as well as strategic asset allocation (strategic asset mix), while evaluating, reviewing and monitoring external asset managers. In each Committee meeting, minutes are prepared to disclose the proceedings and results of the meeting. The secretariat of the Asset Management Committee is staffed with adequately qualified personnel from the Finance and Accounting Department, while the Human Resources Department serves as an observer.

The activities of the "Asset Management Committee" are reported to the "Governance Committee," which is comprised of Representative Directors, Outside Directors and Audit & Supervisory Board Members for review and evaluation.

[Principle 3-1 Full Disclosure]

1. The mission of the Company (management philosophy, etc.), management strategies and management plan These are stated in "I. 1. Basic Views" of this report.
2. Basic views and policy on corporate governance These are stated in "I. 1. Basic Views" of this report.
3. Policy and procedure for determining remuneration for Directors

The Company has established the "Nomination and Remuneration Committee," the majority of whose members and its chairperson are Independent Outside Directors, as an advisory body to the Board of Directors. The "Policy for Determining Remuneration for Directors" is determined by the Board of Directors after the Board of Directors consults with and receives a report from the Committee. The policy stipulates that remuneration for Directors shall be determined in consideration of factors such as each individual's position, responsibilities according to the duties they are in charge of, corporate and individual performance, management environment, and social conditions, with the objective of raising awareness of enhancing corporate value and social evaluation, as well as contributing to an increase in shareholder value. Remuneration for Directors is comprised of monetary compensation consisting of position-based basic remuneration and short-term incentive remuneration (individual performance-linked portion and the corporate performance-linked portion), and stock-based compensation as medium- to long-term incentive remuneration. Both types of remuneration are determined by Representative Director delegated through resolution of the Board of Directors, based on the results of consultations with, and reports from the Nomination and Remuneration Committee with regard to the appropriateness of remuneration levels.

1. Policy and procedure for nominating candidates for Directors and Audit & Supervisory Board Members 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 is comprised of 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, competence, gender, nationalities, career backgrounds, and age 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," comprised of two Independent Outside Directors and one Representative Director, as an advisory body to the Board of Directors. The chair

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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 gender, nationalities, career backgrounds and age of the Board of Directors as a whole, and report the results thereof to the Board of Directors.

(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. Explanation about the nomination, election and removal of individual Directors and the Audit & Supervisory Board Members
   The reasons for the election of each candidate for Director or Audit & Supervisory Board Member are presented 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.

[Supplementary Principle 3-1 (3) Sustainability Initiatives, etc.]

The Company discloses the Group's approach to sustainability and specific initiatives on the Company's website.

The Company discloses its management strategy for sustainability, which effectively utilizes accumulated equity capital, and also discloses and provides specific information on the distribution of management resources, including investment in human capital and intellectual property, in a manner that is easy to understand in order to contribute to the sustainable growth of the Company, while keeping in mind consistency with our management strategy and management issues. In addition, the Board of Directors supervises the effectiveness of this management strategy.

[Supplementary Principle 4-1 (1) Scope of Matters Delegated to Management]

For the purpose of making decisions on the important management-related matters as well as of supervising business execution by individual Directors, a framework has been established in which the Board of Directors prescribe in the "matters subject to deliberation at the Board of Directors" matters including formulation of medium- to long-term business plan and decisions on important businesses, along with the matters stipulated under laws and regulations, and the Articles of Incorporation, while the Management Meeting deliberate on decision-making in the course of business execution, etc., delegated from the Board of Directors, and the Executive Officers execute business under the command and supervision of the Representative Directors based on the "Regulation on the Execution of Duties."

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