小田急（9007） – [Delayed]Corporate Governance Report

Note: This document has been translated from a part of 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 Last Update: December 21, 2021 Odakyu Electric Railway Co., Ltd. Koji Hoshino, President & CEO Contact: +81-3-3349-2526 Securities Code: 9007 https://www.odakyu.jp The corporate governance of Odakyu Electric Railway Co., Ltd. (hereinafter, the “Company”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information 1. Basic Views Basic Views With regard to enhancing and strengthening the Company’s corporate governance, the Company is implementing various measures with the recognition that it is vital to strengthen the function to make decisive decisions unshackled by precedents or customs as well as to strengthen the supervisory function for business execution, by ensuring transparency, fairness and speed when carrying out key strategies. The aim is to maximize the interest of various stakeholders, including our shareholders as well as our customers, business partners, creditors and local communities, and achieve sustained growth as well as enhance the medium- to long-term corporate value of the Company. Basic Policies (1) Securing the Rights and Equal Treatment of Shareholders The Company provides the necessary information for the exercise of rights by shareholders in a timely and appropriate manner, and develops an environment in which shareholders can exercise their rights without hesitation. The Company also gives consideration to substantially ensuring the rights and equal treatment of various shareholders, including minority shareholders. (2) Appropriate Cooperation with Stakeholders Other Than Shareholders The Company recognizes that it is vital to cooperate with stakeholders, including employees, customers, business partners, creditors and local communities, to realize sustained growth and the creation of medium- to long-term corporate value. With this recognition, the Company strives to appropriately cooperate with such stakeholders. (3) Ensuring Appropriate Information Disclosure and Transparency The Company appropriately discloses financial information, such as financial standing and operating results, and non-financial information, such as business strategies and business issues, risk and governance, in compliance with the relevant laws and regulations. In addition, the Company provides other information through news releases, etc. to stakeholders. The Company also makes efforts to provide accurate, clear and useful information, including non-financial information, taking into consideration that disclosed and provided information will serve as the basis for constructive dialogue with shareholders. – 1 – (4) Fulfilling Responsibilities of the Board of Directors The Board of Directors sets the strategic direction of the Company mainly through the Management Vision “UPDATE Odakyu—Becoming a Community-Based Value Creation Company” and the Medium-Term Management Plan based on the Group Management Principle. The Company also establishes an environment where appropriate risk-taking by Directors is supported, while electing highly independent Outside Officers and carrying out effective oversight of Directors. (5) Dialogue with Shareholders The Company engages in constructive dialogue with shareholders even outside the General Meeting of Shareholders, mainly at financial results briefings, with the aim of achieving sustained growth of the Company and enhancing the corporate value over the medium to long term. In such dialogue with shareholders, Directors participate in interviews to the extent reasonable and give appropriate feedback mainly to full-time officers on the views and demands of shareholders grasped during the dialogue. Through these and other efforts, the Company pays due attention to the interests and concerns of shareholders. The Company also makes efforts to explain its business policies to shareholders in an understandable manner so as to gain their support, while at the same time striving to develop a balanced understanding of the positions of shareholders and other stakeholders and act accordingly. [Reasons for Non-compliance with the Principles of the Corporate Governance Code] Updated The reasons for non-compliance with the principles of the Corporate Governance Code are stated in accordance with the revised Corporate Governance Code issued on June 11, 2021. Supplementary Principle 4.11.1 View on Balance between Knowledge, Experience and Skills of the Board of Directors as a Whole, and on Diversity and Size of the Board of Directors and Skills Matrix The Company’s Board of Directors comprises a combination of Executive Directors who are well versed in the Company’s operations, in-house Non-Executive Directors and full-time Auditors, as well as several Outside Directors and Outside Auditors who have career history, experience and professional knowledge that differ from those of in-house Directors and Auditors and are fully capable of fulfilling roles and functions to enhance management supervising functions. In this way, the Company strives to ensure the balance between knowledge, experience and skills of the Board of Directors as a whole, and diversity. The Company also works to have an appropriate size for the constitution of the Board of Directors in light of factors such as business scale and type of operations. The Articles of Incorporation stipulates that the number of Directors shall be 17 or less and the number of Auditors shall be five or less. Based on the policy above, the Board of Directors currently comprises 12 Directors and four Auditors. Among them, the professional background of the four Independent Outside Directors (including one female) consists of three corporate managers and a head of local government, and the professional background of the two Independent Outside Auditors consists of corporate managers. The Company is considering combinations of skills and other elements of Directors. It plans to disclose a skills matrix in the fiscal year ending March 31, 2023. Supplementary Principle 5.2.1 Basic Policies Concerning Business Portfolio, etc. The Company has set “Rebuilding Business Portfolio” as a business issue under its Management Vision “UPDATE Odakyu—Becoming a Community-Based Value Creation Company.” The Company is currently considering the matter. [Disclosure Based on the Principles of the Corporate Governance Code] Updated The disclosure based on the principles of the Corporate Governance Code is stated in accordance with the revised Corporate Governance Code issued on June 11, 2021. Principle 1.4 Strategic Shareholdings The Company considers it necessary to maintain and develop business relations with various companies in order to achieve the Group Management Principle of helping its customers create “irreplaceable times” and “rich and comfortable lifestyles.” To this end, the Company holds shares that are deemed necessary as a policy based on comprehensive consideration of factors such as business relationships with the issuing company. With regard to strategic shareholdings held by the Company, the Board of Directors annually verifies the aim and rationale of holding from a qualitative perspective, such as contribution to the maintenance and development of business relations with the issuing company, as well as from a quantitative perspective such – 2 – and as cost of capital and dividend income. Our policy calls for reducing shares for which the significance of holding has diminished