This document has been translated from the Japanese original (as submitted to the Tokyo Stock Exchange) for
reference purposes only. In the event of any discrepancy, the Japanese original shall prevail. SMS Co., Ltd. assumes
no responsibility for direct, indirect, or any other forms of damages arising from the translation.

Corporate Governance Report
Last Update: June 21, 2024
SMS Co., Ltd.
Natsuki Goto
Representative Director and President (CEO)Securities Code: 2175
https://global.bm-sms.com/
The corporate governance of SMS Co., Ltd. (the “Company” or “SMS”) is described below.

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile
and Other Basic Information

1.

Basic Views

updatedBased on the mission (Group Mission) of SMS and its subsidiaries (Group) of improving people’s quality oflife by providing information infrastructure for an aging society, the Group strives to achieve sustainable growth andincrease its corporate value over the long term by valuing all stakeholders including shareholders, customers, business
partners, employees, and local communities. The markets for medical care, elderly care, healthcare, and senior life, which
are the business domains of the Group, are growing at an accelerating pace and changing rapidly. Therefore, theCompany must make swift and decisive management decisions. At the same time, it is essential to build a soundmanagement system with transparency and fairness to earn the trust of all stakeholders.
Corporate governance is a framework for achieving transparent, fair, and swift management decision-making. The
Company believes it is important to ensure effective corporate governance to realize the Group Mission and increase its
corporate value over the long term. Based on this recognition, the Company will achieve effective corporate governancethrough the following basic policies:(1) Ensuring the Rights of and Equality among Shareholders(i) Ensuring the Rights of Shareholders
The Company discloses information in a timely and appropriate manner and strives to improve the environment
in which shareholders can exert their rights to ensure substantial equality among all shareholders, including minority
and/or foreign shareholders and the appropriate exercise of their rights.

1

(ii) General Shareholders Meetings
The Company believes that a General Shareholders Meeting is an opportunity for constructive dialogue withshareholders. To enable the shareholders to exercise their voting rights appropriately, the Company provides notices withaccurate information on voting on the Company website days ahead.
(iii) Capital Policy
The Company believes it is essential to contribute to shareholder value by achieving sustainable growth andincreasing its corporate value over the long term. The Company aims to achieve continuous growth in net income andmaintain higher ROE than its cost of equity by efficiently utilizing its limited management resources. As huge business
opportunities emerge in the market related to an aging society where the Group operates, the Company will use its profits
for the investments necessary for sustainable growth and long-term corporate value enhancement.
Capital policies that may affect the rights of existing shareholders, such as large-scale capital increases, shall be
conducted through appropriate procedures based on a thorough consideration of its necessity and rationality not to harm
the rights of shareholders unduly.
The Company has updated its dividend policy by resolution of its Board of Directors held on April 26, 2024, as it
has prioritized internal reserves since the acquisition of MIMS group in 2015 and has achieved a certain level of financial
soundness. This policy will be applied from the dividend for the fiscal year ending March 31, 2025.
Dividend Policy(Before the changes)
The Company's basic policy for the dividend is to prioritize growth investments while considering the financial
conditions when determining dividend payouts to its shareholders.
(After the changes)
The Company's basic policy for profit distribution is to pay dividends in line with business results for each fiscal year,with a target consolidated dividend payout ratio of 30%, while prioritizing growth investment and considering thefinancial conditions. However, this does not apply in the event of major investment opportunities such as M&A.
(iv) Cross-Shareholdings
The Company does not hold any listed shares under a so-called “cross-shareholdings” structure. The Company
will not hold such shares if it is not possible to reasonably explain that such shares will lead to long-term enhancement ofcorporate value after comprehensive considerations of factors including consistency with the Group's strategy, synergy
effects, and risks.
(v) Adoption of Takeover Response Policies (or Anti-Takeover Measures)
The Company believes that achieving sustainable growth and long-term enhancement of corporate value andbuilding good relationships with shareholders and investors through IR activities will defend against hostile takeovers.
Therefore, the Company has not adopted takeover response policies (anti-takeover measures.)(vi) Related Party Transactions

2

The Company conducts all transactions through the necessary screening and approval process depending on thetransaction scale and significance following internal regulations.
Any transaction which may cause conflicts of interest is subject to the prior approval of the Board of Directors
and is required to be reported to the Board after it is carried out.
Related party transactions are conducted by taking into account the general terms and conditions of transactionsin the market, and the status of such transactions is monitored to prevent any disadvantages to the Company. The
Company discloses related party transactions in the annual securities report and non-consolidated financial statements
attached to the convocation notice for the General Shareholders Meeting.
(2) Appropriate Cooperation with Stakeholders Other Than Shareholders
The Group Mission states that the Company aims to continue contributing to society through its businessactivities. To this end, it is essential to build good relationships and cooperate with all stakeholders, including
shareholders, customers, business partners, employees, and local communities. The Company's basic stance toward eachstakeholder is as follows:– For customers: The Company values customers (operators, workers, and end-users) through its information-based
services.
– For business partners: The Company builds sound coexistence relationships with business partners by procuring
products and services of appropriate quality at appropriate prices.
– For employees: The Company provides employees with various growth opportunities through the sustainable growthof its business and aims for mutual development between the Company and employees.
– For local communities: The Company contributes to the sustainable development of local communities by solving
various social issues that arise in an aging society through its business activities.
(3) Ensuring Appropriate Information Disclosure and Transparency
The Company believes that it has the responsibility to disclose appropriate information on a timely basis andsufficiently fulfill its accountability. In addition to ensuring disclosures in compliance with relevant laws and regulations,
including the Companies Act, the Financial Instruments and Exchange Act, and the rules of the Tokyo Stock Exchange,
the Company discloses information that may affect the investment decisions of shareholders and investors, in a timely
and appropriate manner.
(4) Responsibilities of the Board of Directors
As a Company operating in a market that is accelerating and changing rapidly, it is imperative to build amanagement system that enables swift and sound management decisions in a timely and appropriate manner to realize theGroup Mission and increase its corporate value over the long term. Therefore, the Company has adopted anorganizational form of a company with an Audit and Supervisory Committee and the authority of the business executionof the Board of Directors has been delegated to the Representative Director and President (CEO), and other Directors.
The Board of Directors focuses on substantial discussions regarding management strategies and issues from a broader
perspective and enhances its supervisory function over business execution. At the Audit and Supervisory Committee, theCommittee members who have the voting rights of the Board of Directors (all are Independent Outside Directors)
conduct audits to improve the effectiveness of audit and supervision. The Company has also established the Nomination3

