Note: This document has been translated from the Japanese original for reference purposes only. In the event ofany discrepancy between this translated document and the Japanese original, the original shall prevail.

Corporate Governance Report
CORPORATE GOVERNANCE

Last Update: August 13, 2024

MODEC, Inc.

Hirohiko Miyata, President & CEO
Contact: +81 -3-5290-1200
Securities code: 6269

https://www.modec.com/

The corporate governance of MODEC, Inc. (the “Company” or “MODEC”) is described below.

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

Basic views on corporate governance
The Company establishes its corporate governance system in accordance with the fundamental principles of strict compliance,
a focus on shareholder returns and securing business transparency. In particular, with regard to securing transparency, theCompany proactively strives to ensure prompt and accurate information disclosure.

Reasons for Non-compliance with the Principles of the Corporate Governance CodeThis report is based on the Corporate Governance Code revised in June 2021.
The Company complies with all principles of the Corporate Governance Code.

Disclosure Based on each Principle of the Corporate Governance Code

The Company has established the MODEC, Inc. Corporate Governance Guidelines (hereinafter, the “MODEC Guidelines”). The
implementation status of each principle of the Corporate Governance Code is disclosed on the Company’s website.
https://www.modec.com/sustainability/pdf/governanceguideline_en.pdf
Please refer to the following items for the Company’s policies regarding matters that the Corporate Governance Code statesshould be disclosed.

< Principle 1-4>
MODEC Guidelines [Article 7. Basic Policy for Cross-Shareholdings and Exercising Voting Rights Associated with CrossShareholdings]
The Company does not currently cross-hold any shares.
< Principle 1-7>
MODEC Guidelines [Article 5. Procedures Concerning Transactions that may Harm the Common Interests of Shareholders]<Supplementary Principle 2-4-1>
Based on the concept that “human resources are a source of competitive strength,” we will bring together the strengths of
employees throughout the MODEC Group with the aim of realizing “a world where the ocean and humanity co-exist inharmony,” as stated in our vision. The environment surrounding the Company is changing in a dynamic manner as evidenced
by the global trend toward “decarbonization.” However, in order for the Company to be needed by society in the future andachieve sustainable growth, we must respond flexibly and quickly to such changes in the environment. Based on thisrecognition, in our Mid-term Business Plan 2024-2026, we have stated that we will decarbonize our FPSOs and develop new
business opportunities, as well as actively invest in human capital, which will be the foundation for growth and transformation.
We will promote the development and acquisition of human resources who will contribute to these efforts and create anenvironment in which such human resources can thrive.
1) Ratio of Women
Based on the above concepts, we are strengthening the recruitment of females at our head office in Japan so that the ratio of
females, excluding engineers dispatched offshore, etc., is on a par with levels of other companies in the same industry. In
addition, in order to create an environment in which female employees can play an active role in the Company over the
medium to long term, we are promoting initiatives to “support the balance between childcare and work,” based on relevant
laws.
Target item
Ratioof
employees*
Ratioofmanagers*

TargetfemalefemaleGreater than maintaining thestatus quo
30% by the end of FY2040* Excluding engineers dispatched offshore

1

FY2023
results
47%
16%2) Foreign nationals
As a company operating globally, we train and promote employees at each location based on each individual employee’s
abilities and achievements, regardless of their nationality, and we do not set numerical targets for “Foreign national managers.”(Reference) Ratio of foreign national employees: 94.8% (including at overseas bases (FY2023))
3) Mid-career hires
The Company trains and promotes employees based on each individual employee’s abilities and achievements, regardless ofwhether they joined the Company as a new graduate or as a mid-career hire, and we do not set numerical targets for “Midcareer managers.”(Reference) Ratio of mid-career hires: 67.2%; Ratio of mid-career hires in managerial positions: 87.2% (Japan head office(2023))<Principle 2-6>
The Company does not have a corporate pension fund system.
<Principle 3-1>
MODEC Guidelines [Article 2. Management Philosophy], [Article 3. Basic Policy for Establishment and Enhancement ofCorporate Governance System], [Article 12. Roles and Responsibilities of the Board of Directors], [Article 13. Composition of
the Board of Directors], [Article 14. Procedures for Nomination of Candidates and Election/Dismissal for Officers], and [Article
15. The Company’s Approach to Executive Remuneration and Decision Procedures]
The election/dismissal of Directors and Directors who are Audit and Supervisory Committee Members is determined inaccordance with the policies outlined in the MODEC Guidelines [Article 13. Composition of the Board of Directors] and [Article
14. Procedures for Nomination of Candidates and Election/Dismissal for Officers], based on each individual’s work experienceand knowledge. Individual career summaries are disclosed in the Annual Securities Report.
Please refer to the Company’s website for the Mid-term Business Plan.
https://www.modec.com/ir/strategy/midterm.html<Supplementary Principle 3-1-3>
Please refer to the Company’s website for information on its approach to sustainability and its sustainability policy andinitiatives. In FY2023, we established the Sustainability Committee to strengthen our sustainability initiatives.
https://www.modec.com/sustainability/
The Company endorses the TCFD Recommendations. Please refer to the Company’s website for information on its climatechange initiatives.
https://www.modec.com/sustainability/tcfd.html<Supplementary Principle 4-1-1>
MODEC Guidelines [Article 12. Roles and Responsibilities of the Board of Directors]<Principle 4-9>
MODEC Guidelines [Article 13. Composition of the Board of Directors]<Principle 4-10-1>
MODEC Guidelines [Article 13. Composition of the Board of Directors]<Supplementary Principle 4-11-1>
MODEC Guidelines [Article 13. Composition of the Board of Directors]
Please refer to the Notice of Convocation of the 38th Annual General Meeting of Shareholders (page 25) “(Reference) Skill
Matrix” for information on the skills that are required of the Board of Directors and the balance of knowledge, experience,
and abilities.
https://www.modec.com/ir/stock/pdf/2023_agm_notice_en.pdf<Supplementary Principle 4-11-2>
MODEC Guidelines [Article 18. Limitation of Interlocking Directorates of Independent Officers]<Supplementary Principle 4-11-3>
MODEC Guidelines [Article 16. Evaluation of the Board of Directors]
Please refer to the Company’s website for a summary of the Board of Directors’ effectiveness evaluation.
Summary of the Board of Directors’ Effectiveness Evaluation
https://www.modec.com/sustainability/governance.html<Supplementary Principle 4-14-2>
MODEC Guidelines [Article 24. Support System for Officers]<Principle 5-1>
MODEC Guidelines [Article 25. Basic Policy] and [Article 26. System for Promoting Dialogue]
The Company’s website includes content for individual investors.
https://www.modec.com/jp/ir/individuals/ (Japanese Only)2