through sale and other means as a result of such verification. The Company also exercises the voting rights on strategic shareholdings for all proposals. In exercising the voting rights, the Company pays special attention to proposals that may damage shareholder value in accordance with the Company’s standards for exercising voting rights based on factors such as the business condition, dividend condition and presence or absence of anti-social acts and other scandals of each company. In addition, the Company receives an explanation of the proposal from the issuing company as necessary. Supplementary Principle 1.4.1 Response to Cases Where Companies Holding the Company’s Shares as Strategic Shareholdings Indicate Their Intentions to Sell These Shares The Company will not imply a possible reduction of business transactions and the like for the purpose of hindering the sale of the Company’s shares held by shareholders who hold them as strategic shareholdings. Principle 1.7 Related Party Transactions At the Company, competing transactions and conflict-of-interest transactions by Directors are specified as proposals to be resolved by the Board of Directors under the Regulations of the Board of Directors. In addition to this, transactions between the Company or its consolidated subsidiaries and officers and their close relatives are also verified to determine the presence of any such transactions and their details every fiscal year, while the details of transactions that fall under the accounting standards and the guidelines for the application of such standards for related party disclosure are disclosed. Principle 2.4.1 Ensuring of Diversity at the Company, Including the Promotion of Active Participation of Women “Initiatives on Diversity and Inclusion” are being promoted to ensure diversity within the Company, details of which have been disclosed on the Company’s website (https://www.odakyu.jp/company/diversity/) and Report” “Diversity (https://www.odakyu.jp/company/diversity/report/210330/book/html5.html#page=1). The views of the Company and the situation concerning the ensuring of diversity in terms of elements such as the appointment of women, mid-career hires and foreign nationals to management positions at the company are as follows. Appointment of Women to Management Positions To promote the active participation of women in the Company, the Company aims to increase the ratio of women in management positions (Section Manager and above) to 6.0% by the fiscal year ending March 31, 2026. As of September 2021, female employees accounted for 5.3% of the individuals in management positions (Section Manager and above). In April 2021, the Company’s first female Executive Officer was appointed. Appointment of Mid-Career Hires and Foreign Nationals to Management Positions As of September 2021, mid-career hires accounted for 4.9% of the individuals appointed to management positions (Section Manager and above) at the Company. There are currently no foreign nationals appointed to management positions. As stated in its “Declaration on Diversity and Inclusion,” the Company will continue to leverage all perspectives to the greatest extent possible. From the perspective of creating new value, the Company will hire the type of talent and appointing the type of individuals to management positions which are required to ensure the sustainable growth of the Company, regardless of factors such as age and nationality. Principle 2.6 Roles of Corporate Pension Funds as Asset Owners In order to enhance the efficiency of pension asset management, the Company periodically holds a Pension Asset Management Advisory Council (hereinafter, “Advisory Council”) with the Manager of Finance & Accounting Department as the chairperson and the Manager of Personnel Department as the vice chairperson. At the Advisory Council, participants discuss matters such as asset allocation for pension fund management, management strategy and the entrusted management company, based on their professional or general knowledge and experience commensurate with each position and responsibility. In determining the specific asset allocation for pension fund management, management strategy and the entrusted management company, the Company has a system to receive advice from outside pension fund management experts as necessary. The Company requests the pension fund management consultant of Rating and Investment Information, Inc. (hereinafter, “R&I”), a group company of Nikkei Inc., to act as an outside Inclusion – 3 – expert. By receiving advice on pension fund management from R&I from a neutral and fair position, the Company has a system that does not allow conflicts of interest to arise between pension fund beneficiaries and the Company. In order to enhance professional knowledge and experience in pension fund management, the Company utilizes advice from R&I and also endeavors to develop, appoint and assign personnel with the appropriate credentials for such fund management. Principle 3.1 Full Disclosure (1) The management principle, management plans and other information are disclosed in the securities reports and the Company’s website (https://www.odakyu.jp/company/philosophy/). (2) Basic views and policies on corporate governance are stated in “I. 1. Basic Views and Basic Policies” of this report. (3) Policies and procedures for determining compensation are stated in “II.1. [Director Remuneration] Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods” of this report. (4) In electing the senior management (Directors concurrently serving as Executive Officers) and nominating candidates for Directors and Auditors, persons with outstanding personality and insights are required. In addition, in the case of in-house candidates, persons who are well versed in the Company’s operations based on experience gained at several departments are elected and nominated for the senior management and Directors, and persons who have expertise regarding finance, accounting and legal affairs as well as knowledge of the Company’s business are elected and nominated for Auditors. In the case of candidates who come from another company or institution, for both Directors and Auditors, the Company nominates those capable of fulfilling roles and functions to enhance management supervising functions, along with career history, experience and professional knowledge, etc. that differ from those of in-house candidates. In addition, election and nomination are conducted by considering the balance between knowledge, experience and skills of the Board of Directors as a whole, and diversity. Also, the dismissal of the senior management is decided in light of the election policy. Based on the policy above, the election/dismissal of the senior management and nomination of candidates for Directors and Auditors are decided by the Board of Directors following deliberations by the Nomination and Compensation Advisory Committee, in which Independent Outside Directors comprise a majority of the members. In addition, the Company explains the matter concerned to Outside Auditors prior to the meeting of the Board of Directors. (5) The individual reasons for the election/dismissal of the senior management, candidates for Directors and Auditors are disclosed in the Reference Documents of the Notice of the General Meeting of Shareholders. Supplementary Principle 3.1.3 Initiatives Concerning Sustainability and Investments, etc. in Human Capital and Intellectual Property The Company discloses the status