Note: This document has been translated from the Japanese original for reference purposes only. In the eventof any discrepancy between this translation and the Japanese original, the Japanese original shallprevail.

To Our Shareholders[Securities code: 2175]
May 28, 2024

Natsuki Goto
Representative Director, President and CEO

SMS Co., Ltd.

2-11-1 Shibakoen, Minato-ku, Tokyo, Japan

Convocation Notice ofthe 21st Ordinary General Meeting of Shareholders
The 21st Ordinary General Meeting of Shareholders of SMS Co., Ltd. (hereinafter the“Company”) will be held as described below.
You can exercise your voting rights either via the Internet or in writing instead of attending themeeting in person. Please review the attached Reference Materials for the General Meeting of
Shareholders and exercise your voting rights by 6:00 p.m. on Thursday, June 20, 2024 (JST).
1. Date and time:
2. Venue:
3. Meeting agenda:
Matters to be reported:

Friday, June 21, 2024, at 10:00 a.m. (JST)(Reception opens at 9:30 a.m.)Tokyo Grand Hotel, 3F Sakura
2-5-2 Shiba, Minato-ku, Tokyo
Business Report, Consolidated Financial Statements and Nonconsolidated Financial Statements for the 21st fiscal year (from April
1, 2023 to March 31, 2024), and results of audits by the Accounting
Auditor as well as the Audit and Supervisory Committee on
Consolidated Financial Statements

Proposals to be resolved:
Proposal 1:
Appropriation of Surplus
Proposal 2:
Election of Two (2) Directors (excluding Directors who are Audit andSupervisory Committee Members)
Proposal 3:
Election of Three (3) Directors who are Audit and Supervisory
Committee Members
Proposal 4:
Election of One (1) Substitute Director who is an Audit andSupervisory Committee Member
4. Matters decided in connection with this convocation:(1) If you exercise your voting rights in writing without indicating your approval ordisapproval, the vote will be treated as an indication of approval.
(2) If you duplicate the vote by exercising the voting rights both via the Internet and inwriting, only the Internet vote will be treated as valid.
(3) If you exercise your voting rights multiple times via the Internet, only the last vote willbe treated as valid.
◎

Should the Reference Materials for the General Meeting of Shareholders, the Business
Report, Consolidated Financial Statements and Non-consolidated Financial Statements
require revisions, the revised versions will be posted on the Company’s website(https://www.bm-sms.co.jp/ir/library/shareholders/).

◎

Please note there will be no souvenirs for those attending the General Meeting of
Shareholders in person.

-1-Reference Materials for the General Meeting of Shareholders
Proposal 1: Appropriation of Surplus
The Company’s basic policy is to place priority on growth investments, while taking financial
conditions into account when determining dividend payouts to its shareholders. Based on thispolicy, the Company proposes to return surplus to the shareholders for this fiscal year in the formof dividends as follows:
Matters concerning year-end dividends:(1) Type of dividend property
Cash(2) Allotment of dividend property to shareholders and the total amount
20 yen per common share of the Company’s stock
Total amount of 1,734,975,360 yen(3) Effective date of dividends
June 24, 2024
(Reference)
1. Total Payout Ratio
The Company implement share repurchases flexibly, according to financial conditions andshare price levels, and repurchased a total amount of 1,999,798,750 yen of shares during thisfiscal year. The total payout ratio for this fiscal year will be 51.7% after the year-end cash
dividend for the fiscal year ended March 31, 2024, to be implemented upon approval of this
proposal, and the said share repurchases.
2. Update of Dividend Policy
The Company’s Board of Directors resolved on April 26, 2024, to update the Company’s
dividend policy, as it has prioritized internal reserves since the acquisition of MIMS group in2015 and has achieved a certain level of financial soundness. This policy will be applied fromthe dividend for the fiscal year ending March 31, 2025.
Dividend Policy
The Company’s basic policy for profit distribution is to pay dividends in line with businessresults for each fiscal year, with a target consolidated dividend payout ratio of 30%, while
prioritizing growth investment and considering the financial conditions. However, this does not
apply in the event of major investment opportunities such as M&A.