<Implementation status of dialogue with shareholders>
In accordance with our basic views on corporate governance, we implement the following systems and measures.
・Establish the Budget and Planning Group under the CFO, a unit responsible for IR.
・Actively hold individual interviews with domestic and overseas institutional investors, small meetings with the President or
CFO (meetings where the President or CFO exchanges opinions with investors and analysts), and financial results briefings
・Prepare and publish a wide range of IR information in Japanese and English, including financial results, financial statements,
and timely disclosure, as well as materials for financial results briefings and mid-term business plans, and strive to enhancefair and timely disclosure by posting IR information on the Company’s website.
・Report opinions obtained through dialogue with shareholders and investors to the Board of Directors every six months
・Conduct surveys to identify genuine shareholders twice a year to ascertain shareholder composition
・Thoroughly comply with internal rules concerning the prevention of insider trading, including by giving due consideration
to fair disclosure when engaging in IR activities<Measures for achieving management that is conscious of capital cost and the stock price>
The Company formulated the Mid-term Business Plan 2024-2026 and disclosed it in February 2024. In order to strengthen the
Company’s profitability, the Plan identifies the foundational projects and their prospects, and sets financial KPIs (including
return on equity (ROE) and Price-Book value Ratio (PBR)) as targets.
Please refer to the Company’s website for the Mid-term Business Plan 2024-2026, “Explore a Sustainable Future with
Innovation.”
https://www.modec.com/ir/strategy/midterm.html
FY2023(Actual)FY2026(Target)Net Profit (*1)

96 million USD

175 million USD

ROE

10.70%

12.0%

PBR

1.12

> 1.0

Adjusted EBITDA (*2)

248 million USD

300 million USD* 1 Profit attributable to owners of parent* 2 Adjusted EBITDA represents EBITDA before adjustments of non-recurring extraordinary items

2.

Capital Structure

Updated

Foreign Shareholding Ratio

20% or more but less than 30%

Status of Major Shareholders Updated

Name or Company Name

Number of Shares
Owned

MITSUI & Co., Ltd
Mitsui O.S.K. Lines, Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
MITSUI E&S Co., Ltd.
Custody Bank of Japan, Ltd. (Trust Account)
MSIP CLIENT SECURITIESBNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)
JP MORGAN CHASE BANK 385632
BNYM AS AGT/CLTS 10 PERCENT
JP JPMSE LUX RE UBS AG LONDON BRANCH EQ CO
Name of Controlling Shareholder, if applicable(excluding Parent Companies)-

Name of Parent Company, if applicable

N/A

10,162,300
10,162,300
4,443,800
2,502,400
2,008,327
1,391,255
1,178,426
1,115,880
999,400
845,866

Supplementary Explanation
As of June 30, 2024

3

Percentage
(%)

14.86
14.86
6.50
3.66
2.93
2.03
1.72
1.63
1.46
1.23

3.

Corporate Attributes
Listed Stock Exchange and Market Segment

Tokyo Stock Exchange (Prime)

Fiscal Year-End

DecemberBusiness Sector

Machinery

Number of Employees (Consolidated) as of the
End of the Previous Fiscal YearNet Sales (Consolidated) for the Previous Fiscal
Year
Number of Consolidated Subsidiaries as of the
End of the Previous Fiscal Year

1,000 or more
¥100 billion or more but less than ¥1 trillion
10 or more but fewer than 50

4.

Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder

5.

Other Special Circumstances which may have a Material Impact on Corporate Governance Updated

N/A

N/A

4

II.
1.

Business Management Organization and Other Corporate Governance Systems regarding
Decision-making, Execution of Business, and Oversight

Organizational Composition and Operation
Corporate Governance System

Company with Audit and Supervisory Committee

Directors

Number of Directors Stipulated in Articles ofIncorporation
Directors’ Term of Office Stipulated in Articles ofIncorporation

15
1year

Chairperson of the Board

Chairperson (excluding those concurrently serving as President)

Number of Directors Updated

12Election of External Directors

ElectedNumber of External Directors Updated
Number of Independent Directors

86External Directors’ Relationship with the Company (1) Updated
Name

Attributesab

Relationship with the Company*
c
d
e
f
g
h
i

j

k

Koichi Wakana
From another company○
Yasuchika Noma
From another company○
Kazuko Shiraishi
Other
Kazuhisa Nishigai
From another company
Masato Kobayashi
LawyerHiroko Noda
CPA
Toshihiko Fujita
Tax Accountant△
Masaaki Amma
From another company*Categories for “Relationship with the Company”.
(Use “○” 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; and“▲” when a close relative of the director fell under the category in the past.)
a. Person who executes business for the Company or its subsidiary
b. Person who executes business for a non-executive director of the Company’s parent company
c. Person who executes business for a fellow subsidiaryd. Person/entity for which the Company is a major client or a person who executes business for said person/entity
e. Major client of the Company or a person who executes business for said clientf.
Consultant, accounting expert, or legal expert who receives large amounts of cash or other assets from the Company inaddition to remuneration as a director/company auditor
g. Major shareholder of the Company (in cases where the shareholder is a corporation, a person who executes business forthe corporation)h. Person who executes business for a client of the Company (excluding persons categorized as any of d, e, or f above)(applies to director him/herself only)i.
Person who executes business for another company that holds cross-directorships/cross-auditorships with the Company(applies to director him/herself only)j.
Person who executes business for an entity receiving donations from the Company (applies to director him/herself only)
k. Other5External Directors’ Relationship with the Company (2) Updated

