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

(Securities Code: 6704)
Date of sending by postal mail: June 12, 2024
Start date of measures for electronic provision: June 6, 2024
To our shareholders:
Shogo Kimura, President
IWATSU ELECTRIC CO., LTD.
7-41, Kugayama 1-Chome, Suginami-ku, Tokyo

Notice of the 115th Annual General Meeting of Shareholders
You are cordially notified of the 115th Annual General Meeting of Shareholders of IWATSU ELECTRIC CO., LTD.
(the “Company”). The meeting will be held as described below.
When convening this general meeting of shareholders, the Company takes measures for providing information that
constitutes the content of reference documents for the general meeting of shareholders, etc. (items subject to measuresfor electronic provision) in electronic format, and posts this information on the Company’s website. Please accessthe website by using the internet address shown below to review the information.
[The Company’s website]
https://www.iwatsu.co.jp/
Please access the Company’s website above and check “IR News” (in Japanese) from the top page.
In addition to the website above, this information is also posted on the website of the Tokyo Stock Exchange (TSE).
[TSE website (Listed Company Search)]https://www.jpx.co.jp/english/listing/co-search/index.html
Please access the TSE website above, enter and search for the company name (IWATSU ELECTRIC) or securities
code (6704), select “Basic information” then “Documents for public inspection/PR information,” and review the
information.
If you will not be attending the meeting in person, you may exercise your voting rights in writing or via theInternet, etc. Please review the Reference Documents for the General Meeting of Shareholders and exercise
your voting rights according to the Instructions for Exercising Your Voting Rights (available only in Japanese)by 5:30 p.m. on Wednesday, June 26, 2024 (JST).

-1-1. Date and Time: Thursday, June 27, 2024, at 10:00 a.m. (JST)
2. Venue:
Conference Room of the Headquarters of the Company
7-41, Kugayama 1-Chome, Suginami-ku, Tokyo
3. Meeting Agenda:
Matters to be reported:
1. The Business Report and Consolidated Financial Statements for the 115th Fiscal Year (from April 1, 2023
to March 31, 2024) and results of audits of the Consolidated Financial Statements by the Financial Auditor
and the Audit & Supervisory Committee
2. Non-consolidated Financial Statements for the 115th Fiscal Year (from April 1, 2023 to March 31, 2024)
Matters to be resolved:
Proposal No. 1
Appropriation of Surplus
Proposal No. 2
Approval of Share Exchange Agreement
Proposal No. 3
Election of Seven Directors (Excluding Directors Who Are Audit & Supervisory
Committee Members)
Proposal No. 4
Election of One Director Who Is an Audit & Supervisory Committee Member
4. Matters Determined in Relation to the Convocation:(1) When voting rights have been exercised in writing, if there is no indication of approval or disapproval ofa proposal on a Voting Rights Exercise Form, it shall be treated as a vote of approval.
(2) If voting rights have been exercised both in writing and via the Internet, etc. multiple times, regardless ofthe date and time of arrival, the exercise of voting rights via the Internet, etc., shall be treated as valid. If
voting rights have been exercised multiple times via the Internet, etc., the final votes submitted shall betreated as valid.
◎ When attending the meeting in person, please submit the Voting Rights Exercise Form at the venue reception.
◎ In accordance with the provisions of laws and regulations and Article 16 of the Articles of Incorporation of the Company, the following
items subject to measures for electronic provision are not provided in the paper-based documents delivered to shareholders who havemade a request for delivery of such documents. The documents listed in (i) and (ii) below are part of the documents included in thescope of audits by the Audit & Supervisory Committee and the Financial Auditor when they create their respective audit reports.
(i) “Notes to Consolidated Financial Statements”(ii) “Notes to Non-consolidated Financial Statements”(iii) Articles of Incorporation of Ai Holdings Corporation and the contents of the Non-consolidated Financial Statements, etc.
related to the final fiscal year of the said company, which are included in “Proposal No. 2 Approval of Share Exchange
Agreement” in the Reference Documents for the General Meeting of Shareholders◎ If any revisions are made to the items subject to measures for electronic provision, a notice of the revisions and the details of thematters before and after the revisions will be posted on the Company’s website and the TSE website.

-2-

Reference Documents for the General Meeting of Shareholders
Proposals and Reference Information
Proposal No. 1

Appropriation of Surplus

The Company recognizes that returning profits to our shareholders is one of our important management issues. The
basic concept of the dividend policy is to implement the payment of stable dividends that correspond to businessperformance, and the medium-term management plan “REBORN” aims for a dividend payout ratio of more than50%.
The Company has given comprehensive consideration to matters including the business performance of the fiscal
year under review, and future business development, and it proposes to pay year-end dividends for the fiscal year
under review as follows:(1) Type of dividend
Cash(2) Allotment of dividend property to shareholders and their aggregate amount¥25 per common share of the Company
Total payment: ¥373,524,350(3) Date of distribution of dividends
June 28, 2024

-3-

Proposal No. 2 Approval of Share Exchange Agreement
The Company and Ai Holdings Corporation (hereinafter referred to as “Ai HD”) resolved at the Board of Directors
meetings of both companies held on May 31, 2024 to integrate their businesses (hereinafter referred to as the“Business Integration”) based on the spirit of equality and to conduct a share exchange (hereinafter referred to as the“Share Exchange”), with Ai HD as a wholly owning parent company and IWATSU ELECTRIC as a wholly owned
subsidiary, and entered into a share exchange agreement (hereinafter referred to as the “Share Exchange Agreement”)
as described below in “2. Contents of the Share Exchange Agreement” on the same day. Therefore, the Company
hereby requests our shareholders to approve the Share Exchange Agreement. Ai HD shall conduct the Share
Exchange without obtaining the approval of the Share Exchange Agreement by a resolution of the general meetingof shareholders in accordance with the procedure for a simplified share exchange pursuant to the provisions of Article
796, Paragraph 2 of the Companies Act (Act No. 86 of 2005, including subsequent amendments; the same applies
hereinafter).
In addition, prior to the effective date of the Share Exchange (scheduled for October 1, 2024), common shares of theCompany (hereinafter referred to as the “Company’s shares”) shall be delisted from the Standard Market of theTokyo Stock Exchange, Inc. (hereinafter referred to as “TSE”) as of September 27, 2024 (the last trading day will be
September 26, 2024). The reasons for the Share Exchange, the contents of the Share Exchange Agreement, and otherrelevant matters are as follows:
1. Reasons for implementing the Share Exchange
Based on the corporate philosophy, “Trust is the beginning of everything. Creation of value acknowledged by
the Society,” Ai HD has focused on two major businesses; the Security Equipment Business which involves
surveillance camera systems and the Peripheral Computer Equipment Business which mainly involves cutting
plotters for commercial and personal use, together with the Card Equipment and Other Office Equipment
Business, Measuring Devices Business, and Design Business. Furthermore, Ai HD has launched the
Decarbonization System Business to be its third core business. In addition to the growth and development ofthese businesses, Ai HD has been aggressively promoting business operations, including business alliances andM&As, not only in Japan but overseas as well.
On the other hand, the Company has provided unique and high-quality products and services in response todiverse needs of customers in the respective business fields of business communication systems, printing systems,
and test and measurement equipment under its management policy, “A bright and vibrant company with anadventurous spirit, valuing speed, creativity and most of all, communication.” Moreover, the Company has been
currently promoting radical management reforms to achieve thorough reduction of fixed costs and progress ingrowth strategies in accordance with the basic policy of the medium-term management plan, “REBORN.” With
these efforts, the Company aims to further expand and grow the IWATSU Group through more efficient andstrengthened businesses in the respective business fields, as well as advanced ESG management, in the future.
In addition to the fact that both companies are engaged in the measuring devices business, it is expected that thecontract manufacturing business, considered as one of our growth areas, will expand as a result of receiving
more outsource orders from Ai HD Group, and thus our businesses are highly compatible and may complement
each other in the sales, development, and manufacturing processes. To this end, we believe that complementing
each other’s business operations will contribute to stable business operations and increased corporate value ofboth companies. Accordingly, Ai HD and the Company concluded a capital and business alliance agreement on
November 30, 2023 and implemented a third-party allocation as part of the capital alliance (hereinafter referred
to as the “Capital and Business Alliance”).
Since the commencement of the Capital and Business Alliance, Ai HD and the Company have established several
subcommittees consisting of practitioners from both companies, and spent a lot of time discussing specific detailsof the collaboration measures of the two companies (referred to as the “Collaboration Measures,” collectively
the collaboration measures under consideration between the two companies) and the conditions for suchmeasures, including contract manufacturing of the products of Ai HD Group companies by the Company andjoint research and development for this purpose, acquisition of the measuring devices business of Graphtec
Corporation (hereinafter referred to as “Graphtec”), a wholly owned subsidiary of Ai HD, and mutual sharing ofresources and expertise in the test and measurement equipment business and contract manufacturing business.
As a result, Ai HD and the Company have come to realize that it is also possible to implement measures to create
further synergies across multiple fields, exceeding the areas assumed at the commencement of the Capital and-4-

