Tokyo Electric Power : Corporate Governance Report

TRANSLATION

Please note that the following purports to be an accurate and complete translation of the original Japanese version prepared for the convenience of the Shareholders outside Japan. However, in the case of any discrepancy between the translation and the Japanese original, the latter shall prevail.

Corporate Governance Report

Last Updated: August 12, 2021

Tokyo Electric Power Company Holdings, Incorporated

Tomoaki Kobayakawa, President Contact: Shareholder & Investor Relations Group, Corporate Affairs & Legal Office [phone] Securities Code: 9501

https://www.tepco.co.jp/en/hd/

The corporate governance of Tokyo Electric Power Company Holdings, Incorporated (hereinafter, the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Attributes and Other Basic Information

1. Basic Views Updated

The Company is working to develop organizational structures and policies for thorough legal and ethical compliance, appropriate and prompt decision-making, efficient business execution, and enhanced auditing and supervisory functions. To further improve the objectivity and transparency of its management, the Company has adopted a "Company with Nominating Committee, etc." management structure, thereby stepping up the effort to secure solid corporate governance.

Moreover, having adopted a holding company system in April 2016, the Company is striving to further enhance its corporate value through the optimal allocation of management resources and a robust corporate governance system encompassing its entire group (hereinafter, the "Group").

Amidst these circumstances, the series of events regarding the Company's power stations have greatly reduced the trust of the local community and society at large. The Company takes these events seriously. Returning to the starting point of reflecting and learning from the lessons of the Fukushima Daiichi Nuclear Power Station accident, the Company will identify causes and work with the site as one to improve safety and work quality.

Furthermore, in light of diversifying social needs, the Company will conduct management with consideration of value creation for various stakeholders based on the following corporate philosophy revised in July 2021.

＜TEPCO Group Corporate Philosophy＞

【Mission】

Develop the future of energy Deliver a comfortable life

We commit to fulfilling our responsibilities to Fukushima.

We pursue expanding possibilities in the world of energy and deliver value beyond the expectations of individual customers.

【Vision】

We strive to earn the trust of our customers and partners.

We create value focusing on global carbon neutrality and regional disaster preparedness for a safe and sustainable society.

【Values】

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Top priority on safety／Fulfill our responsibilities／Customer-focused／Dare to innovate

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

The Company complies with every principle of Japan's Corporate Governance Code.

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

[Principle 1.4 Cross-Shareholdings]

The Company and its core operating companies* retain the minimal shareholdings necessary to improve corporate value, based on a comprehensive assessment of considerations that include whether such holdings are necessary for maintaining medium- to long-term partnerships in accordance with strategies for growth, as well as whether such holdings enable smooth execution of business of the Company and sustainable growth.

Regarding such matters as the rationale for retaining cross-shareholdings, all shares are examined individually by the Board of Directors on an annual basis, and shares of companies deemed unlikely to help improve corporate value from a medium- to long-term perspective are accordingly sold, taking into consideration share prices, market trends and other such factors.

Moreover, with respect to voting rights exercised regarding cross-shareholdings, the Company takes a comprehensive approach in determining approval or disapproval of proposals upon having verified pertinent details through dialogue with respective companies and other such means, from the perspective of improving corporate value and maximizing shareholder returns. A suitable authorized person then sanctions the action.

• Core operating companies: TEPCO Fuel & Power, Incorporated, TEPCO Power Grid, Incorporated, TEPCO Energy Partner, Incorporated and TEPCO Renewable Power, Incorporated

[Principle 1.7 Related Party Transactions]

The Company has established the following operational framework to ensure that transactions engaged in with Directors, Executive Officers, major shareholders or others (i.e., related party transactions) do not harm the interests of the Company or the common interests of its shareholders.

When engaging in transactions involving conflict of interest with Directors and Executive Officers, approval of the Board of Directors must be obtained in accordance with the rules of the Board of Directors, and material facts regarding respective transactions must be reported to the Board of Directors without delay subsequent to such transactions.

Approval of the Board of Directors must also be obtained for other related party transactions in accordance with the rules of the Board of Directors, depending on the extent of materiality.

Such transactions to be submitted as agendas of Board of Directors meetings must be checked by the legal affairs-related departments and attorneys at law as necessary.

Matters regarding transactions with Nuclear Damage Compensation and Decommissioning Facilitation Corporation, a major shareholder, are stated in section I, subsection 4, "Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder," of this report.

[Principle 2.6 Roles of Corporate Pension Funds as asset owner]

Because the Company holds defined benefit corporate pension plans, the Company is working in regard to operation of a reserve fund for its pension scheme per the "Guidelines on roles and responsibilities for parties involved in asset management-related activities regarding defined benefit corporate pensions", in order to ensure that it performs in its role as asset owner. The details are listed below:

Establishment of an Asset Management Committee (composed of Executive Officers and persons beneath them with responsibility for such matters) to implement the formulation and revision of the fundamental management policies, operational guidelines, and asset mix policy.