Name

Membershipof Audit andSupervisory
Committee

Designationas
Independent
Director

Supplementary Explanation of theRelationship<Status of concurrent positions>- Management Officer, Mitsui& Co., Ltd.
- Director, Mitsui & Co. Plan
Systems, Ltd.

Koichi
Wakana<Status of concurrent positions>- Executive Officer, Mitsui
O.S.K. Lines, Ltd.

Yasuchika
Noma< Status of concurrent
positions>- External Director (Audit andSupervisory Committee
Members), SCSK Corporation
KazukoShiraishi○<Status of concurrent positions>- Outside Director, Okabe Co.,Ltd.
- Member of the management
Council, Yamagata University
Kazuhisa
Nishigai○

6

Reasons for Appointment

Mr. Koichi Wakana has been elected as anExternal Director in the expectation that
he will provide advice on the overallmanagement of the Company and monitor
business execution of the Company froman outsider’s point of view based on his
wide range of business experience at amajor general trading company as well aspractical knowledge related to theCompany’s business.
Mr. Yasuchika Noma has been elected as
an External Director in the expectationthat he will provide advice on the overallmanagement of the Company and monitor
business execution of the Company froman outsider’s point of view based on his
wide range of business experience at amajor shipping company as well aspractical knowledge related to theCompany’s business.
Ms. Kazuko Shiraishi has been elected as
an External Director in the expectationthat she will provide advice on the overallmanagement of the Company and monitor
business execution of the Company froman outsider’s point of view based on her
extensive knowledge and wealth ofexperience in international affairs she
gained through her career at government
and public offices.
Ms. Kazuko Shiraishi satisfies thestandards for Independent Directors
established by the Tokyo Stock Exchange
and the Regulations Regarding Criteria for
the Independence of External Directors
established by the Company.
Mr. Kazuhisa Nishigai has been elected as
an External Director in the expectationthat he will provide advice on the overallmanagement of the Company and monitor
business execution of the Company froman outsider’s point of view based on his
extensive knowledge and management
ability gained through his involvement in
the management of a major listed
manufacturing company, as well as wide
range of business experience related to
production engineering, plant
management and sales, etc.
Mr. Kazuhisa Nishigai satisfies thestandards for Independent Directors
established by the Tokyo Stock Exchange
and the Regulations Regarding Criteria for
the Independence of External Directors
established by the Company.

MasatoKobayashi

Hiroko Noda

○

○

○

<Status of concurrent positions>- Partner, City-Yuwa Partners- External Audit & Supervisory
Board Member, Japan
Platform of Industrial
Transformation, Inc.
- Director, Misaki Engagement
Master Fund
- Director, Misaki Engagement
Master Fund Ⅱ Ltd.

<Status of concurrent positions- Representative Director,
Probity consulting Co., Ltd.
- Representative, Noda
Certified Public Account Office- External Director (Audit &Supervisory Committee
Member), Okabe Co., Ltd.
- Outside Director (Audit &Supervisory Committee
Member), S.T. COPORATION- Outside Director, CHORI CO.,LTD.

<Status of concurrent positions>- Director, Hongo Tsuji Tax &Consulting
Toshihiko
FujitaMasaaki
Amma

○

○

○

○

Mr. Masaki Amma had been an
Executive officer of Japan Bankfor International Cooperation(JBIC), our lender; however, it
has been for more than six years
since his retirement from theposition in June 2017, and we
consider that he has sufficient
independence.
<Status of concurrent positions>- Senior Executive Officer,
PricewaterhouseCoopers
Sustainability LLC

7

Mr. Masato Kobayashi has been elected as
an External Director in the expectationthat he will provide advice on the overallmanagement of the Company and monitor
business execution of the Company froman outsider’s point of view based on a
wealth of experience and professional
insight on overall legal affairs as an
attorney.
Mr. Masato Kobayashi satisfies thestandards for Independent Directors
established by the Tokyo Stock Exchange
and the Regulations Regarding Criteria for
the Independence of External Directors
established by the Company.
Ms. Hiroko Noda has been newly elected
as an External Director who is an Audit
and Supervisory Committee Member, as
she is deemed to be capable ofperforming appropriate audit, based onher abundant experience and broad
knowledge acquired at accounting
departments of foreign financial
institutions and as a certified public
accountant and management consultant.
Ms. Hiroko Noda satisfies the standards
for Independent Directors established by
the Tokyo Stock Exchange and theRegulations Regarding Criteria for the
Independence of External Directors
established by the Company.
Mr. Toshihiko Fujita has been newly
elected as an External Director who is an
Audit and Supervisory Committee
Member, as he is deemed to be capable ofperforming appropriate audit, based on
his wealth of experience at government
and public offices, and his professional
insight in taxation business.
Mr. Toshihiko Fujita satisfies the standards
for Independent Directors established by
the Tokyo Stock Exchange and theRegulations Regarding Criteria for the
Independence of External Directors
established by the Company.
Mr. Masaaki Amma has been newly
elected as an External Director who is an
Audit and Supervisory Committee
Member as he is deemed to be capable ofperforming appropriate audit, based on
his wealth of experience and high level of
insight in domestic and overseas financegained at government-affiliated financial
institutions.
Mr. Masaaki Amma satisfies the standards
for Independent Directors established by
the Tokyo Stock Exchange and theRegulations Regarding Criteria for the
Independence of External Directors
established by the Company.