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Proposal 2: Election of Two (2) Directors (excluding Directors who are Audit andSupervisory Committee Members)
The terms of office of all two (2) Directors, excluding Directors who are Audit and Supervisory
Committee members, will expire at the end of this General Meeting of Shareholders. Accordingly,
the Company proposes the election of two (2) Directors.
The Nomination and Remuneration Advisory Committee, of which Independent Outside
Directors account for the majority, has already been consulted about the proposal.
The Audit and Supervisory Committee has confirmed that it has no objection to the proposal.
The candidates are as follows:
Candidate
No.

Name(Date of birth)

Professional background, positions, responsibilities, andsignificant concurrent positions
Apr. 2004

Reappointment
Internal

Natsuki Goto
1

(February 25,
1976)

Attendance at theBoard meetings:
14/14

May 2007

Joined IBM Business Consulting
Services KK (Currently, IBM Japan, Ltd.)
Joined BayCurrent Consulting, Inc.

Dec. 2007

Joined SMS Co., Ltd.

Apr. 2008

General Manager of Corporate Planning

Mar. 2009

Director of Administration

Jun. 2009

Member of the Board

Apr. 2013

Director of Overseas Business

Apr. 2014

Representative Director, President andCEO (Current position)
Director of Elderly Care Business

Apr. 2017

Director of Business Development

Dec. 2018

Number of theCompany’s commonshares held

169,288 shares

Member of the Nomination andRemuneration Advisory Committee(Current position)(Significant concurrent position)
Member of the Board, M3 Career, Inc.
[Reasons for nomination as a candidate for Director]
Since becoming a board member in 2009, Mr. Natsuki Goto has led various divisions including administration
section, overseas business, and elderly care business, and has diverse management experience. Since 2014,
Mr. Goto has led the entire company as the Representative Director, achieving constant significant growth inboth sales and profit. Accordingly, the Company has determined that Mr. Goto is a suitable candidate forenhancing the Company’s corporate value in a sustainable manner, and has once again nominated him as a
candidate for Director.

-3-Candidate
No.

Name
(Date of birth)

Professional background, positions, responsibilities, andsignificant concurrent positions
Apr. 1998

Apr. 2009

Joined Mitsui Leasing & Development,
Ltd. (Currently, JA Mitsui Leasing, Ltd.)
Joined ACCA Networks Co., Ltd.
(Currently, SoftBank Corp.)
Joined SMS Co., Ltd.

MasatoSugizakiOct. 2009

General Manager of General Affairs(October 15, 1975)

Apr. 2011

Attendance at theBoard meetings:
14/14

Apr. 2015

General Manager of Corporate
Management
Director of Corporate Management(Current position)
Member of the Board (Current position)

Reappointment
Internal

2Mar. 2004

Jun. 2016

Number of theCompany’s commonshares held

40,000 shares(Significant concurrent position)
Corporate Auditor, M3 Career, Inc.
[Reasons for nomination as a candidate for Director]
Since joining the Company in 2009, Mr. Masato Sugizaki has led and been committed to strengthening thecorporate divisions as General Manager of General Affairs, General Manager of Corporate Management, andDirector of Corporate Management. Since becoming a board member in 2016, he has also contributed to theCompany's growth with his extensive experience. Accordingly, the Company has determined that Mr. Sugizaki is
a suitable candidate for enhancing the Company’s corporate value in a sustainable manner, and has once again
nominated him as a candidate for Director.
Notes:
1.
There are no special conflicts of interests between each candidate and the Company.
2.
The number of the shares held by Mr. Natsuki Goto includes those held through the Company’s director stock
ownership plan.
3.
The Company has entered into a directors and officers liability insurance agreement with an insurancecompany as stipulated in Article 430-3, Paragraph 1 of the Companies Act. The Company plans to renew theagreement with the same details in November 2024.