of its initiatives concerning sustainability, including the Group’s long-term goals for the environment, vision for the environment and environmental strategy (“Odakyu Group—Carbon Neutral 2050”), on its website (https://www.odakyu.jp/company/socialactivities/environment_consideration/) and in its Integrated Report. Moreover, based on the Company’s Management Vision “UPDATE Odakyu—Becoming a Community-Based Value Creation Company,” the Company is promoting investments in human capital and intellectual property and discloses the details relating thereto on its website and in its Integrated Report. Company website (HR management policy, overview of workstyle reforms, etc.): https://www.odakyu.jp/company/diversity/ Integrated Report: https://www.odakyu.jp/ir/integratedreport/ Having endorsed TCFD’s recommendations, the Company plans to disclose in the fiscal year ending March 31, 2023 details on the impact of the risks of climate change and revenue-generating opportunities on the business activities, revenue and other related factors of the Company. Supplementary Principle 4.1.1 Summary of Scope and Content of Matters Delegated to the Management In addition to matters stipulated in relevant laws and regulations and the Articles of Incorporation, the Company stipulates matters to be resolved by the Board of Directors, such as long-term comprehensive plans in the Regulations of the Board of Directors. Furthermore, the Company sets the standard for the amount, etc. – 4 – according to importance in the criteria for discussing matters at the Board of Directors, and also resolves matters deemed important in accordance with such standards, such as investments and loans, at the Board of Directors. Regarding decisions on matters other than those resolved by the Board of Directors and business execution, matters such as the duties and authority of each position are stipulated in the Official Authority Rules and are delegated to each level of management. Principle 4.9 Independence Standards and Qualification for Independent Outside Directors Independence Standards for Outside Officers specified by the Company are stated in “II.1. [Independent Directors/Auditors] Matters relating to Independent Directors/Auditors” of this report. Supplementary Principle 4.10.1 Voluntary Establishment of Committees The Company has established the Nomination and Compensation Advisory Committee, in which Independent Outside Directors comprise a majority of the members, as an advisory body to the Board of Directors in order to strengthen the independence, objectivity and accountability of the functions of the Board of Directors on matters such as nomination of Directors and Auditors and compensation of Directors. The Committee deliberates on such matters as basic policy for nomination and compensation and draft proposals for the General Meeting of Shareholders, reporting the results to the Board of Directors. Supplementary Principle 4.11.2 Status of Concurrent Positions Held by Directors and Auditors at Other Companies The status of significant concurrent positions held by Directors, Auditors, and their candidates is disclosed every year in the Reference Documents and the Business Report of the Notice of the General Meeting of Shareholders. Supplementary Principle 4.11.3 Analysis and Evaluation of the Effectiveness of the Board of Directors as a Whole The Company conducts self-evaluations of Directors and Auditors every year by means such as questionnaire surveys concerning decision-making and oversight functions of the Board of Directors and the support structure of the Board of Directors. Based on the results of such evaluations, the effectiveness of the Board of Directors as a whole is analyzed and evaluated by the Board of Directors. During the fiscal year ended March 31, 2021, as a result of analyses and evaluations, it was confirmed that the Board of Directors was effective. Furthermore, based on the results of analyses and evaluations in the fiscal year ended March 31, 2020 and in prior fiscal years, the Company increased the number of deliberations on companywide strategy, endeavored to enhance discussions regarding future directions in light of changes in the environment, and expanded the scope of monitoring. As a result of analyses and evaluations in the fiscal year ended March 31, 2021, the Company recognizes that it is necessary to develop a system to enhance the quality of discussions on the medium-term management plan, implement initiatives that contribute to the vitalization of discussions, and increase opportunities for Outside Officers to acquire information and knowledge. With this recognition, the Company will consider further enhancing the effectiveness of the Board of Directors including response to such matters. Supplementary Principle 4.14.2 Training Policy for Directors and Auditors The Company provides information on the Company’s business, among other things, as needed to Outside Directors and Outside Auditors, in addition to mainly creating opportunities to inspect the Company’s facilities and areas along the Odakyu Line as appropriate to support efforts to deepen understanding of the Company’s business. Furthermore, the Company invites outside lecturers to have them give lectures every year on topics such as internal control to Executive Directors and in-house Non-Executive Directors and full-time Auditors. For Executive Directors, the Company also explains and provides information on the details of business of the department they will be in charge of when they assume their respective offices. The Company takes these measures for each Director and Auditor and also provides financial support required for such measures. Principle 5.1 Policy for Constructive Dialogue with Shareholders The Company makes efforts to improve the quality of IR activities through the formulation and disclosure of the Disclosure Policy as well as the following initiatives, in order to promote constructive dialogue with shareholders and investors. – 5 – (1) The Company appoints a Director in charge of overseeing the department responsible for engaging in dialogue with shareholders and investors (Investor Relations Office). (2) Primarily the responsible department gives feedback on the views and demands made by shareholders and investors through regular exchange of information with related departments such as the Management Strategy Department, the Group Management Department, the General Affairs Department and the CSR/Corporate Communications Department, as well as the Group companies, while working to promote understanding inside the Company and the Group. (3) For analysts and institutional investors, initiatives such as briefings for each business by the responsible officers and tours of the Company’s facilities are taken, in addition to holding financial results briefings (twice a year), in which the President and other members of management participate. Furthermore, for individual investors, company information meetings are held in cooperation with securities companies and other institutions. (4) The Company provides opportunities to regularly report mainly on the status of IR activities and the views and demands made by shareholders and investors at meetings of the Board of Executive Officers, primarily comprising full-time officers and department managers, in addition to feedback given to officers, etc. by the responsible departments as appropriate. (5) Important information is strictly handled under the internal rules concerning the management of internal information. In addition, a quiet period is set before the announcement of financial results to restrict external coverage and inquiries. 