Audit and Supervisory Committee
Composition of Audit and Supervisory Committee and Attributes of the Chairperson

Audit andSupervisory
Committee

All Committee
Members

Full-timeMembers4

Appointment of Directors and/or Staff to
Support the Supervisory Committee

Internal
Directors
1

External
Directors
1

Committee Chair
3Internal Director

Appointed

Matters Concerning Independence of Said Directors and/or Staff from Executive Directors
The Office of Audit and Supervisory Committee has been established as a department to assist the Audit and Supervisory
Committee and Audit and Supervisory Committee Members in their duties. Suitable employees have been assigned to the
Office to assist the Audit and Supervisory Committee and Audit and Supervisory Committee Members in their duties.
In addition, employees who assist the Audit and Supervisory Committee and Audit and Supervisory Committee Members intheir duties shall follow the instructions of the Audit and Supervisory Committee and Audit and Supervisory Committee
Members, and personnel changes and evaluations of employees who assist the Audit and Supervisory Committee and Audit
and Supervisory Committee Members in their duties shall respect the opinions of Audit and Supervisory Committee Members
to the maximum extent possible.
Cooperation among the Audit and Supervisory Committee, Accounting Auditor and Internal Auditing Department
By a resolution approved at the 38th Annual General Meeting of Shareholders held on March 27, 2024 to amend the Articles
of Incorporation, the Company transitioned from a company with a Board of Statutory Auditors to a company with an Audit
and Supervisory Committee.
As stated below, the Audit and Supervisory Committee, the Accounting Auditor, and the Internal Auditing Department, a
department responsible for internal audits, shall work in close collaboration.
The Audit and Supervisory Committee receives an explanation of the audit plan from the Accounting Auditor at the beginningof the fiscal year and receives reports on audit results during the fiscal year and at the end of the fiscal year. By holding regularmeetings, the Audit and Supervisory Committee shares awareness and exchange opinions with the Accounting Auditor on theimportant risks faced by the Company. The Internal Auditing Department also attends these meetings.
In addition, the Internal Auditing Department holds monthly meetings with a full-time Audit and Supervisory Committee
Member. At those meetings, the Internal Auditing Department reports on the overall status of audit operations, including
individual audits, and maintains close contact by exchanging opinions on the current status of the Company and its subsidiaries.
The opinions obtained by the Internal Auditing Department from the Audit and Supervisory Committee through these
activities are used as reference when selecting priority items for individual audits, etc., in order to improve the effectivenessand efficiency of audits.
The Internal Auditing Department audits the entire corporate group, comprising the Company and its subsidiaries, and reports
directly to the President, the Board of Directors, and the Audit and Supervisory Committee, creating a so-called “dual reportinglines.”

8

Voluntary Established Committee(s)Voluntary Establishment of Committee(s) equivalent
Nomination Committee or Remuneration Committee

toEstablished

Status of Voluntarily Established Committee(s), Attributes of Members Constituting the Committee and the Committee
Chairperson
Committee’s
Name

All
Members

Voluntarily Established
Committee Equivalent
to Nomination
Committee

Nomination andRemuneration
Committee

3

Voluntarily Established
Committee Equivalent
to Remuneration
Committee

Nomination andRemuneration
Committee

3

Full-timeMembers

Internal
Directors

External
Directors

External
Experts

Other

Chairperson

0

0

3

0

0

External
Director

0

0

3

0

0

External
Director

Supplementary Explanation Updated
The Company has established the Nomination and Remuneration Committee, a non-mandatory body, under the Board of
Directors with the aim of strengthening the functions of the Board of Directors with regard to the nomination andremuneration of Directors and Executive Officers. It is stipulated that the majority of the Committee’s members be
independent External Directors to ensure transparency and objectivity, and to engage in fair and appropriate deliberations.
The Committee met ten times in the fiscal year ended December 31, 2023 and deliberated and reported on selection criteria(skill matrix) and election proposals for Directors. In addition, the Committee provided recommendations and advice, engaged
in discussions, and provided reports regarding the remuneration system for Directors and Executive Officers.

Matters Concerning Independent Directors
Number of Independent Directors

6

Other Matters Concerning Independent Directors
The Company designates all External Directors to Independent Directors who meet the qualifications as Independent Directors.

Incentives

Implementation Status of Measures related toIncentives Granted to Directors

Other

Supplementary Explanation for Applicable Items
At the 38th Annual General Meeting of Shareholders held in 2024, a resolution was approved to introduce a new stock pricelinked remuneration (performance cash) for Directors (excluding non-executive Directors), replacing the previously adopted
share-based remuneration, with the aim of achieving sustainable enhancement of corporate value of the Company over the
medium to long term, providing eligible Directors with incentives for future performance, and further promoting the valuesharing with our shareholders.
When determining the amount of bonus to be paid as an incentive for achieving management targets, it was decided that theamount of bonus shall be determined by multiplying the base amount for each rank by a coefficient, which is calculated fromthe amount of consolidated profit and cash flows for the applicable fiscal year, and by taking into account the actual dividends
paid.
Persons Eligible for Stock Options
Supplementary Explanation for Applicable Items
N/A9