Business Alliance, through the collaborations among Ai HD, its Group companies, and the Company. However,
Ai HD and the Company are both listed companies, and therefore have duties to pursue the proper interests of
their respective shareholders, such as (i) necessity of price negotiations based on the profit level of each company
in negotiating terms and conditions of the contract manufacturing and (ii) necessity to verify the business plan,
including the stand-alone cost of the business to be acquired, and to determine the acquisition price based on abusiness value calculation by external experts, in order to secure the fairness of the business acquisition
considerations, while the method of separating back-office divisions becomes a major point of contention in thediscussions concerning the acquisition of Graphtec’s measuring devices business. Therefore, the two companies
need to spend cost and time to earnestly negotiate on individual terms and conditions whenever considering theimplementation of the Collaboration Measures, leading to a difficult situation to timely implement the
Collaboration Measures.
Although Ai HD initially had a policy to implement the Collaboration Measures under the capital relationshipafter making the Company an equity method affiliate, through the discussions with the Company in thesubcommittees, Ai HD has come to the conclusion that it would be best to make the Company a wholly owned
subsidiary through the Share Exchange rather than the current equity method affiliate structure, in order to fully
realize the synergies of the Capital and Business Alliance and to promote various Collaboration Measures more
flexibly. To this end, Ai HD proposed to the Company in March 2024, its intention to make the Company its
wholly owned subsidiary.
On the other hand, the Company’s business telephones field, which is its primary product in its mainstay business
communication systems, has reached a mature stage, and it is difficult to independently plan for its sustainablegrowth in the future. As announced in the “Notice Regarding the Implementation of Structural Reforms” on May
15, 2024, the Company was forced to thoroughly reduce the fixed costs through optimization of the Group
personnel. Under these circumstances, the Company has recognized the need to quickly advance growthstrategies by thoroughly deepening collaborations with Ai HD, including early and ensured implementation of
the Collaboration Measures.
In addition, the Company has been proactively working to increase its corporate value, including early
implementation of some of the Collaboration Measures with Ai HD after the Capital and Business Alliance, but
the management environment surrounding the Company remains extremely harsh since the Capital and Business
Alliance, as evidenced by the following factors: i) The share price of the Company remains stagnant after the
Capital and Business Alliance and sufficient evaluation is not obtained in the stock market; ii) the Company
revised its earnings forecasts downward twice during the fiscal year ended March 31, 2024, including the one
announced in February 2024, after the Capital and Business Alliance; and iii) the Company has announced
personnel optimization, including the reduction of 200 employees, equivalent to approximately 20% of theGroup’s workforce, in addition to a series of measures to reduce fixed costs implemented by the Company in thepast.
In such circumstances, the Company accepted the offer from Ai HD and, as stated in “3. (4) Matters considered
for avoidance of harm to interest of the Company’s shareholders” below, studied the specific details of the
independent review system required for considering the Share Exchange, in order to ensure the fairness of the
Share Exchange. After establishing the review system appropriately, the Company has determined to commence
specific reviews of the Share Exchange. In the commencement of the specific reviews, the Company has
established a special committee consisting of independent committee members who do not have interest
relationships with Ai HD (hereinafter referred to as the “Special Committee;” and refer to “3. (4) i) Measures toensure fairness” below for details) on March 29, 2024, as well as developed a system for specific reviews,
including the appointment of external experts. These are for the purpose of being cautious about the decisionmaking by the Board of Directors of the Company with respect to the proposal from Ai HD, eliminating thepossibility of arbitrariness and conflict of interest in the decision-making process of the Board of Directors of
the Company, ensuring fairness, and confirming that it is not detrimental to the Company’s minority shareholders
to resolve the Share Change at the Board of Directors meeting of the Company.
Under the above-mentioned system, the Company has carefully considered the proposal from Ai HD and hascome to the conclusion that the Share Exchange will contribute to increasing its corporate value due to the fact
that, by becoming a wholly owned subsidiary of Ai HD, the Company will be able to flexibly achieve themanagement strategies from a medium- to long-term perspective of both Groups through the close collaboration
to implement the Collaboration Measures more quickly than ever before without spending time and cost to ensure
fairness of terms and conditions of the transactions between the two companies, as well as that the Company-5-may reduce maintenance expenses of the administration divisions and other listing retention costs required as alisted company (including expenses required for ongoing disclosure of information such as annual securities
reports, and expenses required for the operation of general meetings of shareholders and outsourcing ofadministrative affairs to the administrator of the shareholder register). For specific measures that can beconsidered after the Share Exchange and synergies through the measures, the following is assumed.
(1) Acquisition of Graphtec’s measuring devices business
The Company has been discussing in the subcommittees the acquisition of Graphtec’s measuring devices
business, which is expected to be synergistic with the Company’s test and measurement equipment business.
However, early implementation has become difficult due to the fact that it is necessary to maintain thefairness of terms and conditions of transactions and ensure the interests of both companies properly in thematters, such as the emerging separation method of the back-office divisions, calculation of the stand-alone
cost for transition services after the business acquisition, and determination of the proper acquisition cost,
since the both companies are independent parties and have their shareholders. For these matters, theCompany believes that becoming a wholly owned subsidiary of Ai HD through the Share Exchange enables
the Company to flexibly make decisions, regardless of minority shareholders’ interests, mostly from theperspective of the greater efficiency of Graphtec’s measuring devices business and maximization of businessvalue, to implement prompt business acquisition, and to achieve synergies with the Company’s businessthrough the reorganization.
(2) Further contract manufacturing from Ai HD and deepening joint research and development with Ai HD
As for the contract manufacturing by the Company and the joint research and development of the products
associated with the contract manufacturing, issues are emerging in the subcommittees, such as need fornegotiations of terms and conditions including prices in pursuit of parties’ respective interests andrestrictions on timely collaborations and deepening the collaborations due to such negotiations of terms andconditions. By resolving these issues through the Share Exchange, the Company believes that maximizing
the volume of the contract manufacturing from Ai HD and deepening the joint research and development
are expected.
(3) Optimizing the Company’s human resources through personnel exchanges by temporary transfer anddeepening synergies
The Company believes that further deepening of synergies is expected by integrating its expertise intechnology, sales, and management with those of Ai HD. Specifically, through personnel exchanges where
the Company’s personnel are seconded to Ai HD, the Company strives to optimize human resources
throughout the Group, as well as expects to contribute widely to Ai HD Groupe in various fields including
nationwide sales stores, customer networks, expertise in conducting planning through development,
manufacturing, and sales, and other product management, quality assurance, ESG management, which theCompany has developed over time.
As a result of the comprehensive reviews based on these factors, Ai HD and the Company agreed that Ai HD
becoming a wholly owning parent company of the Company through the Share Exchange contributes tostrengthening stable competitiveness, expanding businesses, and increasing corporate value of Ai HD and theCompany, and it is also beneficial to their shareholders. Through the reviews and discussions, the two companies
finally agreed on terms and conditions including the allotment ratio in the Share Exchange, resolved to
implement the Share Exchange at the Board of Directors meetings of both companies held on May 31, 2024,
and entered into the Share Exchange Agreement between the two companies.
2. Contents of the Share Exchange Agreement
The contents of the Share Exchange Agreement are as described in the “Share Exchange Agreement (Copy)”
below.

-6-

Share Exchange Agreement (Copy)
Ai Holding Corporation (hereinafter referred to as “Ai HD”) and IWATSU ELECTRIC CO., LTD. (hereinafterreferred to as “IWATSU ELECTRIC”) entered into a share exchange agreement (hereinafter referred to as the“Agreement”) on May 31, 2024 (hereinafter referred to as the “Execution Date”) as follows:
Article 1 (Share Exchange)
In accordance with the provisions of this Agreement, Ai HD and IWATSU ELECTRIC shall execute a share exchange(hereinafter referred to as the “Share Exchange”) with Ai HD as a wholly owning parent company and IWATSU
ELECTRIC as a wholly owned subsidiary, and Ai HD shall acquire all of the issued shares of IWATSU ELECTRIC(excluding shares of IWATSU ELECTRIC held by Ai HD; hereinafter referred to as the “Shares”).
Article 2 (Trade Names and Addresses)
The trade names and addresses of Ai HD and IWATSU ELECTRIC are listed in the following items.
(1) Ai HD (wholly owning parent company)
Trade name: Ai Holdings Corporation
Address: 12-8 Nihonbashi Hisamatsucho, Chuo-ku, Tokyo(2) IWATSU ELECTRIC (wholly owned subsidiary)
Trade name: IWATSU ELECTRIC CO., LTD.
Address: 7-41, Kugayama 1-Chome, Suginami-ku, Tokyo
Article 3 (Shares Delivered in the Share Exchange and Allotment Thereof)
1. In the Share Exchange, Ai HD shall deliver to the shareholders of IWATSU ELECTRIC entered or recorded in
the shareholder register (but only the shareholders after cancelling treasury shares of IWATSU ELECTRIC inaccordance with Article 8; excluding Ai HD; hereinafter referred to as “Shareholders to Be Allotted Shares”), at
the time immediately before Ai HD acquires the Shares through the Share Exchange (hereinafter referred to as
the “Reference Date”), the number of common shares of Ai HD equal to the product of the total number ofcommon shares of IWATSU ELECTRIC held by those shareholders multiplied by 0.6, in exchange for thecommon shares of IWATSU ELECTRIC held by those shareholders.
2. In the Share Exchange, Ai HD shall allot common shares of Ai HD to Shareholders to Be Allotted Shares as of
the Reference Date at the ratio of 0.6 common shares of Ai HD per common share of IWATSU ELECTRIC heldby the Shareholders to Be Allotted Shares.
3. If the number of common shares of Ai HD to be otherwise allotted to Shareholders to Be Allotted Shares pursuant
to the provisions of the preceding two items includes shares less than one share, Ai HD shall handle such sharespursuant to the provisions of Article 234 of the Companies Act and other applicable laws and regulations.
Article 4 (Matters Related to Stated Capital and Reserves)
The increase in the stated capital and reserves of Ai HD in the Share Exchange shall be as follows:(1) Amount of stated capital
Zero (0) yen(2) Amount of capital reserve
This amount shall be separately determined by Ai HD in accordance with the provisions of Article 39 of theRegulation on Corporate Accounting.
(3) Amount of legal reserve of retained earnings
Zero (0) yen
Article 5 (Effective Date)
The date the Share Exchange becomes effective (hereinafter referred to as the “Effective Date”) shall be October 1,
2024. However, Ai HD and IWATSU ELECTRIC may change such date through mutual consultation and agreement
if necessary due to reasons including procedural requirements of the Share Exchange.
Article 6 (Approval of the Agreement)
1. Ai HD shall conduct the Share Exchange without obtaining the approval of the Agreement at the general meetingof shareholders pursuant to the provisions of Article 796, Paragraph 2 of the Companies Act. However, if the-7-