For reviewing the fundamental management policies, the Company has established a structure that can address matters in a continuous and appropriate manner, implementing measures such as the utilization of a consulting company in order to secure expertise and reliability, and avoid conflicts of interest.

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[Principle 3.1 Full Disclosure]

1. The Group engages in business operations on the basis of special business plans approved by the Japanese government, and drawn up with Nuclear Damage Compensation and Decommissioning Facilitation Corporation for the purpose of establishing a managerial platform that is sufficient with respect to fulfilling the Company's longstanding responsibilities to Fukushima while concurrently taking on its obligations in that regard.
   The Group moves ahead in paying compensation, revitalizing Fukushima, and decommissioning nuclear reactors on the basis of such plans, while at the same time taking steps geared to enhancing corporate value largely by engaging in nationwide sales of electric power and actively drawing on alliances in all aspects of its operations.
   The Group will make our utmost effort to undertake an unprecedented management reform continuously toward the securing of funds for compensation and decommissioning work, and enhancement of corporate value, based on the "Revised Comprehensive Special Business Plan (The Fourth Plan)" approved on August 2021.
   Details regarding the "Revised Comprehensive Special Business Plan", and "Integrated Report", which comprises plans such as strategies and business models for "Fukushima" and "Energy Services", are available via the Company's website.
   "Revised Comprehensive Special Business Plan"
   URL: https://www.tepco.co.jp/about/corporateinfo/business_plan/overall_special_plan.html (in Japanese only)
   "Integrated Report"
   URL: https://www.tepco.co.jp/en/hd/about/ir/library/integratedreport/index-e.html
2. The Company's basic views on corporate governance are stated in section I, subsection 1, "Basic Views," of this report.
3. As a "Company with Nominating Committee, etc.," the Company's Compensation Committee maintains authority for determining content of matters such as remuneration for Directors and Executive Officers. Policy with respect to the Compensation Committee determining content of matters such as remuneration for Directors and Executive Officers is stated in section II, subsection 1, "[Remuneration for Directors and Executive Officers], Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods," of this report.
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   While fulfilling the Company's responsibility for the Fukushima Daiichi Nuclear Power Station accident the Company will, based on a mission to achieve a stable supply of electric power while ensuring safety and under competitive conditions, work on realizing the maximization of corporate value, by selecting people who possess the personalities, insights and capabilities suitable for leading business operations and management reform to achieve both "responsibility and competitiveness" as Director candidates and Executive Officers.
   In addition, the Board of Directors consists of a diverse group of Directors with varying backgrounds in terms of expertise and experience, etc., and the actual number of Directors elected is to be an appropriate number within the maximum number of 13 stipulated in the Articles of Incorporation Among this number, regarding Outside Directors, by comparing candidates against the "Standards for Independence of Outside Directors," the Company selects candidates based on whether they fulfill the criteria for independence.
   
   Pursuant to the Companies Act, the Nominating Committee, the majority of which are Outside Directors, determines the content of proposals with regard to the election and dismissal of Directors that are submitted to the General Meeting of Shareholders. In the selection and dismissal of Executive Officers, the Nominating Committee holds a deliberation before a decision is made at a meeting of the Board of Directors.
5. Respective Director candidates and respective Executive Officers are appointed in accordance with the policy stated in item (iv), above. The reasons for appointing Director candidates are stated in Reference Materials for General Meeting of Shareholders. Moreover, reasons for appointing Outside Director
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candidates are also stated in section II, subsection 1, "[Outside Directors], Outside Directors' Relationships with the Company (2)," of this report.

[Principle 4.1 Roles and Responsibilities of the Board of Directors (1)]

(Supplementary Principle 4.1.1)

As a "Company with Nominating Committee, etc.," the Company's Board of Directors determines important business execution stipulated in laws and regulations, the Articles of Incorporation, and rules of the Board of Directors, with respect to matters such as basic policies of corporate management, the personnel issues related to Executive Officers and other management personnel, and the disposal of material assets. Also, the Company's Executive Officers determine other matters and engage in business practices on the basis of decisions made by the Board of Directors, and also report developments thereof to the Board of Directors.

[Principle 4.9 Independence Standards and Qualification for Independent Directors]

The "Standards for Independence of Outside Directors" specified by the Company are stated in section II, subsection 1, "[Independent Directors], Matters relating to Independent Directors" of this report.

[Principle 4.11 Preconditions for Board of Directors and Board of Auditors Effectiveness]

(Supplementary Principle 4.11.1)

The Company's views on the balance, diversity and size of the Board of Directors are stated in item (iv) of [Principle 3.1 Full Disclosure].