and Remuneration Advisory Committee to ensure objectivity, fairness, and transparency in the nomination of Director
candidates, the appointment/dismissal of the senior management, and the remuneration decision for Directors who are not
the Audit and Supervisory Committee members. To realize the most appropriate composition of the Board of Directors
suitable for a rapidly changing business environment, the Company has set the policy for the nomination of Director that
requires candidates a deep understanding of the Company's business along with a wealth of experience and broad insightin areas such as finance, accounting, legal affairs, and corporate management, regardless of age, gender, or nationality.
Specifically, the Company aims to achieve diversity among the members of the Board of Directors in terms of theirbackgrounds, areas of expertise, and international experience. In addition, for Outside Directors who are the Audit andSupervisory Committee members, the Company aims to achieve diversity in terms of tenure to harmonize the experienceof long-serving Directors with the fresh perspectives of the new Directors. The Company believes that the above systemenables the Directors to fulfill their duties. Thereby the Company will realize the Group Mission and increase its
corporate value over the long term.
(5) Dialogue with Shareholders
The Company recognizes that it must engage in constructive dialogue with shareholders and investors with along-term perspective to realize the Group Mission and increase its corporate value over the long term. Therefore, theDirector of Corporate Management (CFO) supervises dialogue with shareholders, and the policy of the dialogue isdecided in cooperation with the CEO. The CEO explains the management strategies and the business conditions atquarterly results briefings and actively participates in IR interviews. In addition, opportunities for dialogue between
Outside Directors and shareholders are provided as necessary.

[Reasons for Non-Compliance with the Principles of the Corporate Governance Code]updatedSupplementary Principle 4.11.1 Views on Overall Balance, Diversity, and Size of the Board of Directors
The Company operates in the markets which are growing at an accelerating pace and changing rapidly. The
Company believes that it is essential to appoint Director candidates, who have a deep understanding of the Company's
business, a wealth of experience and broad insight in areas such as finance, accounting, legal affairs, and/or corporate
management etc., regardless of age, gender, or nationality, in order to realize the most appropriate composition of theBoard of Directors according to the Company’s strategy. Specifically, the Company aims to achieve diversity among themembers of the Board of Directors, in terms of their backgrounds, areas of expertise, and international experience. In
addition, for Outside Directors who are the Audit and Supervisory Committee members, the Company aims to achieve
diversity in terms of tenure to harmonize the experience of long-serving Directors with the fresh perspectives brought by
new Directors. Although there are no Outside Directors with management experience at listed companies or companies
equivalent to those at this moment, the Company believes it has the most appropriate structure that realizes active
discussions at the Board meetings from diverse perspectives needed to execute the Company's current strategy byachieving diversity among Outside Directors, in terms of their backgrounds, areas of expertise, international experience,and tenure.
With regard to the size of the Board of Directors, the Articles of Incorporation limit the number of Directors who
are not the Audit and Supervisory Committee members up to nine, and the number of Directors who are the Audit and4Supervisory Committee members up to five. Currently, the Board consists of two Directors who are not the Audit andSupervisory Committee members and three Directors who are the Audit and Supervisory Committee members (all are
Independent Outside Directors). The Company believes that it has the Board with necessary and sufficient size tosupervise management and ensure swift decision-making. The skill matrix of the Board of Directors is on the last page.
The nomination of Director candidates shall be consulted with the Nomination and Remuneration Advisory
Committee, of which Independent Outside Directors account for the majority, in order to ensure objectivity, fairness andtransparency, and shall be decided by the Board of Directors based on the advice of the Committee. Candidates for
Directors who are the Audit and Supervisory Committee members are to be nominated by the Board of Directors with aprior accord of the Audit and Supervisory Committee.

5Principle 5.2 Establishing and Disclosing Business Strategies and Business Plans
As the Company operates in the rapidly changing environment, it is necessary to constantly update the strategies.
To this end, the Company formulates or revises its medium-term vision and the overall strategy for the Group based onthat vision every year. The Company sets not only the strategies but also the targets for sales and profits in the plan andshares them internally. For shareholders and investors, the Company explains the outline of the strategies and financial
forecasts in its financial results briefings and other materials.
With regard to profitability and capital efficiency, the Company is continuing to grow its net income whileachieving higher ROE than its cost of equity by efficiently utilizing its limited management resources: in fiscal 2023,
ROE was 17.6% and EPS growth rate was +12.9%. In terms of market valuation, the Company is continuing to maintainsufficient levels of PBR and PER (5.1x and 31.2x, respectively; both calculated based on the closing price on March 31,2024). The Company will continue to update its management strategies and business portfolio and make investments
necessary for growth, with the aim of realizing the Group Mission and increasing its corporate value over the long term.
While the Company does not disclose specific targets of profitability and capital efficiency, it will continue to consider
how to communicate and disclose information that contributes to the decisions of shareholders and investors.