approval at the general meeting of shareholders is required for the Agreement pursuant to the provisions of Article
796, Paragraph 3 of the Companies Act, Ai HD shall request the approval at the general meeting of shareholders
for the Agreement no later than the date immediately preceding the Effective Date. Moreover, if necessary due
to reasons including procedural requirements of the Share Exchange or for other reasons, Ai HD and IWATSU
ELECTRIC may change such date through mutual consultation and agreement.
2. IWATSU ELECTRIC shall implement procedures for the approval of the Agreement and matters required for
the Share Exchange at the general meeting of shareholders pursuant to the provisions of Article 783, Paragraph
1 of the Companies Act no later than the date immediately preceding the Effective Date.
3. Ai HD and IWATSU ELECTRIC may change the dates set forth in the preceding paragraphs through mutual
consultation and agreement if necessary due to reasons including procedural requirements of the Share Exchange.
Article 7 (Management of Company Assets, Etc.)
1. During the period between the Execution Date and the Effective Date, Ai HD and IWATSU ELECTRIC shall
execute their operations and manage and operate their assets by exercising its due care, as well as make theirrespective subsidiaries execute their operations and manage and operate their assets by exercising their due care,and shall consult and agree with each other before engaging in any act that may have a material impact on the
Share Exchange.
2. On or after the Execution Date, Ai HD and IWATSU ELECTRIC, except for the provisions prescribed in thefollowing items, shall not make any resolution to distribute dividends of surplus with a date prior to the Effective
Date as a record date, as well as to acquire treasury shares (excluding the acquisition of treasury shares in cases
where the acquisition of treasury shares is required in response to the exercise of shareholder rights in accordancewith applicable laws and regulations) on an acquisition date prior to the Effective Date.
(1) Ai HD may distribute dividends of surplus to the shareholders or registered pledgees of shares entered orrecorded in the final shareholder register of June 30, 2024, limited to an amount of 45 yen per share or an
amount not exceeding 50% of the dividend payout ratio, whichever is higher.
(2) IWATSU ELECTRIC may distribute dividends of surplus to the shareholders or registered pledgees of shares
entered or recorded in the final shareholder register of March 31, 2024, limited to an amount of 25 yen per
share.
Article 8 (Cancellation of Treasury Shares)
IWATSU ELECTRIC shall cancel, as of the Reference Date, all of the treasury shares held by IWATSU ELECTRIC
at the Reference Date (including treasury shares to be acquired in response to the dissenting shareholders’ purchasedemands as provided for in Article 785, Paragraph 1 of the Companies Act to be exercised in the Share Exchange)
by a resolution at the Board of Directors meeting of IWATSU ELECTRIC to be held no later than the date
immediately preceding the Effective Date.
Article 9 (Change in Circumstances and Cancellation)
During the period between the Execution Date and the Effective Date, Ai HD and IWATSU ELECTRIC may modify
the conditions of the Share Exchange or cancel the Share Exchange through mutual consultation and agreement in
the event of any material change in the status of assets or management of Ai HD or IWATSU ELECTRIC due tonatural disasters or other events, the occurrence of material events that hinder the execution of the Share Exchange,or some other reasons that make it difficult to achieve the purpose of the Agreement.
Article 10 (Effect of Agreement)
The Agreement shall lose its validity if (i) the Agreement is not approved at the general meeting of shareholders of
IWATSU ELECTRIC no later than the date immediately preceding the Effective Date; (ii) notwithstanding the factthat Ai HD is required to obtain the approval at the general meeting of shareholders on the Agreement pursuant to
the provisions of Article 796, Paragraph 3 of the Companies Act, the Agreement is not approved at the general
meeting of shareholders of Ai HD no later than the date immediately preceding the Effective Date; (iii) permissions,etc. are not obtained from the relevant authorities, etc. required prior to the Effective Date to conduct the Share
Exchange in accordance with laws and regulations in Japan and any foreign countries; and (iv) the Agreement isterminated in accordance with the preceding Articles.

-8-Article 11 (Non-specified Matters)
Other than as set forth in the Agreement, Ai HD and IWATSU ELECTRIC shall determine any matters not provided
for in the Share Exchange and other matters necessary for the Share Exchange through sincere consultation inaccordance with the intent of the Share Exchange.
IN WITNESS WHEREOF, this Agreement has been executed in duplicate and the parties hereto shall each retain
one original after affixing their respective signatures or names and seal impressions hereto.
May 31, 2024
Ai HD:
Hideyoshi Sasaki
Representative Director and Chairman
Ai Holdings Corporation
12-8 Nihonbashi Hisamatsucho, Chuo-ku, Tokyo
IN WITNESS WHEREOF, this Agreement has been executed in duplicate and the parties hereto shall each retain
one original after affixing their respective signatures or names and seal impressions hereto.
May 31, 2024
IWATSU ELECTRIC:
Shogo Kimura
President & Chief Executive Officer
IWATSU ELECTRIC CO., LTD.
7-41, Kugayama 1-Chome, Suginami-ku, Tokyo-9-

3. Matters concerning appropriateness of exchange considerations(1) Matters concerning appropriateness of total number and allotment of exchange considerationsi)
Allotment of shares in the Share Exchange

Allotment ratio in the Share Exchange
The number of shares to be delivered
through the Share Exchange

Ai HD(wholly owning parent company)

The Company(wholly owned subsidiary)1

0.6

Common shares of Ai HD: 6,024,584 shares (plan)

Note 1: Allotment ratio of shares
0.6 shares of the common shares of Ai HD (hereinafter referred to as “Ai HD shares”) shall be allotted and delivered
per share of the Company. However, 4,900,000 shares of the Company (as of May 31, 2024) held by Ai HD shall not
be subject to the allotment through the Share Exchange.
The aforementioned allotment ratio in the Share Exchange (hereinafter referred to as the “Share Exchange Ratio”) may
be modified in the event of a material change in the terms and conditions on which the calculation is based throughmutual consultation and agreement.
Note 2: The number of Ai HD shares to be delivered through the Share Exchange
In the Share Exchange, Ai HD shall allot and deliver to the shareholders of IWATSU ELECTRIC (but only theshareholders after cancelling the following treasury shares; excluding Ai HD) at the time immediately before Ai HD
acquires all of the issued shares of the Company through the Share Exchange (hereinafter referred to as the “ReferenceDate”) the number of Ai HD shares obtained by multiplying the total number of shares of the Company held by thoseshareholders by the Share Exchange Ratio. Ai HD shall apply its holding treasury shares for the delivery and shall notissue new shares for the allotment in the Share Exchange.
The Company shall cancel, until the Reference Date, all of the treasury shares held by the Company at the Reference
Date (including treasury shares to be acquired in response to the dissenting shareholders’ purchase demands inaccordance with Article 785, Paragraph 1 of the Companies Act concerning the Share Exchange) by a resolution at theBoard of Directors meeting no later than the date immediately preceding the Effective Date of the Share Exchange.
The number of shares to be delivered through the Share Exchange may be subject to change in the future due toreasons, such as acquisition and cancellation of treasury shares of the Company.
Note 3: Treatment of shares less than one unit
Shareholders of the Company who will hold less than one unit of Ai HD shares (less than 100 shares) subsequent to
the Share Exchange may use the following systems concerning Ai HD shares on and after the Effective Date of the
Share Exchange. The shareholders, however, may not sell such shares less than one unit in financial instruments
exchange markets.
i)
System of request for purchase of shares less than one unit (sale of shares less than 100 shares)
This is a system whereby shareholders of Ai HD shares may request Ai HD to purchase the shares less than one
unit held by such shareholders in accordance with the provisions of Article 192, Paragraph 1 of the Companies
Act.
ii)
System of request for additional purchase for shares less than one unit (additional purchase to reach 100 shares)
This is a system whereby shareholders holding less than one unit of Ai HD shares may request Ai HD to sell thenumber of shares that would, together with the number of shares less than one unit held by such shareholders,constitute one unit (100) shares and to purchase such shares from Ai HD in accordance with the provisions ofArticle 194, Paragraph 1 of the Companies Act.
Note 4: Treatment of shares less than one share
For the Company’s shareholders who shall be allotted of shares less than one Ai HD share in the Share Exchange, Ai
HD shall sell Ai HD shares equivalent to the total number of such shares (shares less than one share included in the
total number shall be rounded down) and pay the proceeds of such sale to the aforementioned shareholders inproportion to the shares less than one share pursuant to the provisions of Article 234 of the Companies Act and otherapplicable laws and regulations.