Director Remuneration

Status of Disclosure of Individual Director’s
Remuneration

No Disclosure for any Directors

Supplementary Explanation for Applicable Items(The above information is based on actual results for the fiscal year ended on December 31, 2023 prior to the transition to acompany with an Audit and Supervisory Committee.) The Company discloses the total amount of remuneration for Directors
and Corporate Auditors in securities reports and business reports. The total amount of remuneration for Directors was ¥294
million, and the total amount of remuneration for Corporate Auditors was ¥55 million. Of these amounts, the total amount of
remuneration paid to eleven (11) External Officers (eight (8) External Directors and three (3) External Corporate Auditors) was¥78 million.
Policy on Determining Remuneration Amounts
and Calculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
The Company has established a Nomination and Remuneration Committee, where a majority of the members are External
Directors, and an independent External Director serves as chairperson. This ensures transparency and objectivity and allows
the Committee to determine remuneration in a fair and appropriate manner. The Board of Directors confirms consistency withthe decision-making policy of the Nomination and Remuneration Committee when determining the details of remuneration,etc., for individual Directors for the current fiscal year, and the Board of Directors also respects the reports of the Committee.
Therefore, we have determined that this is in line with the abovementioned policy for determining remuneration, etc.
Details of the policy regarding the determination are as follows.
a. Basic Policy on remuneration for officers, etc.
The Company’s remunerations system for officers, etc. is determined in accordance with the following basic policy with theaim of maximizing the value to be provided to shareholders and other stakeholders.
・The system shall be designed to function as an appropriate incentive commensurate with overall corporate performanceand individual achievements, so as to facilitate medium- to long- term enhancement of corporate value and the realizationof the management plan of the Company.
・ The system shall reflect the roles, responsibilities, and achievements of each officer, etc., thereby encouraging theperformance of duties according to the responsibilities of the position.
・The remuneration shall be set at a competitive level to allow the Company to attract the excellent talent available in themarket, while complying with regulations and guidelines on executive remunerations.
・The system shall be determined based on appropriate governance and control, and shall be reviewed on a timely basis inviews of the business environment and other factors.
b. Structure of the remuneration
The Company’s remuneration for officers, etc. shall comprise basic remuneration, which is fixed remuneration, bonuses, which
are performance-linked remuneration, and stock price-linked remuneration (performance cash), which is medium- to longterm performance-linked remuneration.
The ratio of each type of remuneration to the total remuneration for each officer, etc. is based on levels of officer remuneration
survey data and management remuneration guidelines by an external specialized organization in order to provide appropriate
incentives for achieving performance targets. The fluctuation range of performance-linked remuneration, assuming fixed
remuneration is set at 100, is designed to be approximately 15% to 230%.
Basic remuneration is remuneration commensurate with the roles and responsibilities of each officer, etc., and is intended toencourage the performance of duties according to the responsibilities of the position. The amount of remuneration isdetermined in accordance with the rank of each officer, etc.
Bonuses are remuneration in consideration of overall corporate performance in a single fiscal year and are intended to function
as an incentive for achieving management targets. The amount of bonus shall be determined by multiplying the base amountfor each rank by a coefficient, which is calculated from the amount of consolidated profit (profit attributable to owners ofparent) and cash flows for the applicable fiscal year, and by taking into account the actual dividends paid.
Stock price-linked remuneration (performance cash) is remuneration intended to achieve sustainable enhancement ofcorporate value of the Company over the medium to long term, provide eligible Directors with incentives for future
performance, and further promote the value-sharing with our shareholders. Under the Program, stock points are granted eachfiscal year in accordance with the rank and business performance. At the time of retirement from the office, the amount of
remuneration will be calculated by multiplying the accumulated stock points by the stock price as of the time of retirement,
which will be paid in cash.
For External Directors and Directors who are Audit and Supervisory Committee Members, remuneration shall comprise only
basic remuneration, which is fixed remuneration, without a performance-linked remuneration component, to ensure
independence from management.
c. Process for determining the executive remuneration, etc.
The Board of Directors has deliberated and decided on the policy for determining executive remuneration based on therecommendation from the Nomination and Remuneration Committee.

10

d. Delegation to the Representative Director
In accordance with the policy on determination, the Company has delegated to Representative Director, President and Chief
Executive Officer, the decision on the specific details of the amount of remuneration authority because it has judged that theRepresentative Director, President and Chief Executive Officer is best suited to evaluate the performance and other factors.
To ensure appropriate exercise of such authority by the Representative Director, President and Chief Executive Officer, thepolicy on determination stipulates that such decisions shall be made in accordance with the report of the Nomination andRemuneration Committee.

Support System for External Directors

The General Affairs Department serves as the secretariat for the Board of Directors and provides support as necessary.

Status of Persons who have Retired as Representative Director and President, etc.
Information on Persons Holding Advisory Positions (Sodanyaku, Komon, etc.) after Retiring as Representative Director andPresident, etc.
Name

N/A

Job title/
position

Responsibilities

Terms and Conditions of Employment(Full/part time, with/without remuneration, etc.)

Number of Persons Holding Advisory Positions (Sodanyaku, Komon, etc.)
After Retiring as Representative Director and President, etc.

Date when former role aspresident/ CEO ended

Term

0

Other Related Matters
N/A

2.