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Proposal 3: Election of Three (3) Directors who are Audit and Supervisory Committee
Members
The terms of office of all three (3) Directors who are Audit and Supervisory Committee members
will expire at the end of this General Meeting of Shareholders. Accordingly, the Company proposes
the election of three (3) Directors who are Audit and Supervisory Committee members.
The Nomination and Remuneration Advisory Committee, of which Independent Outside
Directors account for the majority, has already been consulted about the proposal.
The Company has obtained an approval for the proposal from the Audit and Supervisory
Committee.
The candidates are as follows:
Candidate
No.

Name(Date of birth)

Reappointment
OutsideIndependent

TomokiMatsubayashi(February 5, 1973)
1

Professional background, positions, responsibilities, andsignificant concurrent positions
Apr. 2000

Registered as attorney-at-law (Daiichi
Tokyo Bar Association)
Joined Tanabe & Partners

Jul. 2002

Joined the Bank of Japan

Feb. 2004

Returned to Tanabe & Partners

Nov. 2007

Outside Director of SMS Co., Ltd.

Dec. 2007

Partner, Tanabe & Partners

Jun. 2010

Part-time Corporate Auditor of theCompany
Outside Director (Member of the Audit
and Supervisory Committee) of theCompany (Current position)
Chair of the Audit and Supervisory
Committee of the Company (Current
position)
Joined Nozomi Sogo Attorneys at Law

Jun. 2016

Attendance at theBoard meetings:
14/14
Attendance at the
Audit andSupervisory
Committee
meetings: 13/13

Mar. 2017
Apr. 2018

Number of theCompany’s commonshares held

3,105 shares

Partner, Nozomi Sogo Attorneys at Law(Current position)
Apr. 2019
Lead Independent Director of theCompany (Current position)
May 2020
Chair of the Nomination andRemuneration Advisory Committee of theCompany (Current position)(Significant concurrent position)
Partner, Nozomi Sogo Attorneys at Law[Reasons for nomination as a candidate for Outside Director and overview of the expected roles]
Mr. Tomoki Matsubayashi has been working as a lawyer for many years and has abundant knowledge andexperience as well as broad insight as a legal professional. Prior to his appointment as an Outside Director who
is a member of the Audit and Supervisory Committee of the Company, Mr. Matsubayashi served as an Outside
Director and subsequently a part-time Corporate Auditor of the Company. With that combined, the total length of
his tenure with the Company is 16 years and 7 months at the end of this General Meeting of Shareholders. The
Company aims to achieve diversity in terms of the tenure for Outside Directors (Audit and Supervisory
Committee members) to harmonize the experience of long-serving Directors with fresh perspectives brought by
new Directors. In this regard, Mr. Matsubayashi plays an important role as an Outside Director (Audit andSupervisory Committee member). More specifically, he is the only Outside Director candidate who has been
involved in the Company’s management since an early stage of the Company, and deeply understands theCompany’s Philosophy and Principles as well as how the Company should contribute to its stakeholders,
including shareholders, according to the Philosophy and Principles. With such experience and understanding, asa Lead Independent Director, he contributes to passing on the role expected of Outside Directors towards
Directors with shorter tenures, and to promoting understanding of the Company’s culture and business. He is
also expected to play an irreplaceable role by effectively monitoring and supervising the management team toensure that the team fulfill its responsibilities to realize the Philosophy and Principles and enhance corporate
value over a long term from an independent standpoint, as he does not have any issues that may cause conflictsof interest with common shareholders. Furthermore, given that his tenure as Director is longer than that of ourRepresentative Director, the Company believes that appropriate checks and balances against theRepresentative Director would be provided. Accordingly, the Company has once again nominated Mr.
Matsubayashi as a candidate for Outside Director.