ii)

Rationale, etc. for allotment in the Share Exchange
A. Rationale and reason for allotment
Ai HD and the Company have determined to individually request the calculation of the Share
Exchange Ratio to third-party valuators independent from the two companies to ensure the fairness
and appropriateness of the calculation of the Share Exchange Ratio to be used for the Share
Exchange as described in “i) Allotment in the Share Exchange” above. Accordingly, Ai HD selectedDaiwa Securities Co., Ltd. (hereinafter referred to as “Daiwa Securities”) as a financial adviser anda third-party valuator, while the Company selected YAMADA Consulting Group Co., Ltd.
(hereinafter referred to as “YAMADA Consulting Group”) as a third-party valuator.
As described in “(4) i) Measures to ensure fairness” below, Ai HD has carefully discussed andreviewed the Share Exchange Ratio, taking into account the Share Exchange Ratio valuation report
received from its financial adviser and third-party valuator, Daiwa Securities, and advice from its
legal adviser, NAGOYA YAMAMOTO LAW FIRM. As a result, Ai HD has come to the judgmentthat the Share Exchange Ratio is appropriate to contribute to the interests of Ai HD’s shareholders,
and therefore has decided to conduct the Share Exchange with the Share Exchange Ratio.

- 10 -

On the other hand, as described in “(4) i) Measures to ensure fairness” below, the Company has
carefully discussed and reviewed the Share Exchange Ratio, taking into account the Share Exchange
Ratio valuation report received from its third-party valuator, YAMADA Consulting Group, andadvice from its legal advisor, TMI Associates, and its financial adviser, SMBC Nikko Securities Inc.
(hereinafter referred to as “SMBC Nikko Securities”), which have no significant interest
relationship with Ai HD or the Company. As a result, the Company has come to the judgment that
the Share Exchange Ratio described in “i) Allotment in the Share Exchange” above is appropriate tocontribute to the interests of the Company’s shareholders, and therefore has decided to conduct the
Share Exchange with the Share Exchange Ratio.
As mentioned above, Ai HD and the Company have been engaged in negotiations and discussions
comprehensively taking into account the factors, such as their financial conditions, assets status, andfuture outlook by using calculation results of the Share Exchange Ratio received from the respective
third-party valuators as a reference. As a result, Ai HD and the Company have come to the judgmentthat the Share Exchange Ratio is appropriate to contribute to the interests of respective shareholders,
and therefore have decided to conduct the Share Exchange with the Share Exchange Ratio. The
Share Exchange Ratio may be modified in the event of a material change in the terms and conditions
on which the calculation is based through mutual consultation and agreement in accordance with the
Share Exchange Agreement.
B. Overview concerning calculations(i) Names of valuators and the relationships with the Company and Ai HD
Ai HD’s third-party valuator, Daiwa Securities, and the Company’s third-party valuator,
YAMADA Consulting Group, are not applicable to the related parties of Ai HD or the Company.
These institutions are independent from Ai HD and the Company, and do not have significant
interest relationships to be described concerning the Share Exchange.
(ii) Overview of calculations
In the case of Ai HD, Daiwa Securities conducted the calculation by using the market value
method since Ai HD is listed on a financial instruments exchange and market prices of its sharesare available, as well as the discounted cash flow method (hereinafter referred to as the “DCF
method”) to reflect the status of its future business activities in the valuation. As for the market
value method, using May 30, 2024 as a calculation reference date, the average closing prices on
the TSE’s Prime Market for one-month, three-month, and six-month periods up to and including
the calculation reference date were adopted. As for the business plan on which DCF is based, no
significant increase or decrease in profit is expected. The financial forecasts are prepared basedon the assumption of the stand-alone plan.
In the case of the Company, Daiwa Securities conducted the calculation by using the market value
method since the Company is listed on a financial instruments exchange and market prices of its
shares are available, as well as the DCF method to reflect the status of its future businessactivities in the valuation. As for the market value method, using May 30, 2024 as a calculationreference date, the average closing prices on the TSE’s Standard Market for one-month, threemonth, and six-month periods up to and including the calculation reference date were adopted. As
for the business plan on which DCF is based, a significant increase in profit is expected with the
improvement in operating profit from the fiscal year ending March 31, 2025 to the fiscal year
ending March 31, 2026, due to the structural reforms as announced in the “Notice Regarding the
Implementation of Structural Reforms” on May 15, 2024. After the Capital and Business Alliancelast December, the two companies have commenced discussions to implement measures toachieve synergies between them. Among those measures, the synergies associated with thematters that can be rationally determined at present with regard to terms and conditions oftransactions are reflected in the business plans. On the other hand, as described in “1. Reasons for
the Share Exchange” above, under the conditions that the two companies are both listedcompanies and assume duties to pursue proper interests respectively to their shareholders, thesynergies related to the measures that have been discussed but not agreed upon and the synergies
expected to be achieved through the Share Exchange are not reflected in the business plans
because it is difficult to specifically estimate the impact on earnings at this time. For the
background of the verification of the business plans by the Special Committee in light of themedium-term management plan disclosed by the Company on May 13, 2022, please refer to “(4)ii) Measures to avoid conflict of interest” below.
The valuation range of IWATSU ELECTRIC assuming the share value per Ai HD share to be one
is as follows:- 11 -

Adopted method

Calculation results of Share Exchange Ratio

Market value method0.28 - 0.29

DCF method0.52 - 0.62

In principle, Daiwa Securities has taken the information provided from Ai HD and the Company
as well as publicly disclosed information in calculating the aforementioned Share Exchange
Ratio, assuming that such documents and information are all accurate and complete and has notconducted independent studies on their accuracy or completeness. Moreover, Daiwa Securities
has not conducted independent evaluations, appraisals or valuations of the assets or liabilities(including contingent liabilities) of the two companies, including individual analysis orevaluation of each asset or liability, and has not requested any third party to perform appraisals or
valuations thereof. The Share Exchange Ratio calculation by Daiwa Securities reflects theinformation and economic conditions until May 30, 2024. The financial forecasts of the twocompanies are assumed to have been rationally reviewed and prepared by their respective top
management, based on the best predictions and judgment possible at the same date.
In the case of Ai HD, YAMADA Consulting Group conducted the calculation by using the market
value method since Ai HD is listed on a financial instruments exchange and market prices of its
shares are available, as well as the DCF method to reflect the status of its future businessactivities in the valuation. As for the market value method, using May 30, 2024 as a calculationreference date, the average closing prices on the TSE’s Prime Market for one-month, threemonth, and six-month periods up to and including the calculation reference date were adopted.
In the DCF method, the share value is evaluated by discounting future cash flows based on thefinancial forecasts prepared by Ai HD to the present value at a certain discount rate. There is no
fiscal year in which a significant increase or decrease in profit is expected in the financial
forecasts used as calculation assumptions. The financial forecasts are prepared based on theassumption of the stand-alone plan.
In the case of the Company, YAMADA Consulting Group conducted the calculation by using themarket value method since the Company is listed on a financial instruments exchange and market
prices of its shares are available, as well as the DCF method to reflect the status of its futurebusiness activities in the valuation. As for the market value method, using May 30, 2024 as a
calculation reference date, the average closing prices on the TSE’s Standard Market for onemonth, three-month, and six-month periods up to and including the calculation reference datewere adopted.
In the DCF method, the share value is evaluated by discounting future cash flows based on thefinancial forecasts prepared by the Company to the present value at a certain discount rate. There
are fiscal years in which a significant increase in profit is expected in the financial forecasts used
as calculation assumptions. Specifically, as announced in the “Notice Regarding the
Implementation of Structural Reforms” on May 15, 2024, operating profit is expected to be 844
million yen for the fiscal year ending March 31, 2025, an increase by 30% or more year on year,
and an increase by 104% year on year for the fiscal year ending March 31, 2026, despite
operating loss for the fiscal year ended March 31, 2024, due to cost reductions of approximately
700 million yen for the fiscal year ending March 31, 2025 and approximately 1,200 million yen
for the fiscal year ending March 31, 2026. After the Capital and Business Alliance last December,the two companies have commenced discussions to implement measures to achieve synergies
between them. Among those measures, the synergies associated with the matters that can berationally determined at present with regard to terms and conditions of transactions are reflectedin the business plans. On the other hand, as described in “1. Reasons for the Share Exchange”
above, under the conditions that the two companies are both listed companies and assuming
duties to pursue proper interests respectively to their shareholders, the synergies related to themeasures that have been discussed but not agreed upon and the synergies expected to be achieved
through the Share Exchange are not reflected in the business plans because it is difficult tospecifically estimate the impact on earnings at present. For the background of the verification of
the business plans by the Special Committee in light of the medium-term management plan
disclosed by the Company on May 13, 2022, please refer to “(4) ii) Measures to avoid conflict ofinterest” below. The valuation range of the Company assuming the share value per Ai HD shareto be one is as follows.
Adopted method

Calculation results of Share Exchange Ratio

Market value method0.27 - 0.29

DCF method0.51 - 0.76

- 12 -

Notes:In principle, YAMADA Consulting Group has taken the information provided from the two companies
as well as publicly disclosed information in calculating the Share Exchange Ratio, assuming that such
documents and information are all accurate and complete and has not conducted independent studies on
their accuracy or completeness. Moreover, YAMADA Consulting Group has not conducted independent
evaluations, appraisals or valuations of the assets or liabilities (including off-balance assets andliabilities, and other contingent liabilities) of the two companies, and has not requested any third party toperform evaluations, appraisals or valuations thereof. In addition, the information on the financial
forecasts (including profit plans and other information) presented by the two companies are assumed tohave been rationally prepared by their respective top management, based on the best predictions andjudgment possible at the time of the presentation. YAMADA Consulting Group has reflected theinformation and economic conditions it obtained until May 30, 2024 in the calculation.

