Shikoku Electric Power Incorporated : G(Governance)

Business Management that Increases Sustainability

G	Enhancing Corporate Governance
Governance

We are working on the strengthening of governance, the securing of management transparency through dialogue with shareholders and investors, and the promotion of compliance to improve corporate value.

Basic Policy on Corporate Governance

Our fundamental mission is to contribute to the development of local communities by providing our customers with a stable supply of low-cost,high-quality electricity. In order to realize sustainable improvement in our corporate value based on this mission, we are advancing efforts aimed at impartial, quick and bold decision-making, and the improvement of corporate value while taking into consideration the key principles that contribute to effective corporate governance stated in the Yonden Basic Policy on Corporate Governance and Japan's Corporate Governance Code.

Yonden Basic Policy on Corporate Governance: Basic Views on Corporate Governance

1. We will substantially ensure the rights and fairness of our shareholders.
2. We will cooperate with our various stakeholders in an appropriate manner.
3. We will actively disclose information promptly and fairly in an effort to ensure transparency.
4. We will reinforce business execution and management supervisory functions under a corporate governance system with an Audit & Supervisory Committee.
5. We will engage in constructive dialogue with our shareholders and other investors.

Message from outside director

Governance under Unpredictable Circumstances

Director Audit & Supervisory Committee Member

Fujiko Takahata

The COVID-19 pandemic, which began in early 2020, has had an impact which transcends the mold of what we were familiar with in terms of epidemics. It also has reached a level serving to drive a change in people's attitudes and the structures of industry. With no complete end to the pandemic in sight, new challenges have arisen since the end of 2021, including soaring oil prices. Given this, we would have to say that the situation surrounding companies and consumers remains uncertain.

It is under these very unpredictable circumstances that our Company has steadily strengthened its corporate governance system based on the recognition that enhancing corporate governance is essential. With respect to Shikoku Electric Power Group Medium-Term Management Plan 2025 (which was released in March 2021), 5 outside directors participated from the conceptual stage and provided recommendations on the formulation of content leading to the realization of multi-utility corporate group that supports the lifestyles of our customers as set out in the Group Vision. These individuals are also conducting audit and supervisory work through various opportunities, such as discussions at various committees and exchanges of opinions with the representative director. Proactive leveraging of the knowledge possessed by outside directors with diverse

backgrounds within the decision-making process is something that falls in line with our basic policy on corporate governance of appropriate cooperation with stakeholders.

Three years have passed since I became an outside director. I believe that our Company's business activities are worthy of recognition due to our efforts to enhance corporate value by aligning sustainable growth as a company together with our social mission as a company in the position of providing infrastructure to Shikoku, with that mission being to contribute to the development of local communities providing our customers with a stable supply of low-cost,high-quality electricity. At the same time, we are seeing the business environment change dramatically in the modern era, and I feel that there is room for improvement in the decision-making process, particularly in terms of speed.

In this age of turmoil, both a firm sense of mission along with the ability to respond to situations quickly and flexibly are desired. In terms of risk management, the responsibilities of Outside Directors when it comes to governance will become even heavier. I believe that I must make every effort to contribute to the sound growth of the Company and further increase its corporate value, and I am prepared to once again focus my energy on doing that.

59 Shikoku Electric Power Group INTEGRATED REPORT 2022

Shikoku Electric Power Group		President's Message		Value Creation through		Business Management that		Financial / Corporate Information
Value Creation			Business Activities		Increases Sustainability

WWW

The Yonden Basic Policy on Corporate Governance (in Japanese only) https://www.yonden.co.jp/corporate/ir/policy/governance.html

Corporate governance report (in Japanese only) https://www.yonden.co.jp/corporate/ir/library/governance.html

Corporate Governance System

(1) Board of Directors (Chair: Hayato Saeki)

• Supervises decision-making and the execution of important business operations by directors (including with respect to climate change)
• Comprised of 14 members, including 5 outside directors (which includes 2 women)
• Held once a month as a general rule and also held on an temporary basis when necessary

(2) Audit & Supervisory Committee (Chair: Hiroshi Kawahara)

