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: July12, 2022

Tokyo Electric Power Company Holdings, Incorporated

Tomoaki Kobayakawa, President Contact: Shareholder & Investor Relations Group, Corporate Affairs & Legal Office +81-3-6373-1111 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

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

Top priority on safetyFulfill our responsibilitiesCustomer-focusedDare to innovate

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

[Principle 4.8 Effective Use of Independent Directors] (Supplementary Principle 4.8.3)

The Nuclear Damage Compensation and Decommissioning Facilitation Corporation is an authorized corporation, which was established to promptly and appropriately implement nuclear damage compensation, ensure smooth operation of businesses related to nuclear reactor operation, including stable power supply, and to ensure proper and steady implementation of decommissioning, etc., based on the Nuclear Damage Compensation Facilitation Corporation Act. There is no conflict of interest arising from current transactions between the Corporation and the Company, as there are no commercial transactions or other transactions/actions conducted at the mutual discretion of the two parties.

Currently, therefore, even if independent directors do not make up the majority of the Board of Directors or a special committee is not established, we do not believe that minority shareholders will be disadvantaged as a result of conflicts of interest.

At present, material transactions/actions that could cause a conflict of interest between the Corporation and the Company are not anticipated, but even if such transactions/actions are anticipated, the Company will take appropriate measures to protect the interests of minority shareholders.

[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 2.4 Ensuring Internal Diversity Including the Promotion of Women's Empowerment]

(Supplementary Principle 2.4.1)

Policies for Ensuring Diversity and Voluntary Measurable Goals for Ensuring Diversity and Their Status

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With the aim of ensuring diversity in human resources who will play a central role in future corporate management, TEPCO Group provides equal training opportunities and work experience regardless of gender, nationality, etc., while promoting the appointment to managerial positions based on fair evaluation and treatment that emphasize ability and performance.

In recent years, the Company has also strengthened recruitment activities that form the basis of diversity in core human resources. Based on the premise of hiring talented human resources with diverse perspectives and values regardless of gender, nationality, etc., the Company hires foreigners who meet the requirements for the status of residence under the Immigration Control Act, while also focusing on mid-career recruitment of personnel with extensive skills, knowledge, and abilities. The most recent plans call for 20% of new hires through mid- career recruitment.

For voluntary and measurable goals for ensuring diversity, the Company has set the following targets for women. With regard to foreigners and mid-career hires, targets have not been set as the Company is in the process of strengthening recruitment and training, but targets will be considered based on the progress of recruitment and training.

Ratio of female managers

Current status: 5.8% as of end of FY2021 (Ratio of female employees 13.1%)

Target:

10% as of end of FY2025

Policies for Human Resource Development and Internal Environment Development, and The Status Thereof In addition to providing equal training opportunities and work experience regardless of gender, nationality, etc. as mentioned earlier, the Company works to ensure the diversity in core human resources by providing various training programs that contribute to the development of next-generation managers who will lead the workplace and organization, including "Leader Skill Up Training" for female employees, and opportunities to study at graduate schools in Japan and overseas.

[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.

[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.
    Based on the Fourth Comprehensive Special Business Plan approved by the government in August 2021, the Group will continue to work on drastic management reforms with group-wide efforts to secure funds for compensation and decommissioning and improve corporate value.
    Details regarding the Fourth 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.
    TEPCO Group Corporate Philosophy is described in section I, subsection 1, "Basic Views," of this report.
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"the Fourth 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

  1. The Company's basic views on corporate governance are stated in section I, subsection 1, "Basic Views," of this report.
  2. 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.

  3. 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.
  4. 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 the appointing Outside Director candidates are also stated in section II, subsection 1, "[Outside Directors], Outside Directors' Relationships with the Company (2)," of this report.

(Supplementary Principle 3.1.3)

Sustainability Initiatives and Investment in Human Capital/ Intellectual Properties

The Company has disclosed its sustainability initiatives in the Fourth Comprehensive Special Business Plan or the Integrated Report, etc. With regard to investment in human capital and intellectual properties, the Company has disclosed specific information that is consistent with its management strategy/ management issues as easy to understand as possible in the Integrated Report, etc. by referring to the International Integrated Reporting Framework.

Impact of Climate Change Risks and Earning Opportunities on the Company's Business Activities, Profits, etc. The Company recognizes that medium- to long-term response to climate change is an important management issue for the Group, which carries out energy supply, and implements disclosure based on the TCFD recommendations (announcement of risks, opportunities, indicators, and targets based on scenario analysis). The Company will further enhance disclosure contents in light of the opinions of shareholders and investors.

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[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 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].

The skill matrix of directors (including director candidates) is disclosed in the reference documents for General Meeting of Shareholders and the Integrated Report, and the policy/ procedures for the appointment of directors are also disclosed in the reference documents of the General Meeting of Shareholders.

Four of the Company's independent directors have management experience at other companies.

(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 2021 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.

To ensure the objectivity of the effectiveness evaluation, the evaluation was carried out by a third-party organization in fiscal 2021. Questionnaires prepared with advice from the third-party organization were sent to all directors (12 members) regarding the effectiveness of the Board of Directors, and to all members of the Nominating Committee and the Compensation Committee (5 and 4 members, respectively) regarding the effectiveness of each committee, and analysis and evaluation were conducted by the third-party organization based on the results of these questionnaires. Based on the results of the questionnaires and the analysis and evaluation, opinions were exchanged mainly among Outside Directors, followed by deliberations at a meeting of 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 secure opportunities to discuss the progress of the management plan, continue to strengthen the Board's supervising function for the nuclear power business, and secure opportunities for inspection, etc. and discussions on profit-earning strategies in light of changes in the business environment.

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TEPCO - Tokyo Electric Power Company Holdings Inc. published this content on 12 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 July 2022 02:13:05 UTC.