(2) Matters concerning the appropriateness of the amounts of Ai HD’s stated capital and reserves
The amounts of increase in Ai HD’s stated capital and reserves through the Share Exchange are as follows.
The Company considers them appropriate as they have been determined within the scope of laws andregulations by comprehensively taking into account and considering Ai HD’s financial conditions, capital
policy, and other circumstances.
Amount of increase in stated capital
Zero (0) yen
Amount of increase in capital reserve
This amount shall be separately determined by Ai HD in
accordance with the provisions of Article 39 of theRegulation on Corporate Accounting.
Amount of Increase in legal reserve of retained earnings Zero (0) yen(3) Reasons for selecting Ai HD Shares as exchange considerations
Ai HD and the Company selected shares of Ai HD, which is a wholly owning parent company, as
considerations of the Share Exchange. The two companies believe that the above selection is appropriate
for the reasons that Ai HD is listed on the TSE’s Prime Market, its opportunities for transaction are stillsecured on the said market on and after the Effective Date of the Share Exchange, and the Company’s
shareholders are also expected to benefit from synergies in the Share Exchange.
Through the Share Exchange, the Company will become a wholly owned subsidiary of Ai HD on the
Effective Date (scheduled to be October 1, 2024), and the Company’s shares will be delisted as of
September 27, 2024 (the last trading day is September 26, 2024) in accordance with the TSE’s delisting
standards. In the event the current Effective Date of the Share Exchange changes, the delisting date will bechanged.
After delisting, the Company’s shares will no longer be able to be traded on TSE, but Ai HD shares to be
allotted to the Company’s shareholders through the Share Exchange are listed on TSE and are available fortransactions on TSE on or after the Effective Date of the Share Exchange. Accordingly, the Company
believes that liquidity of the shares of one unit or more will continue to be provided to the Company’s
shareholders who hold 167 or more of the Company’s shares on the Reference Date and who receive theallocation of 100 shares, which is one unit, or more of Ai HD shares through the Share Exchange, although
there is a possibility that they will receive the allocation of some shares less than one unit according to thenumber of shares held.
On the other hand, Ai HD shares of less than 100 shares, which will be less than one unit, shall be allottedto the Company’s shareholders who hold less than 167 of the Company’s shares at the Reference Date.
Such shares less than one unit cannot be sold at the financial instruments exchange markets although thoseshareholders shall possess the right to receive dividends of Ai HD according to the number of their shareswith a record date on or after the Effective Date of the Share Exchange. The shareholders who will holdshares less than one unit are allowed to demand Ai HD to purchase their holdings of the shares less than
one unit. In addition, those shareholders may purchase from Ai HD such a number of shares that would,
together with the number of shares less than one unit held by such shareholders, constitute one unit ofshares. For details of such treatment, please refer to “(1) i) Allotment in the Share Exchange (Note 3)
Treatment of shares less than one unit” above. For details of the treatment of shares less than one share incase such shares arise in the Share Exchange, please refer to “(1) i) Allotment in the Share Exchange (Note4) Treatment of shares less than one share” above.
The Company’s shareholders may trade the Company’s shares held on TSE as before until the last trading
day, September 26, 2024 (plan), and may exercise their legal rights as provided for in the Companies Act
and other related laws and regulations.

- 13 -

(4) Matters considered for avoidance of harm to interest of the Company’s shareholdersi)Measures to ensure fairness
The Company has taken the following measures from the perspective of avoiding any suspicion of
conflict of interest, taking into account the factors that Ai HD already holds the Company’s shares(32.80% of voting rights as a percentage of the total number of issued shares of 14,940,974 (excluding
treasury shares) as of March 31, 2024); Ai HD falls under the largest shareholder, which is a major
shareholder, and other associate of the Company; the Company falls under Ai HD’s affiliated company
accounted for by the equity-method; and Ai HD and the Company conduct transactions pertaining tocontract manufacturing and joint research and development; and the Company has temporarilytransferred four employees to Ai HD.
A. Receipt of the Share Exchange Ratio valuation report from independent third-party valuators
In order to secure the fairness of the Share Exchange Ratio in the Share Exchange, Ai HD and theCompany requested the calculation of the Share Exchange Ratio to the third-party valuators
respectively, engaged in negotiations and discussions with the results thereof as a reference, andagreed to implement the Share Exchange using the Share Exchange Ratio as described in “3. (1) i)
Allotment in the Share Exchange” above. Ai HD and the Company have not received fairness
opinions, from the third-party valuators, indicating that the Share Exchange Ratio in the Share
Exchange is appropriate and fair from a financial perspective, as the two companies judged that thefairness of the Share Exchange is fully ensured in light of the measures to ensure the fairness ofother Share Exchange Ratio implemented in the Share Exchange and to avoid conflict of interest.
B. Advice from independent law firms
As legal advisers for the Share Exchange, Ai HD selected NAGOYA & YAMAMOTO LAW FIRM,
while the Company selected TMI Associates, and respectively obtain advice from those law firms
from a legal perspective of various procedures of the Share Exchange and the method and process ofdecision-making. NAGOYA & YAMAMOTO LAW FIRM and TMI Associates are both
independent from Ai HD and the Company and have no significant interest relationship.
C. Appointment of independent financial advisers
The Company appointed SMBC Nikko Securities as an independent financial adviser, other than the
independent third-party valuator in “3. (1) ii) (B) Overview concerning calculations” above that was
requested to calculate the Share Exchange Ratio, for advice on the review of the Share Exchange
and other support in achieving the Business Integration. SMBC Nikko Securities is a member of
Sumitomo Mitsui Financial Group, Inc. to which Sumitomo Mitsui Banking Corporation(hereinafter referred to as “SMBC”) providing regular banking services to Ai HD and the Company
also belongs. However, the Company selected SMBC Nikko Securities as a financial adviser in lightof its track record as a financial adviser, as well as its secured independence as a financial adviser
with the following reasons: i) Predetermined measures are taken to prevent harmful effects among
the division providing advisory services in SMBC Nikko Securities, other divisions, and SMBC; ii)
SMBC Nikko Securities conducts transactions with the Company under the same terms andconditions as general business partners; and iii) SMBC Nikko Securities does not fall under a related
party of Ai HD or the Company. The Company has not received the Share Exchange Ratio valuation
report and fairness opinions from SMBC Nikko Securities.
ii)

Measures to avoid conflict of interest
The Company has taken the following measures from the perspective of avoiding any suspicion of
conflict of interest, taking into account the factors that Ai HD already holds the Company’s shares(32.80% of voting rights as a percentage of the total number of issued shares of 14,940,974 (excluding
treasury shares) as of March 31, 2024); Ai HD falls under the largest shareholder, which is a major
shareholder, and other associate of the Company; the Company falls under Ai HD’s affiliated company
accounted for by the equity-method; and Ai HD and the Company conduct transactions pertaining tocontract manufacturing and joint research and development; and the Company has temporarilytransferred four employees to Ai HD.
A. Establishment of the independent Special Committee at the Company and obtaining a written report
On March 29, 2024, the Company established the Special Committee consisting of the Company’s
Outside Directors, Tsunehiro Oki and Eizo Tabaru, submitted to TSE of notification as independent
officers and have no interest relationships with Ai HD, and the Company’s Outside Director who is
an Audit & Supervisory Committee Member, Shigeru Kawamoto, submitted to TSE of notification- 14 -