• Based on audit policies, plans and other elements, opinions and advice on management are exchanged through the attendance of important meetings such Board of Directors meetings and through regular exchanges of opinions with representative directors. Additionally, the execution of duties by executive directors is audited through hearings on the statuses of the execution of duties conducted with executive directors and other employees. These audits take place through tasks such as the inspection and investigation of important documents.
• Comprised of 5 outside directors (Which includes 2 women) and 1 internal director

(3) Personnel Committee (Chair: Fujiko Takahata [Outside director])

• The Personnel Committee deliberates on matters concerning the appointment and dismissal of the representative director, other directors and corporate officers, and matters concerning the appointment and dismissal of senior advisers and executive advisers
• Composed of 5 outside directors and 2 internal directors

(4) Compensation Committee (Chair: Ryohei Kagawa [Outside director])

• At the request of the Board of Directors, the Compensation Committee deliberates on the amount of director compensation and the details of shareholder meeting proposals related to director compensation, with the committee then reporting its findings to the board.
• Composed of 5 outside directors and 1 internal director

General Meeting of Shareholders

Personnel (3) Committee

Appointment / Dismissal

Appointment / Dismissal

Appointment / Dismissal

(4)

Inquiry

(1) Board of Directors

Compensation Committee

Audits,

Directors

(2) Audit & Supervisory Committee

etc.

Report

(Excluding Directors who are members

(Directors who are members

of the Audit & Supervisory Committee)

of the Audit & Supervisory Committee)

Independent AuditorsAccounting

Appointment /

Audit & Supervisory

Reports

Dismissal /

Audits

Supervision

Committee Ofce

Collaboration

Reports

(5) Board of Managing Directors

Director and President

(Deliberation of important issues)

Instruction

(Rrepresentative Director)

Instruction

Audits

Sustainability Promotion

Reports

Instruction

Reports

(6) Internal Audit

Council

Division

Environmental Strategy Committee

Operations Division

Internal

Social Co-Creation Committee

Compliance Promotion Committee

Regulation

Audit

Compliance Consultation Ofce

(in Japanese only)

Group Companies

Internal: Within the General Affairs Dept.;

External: Lawyer

(5) Board of Managing Directors

(6) Internal Audit Division

• Deliberates on matters to be submitted to the Board of Directors and on important matters related to business execution
• Comprised of the Director and President, and the Executive Officers in charge of HQs and divisions. Furthermore, the Chairman of the Board and Directors who are Audit & Supervisory Committee members with investigative authority, can also attend these meetings.
• Held once a week as a rule.

• The Internal Audit Office conducts internal audits of the implementation status of the management cycle under the Group's management plans for each fiscal year, which describe the Group's basic policies and plans, as well as of appropriate business execution and effective business management based on the responsibilities and authority of each employment position.

Shikoku Electric Power Group INTEGRATED REPORT 2022 60

Business Management that Increases Sustainability

Enhancing Corporate Governance

Enhancing Corporate Governance

Composition of the Board of Directors and nomination policy

The Board of Directors is composed so as to establish a proper balance of insight, experience and ability throughout the board as a whole while maintaining diversity and an appropriate size by a plurality of executive directors from a variety of fields and backgrounds and multiple independent outside directors upon having specified the skills they should be equipped with in light of elements such as management strategies. In doing so, we hope to ensure ample discussion based on of a variety of opinions as well as expedited and rational decision-making.

The Board of Directors nominates candidates for Director who meet the following criteria, and prior to the nomination of candidates, they are deliberated upon by the "Personnel Committee." Following this:

• Candidates for Director (Excluding members of the Audit & Supervisory Committee) are explained at a meeting of the Audit & Supervisory Committee
• Candidates for Director who are members of the Audit & Supervisory Committee must obtain the consent of the Audit & Supervisory Committee.

• The number of directors (Excluding directors who are members of the Audit & Supervisory Committee) must not exceed 13 and the number of Directors who are members of the Audit & Supervisory Committee members must not exceed seven.