Matters Concerning Functions of Business Execution, Auditing and Supervision, Nomination, and Remuneration
Decisions (Overview of Current Corporate Governance System) Updated
In order to appropriately respond to the significantly changing business environment at a faster pace than ever before, enhance
the speed and quality of its management decisions, and further improve the corporate value of the Company group, theCompany transitioned from a company with a Board of Company Auditors to a company with an Audit and Supervisory
Committee following a resolution to amend the Articles of Incorporation at the 38th Annual General Meeting of Shareholders
held on March 27, 2024, for the purposes described below.
・Proceed with the delegation of authority to the Executive Directors from the Board of Directors, and establish a system inwhich the Board of Directors focuses on deliberation of management policies and strategies
・Strengthen the supervisory function of the Board of Directors by including Audit and Supervisory Committee members as
the members of the Board of Directors, and facilitate the quick decision-making(1) Board of Directors
The Board of Directors of the Company comprises eight Directors (excluding Directors who are Audit and Supervisory
Committee Members) (of whom five are External Directors) and four Directors who are Audit and Supervisory Committee
Members (of whom three are External Directors) for a total of twelve members. In principle, the Board of Directors holds
regular meetings once a month and extraordinary meetings as necessary. The Board of Directors secures management fairness
and transparency by exercising its supervisory function over the Company’s overall management, including the exercise ofduties by officers. The Board of Directors also makes decisions for the Company by determining the execution of importantbusiness and other matters based on laws and regulations, the Articles of Incorporation, and Company rules.
(2) Audit and Supervisory Committee
The Audit and Supervisory Committee comprises four Directors who are Audit and Supervisory Committee Members (three ofwhom are External Directors). In principle, the Audit and Supervisory Committee meets once a month, and whenevernecessary. As an independent body entrusted by the shareholders, the Audit and Supervisory Committee audits the executionof duties by the Directors who are not Audit and Supervisory Committee Members. In addition, to ensure the effectiveness ofthese activities, a full-time Audit and Supervisory Committee Member attends the Management Board meetings and expresses
its opinions as necessary. The Audit and Supervisory Committee also holds regular interviews with the Representative Director
and Directors, and conducts audits and investigations on the status of business execution for each internal division andsubsidiaries.
(3) Nomination and Remuneration Committee
The Company has established a non-mandatory Nomination and Remuneration Committee under the Board of Directors withthe aim of strengthening the functions of the Board of Directors with regard to the nomination and remuneration of Directors
and Executive Officers. It is stipulated that the majority of the members of the Committee shall be independent External
Directors in order to ensure transparency and objectivity, as well as fair and appropriate deliberations. Currently, theNomination and Remuneration Committee comprises three independent External Directors, including the Chairman, and holds
meetings as necessary. The President and Chief Executive Officer attends the meetings as an observer.
(4) Management Board
The Company has introduced an executive officer system to delegate functions related to business execution from the Boardof Directors, and to improve management efficiency and facilitate business execution. In addition, we have established a11

Management Board as a management body for business execution based on the basic policy determined by the Board of
Directors. The Management Board is composed of Executive Officers nominated by the President and approved by the Boardof Directors. In principle, the Management Board holds regular meetings twice a month, and extraordinary meetings asnecessary. The Management Board makes decisions on important matters related to the execution of business based on the
management strategy determined by the Board of Directors, and seeks to share information through deliberations and reports.
(5) Liability Limitation Contracts
In order to appoint useful personnel as Directors, the Company stipulates in the current Articles of Incorporation that it may
enter into contracts with Directors (excluding those serving as Executive Directors, etc.) to limit their liabilities forcompensation of damages to the Company within a certain extent. The Company has entered into liability limitation contracts
with Mr. Koichi Wakana, Mr. Yasuchika Noma, Ms. Kazuko Shiraishi, Mr. Kazuhisa Nishigai, Mr. Masato Kobayashi, Mr.
Yoshihiro Takamura, Ms. Hiroko Noda, Mr. Toshihiko Fujita and Mr. Masaaki Amma with the following content.
In the event that the Company is subject to damages arising from the failure of a non-executive Director to perform his or her
duties, the liability for damages shall be the minimum liability amount stipulated in Article 425, Paragraph 1 of the Companies
Act if the duties are performed in good faith and without gross negligence.
For other details of our corporate governance system, please refer to the Company’s Corporate Governance Guidelines.

3.

Reasons for Adoption of Current Corporate Governance System

The Company has adopted the current corporate governance system, which we have determined to be a system that enables
appropriate monitoring and supervision, as described below.
We have adopted an external management monitoring system through the election of External Directors and External
Directors who are Audit and Supervisory Committee Members.
We are working to strengthen the supervisory functions of the Board of Directors by introducing an executive officer systemand separating management and business execution.

12III. Implementation of Measures for Shareholders and Other Stakeholders
1.

Measures to Vitalize the General Meeting of Shareholders and Facilitate Exercise of Voting Rights
Supplementary Explanation
Early Posting of Notice of Convocation of
the General Meeting of Shareholders

The Company has started to provide the notice of the convocation of theAnnual General Meeting of Shareholders electronically and to mail the paper
copy earlier than required by law. The notice of convocation of the 38th Annual
General Meeting of Shareholders was provided electronically on February 29,
2024, and a paper copy was mailed on March 8, 2024.

Scheduling of the General Meeting of
Shareholders on a Non-Peak Day

The date of the Annual General Meeting of Shareholders is set to avoid peakdays as much as possible.

Electronic Exercise of Voting Rights

In facilitate the active exercise of shareholders’ voting rights, the exercise of
voting rights by electronic means has been available since the General Meetingof Shareholders in March 2016.

Participation in the Electronic Voting
Platform and Other Initiatives to Enhance
Environment for Institutional Investors to
Exercise Voting Rights
Provision of Notice (or Summary of Notice)of Convocation of the General Meeting of
Shareholders in English

Other

2.

The Company has used the electronic voting platform for institutional investors
operated by ICJ, Inc. since the General Meeting of Shareholders in March 2018.
English versions of notices of convocation and reference documents areprepared and posted on the Company’s website.
Notices of convocation and their attachments are posted on the Company’s
website as matters for electronic provision, and are also posted on Tokyo Stock
Exchange and electronic voting platforms by means of disclosure via TDnet. In
addition, immediately after a General Meeting of Shareholders, thepresentation materials used at each Meeting are promptly posted on the
Company’s website for a certain period of time.

Status of IR-related Activities Updated
Supplementary Explanation
Formulation and Publication ofDisclosure Policies

Details are provided in Article 11 of the Corporate Governance Guidelines
posted on the Company’s website.
https://www.modec.com/sustainability/pdf/governanceguideline_en.pdf

Regular Briefings held for
Analysts and Institutional
Investors

Briefings are held twice a year. In addition, the Company actively responds
to individual interviews.

