MIRAIT ONE : Corporate Governance Report

Last Update: June 28, 2023

Company Name: MIRAIT ONE Corporation

Representative: Toshiki Nakayama, President and CEO

Exchange Code: 1417

Stock Exchange Listing: TSE Prime Section

Phone: [phone]

Corporate Governance Report

The status of Company's corporate governance is as follows.

I. Basic Approach to Corporate Governance

1. Basic Approach

The Company recognizes the importance of management as a company with social responsibilities, implements organizational structures and mechanisms for ensuring transparency and fairness in decision making, and positions the creation of relationships of trust with all stakeholders including shareholders to be one of the most important issues in management. For this reason, the Company aims to enhance corporate value and achieve sustained growth through the implementation and constant improvement of the following Corporate Governance Code.

[Reason for not Implementing the Principles of the Corporate Governance Code]

The Company has implemented all the principles of the Corporate Governance Code revised in June 2021.

[Disclosure Based on the Principles of the Corporate Governance Code]

• Establishing an environment for electronic exercise of voting rights [Supplementary Principle 1-2-4]

The Company has been adopting the electronic voting platform for institutional investors operated by ICJ, Inc. since the 1st Ordinary General Meeting of Shareholders held on June 28, 2011.

The Company is in the process translating the convocation notice into English, and is enhancing efforts to facilitate the exercise of voting rights by overseas investors.

• Strategic shareholdings (Principle 1-4)

1. Standard of and Approach to Classification of Shares for Investment If the purpose of investment is:

1. maintaining or strengthening business relationships with the Company in which shares are held;
2. maintaining or strengthening cooperative relationships for the promotion of alliance operations; or
3. coordination for efficient construction work, etc.,

the Group classifies such investments as strategic shareholdings. Investments made for other purposes are classified as pure investments.

2. Method of examining the policy on cross-shareholdings and the rationality of shareholdings, and details of examination on whether the holding of specific shares is appropriate by the Board of Directors, etc.

(1) Policy on holding shares

The Group holds shares when it is thought that holding the shares of a business partner will lead to the improvement of the Group's corporate value or the interests of shareholders. The Company checks the objectives of shareholding and the state of trading, and gradually reduces shares for which the meaning of shareholding is found to have diminished through quantitative and qualitative verification, by their sale, etc.

(2) Method of examining the rationality of shareholdings

The Group performs quantitative and qualitative examination of the medium- to long-term economic rationality and future outlook of strategic shareholdings based on factors such as the risks and returns.

1. Details of examination on whether the holding of specific shares is appropriate by the Board of Directors,
   etc.
   The strategic shareholdings held by the Group are subject to investigation of the purpose of holding the shares and the status of transactions. Once every year, the Board of Directors performs quantitative and qualitative examination of each issue regarding whether the risks and returns are commensurate with the capital cost, the purpose of holding the shares and future business trends, etc. to determine whether holding the shares is appropriate.
   Shares which are thought to have "little meaning to be held" as a result of a review are sold as needed while considering factors such as the share price. Furthermore, the strategic shareholdings of the Group as a whole and the condition of the reduction thereof are managed through annual reviews.
   In FY2022, 4 stocks were sold in accordance with the above policy.

3. When exercising voting rights for shares it holds, the Company checks each proposal and makes comprehensive decisions based on whether they contribute to the enhancement of the Group's medium- to long- term corporate value through dialogue with the company (department) in control of transactions with the business partner and verification of the Corporate Strategy Department.

• Responses to intentions to sell cross-shareholdings (Supplementary Principle 1-4-1)

When a company that holds the Company's shares indicates that it intends to sell its shares, the Company does not hinder the sale.

• Transactions with cross-shareholders (Supplementary Principle 1-4-2)

The Company does not engage in transactions with cross-shareholders which are not economically rational.