2. Capital Structure Foreign Shareholding Ratio From 10% to less than 20% [Status of Major Shareholders] Updated Name / Company Name The Master Trust Bank of Japan, Ltd. (Trust Account) The Dai-ichi Life Insurance Company, Limited Nippon Life Insurance Company The Master Trust Bank of Japan, Ltd. (Retirement Benefit Trust Account, Mitsubishi Electric Corporation Account) Custody Bank of Japan, Ltd. (Trust Account) Meiji Yasuda Life Insurance Company MUFG Bank, Ltd. STATE STREET BANK WEST CLIENT – TREATY 505234 (Standing Proxy: Settlement & Clearing Services Department, Mizuho Bank, Ltd.) SUMITOMO LIFE INSURANCE COMPANY Kanagawa Chuo Kotsu Co., Ltd. Number of Shares Owned (Shares) Percentage (%) 49,485,500 20,273,626 16,763,615 12,908,000 12,650,802 7,676,721 5,750,000 5,626,085 5,500,000 4,893,016 13.54 5.55 4.59 3.53 3.46 2.10 1.57 1.54 1.50 1.34 Controlling Shareholder (except for Parent Company) Parent Company — None Supplementary Explanation Updated 1. The status of major shareholders as of September 30, 2021 is stated. – 6 – 2. The Dai-ichi Life Insurance Company, Limited has contributed an additional 2,000 thousand shares of the Company to a retirement benefit trust and retains rights of instruction in regard to shareholder voting rights of the shares. 3. The 12,908 thousand shares held by The Master Trust Bank of Japan, Ltd. (Retirement Benefit Trust Account, Mitsubishi Electric Corporation Account) are trust assets of a retirement benefit trust consigned by Mitsubishi Electric Corporation to The Master Trust Bank of Japan, Ltd. Mitsubishi Electric Corporation retains rights of instruction in regard to shareholder voting rights of the shares. 4. Shares owned by Kanagawa Chuo Kotsu Co., Ltd. are subject to restrictions on shareholder voting rights in accordance with Article 67, Paragraph 1 of the Ordinance for Enforcement of the Companies Act. 5. The percentage of shares owned was calculated after deducting the treasury stock (2,951 thousand shares). The 137 thousand shares of the Company held by the Officer Compensation Trust Account are not included in the treasury stock. 6. Although the Change Report for the Report of Possession of Large Volume released for public inspection as of April 21, 2021 states that the shareholding by Sumitomo Mitsui Trust Bank, Limited and its two joint holders as of April 15, 2021 is as follows, the Company was unable to fully confirm the actual shareholding as of September 30, 2021; therefore, they are not included in the Status of Major Shareholders above. The details of the Change Report are as follows. (1) Name: Sumitomo Mitsui Trust Bank, Limited Location: 1-4-1, Marunouchi, Chiyoda ku, Tokyo Number of shares held (thousand): 7,862 Shareholding ratio (%):2.13 (2) Name: Sumitomo Mitsui Trust Asset Management Co., Ltd. Location: 1-1-1, Shibakoen, Minato ku, Tokyo Number of shares held (thousand): 12,012 Shareholding ratio (%):3.26 (3) Name: Nikko Asset Management Co., Ltd. Location: 9-7-1, Akasaka, Minato ku, Tokyo Number of shares held (thousand): 7,471 Shareholding ratio (%):2.03 The total number of shares held and the total shareholding ratio in (1), (2), and (3) above are as follows: Number of shares held (thousand): 27,346 Shareholding ratio (%):7.42 3. Corporate Attributes Listed Stock Market and Market Section Fiscal Year-End Type of Business Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Tokyo Stock Exchange First Section March Land Transportation More than 1000 From \100 billion to less than \1 trillion From 10 to less than 50 – 7 – 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder — 5. Other Special Circumstances which may have Material Impact on Corporate Governance The Odakyu Group Management Principle calls for “helping its customers create ‘irreplaceable times’ and ‘rich and comfortable lifestyles’.” In order to realize this management principle, the Company has formulated the Management Vision “UPDATE Odakyu—Becoming a Community-Based Value Creation Company,” which indicates the direction to be taken by the Group by the fiscal year ending March 31, 2027, and the Medium-Term Management Plan, which spans a period of three fiscal years, to materialize this vision. Based on the above, each Group company formulates a medium-term management plan and steadily fulfills their respective roles, while also striving to improve corporate value by maximizing future cash flows through cooperation within the Group. Under the above policy, Shirohato Co., Ltd., a listed subsidiary of the Company, is expanding its earnings scale as a company that specializes in the innerwear e-commerce business even before becoming a subsidiary of the Company. For the Group whose customer touchpoints are mainly offline channels, the expertise and know-how of the said subsidiary regarding online sales are recognized as valuable management resources. As the said subsidiary has seen effects of listing such as reflection of various opinions obtained from many shareholders in its management and increases in public name recognition and credit capability, the Company believes that listing will lead to further development of the said subsidiary. Although the Company dispatches Directors to the said subsidiary, in principle, the Company respects the judgements of the said subsidiary’s management team. The said subsidiary strives to ensure that there will be no activities that will unfairly damage the interests of shareholders of the subsidiary besides the Company or other stakeholders. – 8 – II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management 1. Organizational Composition and Operation Organization Form Company with Board of Auditors [Directors] in Articles of Maximum Number of Directors Stipulated in Articles of Incorporation Term of Office Stipulated Incorporation Chairperson of the Board Number of Directors Status of election of Outside Director Number of Outside Directors Number of Outside Directors designated as Independent Directors 17 1 year President 12 Elected 4 4 Outside Directors’ Relationship with the Company (1) Name Attribute Relationship with the Company* a b d c e f g h i j k Tamotsu Nomakuchi Hiroko Nakayama Toru Ohara Takehide Itonaga From another company Other From another company From another company △ △ △ * * * Categories for “Relationship with the Company” “○” when the director presently falls or has recently fallen under the category; “△” when the director fell under the category in the past “●” when a close relative of the director presently falls or has recently fallen under the category; “▲” when a close relative of the director fell under the category in the past a. Business executive of the Company or its subsidiaries b. Non-executive director or business executive of a parent company of the Company c. Business executive of a fellow subsidiary company of the Company d. A party whose major business partner is the Company or a business executive thereof e. Major business partner of the Company or a business executive thereof f. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company other than remuneration as an officer g. Major shareholder of the Company (or a business executive of the said major shareholder if the shareholder h. Business executive of a business partner of the Company (which does not correspond to any of d, e, or f) is a legal entity) (the director himself/herself only) i. Business executive of another company whose position would constitute the person as having an interlocking relationship (the director himself/herself only) j. Business executive of a company or organization that receives a donation from the Company (the director himself/herself only) k. Others – 9 – Outside Directors’ Relationship with the Company (2) Name Designation as Independent Director Supplementary Explanation of the Relationship Reasons of Appointment Tamotsu Nomakuchi ○ Hiroko Nakayama ○ Institute He served as President of the National of Advanced Industrial Science and Technology until March 2013. The Company and the Institute are engaged in transactions based on an outsourcing agreement on conducting demonstration testing of Mobility as a Service (MaaS), but the total transaction amount thereof is insignificant, at less than 1% of both the consolidated revenue from operations of the the Company ordinary the Institute. and revenue of for She served as Mayor of Shinjuku-ku until November 2014. The Company and Shinjuku-ku are engaged in transactions, including loan for use agreements regarding warehouses disaster stockpile items, but the total transaction amount thereof is insignificant, at less than 0.1% the consolidated revenue from operations of the Company and the annual revenue of Shinjuku-ku. both of from function to enhance He has management experience and broad insight into the engineering field. The Company elects him as Outside Director as he is fulfilling his the management role supervising through activities including deliberations at the Board of Directors and the and Compensation Nomination Advisory Committee an independent and objective perspective by drawing on such experience. In addition, as the Company judged that there is no relationship with significant influence between him and the Company’s management, and he has no risk of conflict of interest with the Company’s general shareholders, he was designated as an Independent Director. She has experience in promoting the revitalization of local community among others as Mayor of Shinjuku, and extensive knowledge based on such experience. The Company elects her as Outside Director as she is fulfilling her role to enhance the function management including activities through deliberations at the Board of Directors and and Compensation Advisory Committee from an independent and objective perspective by drawing on such experience. In addition, as the Company judged that there is no relationship with significant influence between her and the Company’s management, and she has no risk of conflict of interest with the Company’s general shareholders, she was designated as an Independent Director. He has management experience and broad insight based on his work at financial institutions. The Company elects him as Outside Director as he is fulfilling his role to enhance the function management including activities through deliberations at the Board of Directors and and Nomination Nomination supervising supervising the the Toru Ohara ○ ――― – 10 – Compensation Advisory Committee from an independent and objective perspective by drawing on such experience. In addition, as the Company judged that there is no relationship with significant influence between him and the Company’s management, and he has no risk of conflict of interest with the Company’s general shareholders, he was designated as an Independent Director. He has management experience, broad insight based on his work at financial institutions as well as knowledge regarding the real estate business. The Company elects him as Outside Director as he is fulfilling his the management role supervising through activities including deliberations at the the Board of Directors and and Compensation Nomination Advisory Committee an independent and objective perspective by drawing on such experience. In addition, as the Company judged that there is no relationship with significant influence between him and the Company’s management, and he has no risk of conflict of interest with the Company’s general shareholders, he was designated as an Independent Director. to enhance function from in the served He as business executive at The Dai-ichi Life Insurance Company, Limited, until March 2016. The Dai-ichi Life Insurance is a Company, Limited, lender of the Company, but does not fall under “principal lender” stipulated the Independence Standards for Outside Officers (financial institution on which the irreplaceably Company is total dependent) as amount of the borrowings is less the than 1% of consolidated total assets of the the Company. Also, Company and The Dai-ichi Insurance Company, Life Limited, are engaged in including transactions payment of interest, but the total amount thereof is insignificant, at less than 1% of both the consolidated revenue from operations of the Company and the ordinary revenue of The Dai-ichi Life Insurance Company, Limited. transaction Takehide Itonaga ○ Voluntary Establishment of Committee(s) Corresponding to Nomination Committee or Remuneration Committee Established Committee’s Name, Composition, and Attributes of Chairperson Committee’s Name Corresponding to Corresponding to Committee Nomination Committee Nomination Advisory Committee Committee Remuneration Committee Nomination Advisory Committee and Compensation and Compensation – 11 – All Committee Members Full-time Members Inside Directors Outside Directors Outside Experts Other Chairperson Supplementary Explanation 5 0 1 4 0 0 5 0 1 4 0 0 Inside Directors Inside Directors The Company has established the Nomination and Compensation Advisory Committee, in which Independent Outside Directors comprise a majority of the members, as an advisory body to the Board of Directors in order to strengthen the independence, objectivity and accountability of the functions of the Board of Directors on matters such as nomination of Directors and Auditors and compensation of Directors. In addition to President & CEO Koji Hoshino, the Committee comprises persons selected by a resolution of the Board of Directors (Outside Directors Tamotsu Nomakuchi, Hiroko Nakayama, Toru Ohara and Takehide Itonaga), and deliberates on such matters as basic policy for nomination and compensation and draft proposals for the General Meeting of Shareholders, reporting the results to the Board of Directors. The Committee held four meetings in the fiscal year ended March 31, 2021, which were attended by all of the Committee members who were in office in the fiscal year. [Auditors] Establishment of Board of Auditors Maximum Number of Auditors Stipulated in Articles of Incorporation Number of Auditors 5 4 Established Coordination among Auditors, Accounting Auditor and Internal Audit Department Full-time Auditors request the Accounting Auditor to report on such matters as the accounting audit policies, audit plans and audit results during the year and at year-end, as well as explain such matters as the audit policies and audit plans for the audits by Auditors, deepen mutual understanding, and separately have occasions to exchange information with the Accounting Auditor as necessary. In addition, they request the Accounting Auditor to attend the meeting of the Board of Auditors at the beginning of the year, during the year, and at year-end to exchange views with the Accounting Auditor and Outside Auditors. Furthermore, full-time Auditors value the importance of coordination with the internal audit department and hold audit reporting