-5-Candidate
No.

Name
(Date of birth)

Professional background, positions, responsibilities, andsignificant concurrent positions
Apr. 2004

Number of theCompany’s commonshares held

Research Staff Member, IBM Tokyo
Research Laboratory (TRL) (Currently,
IBM Research–Tokyo)
Apr. 2009
Visiting Associate Professor, Graduate
School of Information Science andEngineering, Tokyo Institute ofTechnology (Currently, School of
Reappointment
Computing, Tokyo Institute of
OutsideTechnology)
Independent
Apr. 2013
Visiting Associate Professor, University
College Dublin
Toyotaro
Oct. 2013
Research Staff Member, IBM Research
Suzumura
Europe–Ireland(August 25, 1975)
Apr. 2015
Research Scientist, IBM T.J. Watson
Research Center–IBM Research, New2288 shares
Attendance at theYork
Board meetings:
Apr. 2016
Visiting Full Professor, Barcelona
14/14Supercomputing Center, Spain
Sep. 2018
Principal Investigator, MIT-IBM Watson
Attendance at the
AI Lab, Boston
Audit andJun. 2020
Outside Director (Member of the Audit
Supervisory
and Supervisory Committee) of theCommittee
Company (Current position)
meetings: 13/13
Apr. 2021
Professor, Graduate School ofInformation Science and Technology,
The University of Tokyo (Current
position)(Significant concurrent position)
Professor, Graduate School of Information Scienceand Technology, The University of Tokyo[Reasons for nomination as a candidate for Outside Director and overview of the expected roles]
Mr. Toyotaro Suzumura is an internationally recognized computer scientist, and has a wide range of knowledge
and experience as well as broad insight in areas such as big data analysis and utilization. To realize theCompany’s mission of “providing information infrastructure for an aging society,” it is crucial for the Company toutilize the vast amount of data related to medical care, elderly/disability care, healthcare, and senior life
accumulated through its domestic and overseas businesses. We believe that Mr. Suzumura’s abundant
knowledge, experience, and broad insight gained through his global career will allow him to effectively monitor
and supervise the Company’s management in promoting mission-driven activities and bring a valuable andinsightful perspective to such activities. Mr. Suzumura does not have any issues that may cause conflicts ofinterest with common shareholders and thus is expected to provide effective oversight and supervision on
management from an independent standpoint. Accordingly, the Company has once again nominated Mr.
Suzumura as a candidate for Outside Director. Although he has not been directly involved in corporate
management, we determine, for the above reasons, that he will be able to adequately fulfill the duties as an
Outside Director.

-6-

Candidate
No.

Name
(Date of birth)

Professional background, positions, responsibilities, andsignificant concurrent positions
Oct. 2002
May 2006
Aug. 2006

Reappointment
OutsideIndependent

Nov. 2007
Mar. 2011

Nobuko Takagi Jul. 2017

(The name on thefamilyregister:
Nobuko Teraoka)(October 22,
1977)

Joined Tohmatsu & Co. (Currently,
Deloitte Touche Tohmatsu LLC)
Registered as a Japanese CPA

Number of theCompany’s commonshares held

Joined Tohmatsu Tax Co. (Currently,
Deloitte Tohmatsu Tax Co.)
Joined GCA Corporation (Currently,
Houlihan Lokey Corporation)
Joined NEC Corporation
Representative, Nobuko Takagi Certified
Public Accountants' Office (Current
position)
Outside Corporate Auditor, I-ne Co., Ltd.