Regular Briefings held forOverseas Investors
Online Disclosure of IR
Information
Establishment of Department
and/or Placement of aManager in Charge of IR

The Company participates in conferences sponsored by securities
companies and holds overseas road shows. In addition, the Company
actively responds to individual interviews.
Presentation materials used at analyst briefings are posted on the
Company’s website. In addition, the Company strives to enhance thecontent of information that contributes to the understanding of its business,
including project introductions and explanations of technical terms.
The Budget and Planning Group is in charge of IR, and the CFO, whooversees this group, is the Executive officer in charge.

13

Explanationby theRepresentative
himself

Held
Held

3.

Status of Measures to Ensure Due Respect for Stakeholders
Supplementary Explanation
Establishment of Internal Rules, etc.
Stipulating Respect for the Positionof Stakeholders

Details are provided in Article 9 of the Corporate Governance Guidelines posted on the
Company’s website.
https://www.modec.com/sustainability/pdf/governanceguideline_en.pdf
We have also established a policy regarding “Accountability to Stakeholders.”
https://www.modec.com/sustainability/approach/communication.html

Implementation of Environmental
Preservation Activities and CSR
Activities, etc.

・We have identified six important sustainability issues as Materiality in 2023. By linking
the Materiality to the MODEC Group’s business strategy, we will strengthen ourmanagement foundation from both organizational and human resource
perspectives, create value that is unique to the MODEC Group, and contribute to thesolution of the global social issues of sustainable energy supply and a climate change
response. For more details, please refer to the Company’s website.
https://www.modec.com/sustainability/approach/・The Sustainability Committee was established in 2023 as an advisory body to theManagement Board with the aim of planning and promoting activities related tosustainability issues as a Group, and simultaneously managing and evaluating those
activities.
・The Company has established the Basic Environment Policy, and recognizes the criticalimportance of the harmony with irreplaceable global environment and humanity, as
well as sustainable development. Our environmental philosophy is to contribute to“Realization of a Low Carbon society” while also considering health maintenance andenvironmental conservation. We are aiming to realize this through cooperation withvarious stakeholders in our all business activities.
In addition, we have selected five of the 17 Sustainable Development Goals (SDGs)
adopted by the United Nations to which we believe we can contribute most, and weare focusing on initiatives to achieve them.

Formulation of Policies, etc. on
Provision of Information to
Stakeholders

Goal 5: Gender Equality
Goal 7: Affordable and Clean Energy
Goal 8: Decent Work and Economic Growth
Goal 13: Climate Action
Goal 14: Life Below Water
https://www.modec.com/sustainability/approach/sdgs.html
Securing business transparency is one of our fundamental principles with regard tocorporate governance, and the Company proactively focuses on initiatives for
information disclosure.

14

IV. Matters Concerning the Internal Control System

1. Basic Views on Internal Control System and Status of Development
The Company establishes and maintains internal control to achieve the objectives of internal control, including “ensuring theeffectiveness and efficiency of business operations,” “ensuring the reliability of financial reporting,” and “complying with laws
and regulations, the Articles of Incorporation, and social norms.”
In addition, the details approved by resolution of the Board of Directors of the Company regarding the maintenance of systems
to ensure that the execution of duties by the Company’s Directors, Executive Officers, and employees, as well as the executionof duties by the Directors, etc. and employees of the Company’s subsidiaries comply with laws and regulations, and the Articles
of Incorporation, and systems, etc. to ensure the appropriateness of other operations are as follows.
(1) Systems to ensure that the execution of duties by the Company’s Directors, Executive Officers, and employees, and theexecution of duties by Directors, etc. and employees of the Company’s subsidiaries comply with laws and regulations, and
the Articles of Incorporation
1) Formulate the Code of Business Conduct and Ethics as a common code of conduct for the MODEC Group, its Directors,
Executive Officers, employees, and all other persons engaged in the MODEC Group’s business.
2) In order to ensure thorough compliance, establish the MODEC Group Compliance Committee, whose members include
attorneys, as an organization reporting directly to the Board of Directors. The MODEC Group Compliance Committee
holds regular meetings to monitor the compliance status of the MODEC Group with laws and regulations, and the
Articles of Incorporation, etc., and holds training sessions, etc. for all officers and employees of the MODEC Group aspart of activities to raise awareness of compliance and ensure compliance-related matters within the Group.
3) Establish the Compliance & Ethics Reporting Policy for the early detection and correction of violations of laws andregulations and other compliance violations, and establish the MODEC Ethics Hotline operated by a third-party
organization as a whistle-blowing system common to the MODEC Group to be operated appropriately and promoted
through trainings, etc.
4) Strive to ensure the reliability of financial statements and information that may have a material impact on financial
statements.
5) As the internal audit divisions, audit the compliance status by the MODEC Group with laws and regulations, and the
Articles of Incorporation, etc. regularly, report the results to the President and Chief Executive Officer and the Audit
and Supervisory Committee, and make recommendations for improvement measures as necessary.
(2) Systems to storage and manage the information related to the execution of duties by the Company’s Directors
1) Information regarding the execution of duties by the Company’s Directors shall be stored and managed in accordancewith regulations such as the Regulations for Document Management and the Regulations for the Management ofConfidential Corporate Matters. The Audit and Supervisory Committee may view these documents as necessary.
2) The department in charge of the documents shall be in accordance with the division of duties stipulated in theRegulations for the Division of Duties, and the storage method and period shall be in accordance with the provisions of
the Regulations for Document Management.
(3) Regulations and other systems concerning risk of loss of the MODEC Group
1) Risks related to business execution by the MODEC Group are managed based on the Regulations for Risk Management,
the Regulations for Enterprise Risk Management, and various business-related regulations that specify details of risks
and management procedures. Persons responsible for the execution of each business are specified in the Regulations
for the Division of Duties, the Administrative Authority Regulations, and the Affiliated Company Management
Regulations.
2) We ensure thorough understanding and management of risks across the MODEC Group by deliberating importantmatters and reporting the status of business execution and those results to the Management Board, which comprises
key Executive Officers who oversee business operations.
3) The internal audit divisions regularly audit the status of risk management in the MODEC Group, report the results to
the President and Chief Executive Officer and the Audit and Supervisory Committee, and make recommendations for
improvement measures as necessary.
(4) Systems to ensure that the execution of duties by the Company’s Directors and Directors, etc. of the Company’s subsidiaries
is carried out efficiently
1) The Company has adopted an executive officer system in order to ensure a system in which the execution of businessis carried out promptly and appropriately. Authority related to the execution of business is delegated to Executive
Officers appointed by the Board of Directors to strengthen the decision-making and supervisory functions of the Boardof Directors and clarify responsibility for business execution. In addition, we clarify the department in charge of eachbusiness and the persons with decision-making authority based on the Regulations for the Division of Duties, theAdministrative Authority Regulations, and the Affiliated Company Management Regulations to ensure the organizedand efficient management of business execution by the MODEC Group.
2) The Board of Directors holds regular meetings once a month and extraordinary meetings as necessary to approve
resolutions on important matters related to the management policies and management strategy of the MODEC Group.
In addition, important matters are deliberated and determined at meetings of the Management Board held twice amonth in principle, which comprises Executive Officers nominated by the President and Chief Executive Officer andapproved by the Board of Directors.
(5) Systems for reporting matters related to the execution of duties by Directors, etc. of the Company’s subsidiaries to theCompany
1) When a subsidiary makes a decision on an important matter, it holds discussions in advance with the relevant divisionsof the Company in accordance with the Affiliated Company Management Regulations.
2) The Company’s supervisory divisions or divisions with jurisdiction request a subsidiary to submit documents asnecessary to understand and consider details of the subsidiary’s management.