• Related party transactions (Principle 1-7)

The Company requires that competing transactions and transactions in conflict of interest by directors are deliberated and resolved by the Board of Directors, and reports on the status of transactions are periodically made to the Board of Directors.

Board members are required to submit a "Confirmation of Related Parties" to ascertain whether there are any transactions with related parties such as the board members themselves, their close relatives, organizations they represent and organizations in which they hold a majority of voting rights.

The Board of Directors receives reports on transactions with major shareholders periodically and as required, and provides supervision to ensure the common interests of shareholders are not harmed.

• Ensuring internal diversity including promotion of activities of women [Supplementary Principle 2-4-1] In order for the Company to fulfill the social responsibilities as a company and attain sustainable growth and

development, the Company considers that it is important to recruit diverse human resources, including mid-carriers with various work histories, regardless of gender or nationality. In order to utilize diverse perspectives and senses of value in corporate management, the Company has set up a specialized organization to promote diversity and inclusion, and is boosting efforts such as establishing a work environment to maximize the characteristics and abilities of each worker and training of the management staff.

In particular, the Company recognizes that promoting activities of women is indispensable. Thus, it has set such goals as increasing the ratio of female new graduates to all new hires by 25% and the number of female managers by 20% (compared to July 2022), and is working on an action plan to encourage the promotion of women to managerial positions. In addition, for flexible work styles, the Company strives to offer an institutional support such as a telecommuting system and a childcare leave system that meet higher requirements than the legal requirements. The Company also makes efforts to expand the range of occupations in which diverse human resources can be successful.

At our overseas bases, mainly in the Asia-Pacific region, the Company is committed to developing human resources so that each and every employee can fully demonstrate his or her abilities, such as through mutual support by dispatching personnel between bases to improve the overall technical capabilities of local human resources.

Furthermore, the Company is actively expanding the use of external human resources, and as of March 2023, the percentage of mid-career hires in managerial positions was less than 30%, and the Company aims to achieve the same level of diversity and inclusion in the future.

In December 2022, the Company formulated the "Diversity & Inclusion Declaration" to further develop these efforts toward diversity and inclusion. The Company will continue to promote diversity and inclusion in order to realize our mission " Creating an attractive corporate culture with a diverse and dynamic workforce.", which clearly states the Group's Mission statement to each stakeholder.

• Exhibiting functions as a corporate pension asset owner (Principle 2-6)

For the corporate pension, the Company has consolidated, since October 2020, the defined benefit corporate pension plan of each of MIRAIT ONE Corporation, SOLCOM Co., Ltd. and Shikokutsuken Co., Ltd. into an association defined benefit corporate pension plan called "MIRAIT ONE Group Defined Benefit Corporate Pension Plan" (hereinafter referred to as the "MIRAIT ONE Group DB"), and has been operating the MIRAIT ONE Group DB, in order to integrally manage toward reinforced governance.

(Note) TTK Co., Ltd. and MIRAIT ONE SYSTEMS Corporation has implemented a defined contribution corporate pension plan, and does not have a defined benefit corporate pension plan.

With regard to its operation, a governance system has been established by establishing the Pension Committee made up of the members such as officers in charge of personnel affairs and finance at the Company in addition to the officers or general managers in charge of personnel and general affairs and finance in operating companies and employee representatives. The Pension Committee conducts asset and liability management (ALM), has established the appropriate composition of strategic assets in the "Basic Policy on Management of Pension Assets" based on basic approach of long-term investment with acceptable risk, and conducts monitoring of the state of management each quarter while obtaining information as appropriate from the master trustee company as an external expert to ensure appropriate management of pension assets.

Furthermore, appropriate personnel have been assigned in the Company to serve as the personnel responsible for pensions, and efforts are being made to develop personnel by providing opportunities to learn and appropriately update specialized knowledge by dispatching them to external seminars on corporate pensions and through workshops conducted by external experts.