meetings to hear quarterly reports on the annual plan of internal audit and the status of audit implementation, while seeking understanding and cooperation by explaining such matters as the audit plan of Auditors. In addition, as part of an effort to strengthen coordination between the audit by Auditors and the internal audit, full-time Auditors separately have occasions to exchange views on such matters as the method of monitoring and verifying the establishment and operational status of internal control systems, as necessary. Full-time Auditors also receive reports on such matters as the results of internal audit directly from the person in charge of the internal audit department at the meeting of the Board of Auditors, so as to strengthen coordination between Outside Auditors and the internal audit department. Additionally, full-time Auditors, the Accounting Auditor, and the internal audit department hold a three-way audit meeting to report on and exchange views on each other’s audit plan and audit status. To complement efforts to reinforce information provision to Auditors in internal control, the information obtained by full-time Auditors is provided to the meeting of the Board of Auditors and the forums for discussions among Auditors, as appropriate. This is aimed to enhance information provision to Outside Auditors. Appointment of Outside Auditors Appointed – 12 – Number of Outside Auditors Number of Outside Auditors designated as Independent Auditors 2 2 Outside Auditor’s Relationship with the Company (1) Name Masataka Ito Takeshi Hayashi Attribute From another company From another company Relationship with the Company* d a Categories for “Relationship with the Company” “○” when the auditor presently falls or has recently fallen under the category; “△” when the auditor fell under the category in the past “●” when a close relative of the auditor presently falls or has recently fallen under the category; “▲” when a close relative of the auditor fell under the category in the past i j △ h b g k c e f * * * l m a. Business executive of the Company or its subsidiaries b. Non-executive director or accounting advisor of the Company or its subsidiaries c. Non-executive director or business executive of a parent company of the Company d. Auditor of a parent company of the Company e. Business executive of a fellow subsidiary company of the Company f. A party whose major business partner is the Company or a business executive thereof g. Major business partner of the Company or a business executive thereof h. Consultant, accountant or legal professional who receives a large amount of monetary consideration or other property from the Company other than remuneration as an officer i. Major shareholder of the Company (or a business executive of the said major shareholder if the shareholder j. Business executive of a business partner of the Company (which does not correspond to any of f, g, or h) is a legal entity) (the auditor himself/herself only) k. Business executive of another company whose position would constitute the person as having an interlocking relationship (the auditor himself/herself only) l. Business executive of a company or organization that receives a donation from the Company (the auditor himself/herself only) m. Others Outside Auditor’s Relationship with the Company (2) Name Designation as Independent Auditor Supplementary Explanation of the Relationship Reasons of Appointment Masataka Ito ○ ――― as He has management experience and broad insight based on his work and financial auditing experience at institutions, ample as well knowledge regarding finance and accounting. The Company elects him as Outside Auditor as he is fulfilling his role to enhance the auditing function from an independent and objective perspective by drawing on such experience. In addition, as the Company judged that there is no relationship with significant influence between him and the Company’s management, and he has no risk of conflict of interest with – 13 – Takeshi Hayashi ○ the Company’s general shareholders, he was designated as an Independent Auditor. He has management experience and broad insight based on his work at financial institutions. The Company elects him as Outside Auditor as it believes that he can fulfill his role to enhance the auditing function from an independent and objective perspective by drawing on such experience. In addition, as the Company judged that there is no relationship with significant influence between him and the Company’s management, and he has no risk of conflict of interest with the Company’s general shareholders, he was designated as an Independent Auditor. in the served He as business executive at Nippon Life Insurance Company until March 2018. Nippon Life Insurance Company is a lender of the Company, but does not fall under “principal lender” stipulated the Independence Standards for Outside Officers (financial the institution on which irreplaceably Company is dependent) as total amount of the borrowings is the than 1% of less consolidated total assets of the Company. In addition, the Company and Nippon Life Insurance Company are transactions engaged of including total interest, is transaction insignificant, at less than 1% of both the consolidated revenue from operations of the the Company ordinary revenue of Nippon Life Insurance Company. the amount payment and but in [Independent Directors/Auditors] Number of Independent Directors/Auditors 6 Matters relating to Independent Directors/Auditors The Company designates all Outside Officers who are qualified to be Independent Directors/Auditors as Independent Directors/Auditors. Independence Standards for Outside Officers Outside Officers are judged to be sufficiently independent so long as they do not fall under any of the following categories. (1) A business executive of the Company or its Group company (collectively, the “Group”) (2) A major shareholder of the Company (who possesses 10% or more of voting rights either directly or indirectly) or a business executive thereof (3) A business executive of a principal lender (financial institution or other significant creditor indispensable for the Group’s financing and on which the Group is irreplaceably dependent) of the Group (4) A business executive of a major business partner (an entity who pays the Group 2% or more of the Group’s annual consolidated net sales) of the Group (5) A business executive of a company which holds the Group as a major business partner (an entity which receives from the Group 2% or more of its annual consolidated net sales) (6) An individual who receives a remuneration of ¥10 million or more per year from the Group other than remuneration as an officer – 14 – (7) A business executive of an entity that receives donations of ¥10 million or more per year from the Group (8) A business executive of another company whose position would constitute the person as having an interlocking relationship (9) A spouse or relative within two degrees of kinship of an individual with an important position who falls under the above criteria (1) through (8) (10) An individual who has fallen under the above criteria (1) in the past 10 years, an individual who has fallen under the above criteria (2) in the past five years, and an individual who has fallen under the above criteria (3) through (9) in the past three years [Incentives] Incentive Policies for Directors Other Supplementary Explanation Supplementary explanation is stated in “II.1. [Director Remuneration] Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods” of this report. Recipients of Stock Options Supplementary Explanation — [Director Remuneration] Disclosure Remuneration Supplementary Explanation of Individual Directors’ No Individual Disclosure The amount of compensation, etc., for the Company’s Directors and Auditors in the fiscal year ended March 31, 2021 is as follows: Category Number (persons) Total amount (\ million) Total amount by type (\ million) Fixed compensation Cash compensation 216 80 Stock compensation 52 – Performance-linked compensation 56 – 17 8 325 80 a) Director b) Auditor Total (of which, Outside Officers) (Notes) 1. a) and b) above include four Directors and three Auditors who retired upon expiration of the term of office at the conclusion of the 99th Annual General Meeting of Shareholders held on June 26, 2020. 