as an independent officer. This is for the purpose of carefully making decisions by the Board of
Directors of the Company for the proposal from Ai HD, excluding fears of arbitrariness and conflictof interest in the decision-making process of the Board of Directors of the Company and securing its
fairness, as well as confirming that the decision on the Share Exchange by the Board of Directors of
the Company is not detrimental to the Company’s minority shareholders. Each committee member
shall be paid a fixed amount of remuneration for their duties, regardless of the contents of thewritten report.
In considering the Share Exchange, the Company consulted with the Special Committee about (i)validity and rationality of the purpose of the Share Exchange; (ii) appropriateness of terms andconditions of the Share Exchange; (iii) fairness of the negotiation process and decision-making
procedures upon the Share Exchange; and (iv) based on the above (i) to (iii) and other matters,
whether the Share Exchange is disadvantageous to the Company’s minority shareholders or not(hereinafter (i) through (iv) collectively referred to as the “advisory matters”). The Special
Committee has carefully considered advisory matters, such as collecting information by its own andholding discussions as needed, in addition to a total of seven meetings held from April 4, 2024 to
May 30, 2024. Specifically, the Special Committee first confirmed that there are no problems withindependence and expertise in any of the entities selected by the Company, the third-party valuator,
YAMADA Consulting; the legal adviser, TMI Associates; and the financial adviser, SMBC Nikko
Securities, and then approved the selection. Moreover, the Special Committee has received an
explanation from the Company about its business activities, business environment, major
management issues, assumed advantages and disadvantages of the Share Exchange on the
Company’s business, and calculation procedures of the Company’s business plan to be anassumption of the Share Exchange Ratio. Furthermore, the Special Committee received advice fromthe Company’s legal adviser, TMI Associates, on the method and process of decision-making by the
Board of Directors of the Company upon the Share Exchange, measures to ensure the fairness ofoperation and other procedures of the Special Committee, and measures to avoid conflict of interest,
while receiving an explanation from its third-party valuator, YAMADA Consulting Group, on themethod of valuation of the Share Exchange Ratio in the Share Exchange and the results thereof, andheld question and answer sessions. After receiving timely reports on the process and details of
discussions and negotiations upon the Share Exchange between Ai HD and the Company, theSpecial Committee has discussed the negotiation policy on several occasions until receiving thefinal proposal of the Share Exchange Ratio from Ai HD, and offered advice to the Company.
The Special Committee, through such a procedure, has carefully discussed and considered theadvisory matters, and submitted to the Board of Directors of the Company on May 30, 2024 a
written report describing that: (i) the Share Exchange contributes to increasing corporate value of
the Company, and its purpose is recognized as valid and rational; (ii) terms and conditions of the
Share Exchange are recognized as appropriate; (iii) the negotiation process and decision-making
procedures upon the Share Exchange are recognized as fair; and (iv) based on the above (i) to (iii)and other matters, the determination of the Share Exchange is not detrimental to the Company’s
minority shareholders. The overview of the opinions of the Special Committee is as follows:(i) Validity and rationality of the purpose of the Share Exchange
After receiving an explanation on each of the following matters from the Company andconducting comprehensive reviews thereof through questions and answers, the Special
Committee judged that there was no irrational points on the Company’s explanation and the
purpose of the implementation of the Share Exchange was recognized as valid and rational due toits contribution to stable business operations and increasing corporate value of Ai HD and theCompany.
(a) After the commencement of the Capital and Business Alliance, Ai HD and the Company havediscussed specific details of the Collaboration Measures and terms and conditions thereof,
resulting in the recognition that further synergies can be created in more fields than expected at
the time of the commencement of the Capital and Business Alliance; (b) on the other hand, thetwo companies are both listed companies and assuming duties to pursue profit respectively totheir shareholders, and thus it may be difficult to implement the Collaboration Measures quickly
due to sincere negotiations; (c) the Company needs to thoroughly deepen collaborations with Ai
HD, including early and ensured implementation of the Collaboration Measures, under theconditions that the main business is difficult to sustainably grow by itself and reduction of fixed
costs due to optimization of Group personnel is forced, and therefore has actively worked toincrease corporate value since the Capital and Business Alliance, such as early implementation ofsome of the Collaboration Measures with Ai HD; (d) nevertheless, the management environment
surrounding the Company remains extremely harsh as evident from the fact that the Company’s- 15 -

share prices remain stagnant even after the Capital and Business Alliance, no sufficient evaluation
is obtained in the stock market, the Company’s earnings forecasts were revised downward twice
during the fiscal year ended March 31, 2024, including the one announced in February 2024 after
the Capital and Business Alliance, and personnel optimization was announced, including the
reduction in scale of 200 employees, equivalent to approximately 20% of the Group’s workforce,in addition to a series of measures to reduce fixed costs implemented by the Company in the past;(e) in such circumstances, Ai HD proposed its intention to make the Company a wholly owned
subsidiary with the conclusion that it would be best to make the Company a wholly owned
subsidiary through the Share Exchange rather than the initial equity method affiliate structure, inorder to fully realize the synergies of the Capital and Business Alliance and to promote various
Collaboration Measures more flexibly; (f) after carefully considering the proposal from Ai HD,
the Company has come to the conclusion that the Share Exchange contributes to increasing
corporate value of the Company due to the fact that implementing the Business Integration basedon the spirit of equality and becoming a wholly owned subsidiary of Ai HD enable the Company
to flexibly achieve the management strategies from a medium to long-term perspective of bothGroups through quicker and closer collaboration on the Collaboration Measures than ever before,
as well as that the Company may reduce listing retention costs; and (g) the following matters are
assumed as measures to be able to be specifically considered after the Share Exchange andsynergies through such measures: i) acquisition of Graphtec’s test and measurement business; ii)
further contract manufacturing from Ai HD and deepening joint research and development with
Ai HD; and iii) optimizing the Company’s human resources through personnel exchanges bytemporary transfer and deepening synergies.
The Special Committee has confirmed the rationality of the contents of the business plan,
important prerequisites, and the preparation process, although the Company’s business plan used
for the transaction is not identical with the medium-term management plan announced by theCompany in May 2022, mainly due to the fact that (a) it is natural to conduct reviews as neededin light of changes in the management environment surrounding the Company that has occurred
after May 2022 and (b) the contents of the business plan prepared by the Company have indicatedcertain arguments in light of the changes in the business environment from the time of
preparation of the previous medium-term management plan and there are no irrational points.
(ii) Appropriateness of terms and conditions of the Share Exchange
In the calculation results of the Share Exchange Ratio valuation report the Company received
from YAMADA Consulting Group, the valuation range of the Company’s common share,
assuming the per share value of Ai HD share to be 1, is 0.27 to 0.29 under the market value
method, and 0.51 to 0.76 under the DCF method. The Share Exchange Ratio is higher than theupper range of the results calculated by the market value method and is within the range of and isclose to the median of the results calculated by the DCF method. The Share Exchange Ratio isequivalent to the ratio adding a premium of 119.43% (rounded to two decimal places) to theexchange ratio calculated based on the closing prices of Ai HD shares and the Company’s shares(2,443 yen and 668 yen) on TSE on May 29, 2024. The level of such premium offered to theCompany’s shareholders is significantly higher than the average premium level in recent cases ofother listed subsidiaries becoming wholly owned subsidiaries through the Share Exchange.
Furthermore, the Share Exchange is to allot and deliver Ai HD shares to the Company’s
shareholders and they, as Ai HD’s shareholders, may benefit from achieving synergies expected
to arise through the Share Exchange. As Ai HD is listed on the TSE’s Prime Market, the liquidityof the shares continues to be ensured for the Company’s shareholders who acquire Ai HD sharesof one unit or more, and those who acquire less than one unit of Ai HD shares can use the systemof request for purchase of shares less than one unit as well.
Accordingly, the delivery of Ai HD shares to the Company’s shareholders is consideredreasonable as a method of implementation of the Share Exchange and type of considerations.
(iii) Fairness of negotiation process and decision-making procedures upon the Share Exchange
In considering the Share Exchange, the procedures of the transaction are deemed fair based on thefacts that the Company has established the Special Committee and timely reported the status of
discussions and negotiations with Ai HD to it with full respect for the Committee’s opinions, has
carefully considered and discussed the appropriateness of terms and conditions of the Share
Exchange, including the Share Exchange Ratio with advice from independent external experts,
has conducted sincere discussions and negotiations to increase the Share Exchange Ratio from theperspective of protecting the interests of minority shareholders, and does not involve any person
who has a special interest relationship in the negotiation process.

- 16 -

(iv) Whether the Share Exchange is disadvantageous to the Company’s minority shareholders or not,based on the above (i) to (iii) and other matters
The Share Exchange is not disadvantageous to the Company’s shareholders in light of (i) to (iii)
above.
B. Approval of all the Directors (including Directors who are Audit & Supervisory Committee
Members) of the Company who have no interest relationships
At the Board of Directors meeting of the Company held on May 31, 2024, all Directors of theCompany deliberated and then resolved to implement the Share Exchange upon the approval of allof them. There are no Directors of the Company who have interest relationships with Ai HD.
4. Matters to be referred to relating to exchange considerations(1) Provisions of the Articles of Incorporation of Ai HD
The Articles of Incorporation of Ai HD is posted on the Company’s website (https://www.iwatsu.co.jp/) (inJapanese) and the TSE website (https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show) (inJapanese) according to the laws and regulations and provisions of Article 16 of the Articles ofIncorporation of the Company.
(2) Matters concerning liquidation method of exchange considerationsi)Markets for transactions of exchange considerations
Ai HD shares are traded on the TSE’s Prime Market.
ii) Parties performing brokering, intermediation, and agency services for transactions of exchange
considerations
Ai HD shares are intermediated and brokered by financial instruments dealers (securities companies,etc.) nationwide.
iii) Restrictions on transfer and other portions of exchange considerations if any
Not applicable.
(3) Matters concerning market price for exchange considerations
Based on the business day immediately preceding the announcement date of the conclusion of the Share
Exchange Agreement (May 31, 2024), the average closing prices of Ai HD shares on the TSE’s Prime
Market of one-month, three-month, and six-month periods are 2,448 yen, 2,412 yen, and 2,418 yen,respectively.
Market prices, etc. of Ai HD shares are available on the TSE’s website (https://www.jpx.co.jp/) (inJapanese).
(4) Balance sheets of Ai HD for each fiscal year ending on the last day of the fiscal year in the past five years
Ai HD has filed the annual securities report for any of the fiscal years pursuant to the provisions in Article
24, Paragraph 1 of the Financial Instruments and Exchange Act, and therefore the description is omitted.
5. Matters concerning the appropriateness of the provisions of share acquisition rights upon the Share Exchange
Not applicable.
6. Matters concerning non-consolidated financial statements, etc.
(1) Non-consolidated financial statements of Ai HD for the most recent fiscal year
The non-consolidated financial statements, etc. of Ai HD for the most recent fiscal year ended June 30,2023 are not provided in the paper-based documents (documents stating items subject to measures forelectronic provision) delivered to shareholders who have made a request for delivery of such documents, inaccordance with the provisions of laws and regulations and Article 16 of the Articles of Incorporation of
the Company, but posted on the Company’s website (https://www.iwatsu.co.jp/) (in Japanese) or the TSE
website (https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show) (in Japanese).
(2) Contents of the events that occurred in the Company and Ai HD after the last day of the most recent fiscal
year, such as disposal of important properties, bearing of significant obligations, and other events
significantly affecting the status of the company propertiesi)
The Company
A. The Company resolved at the Board of Directors meeting held on May 31, 2024 to implement the
Share Exchange with Ai HD by making Ai HD as a wholly owning parent company and theCompany as a wholly owned subsidiary, and entered into the Share Exchange Agreement on the- 17 -