Note that SEIBU CONSTRUCTION CO.,LTD. also operates a defined benefit corporate pension plan. The Pension Committee of SEIBU CONSTRUCTION CO.,LTD. checks the operating status of the defined benefit corporate pension plan so as to carry out its proper operation.

• Company objectives, business strategies and business plans (Principle 3-1-1)

In the management integration in July 2022, the Group redefined its Purpose (meaning of existence) and Mission (public mission) as follows.

[Purpose]

・Co-creating an exciting future through challenges and technology.

[Mission]

・Meeting customer expectations and contributing to realize a prosperous society.

・Constantly refining our technology and business model to add more value. ・Building and maintaining future social infrastructure with our partners.

・Creating an attractive corporate culture with a diverse and dynamic workforce.

・Continuing to be a trusted company through improved sustainability and strict compliance.

[Management plan]

Under the newly redefined Purpose and Mission last fiscal year, the Group aims to evolve into a corporate group contributing more than ever to solving of various social problems in wide social infrastructure areas. In order to remain a reliable corporate group that keeps "creating and supporting" future social infrastructures, the Group has formed 'MIRAIT ONE Group Vision 2030" and the Fifth Medium-term Management Plan of five years starting with fiscal 2022 as a business vision toward 2030.

[MIRAIT ONE Group Vision 2030 and New Medium-term Management Plan]

1. Management Strategy in the MIRAIT ONE Group Vision 2030

The MIRAIT ONE Group Vision 2030 is centered on five changes as a new growth strategy based on the key

word that we will change and the future will change.

◇Change 1: People-centric management

• MIRAI College: "Driving force of business structure reform" providing learning and connection
• "Health management" creating a friendly working environment and protecting the physical and mental health of employees
• MIRAIT ONE work style reforms

◇Change 2: Acceleration of business growth

• Strategically addressing business growth through human capital growth and organically combining and mobilizing the Group's resources in the growth area of "MIRAI Domain" (promotion of business structure reform to a full-value model)
  ■ Urban development and regional development business (regional redevelopment business), and acceleration of

corporate DX and promotion of green operations

■ Expansion of Green Energy business

■ Strengthening of SI business contributing to customers' DX (strategic consolidation)

■ Strengthening of global business promoting overseas data center related business and infrastructure sharing

• Strengthening of customer base of existing business (responding to expansion of customers and growth of customers)

◇Change 3: Top-class profitability

• Strengthening of management foundation through concentration and improvement of efficiency by integrating the three companies
• • Improvement of efficiency through the fundamental revision of operations and utilization of data insight
  • Review of existing operations and costs through promotion of group coordination

◇Change 4: Management based on data insights

• Establishment of knowledge-based data environment and optimization of sales approach (aggressive DX)
• Value chain reform, smart construction, utilization of BPO/RPA/robotics (defensive DX)
• Development of experts and core personnel, improvement of companywide literacy (development of DX personnel)

◇Change 5: Strong foundation for ESG management

• Initiatives aimed at the achievement of greenhouse gas reduction targets (science-based targets)
• Creation of social value through the MIRAIT ONE Partner Association
• Enhancement of audit system and strengthening of audit functions through third line of defense
• Strengthening of corporate governance through new Group management system

2. Medium-term Management Plan

The Group has adopted, as objective indicators used to determine the attainment status of management goals called Key Performance Indicators (hereinafter referred to as KPIs) of the Fifth Medium-term Management Plan, Sales, Ratio of MIRAI Domains (*), Operating Income (Rate), ROE (Return on Equity) and EPS (Earnings per Share), and specified, as goals in fiscal 2026, a Sales of at least 720 billion yen, a Ratio of MIRAI Domains of at least 40%, an Operating Income (Rate) of at least 7.5%, an ROE of at least 10%, and an EPS-CAGR of at least 10%.