CEO, COEING AND COMPANY Inc.
617 shares(Current position)
Outside Director, USS Co., Ltd. (Current
Attendance at the Jun. 2018
position)
Board meetings:
Jun. 2022
Outside Director (Member of the Audit
14/14
and Supervisory Committee) of theCompany (Current position)
Attendance at theMember of the Nomination and
Audit
and
Remuneration Advisory Committee
Supervisory(Current position)
Committee
Mar. 2024
Outside Director, KOSÉ Corporation
meetings: 13/13(Current position)(Significant concurrent positions)
CEO, COEING AND COMPANY Inc.
Representative, Nobuko Takagi Certified Public
Accountants' Office[Reasons for nomination as a candidate for Outside Director and overview of the expected roles]
In addition to the working experience at an audit firm and tax accountant corporation as a Japanese CPA, Ms.
Nobuko Takagi has provided M&A advisory services at an M&A advisory firm, offered strategic planning services
in the industry, been on the management side of a management consulting firm, and served as an outside
director at a listed company. Ms. Takagi has abundant knowledge, experience, and broad insight as an expert infinance and accounting as well as a management consultant. Ms. Takagi does not have any issues that may
cause conflicts of interest with common shareholders and thus is expected to provide effective oversight andsupervision on management from an independent standpoint leveraging her expertise. Accordingly, theCompany has once again nominated Ms. Takagi as a candidate for Outside Director.
Notes:
1.
The Company has a business relationship relating to joint research with The University of Tokyo, which Mr.
Toyotaro Suzumura currently belongs to. Neither Mr. Tomoki Matsubayashi nor Ms. Nobuko Takagi has any
special conflicts of interests with the Company.
2.
Mr. Matsubayashi, Mr. Suzumura, and Ms. Takagi are candidates for Outside Directors.
3.
The Company has designated Mr. Matsubayashi as Independent Director pursuant to the provisions of theTokyo Stock Exchange and submitted a notification to the Exchange. The Company has entered into a legal
advisory contract with Tanabe & Partners, to which Mr. Matsubayashi previously belonged. However, theCompany has determined that the contract between the Company and Tanabe & Partners does not affect Mr.
Matsubayashi’s independence as an Outside Director because (i) he has no history of being involved in any of
the Company’s cases at the law firm ever since he was appointed as the Outside Director in November 2007,(ii) he left the law firm at the end of February 2017, and (iii) transaction amounts between the Company andthe law firm never exceeded 1% of annual consolidated sales of either party and was always less than 10
million yen every fiscal year. Further, there is no business relationship between the Company and Nozomi
Sogo Attorneys at Law, which Mr. Matsubayashi currently belongs to. Mr. Matsubayashi is an incumbent
Outside Director who serves as an Audit and Supervisory Committee member of the Company, and also used
to be an Outside Director and a Part-time Corporate Auditor without being involved in business execution of
the Company. At the end of this General Meeting of Shareholders, his tenure will be 8 years as an Audit andSupervisory Committee member and amounts to 16 years and 7 months by adding his term of office as
Director with no involvement of business execution. As described in “Reasons for nomination as a candidate
for Outside Director and overview of the expected roles” for Mr. Matsubayashi, the Company’s view on thetenure of Outside Directors and expectations on Mr. Matsubayashi's role as an indispensable contributor to
the Company justify that his long tenure as an Outside Director does not have a negative impact on his
independence as an Outside Director, but rather contributes to his independence.
3

Apr. 2018

-7-

4.

5.

6.

7.
8.