Standards for director candidates

1. Candidates must excel in character, insight and ability, and have a high sense of ethics and law-abiding spirit
2. Candidates must understand our fundamental mission and corporate philosophy and be able to contribute to the sustainable improvement of corporate value and regional development
3. Candidates must be able to adequately carry out management decision-making and supervision from a company-wide perspective as a constituent member of the Board of Directors
4. Candidates must meet the statutory qualification requirements as directors

Process for nominating director candidates

		denotes the fact that it is optional			denotes designation by law
Organization	Personnel	Audit & Supervisory	Board of Directors
Subjects	Committee	Committee
Director		Decision-making
	on appointments, etc.
(Excluding members of
	Statements of opinion
the Audit & Supervisory
	at General Meetings
Committee)	Deliberation	Resolution
of Shareholders
Director Audit &
Supervisory		Consent
Committee Member

Way of thinking on compensation for directors

Compensation for directors is determined by a comprehensive assessment of several factors, including business performance, content and execution of duties, and compensation levels of other businesses with particular focus on listed companies. In doing so, we aim to provide appropriate compensation in light of each director's responsibility to realize our mission and to facilitate sustainable improvement of corporate value.

The specific levels of compensation are determined by the Board of Directors based on reports provided by the Compensation Committee and within the amount limits determined by resolutions issued at General Meetings of Shareholders.

Compensation of Directors

• Monthly compensation
• Bonus determined at the General Meeting of Shareholders, taking into consideration business performance for each fiscal year (There are no standard indicators)
• Stock compensation paid with the purpose thereof being the improvement of medium-tolong-term business performance and corporate value

• Monthly compensation only

	Compensation amounts (FY2021)		(Millions of yen)
		Total	Total amount by type of compensation, etc.
					Number of
	Executive	amount of	Monthly	Bonus	Stock
classification	compensation,	compensation	subject
		etc.	compensation	(Results-linked	(Non-monetary	directors
			[Annual amount]	compensation, etc.)	remuneration, etc.)
	Director
	(Excluding
members of	309	278	ー	30	9
the Audit &
Supervisory
Committee)
Director Audit &	39	39			2
	Supervisory
Committee member
	(Internal)
Outside Director	45	45			8

• Including the total amount of compensation paid to directors retiring from their positions at the General Meeting of Shareholders held in June 2021 and the number of such directors.

Reference: Maximum monthly compensation, etc.

[Total for all people]		(Millions of yen)
Executive classification	Monthly compensation	Stock compensation
[Monthly amount]
Director		• 160 million yen over 3
(Excluding members of	38	fiscal years
the Audit & Supervisory
	• 50,000 points annually*
Committee)
Directors who are members	10
of the Audit & Supervisory
Committee
		* 1 point = 1 share

61 Shikoku Electric Power Group INTEGRATED REPORT 2022

Shikoku Electric Power Group		President's Message		Value Creation through		Business Management that		Financial / Corporate Information
Value Creation			Business Activities		Increases Sustainability

WWW

Fiscal 2021 report (in Japanese only) https://www.yonden.co.jp/assets/pdf/corporate/ir/library/report/report_to_shareholders_2021.pdf

Corporate governance report (in Japanese only) https://www.yonden.co.jp/corporate/ir/library/governance.html

Evaluation of the effectiveness of the Board of Directors

We conduct an annual questionnaire survey among all directors on the effectiveness of the Board of Directors, and evaluate the composition, governance and management of the Board of Directors based on the results. We have judged that the effectiveness of the Board of Directors has been ensured adequately in fiscal 2021.

We will continue to take measures based on the opinions of directors to optimize governance, and will strive for further improvement of the effectiveness of the Board of Directors.

Results of evaluation of the effectiveness of the Board of Directors (Overview of FY2021)

• The Board of Directors as a whole has a good balance of knowledge, experience, and abilities, and diversity has also been ensured
• A framework is being developed to improve governance functions, which includes increasing independence and checks and balances by appointing outside directors as chairs of the Personnel Committee and Compensation Committee (Which are optional committees)
• For specialized matters, measures are taken to promote the understanding of outside directors, such as sharing the important points of discussions in advance using summary documents

• Add further vitalization to discussions by efficiently explaining the main points of the materials
• Further enhancement of opportunities for sharing information with outside directors

Frequency and attendance rates of meetings of the Board of Directors and Audit & Supervisory Committee (FY2021)

	Number of meetings held	Attendance rate
Board of Directors	12	100.0%
Audit & Supervisory	19	99.1%
Committee

Appropriate internal controls

To ensure the effective functioning of internal controls so that day-to-day business operations can be executed appropriately and efficiently, it is important for us to maintain a sound corporate culture, identify chains of authority and responsibility, and develop systems to manage risks. It is also important for us to check the state of operation of such mechanisms regularly and make improvements.