same day. The contents of the Share Exchange Agreement are described in “2. Contents of the Share
Exchange Agreement” above.
B. The Company shall cancel, until the Reference Date, all of the treasury shares held by the Company(including treasury shares to be acquired in response to the dissenting shareholders’ purchasedemands to be exercised concerning the Share Exchange) by a resolution at the Board of Directors
meeting no later than the date immediately preceding the Effective Date of the Share Exchange.
ii)

Ai HD
Ai HD resolved at the Board of Directors meeting held on May 31, 2024 to implement the Share
Exchange with the Company by making Ai HD as a wholly owning parent company and the Company
as a wholly owned subsidiary, and entered into the Share Exchange Agreement on the same day. The
contents of the Share Exchange Agreement are described in “2. Contents of the Share Exchange
Agreement” above.

- 18 -

Proposal No. 3

Election of Seven Directors (Excluding Directors Who Are Audit & Supervisory Committee
Members)

The terms of office for all seven Directors (excluding those who are also Audit & Supervisory Committee Members;
the same shall apply hereafter in this proposal) will expire at the conclusion of this meeting.
Therefore, the Company proposes the election of seven Directors.
The Audit & Supervisory Committee has no particular statement for this proposal.
The candidates for Directors are as follows:
Candidate
No.

Name(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1984
Oct. 2004

Sept. 2006
May 2009

May 2011
July 2013
Shogo Kimura(January 25, 1962)
Reelection
1

Aug. 2013
Oct. 2013
June 2015
June 2016
July 2016
June 2017
June 2021
June 2022

Joined The Sanwa Bank, Ltd.
General Manager, Tokorozawa Corporate
Banking Department and General Manager,
Tokorozawa Branch of UFJ Bank Limited
General Manager, Katsushika Branch Office of
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
General Manager, Osaka Corporate Banking
Division No.1, Osaka Corporate Banking
Group
General Manager, Corporate Payment Business
Department
Assistant to General Manager, Management
Division of the Company
Assistant to General Manager, Reprographic
Systems Division
General Manager, Sales Dept., Printing Systems
Division
Executive Officer; and General Manager,
Printing Systems Division
Director & Executive Officer; and General
Manager, Printing Systems Division
Director & Executive Officer; and General
Manager, Sales Division No.1
Director & Senior Executive Officer; andGeneral Manager, Sales Division
Director & Senior Executive Officer; andGeneral Manager, Management Division
President & Chief Executive Officer (current
position)

Number of theCompany’s shares
owned

7,300

[Reasons for nomination as candidate for Director]
Shogo Kimura has deep discernment related to finance obtained through his service in financial institutions, and also
has the ability to manage and lead based on his experience as General Manager of the Sales Division and Management
Division. The Company judges that he has experience and capabilities suitable for Director and Executive Officer of theCompany and thus has nominated Mr. Kimura as a candidate for Director.

- 19 -

Candidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1987
July 1999

July 2000
Oct. 2001
May 2005

Tsukasa Aiura(August 3, 1962)
Reelection
2

July 2007
July 2010
July 2013
Oct. 2013

June 2015
July 2016
June 2017
Apr. 2018

July 2018
Apr. 2024

3

Joined NIPPON TELEGRAPH AND
TELEPHONE CORPORATIONManager-in-charge of Research andDevelopment Center of NIPPONTELEGRAPH AND TELEPHONE WEST
CORPORATIONManager-in-charge of Equipment Department
Manager of Equipment Department
Manager of Network Interconnection
Department
Manager of Network Department
Manager of Technology Innovation Department
Manager of Shizuoka BranchManager of Shizuoka Branch and Deputy
General Manager of Tokai Regional
Headquarters
Director & Executive Officer; and General
Manager, ICT Division of the Company
Director & Executive Officer; and General
Manager, ICT Business Division
Director & Senior Executive Officer; andGeneral Manager, ICT Business Division
Director & Senior Executive Officer; General
Manager, ICT Business Division; and General
Manager, NTT Sales Dept., ICT Business
Division
Director & Senior Executive Officer; andGeneral Manager, ICT Business Division
Director & Senior Executive Officer; andGeneral Manager, supervising Sales Division(current position)

Number of theCompany’s shares
owned

6,300

[Reasons for nomination as candidate for Director]
Tsukasa Aiura has deep discernment in the information communications business obtained through his service in atelecommunications carrier and also an ability to lead departments and divisions. The Company judges that he has
experience and capabilities suitable for Director and Executive Officer of the Company and thus has nominated Mr.
Aiura as a candidate for Director.
Apr. 1991
Joined the Company
Dec. 2018
General Manager, Accounting & Financial
Dept., Management Division
June 2021
Executive Officer; Deputy General Manager,
Management Division; and General Manager,
Hidenori Tokida
Accounting & Financial Dept., Management(February 5, 1968)
6,900
Division
Reelection
June 2022
Director & Executive Officer; and General
Manager, Management Division
Apr. 2024
Director & Executive Officer; and General
Manager, Corporate Management Division(current position)[Reasons for nomination as candidate for Director]
Hidenori Tokida has engaged in the management department since joining the Company and is well versed in theoverall finance and accounting, and has excellent management ability. The Company judges that he has experience andcapabilities suitable for Director and Executive Officer of the Company and thus has nominated Mr. Tokida as a
candidate for Director.

- 20 -

Candidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1991
Apr. 2011
Apr. 2013
June 2015
July 2016
June 2017

Takehiro Okawa(February 1, 1969)

Apr. 2019
June 2021

New election
4
Apr. 2022

Oct. 2022

Apr. 2024

5

Joined the Company
General Manager, Solutions Sales Dept., ITNSDivision
General Manager, IT Solutions Sales Dept., IT
Solutions Division
General Manager, Sales Dept., Printing Systems
Division
General Manager, Sales Dept. No.1, Sales
Division No.1
General Manager, Sales Dept. No.1, Sales
Division
General Manager, Sales Incubation Dept., Sales
Division
Executive Officer; Deputy General Manager,
Sales Division; and General Manager, Sales
Incubation Dept., Sales Division
Executive Officer; Deputy General Manager,
Sales Division; and General Manager, Business
Design Dept., Sales Division
Executive Officer; Deputy General Manager,
Sales Division; General Manager, Business
Design Dept., Sales Division; and General
Manager, Print Solutions Sales Dept., Sales
Division
Executive Officer; General Manager, Total
Communications Company (current position)

Number of theCompany’s shares
owned

7,157

[Reasons for nomination as candidate for Director]
Takehiro Okawa has engaged in the sales departments of IT solutions, printing systems, new businesses, andcommunication systems since joining the Company and thus is well versed in each of these business areas and overallsales activities. The Company judges that he has experience and capabilities suitable for Director and Executive Officerof the Company and has nominated Mr. Okawa as a candidate for Director.
Apr. 1993
Joined The Sanwa Bank, Ltd.
Sept. 2015
Deputy General Manager, Corporate Planning
Dept. (Osaka), and General Manager,
Secretarial Office (Osaka) of The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Apr. 2019
General Manager, Kojimachi Branch of MUFG
Bank, Ltd.
Koji Umehara(April 17, 1970)
Aug. 2021
Assistant to General Manager, Management
1,000
Division of the Company
New election
Apr. 2022
General Manager, Management Strategy Dept.,
Management Division
June 2023
Executive Officer; and General Manager,
Management Strategy Dept., Management
Division
Apr. 2024
Executive Officer; and General Manager,
Corporate Planning Dept. (current position)[Reasons for nomination as candidate for Director]
Koji Umehara has deep discernment in finance obtained through his service in financial institutions and also experiencein management strategy. Therefore, the Company judges that he has experience and capabilities suitable for Directorand Executive Officer of the Company and has nominated Mr. Umehara as a candidate for Director.