The Company has designated Mr. Toyotaro Suzumura as Independent Director pursuant to the provisions of
the Tokyo Stock Exchange and submitted a notification to the Exchange. The Company has a business
relationship with The University of Tokyo, which Mr. Suzumura currently belongs to, in relation to joint
research, our recruiting advertisement service, and others. However, the Company has determined that therelationship between the Company and the university does not affect Mr. Suzumura’s independence as an
Outside Director because transaction amounts between the Company and the university never exceeded 1%of annual consolidated sales of either party and was always less than 10 million yen every fiscal year. Mr.
Suzumura is an incumbent Outside Director who is an Audit and Supervisory Committee member of theCompany, and his tenure will be 4 years at the end of this General Meeting of Shareholders.
The Company has designated Ms. Nobuko Takagi as Independent Director pursuant to the provisions of theTokyo Stock Exchange and submitted a notification to the Exchange. Ms. Takagi is an incumbent Outside
Director who is an Audit and Supervisory Committee member of the Company, and her tenure will be 2 years
at the end of this General Meeting of Shareholders.
Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company has entered into
an agreement with Mr. Tomoki Matsubayashi, Mr. Toyotaro Suzumura, and Ms. Nobuko Takagi to limit their
liability for damages under Article 423, Paragraph 1 of the same Act. The cap on the amount of liability under
the said agreement shall be the minimum amount prescribed in Article 425, Paragraph 1 of the same Act. If
each candidate is elected as Director who is an Audit and Supervisory Committee member, the Company
plans to continue the above-mentioned agreement.
The number of the Company’s shares held by Mr. Tomoki Matsubayashi, Mr. Toyotaro Suzumura, and Ms.
Nobuko Takagi includes those held through the Company’s director stock ownership plan.
The Company has entered into a directors and officers liability insurance agreement with an insurancecompany as stipulated in Article 430-3, Paragraph 1 of the Companies Act. The Company plans to renew theagreement with the same details in November 2024.

-8-

Proposal 4: Election of One (1) Substitute Director who is an Audit and Supervisory
Committee Member
To prepare for a case where the number of Directors who are Audit and Supervisory Committee
members falls below the number required by laws and regulations, the Company proposes theelection of one (1) Substitute Director who is an Audit and Supervisory Committee member inadvance.
The Nomination and Remuneration Advisory Committee, of which Independent Outside
Directors account for the majority, has already been consulted about the proposal.
The Company has obtained an approval for the submission of this proposal from the Audit andSupervisory Committee.
The candidate is as follows:
Name(Date of birth)TaroMizunuma(July 6, 1971)

Professional background, positions, responsibilities, and significant
concurrent positions
Apr. 2000

Registered as Attorney at Law (Daini Tokyo Bar
Association)
Joined Miyakezaka Sogo Law Offices

Apr. 2009

Partner, Miyakezaka Sogo Law Offices

May 2012

Joined Shinsei Sogo Law Office

Sep. 2015

Joined Otake Law Office (Current position)

Number of theCompany’s commonshares held—

(Significant concurrent position)
Attorney at Law, Otake Law Office[Reasons for nomination as a candidate for Substitute Outside Director and overview of expected roles]
Mr. Taro Mizunuma has been working as a lawyer for many years and has an abundant knowledge andexperience as well as broad insight as a legal professional. Specifically, he has rich experience in legal caseswith medical institutions and is well-versed in the medical field, one of the Company's business domains. Mr.
Mizunuma does not have any issues that may cause conflicts of interest with common shareholders and thus is
expected to provide effective oversight and supervision on management from an independent standpoint.
Accordingly, the Company has nominated Mr. Mizunuma as a candidate for Substitute Outside Director.
Although Mr. Mizunuma has not been directly involved in corporate management, we determine, for the above
reasons, that he will be able to adequately fulfill the duties as an Outside Director.
Notes:
1.
There are no special conflicts of interests between Mr. Taro Mizunuma and the Company.
2.
Mr. Mizunuma is a candidate for Substitute Outside Director. If this proposal is approved and adopted and Mr.
Mizunuma assumes the office of Outside Director, the Company will designate him as an Independent
Director pursuant to the provisions of the Tokyo Stock Exchange and submit a notification to the Exchange.
3.
If Mr. Mizunuma assumes the office of Director who is an Audit and Supervisory Committee member, pursuant
to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company will enter into an agreementwith him to limit his liability for damages under Article 423, Paragraph 1 of the same Act. The cap on theamount of liability under the said agreement shall be the minimum amount prescribed in Article 425,
Paragraph 1 of the same Act.
4.
The Company has entered into a directors and officers liability insurance agreement with an insurancecompany as stipulated in Article 430-3, Paragraph 1 of the Companies Act. If Mr. Taro Mizunuma assumes theoffice of Director who is an Audit and Supervisory Committee member, he will be insured under the insurance
agreement. The Company plans to renew the agreement with the same details in November 2024.