406 (75) 297 (75) 25 (10) 56 (-) 52 (-) 2. In addition to the amount in a) above, a total amount of \18 million was paid as the employee salary portion for one Director concurrently serving as employee. 3. Taking seriously the business performance for the fiscal year ended March 31, 2021 and the suspension of the appropriation of surplus (interim dividend), executive compensation was reduced as follows: (From July to October 2020) Representative Directors (two persons) and Directors concurrently serving as Executive Officers (six persons): 10% reduction of monthly compensation (excluding stock compensation) (From November 2020 to March 2021) Representative Directors (two persons): 30% reduction of monthly compensation (excluding stock compensation) – 15 – Directors concurrently serving as Executive Officers (six persons): 20% reduction of monthly compensation (excluding stock compensation) Full-time Auditors (two persons): 10% reduction of monthly compensation Policy on Determining Remuneration Amounts and Calculation Methods Established Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods Compensation for Directors concurrently serving as Executive Officers is determined by the role-linked compensation, determined in accordance with position, in addition to the compensation plan linked to business performance per fiscal year, determined based on certain standards including sales growth rate, adjusted for the status of each Director’s achievement of targets, and stock compensation plan with stronger linkage with the shareholder value that uses a trust to provide incentives for improving business performance over the long term. In addition, the ratio of the performance-linked compensation to the total amount of compensation will be set to increase as the position rises. Compensation for Directors not concurrently serving as Executive Officers (Outside Directors, etc.) is determined only by the role-linked compensation in light of the fact that their major role is management supervising function. With regard to the performance-linked compensation, 75% of the criteria for determining the performance appraisal that forms the basis for calculation is qualitative targets and 25% is quantitative targets. Qualitative targets set out individual issues from a management standpoint from a medium- to long-term perspective, while quantitative targets are set according to four consolidated performance indicators (sales growth rate, EBITDA growth ratio, adjusted ROA, and EPS) from a Group management perspective, and based on these, the evaluation results of the achievement levels for each fiscal year are reflected in the amount of compensation. The role-linked compensation and the performance-linked compensation are paid regularly while Directors are in office. Shares of the Company and cash based on the stock compensation plan that uses a trust are granted at the time of retirement, in principle. Stock compensation that uses a trust is determined in accordance with the position. In the event that a recipient of stock compensation is dismissed or resigns from his/her office as Director due to damages he/she caused to the Company or in other similar cases, all or part of granted beneficiary rights to shares of the Company will be invalidated by a resolution of the Board of Directors. Remuneration amounts for individual Directors are deliberated at the Nomination and Compensation Advisory Committee by comprehensively considering this basic policy, general norms, etc., and the results thereof are reported to the Board of Directors. The Board of Directors resolves to leave the matter to Representative Director on the premise of payment of the amounts in line with the report of the Nomination and Compensation Advisory Committee on remuneration amounts for individual Directors. [Supporting System for Outside Directors and/or Auditors] Important matters and the status of business execution are reported to Outside Directors as appropriate. In addition, the Company has established the Auditor’s Office as a dedicated organization to assist Outside Auditors. The Auditor’s Office comprises full-time employees who carry out their duties according to instructions from full-time Auditors. As for the transmission of information to Outside Auditors, the Company provides opportunities for contact with full-time Auditors outside the meetings of the Board of Auditors to enable the exchange of information on such matters as how corporate governance of the Company should be, while having the relevant departments within the Company and the Auditor’s Office provide important internal information in a timely manner. – 16 – [Retired presidents/CEOs holding advisory positions (Senior Advisor, Advisor, etc.)] Information on retired presidents/CEOs holding advisory positions (Senior Advisor, Advisor, etc.) Name Responsibilities Job title/ position Employment terms (Full/part with/without compensation, etc.) time, Date when former role as president/ CEO ended Term Toshimitsu Yamaki Special adviser Part time, with compensation March 31, 2020 1 year Provide information to management, external activities at public and industrial organizations, activities that contribute to regional societies, etc. Number of retired presidents/CEOs holding advisory positions (Senior Advisor, Advisor, etc.) 1 Others Regarding a special adviser, the term of office is one year, and an election is made by the Board of Directors following deliberations by the Nomination and Compensation Advisory Committee, in which Independent Outside Directors comprise a majority of the members. A special adviser is not involved in any form of decision making. 