- 21 -

Candidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Nov. 1977
Sept. 1981
July 1992
May 2001
July 2010

6

Number of theCompany’s shares
ownedJoined Asahi & Co.
Registered as a certified public accountant
Partner of Asahi Shinwa & Co.
Senior Partner of Asahi & Co.
Partner of KPMG AZSA LLC (retired from
Tsunehiro Oki
office in June 2015)(November 11, 1952)
July 2015
Oki Certified Public Accountant & Tax
0Accountant Office (current position)
Reelection
June
2016
OutsideAudit
andSupervisory
Board
MemberOutsideof Utoc Corporation
Independent
June 2016
Outside Director of the Company (current
position)
June 2019
Outside Director of Takakita Co., Ltd. (Audit
and Supervisory Committee Member) (current
position)[Reasons for nomination as candidate for Outside Director and summary of expected roles]
Tsunehiro Oki is expected to offer useful opinions and candid indications on the management of the Company utilizing
his extensive experience and discernment regarding finance and accounting obtained as a certified public accountant.
Therefore, the Company has nominated Mr. Oki as a candidate for Outside Director. If Mr. Oki is elected, the Company
plans for him to be involved in determining the selection of candidates and remuneration, etc. for directors and officersof the Company as a member of the voluntary Remuneration and Nomination Advisory Committee from an objective
and neutral standpoint.

- 22 -

Candidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1981
Apr. 2010

7

Notes:

Number of theCompany’s shares
ownedJoined Mitsubishi Chemical Industries Ltd.
General Manager of Finance and Accounting
Department of Mitsubishi Chemical
Corporation
June 2010
Associate Director and General Manager ofFinance and Accounting Department
Apr. 2012
Executive Officer and General Manager ofFinance and Accounting Department
Apr. 2014
Executive Officer and General Manager ofFinance & Accounting Department of
Mitsubishi Tanabe Pharma Corporation
June 2015
Member of the Board, Executive Officer, andGeneral Manager of Finance & Accounting
Department
Apr. 2016
Member of the Board, Managing Executive
Officer, and General Manager of Finance &Accounting Department
Apr. 2017
Member of the Board, Managing Executive
Eizo Tabaru
Officer, and in charge of Corporate Strategy &(July 3, 1958)
Planning Department, Finance & Accounting
Department, Corporate Communications
500
Reelection
Department, and ICT Management Department
OutsideApr. 2018
Member of the Board, Managing Executive
Independent
Officer, in charge of Corporate Strategy &Planning Department, NeuroDerm Office,Finance & Accounting Department, andCorporate Communications Department
Apr. 2020
Representative Director, Managing Executive
Officer, in charge of Corporate Management
Department, Corporate Communications
Department, Legal & General Affairs
Department, and Japan Quality Assurance
Department
Apr. 2021
Representative Director, Managing Executive
Officer, in charge of Corporate Management
Department, Communication Crossroads
Department, General Affairs Department, andJapan Quality Assurance Department
Apr. 2022
Senior Advisor
June 2022
Adviser of Palo Alto Co., Ltd. (current position)
June 2023
Outside Director of the Company (current
position)[Reasons for nomination as candidate for Outside Director and summary of expected roles]
Eizo Tabaru is expected to offer useful opinions and candid indications on the management of the Company utilizing
his extensive career in pharmaceutical companies and his experience and discernment obtained through his service as adirector. Therefore, the Company has nominated Mr. Tabaru as a candidate for Outside Director. If Mr. Tabaru iselected, the Company plans for him to be involved in determining the selection of candidates and remuneration, etc. for
directors and officers of the Company as a member of the voluntary Remuneration and Nomination Advisory
Committee from an objective and neutral standpoint.
1. There is no special interest between any of the candidates and the Company.
2. Both Tsunehiro Oki and Eizo Tabaru are candidates for Outside Director.
Subject to the approval and adoption of this proposal, the Company has submitted notification to the Tokyo Stock
Exchange that both of them have been designated as independent officers as provided for by the aforementioned exchange.
3. Tenure as Outside Director(1) Tsunehiro Oki is currently an Outside Director of the Company, and at the conclusion of this meeting, his tenure as
Outside Director will have been eight years.

- 23 -

(2) Eizo Tabaru is currently an Outside Director of the Company, and at the conclusion of this meeting, his tenure as
Outside Director will have been one year.
4. The Company has entered into agreements with Tsunehiro Oki and Eizo Tabaru to limit the maximum amount of liability
for damages provided for by Article 423, paragraph (1) of the Companies Act, to the amount provided for by each item ofparagraph (1) of Article 425 of the said Act. If their reelections are approved and adopted in this proposal, the Company
plans to renew the abovementioned agreements with them.
5. The Company has entered into a liability insurance contract with an insurance company for directors and officers to coverdamages that may arise from the insured assuming responsibility for the execution of their duties or receiving claims
related to the pursuit of such responsibility by such insurance contract. If the election of each candidate is approved andadopted in this proposal, each candidate will be included as the insured of such insurance contract. In addition, theCompany plans to renew such insurance contract with the same content at the next renewal time.

- 24 -

Proposal No. 4

Election of One Director Who Is an Audit & Supervisory Committee Member

The term of office for Director Osamu Sato, who is an Audit & Supervisory Committee Member, will expire, andDirector Takaharu Nishimura, who is an Audit & Supervisory Committee Member, will resign, at the conclusion ofthis meeting.
Therefore, the Company proposes the election of one Director who is an Audit & Supervisory Committee Member.
If this proposal is approved and adopted, although the number of Directors who are Audit & Supervisory Committee
Members will be reduced by one to a total of four Directors, the Company judges that they can continue to ensure
the effectiveness of audits through collaboration with the internal audit department.
The Audit & Supervisory Committee has given consent to this proposal.
The candidate for Director who is an Audit & Supervisory Committee Member is as follows:
Name(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1984
June 2011

Number of theCompany’s shares
ownedJoined the Company
General Manager, Administration & Planning
Dept., ICT Division
June 2014
General Manager, Business Planning Dept.,
ICT Division
Apr. 2015
General Manager, Business Planning Dept.,
ICT Division and General Manager, Business
Planning Dept., Smart Community Division
June 2015
Executive Officer; Deputy General Manager,
ICT Division; General Manager, Business
Planning Dept., ICT Division; Deputy General
Manager, Smart Community Division; andGeneral Manager, Business Planning Dept.,
Smart Community Division
June 2016
Executive Officer; Deputy General Manager,
ICT Division; General Manager, Business
Osamu Sato
Planning Dept., ICT Division; General(February 5, 1962)
8,200
Manager, IT Solution Division; General
Manager, Smart Community Division; andReelection
General Manager, Business Planning Dept.,
Smart Community Division
July 2016
Executive Officer; and General Manager, Sales
Division No.2
June 2017
Director & Executive Officer; General
Manager, Management Division; and General
Manager, Corporate Planning Dept.,
Management Division
Apr. 2019
Director & Executive Officer; and General
Manager, Management Division
July 2021
President of IWATSU Business Services Co.,Ltd.
June 2022
Director who is a Full-Time Audit &Supervisory Committee Member (current
position)[Reasons for nomination as candidate for Director who is an Audit & Supervisory Committee Member]
Osamu Sato served as Chief Financial Officer of the Company as a General Manager of the Management Division, and has
experience in the planning department and sales department with ICT business and smart community business, and also has
experience as president of a subsidiary of the Company. In light of his extensive discernment, the Company judges that he has
experience and capabilities suitable for Director who is an Audit and Supervisory Committee Member of the Company and thus has
nominated Mr. Sato as a candidate for Director who is an Audit & Supervisory Committee Member.
Notes: 1. There is no special interest between the candidate and the Company.
2. The Company has entered into a liability insurance contract with an insurance company for directors and officers to coverdamages that may arise from the insured assuming responsibility for the execution of their duties or receiving claims
related to the pursuit of such responsibility by such insurance contract. If the election of the candidate is approved and- 25 -

adopted in this proposal, the candidate will be included as the insured of such insurance contract. In addition, the Company
plans to renew such insurance contract with the same content at the next renewal time.

- 26 -

(Reference)
Skills Matrix of Board of Directors and Audit & Supervisory Committee Members (When Proposals 3 and 4 havebeen approved.)
Expected Role, Experience, and Knowledge
IndeCorporate
pendent Management
Officer Management

Finance
Accounting

GovernanceCompliance

Sales
Marketing

〇

〇

〇

〇

〇

Strategy
Director

Shogo Kimura〇

Director

Tsukasa Aiura〇

Director

Hidenori Tokida〇

Director

Takehiro Okawa〇

Director

Koji Umehara〇

Outside Director

Tsunehiro Oki〇

Outside Director

Eizo Tabaru〇

Director
Audit &
Osamu Sato
Supervisory
Committee Member
Outside Director
Audit &
Shigeru Kawamoto
Supervisory
Committee Member
Outside Director
Audit &
Kazuaki Tanaka
Supervisory
Committee Member
Outside Director
Audit &
Yoshikazu Takahashi
Supervisory
Committee Member

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

* The above list only includes the main skills that each person is expected to possess.

- 27 -

〇

〇

〇

〇

〇
〇

〇

〇

Social/GlobalEnvironment InternationalSustainability
ity
〇

〇
〇

〇

IT/DX
R&D
Production〇〇