[Disclosure Based on the Principles of the Corporate Governance Code]updatedPrinciple 1.4 Cross-Shareholdings
The Company does not hold any listed shares under a so-called “cross-shareholdings” structure. The Company
will not hold such shares if it is not possible to reasonably explain that such shares will lead to an increase in corporate
value after comprehensive considerations of factors including consistency with the Group's strategy, synergy effects, andrisks.

Principle 1.7 Related Party Transactions
The Company conducts all transactions through the necessary screening and approval process depending on thetransaction scale and significance in accordance with internal regulations.
Any transaction which may cause conflicts of interest is subject to the prior approval of the Board of Directors
and is required to be reported to the Board after it is carried out.
Related party transactions are conducted by considering the general terms and conditions of transactions in themarket and the status of such transactions is monitored in order to prevent any disadvantages to the Company. The
Company discloses related party transactions in the annual securities report and non-consolidated financial statements
attached to the convocation notice for the General Shareholders Meeting.

Supplementary Principle 2.4.1 Ensuring Diversity in the Promotion etc. of Core Personnel
Mid-career hires account for more than 90% of the total employees of the Group. Foreign employees account for
approximately 30% as the Company is actively operating overseas. In the promotion of core personnel, the Company

6makes judgments based on their abilities in accordance with their expected roles, regardless of age, gender, nationality, orother attributes. As a result, the ratio of mid-career hires and foreign nationals in management positions does not differ
significantly from the overall personnel composition, and the ratio of female managers is around 40%, indicating that theCompany has achieved a decent level of diversity in its core personnel.
The Company intends to continue to develop human resources and improve the work environment to ensure
diversity, sustainable growth, and long-term enhancement of corporate value.
The Company discloses its policies, initiatives, indicators and targets regarding human capital on its website.
(https://global.bm-sms.com/sustainability/people/)

Principle 2.6 Roles of Corporate Pension Funds as Asset Owners
The Company has not adopted any corporate pension plan and there is no opportunity to perform its role as an
asset owner of a corporate pension plan. The Company will take necessary measures in the event such as an acquisitionof a company with a corporate pension plan.

Principle 3.1 Full Disclosure(i) The Group Mission and management strategies are disclosed on the Company's website and in the financial results
briefing materials, the annual securities reports, etc.
(ii) The company's basic stance on corporate governance is described in the section of this report entitled “Ⅰ. 1. Basic
Views.”(iii) The determination policy and procedure of the Director remuneration are described in the section of this report
entitled “II.1 Director Remuneration, Disclosure of Policy on Determining Remuneration Amounts and Calculation
Methods.”(iv) The nomination of Director candidates and the appointment/dismissal of the senior management shall be consulted
with the Nomination and Remuneration Advisory Committee, of which Independent Outside Directors account for the
majority, in order to ensure objectivity, fairness and transparency, and shall be decided by the Board of Directors basedon the advice of the Committee. Candidates for Directors who are the Audit and Supervisory Committee members are to
be nominated by the Board of Directors with a prior accord of the Audit and Supervisory Committee.
In nominating the candidates for Directors, with the aim of realizing the most appropriate composition of theBoard of Directors suitable for the business environment, the Company's policy is to nominate candidates who have a
deep understanding of the Company's business along with a wealth of experience and broad insight in areas such as
finance, accounting, legal affairs, and/or corporate management, regardless of age, gender, or nationality. In appointing
the senior management including the CEO, the Company appoints persons familiar with the Company's business who areable to fulfill their responsibilities and contribute to the realization of the Group Mission and the improvement of its
corporate value over the long term.

7With regard to the dismissal of Directors and the senior management, the Board of Directors will not nominate aperson as a candidate for Director and will dismiss him/her from the position as the senior management in the event thatthe person is found to have violated laws and regulations, the Articles of Incorporation, or internal rules, or that the Boardof Directors determines that the person has not fulfilled the functions and roles required for his/her office based on theadvice of the Nomination and Remuneration Advisory Committee.
(v) The explanation for the nomination of the current Directors is contained in the “Convocation Notice for the Annual
Shareholders Meeting.”

Supplementary Principle 3.1.3 Sustainability Initiatives(1) Sustainability initiatives
The Company has established a Sustainability Committee to examine policies and measures on sustainability
issues and to monitor progress. The Sustainability Committee, chaired by the CEO and composed of all Directors, meetsin principle four times a year. The Sustainability Promotion Office serves as the secretariat of the Committee andsupports the formulation and implementation of sustainability-related strategies and measures in cooperation with eachbusiness and corporate department. The Office and the department in charge of risk management integratedly conduct
group-wide risk management related to sustainability issues. The Company discloses its policies and initiatives regarding
sustainability in the annual securities report and on its website. (https://global.bm-sms.com/sustainability/)
The Company does not expect that climate change issues will seriously affect the Group’s business activities orthat its business activities will have a significant impact on climate change at the present time. However, the Company
considers that it is important to address climate change issues to realize a sustainable society. The Company therefore
decided to support for the Task Force on Climate-related Financial Disclosures (the “TCFD") recommendations in
October 2022.
Details of disclosure based on the TCFD Recommendations are on the Company’s website. (https://global.bmsms.com/sustainability/environment/)(2) Investment in human capital and intellectual property
The Company believes that human capital and intellectual property are important management resources topromote the Group’s business.
The Company discloses details of human capital policies, initiatives, and indicators/ targets on its website.
(https://global.bm-sms.com/sustainability/people/)
With regard to intellectual property, the Company makes investment as necessary, including defensive measures,to protect its knowhow and trademark rights.