(*) Ratio of sales of MIRAI Domains (areas aiming at business growth) in Total Sales

The reason these KPIs have been adopted is because of the recognition that they are important indicators for all stakeholders including shareholders to understand the Group's management policies and management strategies, in addition to enabling the evaluation of their progress and feasibility.

Operating income and ROE have also been adopted as indicators for the calculation of points granted in the Board Benefit Trust performance-linked stock compensation scheme it has implemented to raise awareness of the contributions to performance of Group companies and enhancement of corporate value.

(Note) These figures for these KPIS are based on reasonable judgments according to circumstances, etc. that can be forecast as of the date of the submission of this report (June 28, 2023)., and do not constitute a guarantee of their achievement.

• Basic views and guidelines on corporate governance (Principle 3-1-2)

The Company recognizes that the realization of effective corporate governance is essential for the creation of relationships of trust with stakeholders. To this end, the Company will increase the effectiveness of corporate governance by:

1. Ensuring the rights and equality, etc. of shareholders;
2. Appropriately collaborating with stakeholders other than shareholders;
3. Ensuring appropriate disclosure and transparency;
4. Performance of responsibilities of the Board of Directors, etc.; and
5. Dialogue with shareholders.

Furthermore, MIRAIT ONE Group: Charter on Safety and Compliance has been established as the basic policy of corporate ethics and a specific code of conduct, and is published on the Company's website (https://www.mirait-one.com/english/)

• Board policies and procedures in determining the remuneration of the senior management and directors (Principle 3-1-3)
  These are stated in "II. Status of Corporate Management Organizations and Other Corporate Governance Systems

Related to Management Decisions, Execution and Supervision 1. Matters Pertaining to Organization Composition and Organization Management, etc. [Directors' Remuneration]".

• Policies and procedures in the appointment of directors, and explanations of nominations (Principles 3-1-4 and 3-1-5)
  When nominating candidates for director, the Company selects a wide variety of candidates from inside and

outside the Company, consults with the Nomination and Compensation Committee chaired by an independent outside director and decides in the Board of Directors the candidates who have excellent character and knowledge along with a high level of management capability based on the committee's responses.

In particular, independent outside directors are nominated based on their ability to fulfill their roles and responsibilities from an expert and objective perspective, such as having abundant experience and knowledge in their respective fields, and providing advice and supervision from the perspective of medium- to long-term enhancement of corporate value. Moreover, independent directors who are Audit and Supervisory Committee members are nominated based on their ability to increase transparency of the Board of Directors and enhance corporate value by appropriately monitoring the state of compliance with laws, regulations and the Articles of Incorporation regarding management decisions and execution of operations by directors with abundant experience and knowledge in their respective fields.

The reasons for the election of the individual directors and the number of attendance times are described below in the "Notice of the General Meeting of Shareholders."

• Promotion of disclosure in English [Supplementary Principle 3-1-2]

The Company has translated into English: the financial statements, convocation notices (abstract translations), integrated reports, corporate governance reports, IR materials, video distribution of financial results briefings, timely disclosure materials and the like. The Company strives to provide important information in English to overseas institutional investors and shareholders in a timely manner.

The Company strives to provide a wider range of information disclosure of materials translated into English, by utilizing TDnet and the Company's website (https://www.mirait-one.com/english/). Additionally, the Company carries out overseas IRs in North America, Europe, and Asia more than once a year.

• Enhancement of sustainability information disclosure [Supplementary Principle 3-1-3] 1.Sustainability Initiatives
  The MIRAIT ONE Group has been building communication and electrical infrastructure foundations such as 5G facility establishment, EV station construction, and renewable energy business, by taking advantage of on-site and technical forces that the Company has cultivated so far.
  The Company strives to solve customer, social, and environmental issues through the operations of the Group.
  The Group has established the "ESG Management Promotion Committee" with an aim to improve the corporate value toward contribution to SDGs and sustainable growth and has been formulating strategies and solving challenges related to ESG management in general. Full discussion has been made at the committee, in