-9-

(Reference) Composition and Skill Matrix of the Board of Directors after the conclusion ofthis General Meeting of Shareholders
1. Composition of the Board of Directors
Three of the five Directors are Independent Outside Directors.
2. Skill Matrix of Directors
Name
Position

Notable Knowledge and Experiences
GenderManagement

Business International Legal & Risk Accounting
Knowledge Experience Management
& Tax

IT

ESG

Reappointment
Internal

Natsuki
Goto

Male

●

●

●

●

●

●

●

Male

●

●

●

●

●

●

●

Representative
Director andPresident (CEO)Reappointment
Internal

MasatoSugizakiDirector

Reappointment
OutsideIndependent

TomokiMatsubayashi

Male

●

●

●

Director(Member of the Audit
and Supervisory
Committee)
Reappointment
OutsideIndependent

Toyotaro
Suzumura

Male●

Female●●●Director(Member of the Audit
and Supervisory
Committee)
Reappointment
OutsideIndependent

NobukoTakagi●

Director(Member of the Audit
and Supervisory
Committee)

The Company does not have a system of Advisors (“sodanyaku” or “komon”).
Accordingly, the Company does not appoint any former Directors, etc. as Advisors.
- 10 -●

(Reference) Criteria for the Independence of Outside Directors
The Company has set the following criteria to make an objective judgment on independence when
designating Outside Directors as Independent Directors. Outside Directors are deemed to havesufficient independence from the Company if none of the following apply.
(1) Person who engages in business execution of the Company or the Company’s subsidiaries(collectively, the "Group”), or a person who engaged in business execution of the Group at any
time in the past five (5) years.
(2) Business partner of the Group, to which the Group’s sales made in the most recent fiscal year
exceeded 1% of the Group’s annual sales on a consolidated basis, or a person who engages
in business execution of the business partner.
(3) Party for which the Group is a business partner and whose sales for the Group in the mostrecent fiscal year exceeds 1% of the Group’s annual consolidated sales, or a person who
engages in business execution of such business partner.
(4) Attorney at law, certified public accountant, consultant or other specialist who obtains
monetary consideration or other property exceeding 10 million yen from the Group besides
his/her renumeration as Director. If the person obtaining such property belongs to anincorporated entity, partnership, or other organization, a transaction amount exceeding 1% ofannual sales of either party on a consolidated basis or 10 million yen, whichever is applicable,
shall be referred to as the criterion instead.
(5) Major creditor of the Group or a person who engages in business execution of a financial
institution and other large creditors, which is indispensable for the Group’s financing and on
which the Group is dependent without alternative options.
(6) Major shareholder of the Company, holding 10% or more of voting rights, or a person who
engages in business execution of such shareholder.
(7) Person who received donations exceeding 10 million yen from the Group in the most recent
fiscal year.
(8) Accounting auditor or a practitioner who are engaged in the auditing work of the Group.
(9) Person who engages in business execution of a company holding cross-directorships with theGroup.
(10) Person who falls under any of the above items from (2) to (9) at any time in the past three (3)years.
(11) Spouse or relative within the second degree of kinship of a person who falls under any of theabove items from (1) to (10), excluding those from (5) to (8) if not significant.
(12) Notwithstanding with the criteria from (1) to (11) above, a person with specific reasons for not
being able to perform his/her duties as an Independent Outside Director, including those witha potential conflict of interest with common shareholders.
The Company aims to achieve diversity in terms of tenure for Outside Directors (Audit andSupervisory Committee members) to harmonize the experience of long-serving Directors withfresh perspectives brought by new Directors. Accordingly, the Company does not set a specificcriterion for tenure in number for Outside Directors.

- 11 -