8Supplementary Principle 4.1.1 Scope and Content of the Matters Delegated to the Management
SMS is a company with the Audit and Supervisory Committee and its Articles of Incorporation stipulate that theCompany may delegate all or part of the decisions regarding important business execution from the Board of Directors to
Directors, except for matters stipulated by laws and regulations, from the viewpoint of ensuring speedy businessexecution and strengthening the supervisory functions of the Board.
The Board of Directors is supposed to make resolutions on matters prescribed by laws, regulations and the
Articles of Incorporation, matters delegated by the resolutions of General Shareholders Meetings, and other importantmanagement decisions. The related standards are stipulated in the “Rules of the Board of Directors.”
In addition, the “Rules of Authorities” stipulates the decision-making authority for each committee/position in
respect of business execution. The Company reviews these rules in a timely manner according to the status of legal
system and the Company's situation, with the aim of ensuring that each committee including the Board of Directors or
person at each position makes effective and swift decisions.

Principle 4-9 Independence Standards and Qualification for Independent Directors
The Company's views on the independence of the Outside Directors are described in the section of this report
entitled “II-1 Independent Directors, Other Matters related to Independent Directors.”

Supplementary Principle 4.10.1 Involvement and Advice of Outside Directors regarding Nomination and
Renumeration
The Board of Directors consists of two Directors who are not the Audit and Supervisory Committee members,
and three Directors who are the Audit and Supervisory Committee members (all are Independent Outside Directors). The
Company established the Nomination and Remuneration Advisory Committee, of which Independent Outside Directors
account for the majority, in December 2018. The Committee is chaired by the Lead Independent Outside Director. Pleaserefer to "II-2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Determination of
Remuneration, etc." regarding the role of the Committee.

Supplementary Principle 4.11.2 Status of Concurrent Positions Held by Directors and Audit & Supervisory
Committee Members
The status of important concurrent positions held by Directors is disclosed annually in the “Convocation Noticefor the Annual Shareholders Meeting” and the annual securities report.
The attendance rate of Directors at meetings of the Board of Directors and that of Directors who are the Audit andSupervisory Committee members at meetings of the Audit and Supervisory Committee are very high (the attendance rateof all Directors at meetings of the Board of Directors: 100%, the attendance rate of all Audit and Supervisory Committee
members at meetings of the Audit and Supervisory Committee: 100%, in fiscal 2023), and they are executing their duties
as Directors appropriately. Therefore, the Company believes that the status of concurrent positions held by Directors falls
within a reasonable range.

9Supplementary Principle 4.11.3 Analysis and Evaluation of Board Effectiveness
The Company believes that the Board of Directors has demonstrated its effectiveness as all Directors engage inactive discussions and deliberations to make important decisions by fully utilizing their experience and expertise. In
addition, the Company believes that the effectiveness of the Board of Directors is sufficiently ensured through the audit
and supervision by the Audit and Supervisory Committee. From fiscal 2022, the Company conducts a questionnaire
survey of all Directors on the effectiveness of the Board of Directors, analyzes and evaluates the result, and disclose thesummery on its website. (https://global.bm-sms.com/ir-news/20230920/)

Supplementary Principle 4.14.2 Training Policy for Directors and Audit & Supervisory Committee Members
In the appointment of Directors, the Company has nominated persons who have sufficient knowledge andcapabilities to fulfill their respective duties, in accordance with the business environment, and has obtained approvals of
the appointments at the General Shareholders Meetings. In addition to requiring Directors to improve themselves, theCompany provides them with information relating to the Company’s business, financial and organizational status,changes in laws and regulations and other industry trends as appropriate, so that Directors can respond to the rapidlychanging business environment and properly fulfill their roles. The Company also provides information and support for
expenses regarding external training courses as necessary in order for them to collect information and acquire knowledge.

Principle 5.1 Policy for Constructive Dialogue with Shareholders
The CFO supervises dialogue with shareholders, and the policy of the dialogue is decided in cooperation with theCEO. The CEO explains the management strategies and the business conditions at quarterly results briefings and actively
participates in IR interviews. In addition, opportunities for dialogue between Outside Directors and shareholders areprovided as necessary. All sections that should cooperate with the IR section, such as the finance section and the risk
management section, belong to the same Corporate Management Division as the IR section, and each section provides
assistance for IR activities as necessary.
With regard to relationships with shareholders, the Company endeavors to identify the ownership structure ofshareholders, including shareholders substantially holding the shares, and the content of dialogues with shareholders is
fed back to the senior management as necessary. In order to prevent leakage of insider information, the Company holds a
quiet period before the announcement of financial results and thoroughly controls insider information by refraining fromanswers or comments to inquiries about financial results.