2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration Decisions (Overview of Current Corporate Governance System) (1) Overview of the Current System The Company adopts the auditor system and makes efforts to strengthen the corporate governance system with a view to achieving highly efficient and sound management under this system. The Company’s Board of Directors (held 13 meetings in the fiscal year ended March 31, 2021), which comprises 12 Directors, including four Outside Directors, makes decisions on important business execution and other items stipulated by laws and regulations, in addition to overseeing business execution. The record of attendance at the meetings of the Board of Directors by each Director is as disclosed in the Reference Documents of the Notice of the General Meeting of Shareholders. There are four Auditors, including two Outside Auditors, and each Auditor complies with the standards for the audits by Auditors which were determined by the Board of Auditors (held 10 meetings in the fiscal year ended March 31, 2021) and follows the audit policies and audit plans. The Auditors attend meetings of the Board of Directors and other important meetings, review important approved documents, investigate the business and financial conditions, monitor and evaluate the development and operational status of the internal control systems in conducting stringent audits. Also, among the Auditors, two full-time Auditors (Toshiro Yamamoto, Jun Usami) at the Company and the Group companies, one Outside Auditor (Masataka Ito) at Tokyo Ryutsu Center Inc. have business experience as the officers responsible for (officers in charge of) the accounting department, along with considerable insight regarding finance and accounting. In addition to this, for the purpose of strengthening supervisory functions of the Board of Directors with respect to business execution and optimizing the decision-making process, the Company has adopted the Executive Officer System comprising Directors and department managers in charge of business execution. The Company also has established the Nomination and Compensation Advisory Committee, in which Independent Outside Directors comprise a majority of the members, as an advisory body to the Board of Directors with the aim of strengthening the independence, objectivity and accountability of the functions of the Board of Directors with regard to matters such as the nomination of Directors and Auditors, as well as compensation for Directors. The Committee deliberates on such matters as basic policy on nominations and compensation, and drafts proposals for the General Meeting of Shareholders, reporting the results thereof to the Board of Directors. – 17 – The status of audit, including the organization and personnel involved in the internal audit and assisting duties of the Auditors, is as described in “IV. 1. Basic Views on Internal Control System and the Progress of System Development” below. Ernst & Young ShinNihon LLC was appointed as the Accounting Auditor, and the names of certified public accountants who performed audit work in the fiscal year ended March 31, 2021 and the composition of assistants involved in audit work are as follows: Ernst & Young ShinNihon LLC Designated Limited Liability Partner and Engagement Partner: Motoki Yoshimura Designated Limited Liability Partner and Engagement Partner: Tokuro Onohara Designated Limited Liability Partner and Engagement Partner: Yoshikatsu Nakahara * Composition of assistants involved in audit work: seven certified public accountants, 19 assistants (2) Status of initiatives to strengthen the functions of Auditors The status of initiatives to strengthen the functions of Auditors is as described in “II 1. Coordination among Auditors, Accounting Auditor and Internal Audit Department” and “II 1. Supporting System for Outside Auditors” above. (3) Overview of contents of liability limitation agreement with Outside Officers The Company’s Articles of Incorporation stipulate that the Company may enter into agreements with Directors (excluding persons who are Executive Directors, etc.) and Auditors that limit their liabilities for damages to the Company in order to facilitate the recruitment of appropriate human resources and enable them to fully perform their expected roles. Among the Directors, all Outside Officers have entered into such agreements with the Company, and in the event that the Outside Officers neglect their duties and cause damages to the Company, the maximum amount of liability for damages under the agreements will be \10 million or the minimum liability amount set out in Article 425, Paragraph 1 of the Companies Act, whichever is higher, on the condition that they perform their duties in good faith and without gross negligence. 3. Reasons for Adoption of Current Corporate Governance System (1) Reason for adopting the current system The Company ensures efficiency and soundness, as well as effectiveness and expertise, etc., of management, while fully respecting the roles and functions of Outside Officers under the governance system above, in view of the business characteristics of the Group, which is engaged in a wide range of businesses oriented towards people’s livelihood mainly in areas along the Odakyu Line, centered on the transportation business which has a social mission as a public transportation service provider. The Company adopted this system based on its judgment that supervision of management is functioning effectively as a result of this approach. (2) Matters concerning Outside Directors Outside Directors perform roles and functions to enhance the management supervising function, including providing effective opinions to management from an objective, neutral or independent perspective based on career history, experience and professional knowledge that differ from those of in-house Directors. – 18 – III. Implementation of Measures for Shareholders and Other Stakeholders 1. Measures to Vitalize the General Meeting of Shareholders and Smooth Exercise of Voting Rights Supplementary Explanations Send the notice three weeks before the General Meeting of Shareholders. Exercise voting rights via the Internet. Participate in the electronic voting platform. Early Notification of General Meeting of Shareholders Allowing Electronic Exercise of Voting Rights in Electronic Participation Voting Platform and Other Efforts to Enhance the Voting Environment for Institutional Investors Providing Convocation Notice in English Other Part of the notice (narrowly defined notice and reference documents) is translated into English. The translation becomes available on the websites of the Tokyo Stock Exchange and the Company at the same time as the Japanese version. Visualize business report and other materials, and post the notice on the Company’s website four weeks before the General Meeting of Shareholders. Explanation by Representative None Yes 2. IR Activities Supplementary Explanations Preparation and Publication of Disclosure Policy Regular Investor Briefings for Individual Investors Regular Investor Briefings for Analysts Institutional Investors and Posting of IR Materials on Website Establishment of Department and/or Manager in Charge of IR Formulate the Disclosure Policy and disclose it on the website URL: https://www.odakyu.jp/ir/odakyu/ Participate in investor briefings for individual investors sponsored by securities companies, etc. Time and number of times of briefing: After announcement of financial results, twice a year (May and November every year) Number of participants: Approximately 50 persons Materials posted: Financial information, materials for timely disclosure other than financial information, financial results briefing materials, securities reports and quarterly reports, business reports, monthly sales overview, FAQ, etc. URL: https://www.odakyu.jp/ir/ Responsible department: Investor Relations Office Officer responsible for investor relations: Takashi Hayama, Managing Director Person responsible to contact for investor relations matters: Toru Ishiguro, Investor Relations Office Manager – 19 – Implementation of Environmental Activities, CSR Activities etc. 3. Measures to Ensure Due Respect for Stakeholders Updated Supplementary Explanations For details on the implementation status of social/environmental activities, refer to Supplementary Principle 3-1-3 Initiatives Concerning Sustainability and Investments, etc. in Human Capital and Intellectual Property” under “Disclosure Based on the