15

(6) Matters related to Directors and employees who assist with the duties of the Company’s Audit and Supervisory Committee
1) If requested by the Company’s Audit and Supervisory Committee, employees who assist with the Committee’s duties(hereinafter, “Support Staff”) shall be assigned following consultation with the Audit and Supervisory Committee
regarding the necessary number of members and the qualifications required.
2) The internal audit divisions may conduct internal audits of matters requested by the Audit and Supervisory Committee
through consultation with the Audit and Supervisory Committee, and report the results to the Audit and Supervisory
Committee.
(7) Matters related to the independence of Support Staff from the Company’s Directors (excluding Directors who are Audit
and Supervisory Committee Members)
Support Staff who receive instructions required for audit operations from the Audit and Supervisory Committee shall not
be subject to commands or orders from Directors (excluding Directors who are Audit and Supervisory Committee
Members) regarding those instructions.
(8) Matters related to ensuring the effectiveness of the Audit and Supervisory Committee’s instructions to Support Staff
Decisions regarding matters such as personnel changes, personnel evaluations, and disciplinary actions related to Support
Staff shall reflect the opinions of the Audit and Supervisory Committee.
(9) Systems for the Company’s Directors (excluding Directors who are Audit and Supervisory Committee Members), Executive
Officers, and employees to report to the Audit and Supervisory Committee, as well as systems for Directors, etc. andemployees of the Company’s subsidiaries or persons receiving reports from these parties to report to the Company’s Audit
and Supervisory Committee
1) The Company’s Directors (excluding Directors who are Audit and Supervisory Committee Members), Executive Officers,
and employees, as well as Directors, etc. and employees of the Company’s subsidiaries shall report facts that may havea significant impact on the MODEC Group to the Audit and Supervisory Committee, in addition to statutory matters.
2) The Audit and Supervisory Committee may request reports from the Company’s Directors (excluding Directors who are
Audit and Supervisory Committee Members), Executive Officers, and employees, as well as Directors, etc. andemployees of the Company’s subsidiaries, as necessary.
(10) Systems to ensure that persons reporting to the Company’s Audit and Supervisory Committee are not subject tounfavorable treatment as a result of having made such a report
The Code of Business Conduct and Ethics prohibits retaliatory measures against persons making a report through the
Audit and Supervisory Committee or the MODEC Ethics Hotline.
(11) Matters related to procedures for advance payment or reimbursement of expenses arising from the execution of duties
by the Company’s Audit and Supervisory Committee, and other policies regarding the processing of expenses or liabilities
arising from the execution of said duties
Expenses required for the execution of duties by the Audit and Supervisory Committee shall be secured in the annual
budget.
(12) Other systems to ensure effective audits by the Audit and Supervisory Committee
The Company’s Audit and Supervisory Committee shall be given the opportunity to hear reports from the Company’s
Directors, Executive Officers, and employees, and shall hold regular meetings with the President and Chief Executive
Officer and the auditing firm.

2. Basic Views on Measures for Eliminating Anti-Social Forces and Status of Development(1) Basic views on measures for eliminating anti-social forces
The Company has established a policy of resolutely eliminating any relationship with anti-social forces in the Code ofBusiness Conduct and Ethics, and ensures that all officers and employees are fully aware that they adamantly refuse any
request received from anti-social forces.

(2) Status of development for eliminating anti-social forces
The Company’s General Affairs Department is the supervisory department, and works on the centralized collection andaccumulation of information on anti-social forces and improvements to our internal systems. In addition, we have built
close collaborative relationships with attorneys, the police, and external professional organizations by communicating ona regular basis.

16

V. Other1.

Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation for Applicable Items
The Company has not adopted any anti-takeover measures to be noted.

2. Other Matters Concerning the Corporate Governance System1718