Action to Implement Management that is Conscious of Cost of Capital and Stock Price (under consideration)
The Company is continuing to grow its net income while achieving higher ROE than its cost of equity by
efficiently utilizing its limited management resources: in fiscal 2023, ROE was 17.6% and EPS growth rate was +12.9%.
In terms of market valuation, the Company is continuing to maintain sufficient levels of PBR and PER (5.1x and 31.2x,
respectively; both calculated based on the closing price on March 31, 2024). The Company will continue to update its
management strategies and business portfolio and make investments necessary for growth, with the aim of realizing the10Group Mission and increasing its corporate value over the long term. Regarding disclosure of specific targets andinitiatives, the Company will continue to consider the contents and timing of disclosure.

Dialogue with Shareholders
The Company’s basic stance toward dialogue with shareholders is described in the section of this report entitled“I-1. (5) Dialogue with Shareholders.” In fiscal 2023, the Company conducted 297 meetings with institutional investors
and analysts.

11

2.

Capital Structure
Foreign Shareholding Ratio

Status of Major Shareholders

30% or more
updated

Name/Company Name

Number of Shares

Percentage (%)

Owned
MORO, LLC

15,373,618

17.72

The Master Trust Bank of Japan, Ltd. (Trust Account)

11,394,900

13.13

Custody Bank of Japan, Ltd. (Trust Account)

7,233,500

8.33

SSBTC CLIENT OMNIBUS ACCOUNT

4,036,006

4.65

3,370,892

3.88

AS ONE Corporation

2,404,000

2.77

CEPLUX THREADNEEDLE (LUX)

2,193,000

2.52

1,293,558

1.49

1,185,963

1.36

1,160,200

1.33(Standing Proxy: The Hongkong and Shanghai Banking
Corporation Limited, Tokyo branch)
BNYM AS AGT/CLTS NON TREATY JASDEC(Standing Proxy: MUFG Bank, Ltd.)(Standing Proxy: Citibank, N.A. , Tokyo Branch)
STATE STREET BANK AND TRUST COMPANY 505103(Standing Proxy: Mizuho Bank, Ltd., Settlement & Clearing
Services Department)
NORTHERN TRUST CO.(AVFC) RE U.S. TAX EXEMPTEDPENSION FUNDS SEC LENDING(Standing Proxy: The Hongkong and Shanghai Banking
Corporation Limited, Tokyo branch)
BBHC FOR SEI INSTITUTIONAL INVESTMENTS TRUST WORLD EQUITY EX-US FUND / LAZARD IQG(Standing Proxy: MUFG Bank, Ltd.)
Controlling Shareholder (except for Parent

N/A

Company)
Parent Company

Supplementary Explanation

None

updated– The status of major shareholders above is the status as of March 31, 2024.
– Shareholding ratio is calculated excluding treasury shares.

12

– According to the large shareholding report (change report) dated January 22, 2024 and the amendment report
dated January 23, 2024, submitted by Wasatch Advisors, LP, they owned 5,426,280 shares (6.20%) as of January
15, 2024. However, these are not included in the above Major Shareholders list since the actual numbers ofshares owned as of March 31, 2024 are not confirmed.
– According to the large shareholding report (change report) dated March 6, 2024, submitted by Nomura Securities
Co., Ltd. and Nomura Asset Management Co., Ltd., they owned 72,419 shares (0.08%) and 5,411,200 shares(6.18%) respectively as of February 29, 2024. However, these are not included in the above Major Shareholders
list since the actual numbers of shares owned as of March 31, 2024 are not confirmed.
–

13

3.

Corporate Attributes
Listed Stock Market and Market Section

Tokyo, Prime Market

Fiscal Year-End

MarchType of Business

Services

Number of Employees (consolidated) as of the End

1,000 or moreof the Previous Fiscal YearSales (consolidated) as of the End of the Previous

JPY10 billion or more and less than JPY100 billion

Fiscal Year
Number of Consolidated Subsidiaries as of the End

10 or more and less than 50of the Previous Fiscal Year

4.

Policy on Measures to Protect Minority Shareholders in Conducting Transactions with
Controlling Shareholders
N/A

5.

Other Special Circumstances which may have Material Impact on Corporate
Governance
N/A

14

II.

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

1.

Organizational Composition and Operation
Organization Form

Company with Audit & Supervisory Committee

Directors
Maximum Number of Directors stipulated in

14

the Articles of Incorporation
Term of Office of Directors stipulated in the

1 year

Articles of Incorporation
Chairperson of the Board of Directors

Representative Director and President

Number of Directors

5

Appointment of Outside Directors

Appointed

Number of Outside Directors

3

Number of Independent Directors

3Outside Directors’ Relationship with the Company (1)NameAttribute

Relationship with the Company (*)
a

b

c

d

e

f

g

h

Tomoki Matsubayashi

Lawyer△Toyotaro Suzumura

Scholar〇

Nobuko Takagi

Certified Public Accountant

i

j

k

* Categories for “Relationship with the Company”* “〇” when the Director presently falls or has recently fallen under the category;“△” when the Director fell under the category in the past
* “●” when a close relative of the Director presently falls or has recently fallen under the category;“▲” when a close relative for the Director fell under the category in the pasta. Executive of the Company or its subsidiaries
b. Non-executive Director or executive of a parent company of the Company
c. Executive of a fellow subsidiary company of the Company
d. A party whose major client or supplier is the Company or an executive thereof
e. Major client or supplier of the Company or an executive thereof
f. Consultant, certified public accountant or legal professional who receives a large amount of monetaryconsideration or otherg. property from the Company besides renumeration as a Director
h. Major shareholder of the Company (or an executive of the said major shareholder if the shareholder is a legal
entity)15

i. Executive of a client or supplier company of the Company (which does not correspond to any of d, e, or f) (theDirector himself/herself only)
j. Executive of a company, between which the Company’s Outside Directors are mutually appointed (the Director
himself/herself only)
k. Executive of a company or organization that receives a donation from the Company (the Director himself/herself
only)
l. Others
Outside Directors’ Relationship with the Company (2)Nameupdated