(Supplementary Principle 4.11.2)

The Business Report provided annually by the Company as an attached document to the Notice of Convocation of the General Meeting of Shareholders discloses important concurrently-held positions of Directors and Executive Officers, and figures for attendance of the Outside Directors at Board of Directors and committee meetings.

(Supplementary Principle 4.11.3)

The Company strives to improve the effectiveness of the Board of Directors through active deliberation, etc. by utilizing remarks, etc. based on the rich experience and wide-ranging insights, etc. of diverse Outside Directors, including corporate managers, certified public accountants, attorneys at law, and academic experts.

The evaluation of the effectiveness for fiscal 2020 was conducted for the Board of Directors, the Nominating Committee, and the Compensation Committee (hereinafter Board of Directors, etc.). An overview of the evaluations is as follows.

A questionnaire was conducted for all directors (13 persons) on the effectiveness of the Board of Directors, and for all members of the Nominating Committee and the Compensation Committee (6 persons, 3 persons) on the effectiveness of the Nominating Committee and Compensation Committee respectively. The results were analyzed and evaluated and then reviewed by the Board of Directors.

The effectiveness of the Board of Directors, etc. of the Company was evaluated as having been ensured, based on the following factors: the Board of Directors had an appropriate number of diverse members; discussions were conducted freely; the Board of Directors, etc. continued to receive a high evaluation in the questionnaire with no major issues related to the Board of Directors, etc. identified in the questionnaire.

It is confirmed that it is necessary to strengthen the Board's supervising function for the nuclear power business, to discuss strategies, etc. for earning in light of changes in the market environment, and to continue to provide risk information and secure opportunities for inspections, etc. in addition to other activities.

Given this evaluation, we will continue to further improve the effectiveness of the Board of Directors, etc. by implementing additional improvements.

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[Principle 4.14 Director and Auditor Training]

(Supplementary Principle 4.14.2)

To ensure that the Company's Directors and Executive Officers are able to sufficiently fulfill their duties, the Company has outside experts conduct various forms of training as appropriate, including training in areas such as legal affairs and finance, as well as media training, and also has its Directors and Executive Officers take part in workshops outside the Company as necessary. Moreover, Outside Directors are provided with opportunities to gain a deeper understanding of the Company's business operations through briefings held regarding details of the Company's business operations as well as organizational and management issues, and through inspections of the Company's power stations, offices and other locations, as appropriate.

[Principle 5.1 Policy for Constructive Dialogue with Shareholders]

1. Basic Views
   With the aim of enhancing management transparency and ensuring that opinions of those outside the Company are reflected in management, the Company promotes accurate and prompt disclosure of management information, and otherwise endeavors to grow sustainably and enhance corporate value over the medium- to long-term through constructive dialogue with its shareholders and investors.
2. IR/SR activities
   Three Executive Officers have been appointed as officers in charge of IR to oversee IR activities. The Company has also appointed a full-time General Manager in charge of IR.
   Two Executive Officers have been appointed as officers in charge of SR to oversee SR activities. Corporate division which includes the Corporate Management & Planning Unit (Corporate Planning Office, ESG Office, Corporate Management Office, Corporate Affairs & Legal Office, Accounting & Treasury Office, etc.) and the Public Relations & Corporate Communications Unit (Corporate Communications Office, etc.), as well as the Fukushima Revitalization Headquarters, the Niigata Headquarters, other respective companies, and the core operating companies are cooperating organically to enhance Company dialogue with its shareholders and investors.
3. Approach to Dialogue
   The Company endeavors to disclose easy-to-understand information in order to promote constructive dialogue with its shareholders and investors. To that end, the Company holds briefings, etc. and makes use of its website, as detailed below.
   
   Briefings for institutional investors on business management plans, specifics of financial results, and other matters of great interest to such investors
   Individual visits subsequent to earnings releases and prior to General Meetings of Shareholders
   Meetings for facilitating exchange of opinions involving the Company's management team and institutional investors
   
   The Company's website has pages especially for the Company's shareholders and investors containing its Quarterly Financial Results (in Japanese only), Annual and Quarterly Securities Reports (in Japanese only), Integrated Report and Business Reports. For analysts, shareholders and others, the website also contains Factbooks, presentation materials and explanations, Q&A summaries, and other such materials.
   The results of IR/SR activities and concerns of shareholders and investors are being provided as feedback to Company management and periodically shared with related divisions to enhance future IR/SR activities. Specifically, with respect to IR activities, the President and officers in charge of IR are directly meeting with institutional investors to exchange opinions to gain a better understanding of the investors' issues of interest, and the concerns and opinions of institutional investors are being shared in the Management & Planning Meeting.
   With respect to SR activities, the ESG Committee and other meeting bodies discuss the Company's response to the concerns and requests of its shareholders and investors. The responses are included in the Integrated Report to widely disseminate Company information among Company shareholders and investors.
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