Having recognized the importance of winning the trust of society at large, the Board of Directors passed a resolution setting out our policy on a System for Ensuring Sound Business based on the perspective of conducting business activities that are legal, appropriate, and efficient. Going forward, we will implement business management in accordance with this policy.

Further, we will disseminate the policy continuously to gain the understanding of all our Directors and employees, in order to strengthen our initiatives for enhancing our internal control systems.

Way of thinking on cross-shareholdings

The shares that we hold are limited to those of companies which contribute to the sustainable improvement of our Group's corporate value in terms of the efficient operation of electric power business, stable fund procurement, and other such elements.

In addition, the rationality of shareholdings in listed companies is verified each year in consideration of profitability and other factors while taking into account their importance in terms of business operations and capital costs. Having done that, the results are then reported to the Board of Directors. Shareholdings which have ceased to be recognized as necessary for us to own are then quickly sold.

Shareholdings (End of FY2021)		(100 million yen)
	Number	B/S recorded	Difference against previous year
	of stocks	amount	Number	B/S recorded
			of stocks	amount
Listed stocks	8	33	-4	-7
Unlisted stocks	67	288*	1	1

• In terms of shares we hold in unlisted companies, 26.7 billion yen accounts for 10 companies related to nuclear power. Of that amount, 25.6 billion yen accounts for our share of Japan Nuclear Fuel Limited. The company's business plays an important role in the nuclear fuel cycle. We have also invested in the project owing to its necessity for the stable operation of nuclear power plants.

Shikoku Electric Power Group INTEGRATED REPORT 2022 62

Business Management that Increases Sustainability

Enhancing Corporate Governance

React to Risks and Opportunities

We grasp and manage risks anticipated in business operations based on social issues (Including climate change), the business environment, management resources, etc. In addition, we are also moving forward with initiatives connected to new value creation by taking good advantage of opportunities generated in association with changes which come about.

Risk management system

Based on the "Risk Management Rules" that define the basic aspects of risk management and action principles, management checks and reviews risks that have the potential to significantly impact operations every year (Including climate change), and incorporates the results into our management plans for the following fiscal year to ensure every effort is made to prevent or reduce the impact of risk.

For risks that cut across the entire Group, we set up expert committees as necessary and address such risks in an appropriate manner based on comprehensive assessments.

For emergency situations brought about by natural disasters or other circumstances, we have established individual rules and manuals and clarified the management structure so that damage is minimized and recovery expedited.

Moreover, we share information appropriately by establishing a "crisis hotline" as a helpdesk that swiftly gathers crisis-related information to make all employees fully aware of the importance of crisis management.

The PDCA of risk management

[Management level (Plan)]

Discuss among

management and reflect in management plans

[Divisions, etc.		[Divisions, etc. (Do)]
(Action)]		Monitoring of business
Evaluation and prioritization of
	execution risks and
risks and opportunities		opportunities

[Divisions, etc. (Check)]

Recognition of

risks and opportunities

Business Continuity Plan (BCP) for responding to infectious diseases

We have established a BCP (A business plan for measures against novel influenza, etc.) that will enable continuity of business by securing stable supply of power, even supposing that approx. 40% of employees are absent from work due to infection.

Based on this plan, if an infectious disease spreads, we will implement the following thoroughly:

• Prevention of the spread of infection among shift workers in electric power generation, grid, supply and demand operations, etc.
• Measures for the entry, etc. of power station workers, etc.

At the same time, we are working to maintain a stable supply of electricity through efforts such as the support of other business sites.

Response based on BCP

We will implement the following measures in advance based on the plan:

1. Selection of work that is important to the continuation of stable supply
2. Establishment of systems that enable the minimum number of personnel required to carry out work
3. Listing of shift supervisors and personnel who can act on their behalf, and implementation of education and training as required

		Procurement
Operation /	Maintenance /	of fuel /
Control	Inspections	Equipment /
		Materials

If personnel shortages do occur, support will be provided from other places of business.

63 Shikoku Electric Power Group INTEGRATED REPORT 2022