Audit &

Independent

Supplementary

Supervisory

Director

Explanation of theCommittee

Reason for Appointment

Relationship

MemberTomokiMatsubayashi○○

The Company has entered

Mr. Tomoki Matsubayashi has been

into a legal advisory

working as a lawyer for many years

contract with Tanabe &and has abundant knowledge andPartners, to which Mr.

experience as well as broad insight as

Matsubayashi previously

a legal professional. Prior to his

belonged. However, theappointment as an Outside Director

Company has determined

who is a member of the Audit andthat the contract between

Supervisory Committee of thethe Company and the law

Company, Mr. Matsubayashi served as

firm does not affect Mr.

an Outside Director and subsequently

Matsubayashi’sa part-time Corporate Auditor of the

independence as an

Company. With that combined, theOutside Director because

total length of his tenure with the(i) he has no history ofCompany is 16 years and 7 months atbeing involved in any of

the conclusion of the 21st Annual

the Company’s cases at the General Shareholders Meeting held on
law firm ever since he was June 21, 2024. The Company aims toappointed as the Outsideachieve diversity in terms of the

Director in November

tenure for Outside Directors (Audit

2007, (ii) he left the law

and Supervisory Committee members)

firm at the end of February to harmonize the experience of long2017, and (iii) transaction

serving Directors with freshamounts between theperspectives brought by new

Company and the law firm Directors. In this regard, Mr.
never exceeded 1% of

Matsubayashi plays an important role

annual consolidated sales

as an Outside Director (Audit and16

of either party and wasSupervisory Committee member).

always less than 10 million More specifically, he is the only
yen every fiscal year.

Outside Director who has been

Further, there is no

involved in the Company’sbusiness relationshipmanagement since an early stage of

between the Company and the Company, and deeply understands
Nozomi Sogo Attorneys at the Company’s Philosophy andLaw, which Mr.

Principles as well as how the

Matsubayashi currently

Company should contribute to its

belongs to.

stakeholders, including shareholders,according to the Philosophy andPrinciples. He is also expected to play
an irreplaceable role by effectively
monitoring and supervising themanagement team to ensure that theteam fulfill its responsibilities torealize the Philosophy and Principles
and enhance corporate value over along term. Furthermore, given that his
tenure as Director is longer than thatof our Representative Director, theCompany believes that appropriate
checks and balances against theRepresentative Director would be
provided. Mr. Matsubayashi has been
designated as an Independent Director
as well with the expectation that hewill provide effective oversight andsupervision of management from an
independent standpoint. He does not
fall under any of the criteria itemizedby the Tokyo Stock Exchange that
could potentially cause conflicts ofinterest against common shareholders,such as being a major client or
supplier of the Group or a consultant
who receives large amount ofmonetary consideration or otherproperty besides the renumeration as a17

Director, and meets the independence
standards set by the Company itself.
Toyotaro
Suzumura○○

The Company has a

Mr. Toyotaro Suzumura is anbusiness relationship withinternationally recognized computer

The University of Tokyo,

scientist, and has a wide range of

which Mr. Suzumura

knowledge and experience as well as

currently belongs to, in

broad insight in areas such as big data

relation to joint research,

analysis and utilization. To realize theour recruiting

Group Mission of “to improveadvertisement service, and people’s quality of life by providing
others. However, theinformation infrastructure for an aging

Company has determinedsociety,” it is crucial for the Company

that the relationshipto utilize the vast amount of data

between the Company and related to medical care, elderly
the university does not/disability care, healthcare, and senioraffect Mr. Suzumura’s

life accumulated through its domestic

independence as anand overseas businesses. We believe

Outside Director becausethat Mr. Suzumura’s abundanttransaction amounts

knowledge, experience, and broad

between the Company and insight gained through his global
the university nevercareer will allow him to effectively

exceeded 1% of annual

monitor and supervise the Company’s

consolidated sales of either management in promoting missionparty and was always lessdriven activities and bring a valuable

than 10 million yen every

and insightful perspective to such

fiscal year.

activities. Mr. Suzumura has been
designated as an Independent Director
as well with the expectation that hewill provide effective oversight andsupervision of management from an
independent standpoint. He does not
fall under any of the criteria itemizedby the Tokyo Stock Exchange that
could potentially cause conflicts ofinterest against common shareholders,such as being a major client or
supplier of the Group or a consultant
who receives large amount ofmonetary consideration or other18

property besides the renumeration as a
Director, and meets the independence
standards set by the Company itself.
Nobuko Takagi ○○-In addition to the working experienceat 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 anexpert in finance and accounting aswell as a management consultant. Ms.
Takagi has been designated as an
Independent Director as well with the
expectation that she will provide
effective oversight and supervision ofmanagement from an independent
standpoint. She does not fall under
any of the criteria itemized by the
Tokyo Stock Exchange that could
potentially cause conflicts of interest
against common shareholders, such as
being a major client or supplier of theGroup or a consultant who receives
large amount of monetaryconsideration or other property
besides the renumeration as a
Director, and meets the independence
standards set by the Company itself.

19

Audit and Supervisory Committee
Committee’s Composition and Attributes of Chairperson

Audit & Supervisory

All Committee

Full-time

Internal

OutsideMembers

Members

Directors

Directors

3

0

0

3

Committee

Chairperson
OutsideDirector

Appointment of Directors and/or Employees to Support Duties of the Audit &Appointed

Supervisory Committee
Matters related to the Independence of Such Directors and/or Employees from Executive Directors
The Internal Audit Office plays the role of the Audit and Supervisory Committee secretariat and assists
auditing duties as appropriate.
In order to ensure the independence of the employees of the Internal Audit Office who assist the Audit andSupervisory Committee in its duties, decisions concerning personnel changes, etc. are made with the prior consent of
the Audit and Supervisory Committee. In addition, employees who have received an order from the Audit andSupervisory Committee in relation to auditing duties are not subject to instructions or orders from Directors(excluding Directors who are the Audit and Supervisory Committee members) regarding that order.
Cooperation among Audit & Supervisory Committee, Accounting Auditors, and Internal Audit Function
The Audit and Supervisory Committee strives to cooperate with the Internal Audit Office to conduct auditing
duties. The Audit and Supervisory Committee receives quarterly reports from the accounting auditors on audit results,
and the Audit and Supervisory Committee cooperates with the accounting auditors by having meetings on a timely
basis to exchange opinions and information.
The Internal Audit Office, in addition to assisting in the duties of the Audit and Supervisory Committee, holds
monthly meetings with the Audit and Supervisory Committee, where reports are made on audit plans as well as theresults and progress of audits, and opinions and information are exchanged. The Internal Audit Office also reports on
the status of operation of the whistle-blowing system. By these ways, the Office strives to cooperate with the Audit
and Supervisory Committee. It exchanges opinions and information with accounting auditors mainly regarding
internal control audits based on the Financial Instruments and Exchange Act, and closely cooperates with each otherin order to improve the effectiveness and efficiency of audits.
Also, the internal control section evaluates matters raised by above audits and strives to implement necessary
measures.

20

Voluntary Establishment of Nomination/Remuneration Committee
Voluntary Establishment of Committee(s) Corresponding to Nomination

Established

Committee or Remuneration Committee
Committee’s Name, Composition, and Attributes of Chairperson

Committee corresponding to Nomination Committee
Committee’s nameNomination and Remuneration Advisory Committee

All Committee

Full-time

Internal

OutsideOutsideMembers

Members

Directors

Directors

Experts

3

0

1

2

0

Other

Chairperson0OutsideDirector

Committee corresponding to Remuneration Committee
Committee’s nameNomination and Remuneration Advisory Committee

All Committee

Full-time

Internal

OutsideOutsideMembers

Members

Directors

Directors

Experts

3

0

1

2

0

Other

Chairperson0OutsideDirector

Supplementary Explanation
The Company established the Nomination and Remuneration Advisory Committee in December 2018. The
committee is an advisory body to the Board of Directors, which was established to deliberate on thenomination/dismissal of Directors (including the appointment/dismissal of the Representative Directors and othersenior management), remuneration for Directors who are not the Audit and Supervisory Committee members,
succession plans for the CEO, and other important matters of the Group. Since May 2021, the committee has been
responsible for determining the amount and the timing of remuneration for each individual director of the Company(Each Director) who is not a member of the Audit and Supervisory Committee.
The members selected for the Nomination and Remuneration Advisory Committee are as follows:
Chairperson:
Tomoki Matsubayashi, Chairperson of the Audit and Supervisory Committee and Lead Independent Outside
Director
Committee members:
Nobuko Takagi, The Audit and Supervisory Committee member and Independent Outside Director
Natsuki Goto, Representative Director and President (CEO)Independent Directors
Number of Independent Directors

321Other Matters related to Independent Directors
The Company has set the following criteria for the objective judgment of independence as a requirement todesignate Outside Directors as Independent Directors. They are deemed to have sufficient independence from theCompany if none of the following items are found to apply.
a. 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 5 years.
b. Business partner of the Group, for which the sales of the Group in the most recent business year exceeds 1% of
the Group’s annual consolidated sales, or a person who engages in business execution of such business partner.
c. Party for which the Group is a business partner and whose sales for the Group in the most recent business year
exceeds 1% of the party’s annual consolidated sales, or a person who engages in business execution of suchbusiness partner.
d. Attorney at law, certified public accountant, consultant, etc. who obtains monetary consideration or other property
exceeding JPY10 million from the Group besides the renumeration as a Director (in cases where the person
obtaining such property belongs to an incorporated entity, partnership or other organization, the transaction
amount exceeding 1% of the annual consolidated net sales of either party or exceeding JPY10 million is referredto)e. Major creditor of the Group or a person who engages in business execution of a financial institution and otherlarge creditors, which is indispensable for the Group’s financing and on which the Group is dependent without
alternative options.
f. Major shareholder of the Company (holding 10% or more of voting rights) or a person who engages in businessexecution of such shareholder.
g. Party which receives donations exceeding JPY10 million from the Group in the most recent business year, or aperson who engages in business execution of such partyh. Accounting auditor who engages in the auditing duties of the Group or a certified public accountant who engages
in the execution of the duties in such accounting auditor.
i. Person who engages in business execution of a company holding cross-directorships with the Group.
j. Person who falls under any of the above items from (b) to (i) at any time in the past 3 years.
k. Spouse or relative within the second degree of kinship of a person who falls under any of the above items from (a)to (j) (excluding a person who is not significant with regard to (e) to (h))
l. Notwithstanding the provisions of the respective items (a) to (k) above, a person with special grounds for being
unable to perform his/her duties as an Independent Outside Director, such as a potential conflict of interests with
common shareholders.
For Outside Directors who are the Audit and Supervisory Committee members, the Company aims to achieve
diversity in terms of tenure to harmonize the experience of long-serving directors with the fresh perspectives broughtby new directors. From this perspective, the Company does not set an upper limit on the tenure.

Incentives
Implementation of Measures to Grant Incentives toIntroduction of Stock Option System

Directors

22

Supplementary Explanation
The Company has introduced a stock option system with the aim of enhancing moral and motivation andpromoting medium to long term contributions toward an improvement of the Group’s business performance. The
summary of our stock options is described in the annual securities report.
Recipients of Stock Options

Internal directors, employees, directors of subsidiaries,
employees of subsidiaries

Supplementary Explanation
Eligible recipients of the stock options whose exercise rights have not expired as of the filing date of thisreport.

Director Remuneration
Disclosure of Individual Directors’ Remuneration

Individual Directors’ remuneration is not disclosed

Supplementary Explanation
N/A
Policy on Determining Remuneration Amounts andCalculation Methods

EstablishedupdatedDisclosure of Policy on Determining Remuneration Amounts and Calculation Methods
The policy on determining remuneration for Each Director who is not a member of the Audit and Supervisory
Committee (the same shall apply in this section) was resolved at the meeting of the Board of Directors held on June24, 2022. The Company determines the policy based on the consultation with and advice from the Nomination andRemuneration Advisory Committee.
The policy on determining remuneration for Each Director is as follows:(a) Amount/calculation method of remuneration for individual Directors
The fixed amount of remuneration is determined by referring to the amount of remuneration of the companies
with similar business performance or business characteristics to the Company. The fixed amount of remuneration
for the following years is determined based on the profit growth rate and other factors, by applying them to acertain table.
(b) Performance-based remuneration: KPIs and calculation method
No performance-based remuneration.
(c) Non-cash remuneration: details and amount/calculation method
Stock options as remuneration may be granted upon resolution of a General Shareholders Meeting or throughconsultation with/advice from the Nomination and Remuneration Advisory Committee, as necessary.
(d) Ratio of remuneration (a) - (c) to total remuneration for Each Director
In principle, the entire remuneration shall be a fixed remuneration, excluding the amount pertaining to stock
options as remuneration already granted. The Board of Directors shall revise the policy on determining the
proportion of fixed remuneration and stock options, in case that stock options are newly granted as remuneration.

23

(e) Timing or conditions for payment of remuneration to Directors
The fixed amount of remuneration shall be paid on a monthly basis during the term of office.
(f) Matters concerning the delegation of all or part of the determination on the details of remuneration for Each
Director to third parties including a Director.
The Audit and Supervisory Committee determines the amount and the payment timing of remuneration for Each
Director. The Board of Directors shall delegate the authority to Tomoki Matsubayashi (Director, a member of the
Audit and Supervisory Committee), Nobuko Takagi (Director, a member of the Audit and Supervisory
Committee), and Natsuki Goto (Representative Director and President), who are the members of the committee.
The Board of Directors is reported from the Nomination and Remuneration Advisory Committee on the progressand results of its deliberations in accordance with the Regulations of the Committee.
At the 13th Annual General Shareholder Meeting held on June 24, 2016, it was resolved that the maximum
amount of remuneration for Directors (excluding Directors who are the Audit and Supervisory Committee members)
should be JPY200 million per year (the number of members set in the Articles of Incorporation: up to nine), and the
maximum amount of remuneration for Directors who are the Audit and Supervisory Committee members should be
JPY100 million per year (the number of members set in the Articles of Incorporation: up to five). At the conclusion of
the 13th Annual General Shareholders Meeting, the number of Directors who were not the Audit and Supervisory
Committee members was three, and the number of Directors who were the Audit and Supervisory Committee
members was three.

The Nomination and Renumeration Advisory Committee determined the amount and the payment timing of
remuneration for Each Director in fiscal 2023. Prior to that, at a meeting of the Board of Directors held on June 23,
2023, it was resolved to delegate the authority to determine these matters to Tomoki Matsubayashi (Director, amember of the Audit and Supervisory Committee), Nobuko Takagi (Director, a member of the Audit and Supervisory
Committee), and Natsuki Goto (Representative Director and President), who are members of the Committee. The
reason is to improve transparency and fairness in determining the remuneration for Each Director by delegating it to
the Nomination and Renumeration Advisory Committee, which consists of two Independent Outside Directors andthe Representative Director and is chaired by the Lead Independent Outside Director.
The Company regards that the Board of Directors confirmed that the determination method and the determined
remuneration for Each Director for fiscal 2023 are consistent with the determination policy resolved at the meeting of
the Board of Directors held on June 24, 2022, follows the said determination policy.
As a result of mutual consultation of all Directors who are the Audit and Supervisory Committee members,
discretionary authority over the amount of remuneration for Directors who are the Audit and Supervisory Committee
members and the payment timing are placed to the Audit and Supervisory Committee Chairperson Tomoki
Matsubayashi.
The total amount of remuneration for fiscal 2023 is disclosed in the annual securities report.

24Supporting System for Outside Directors
The Company allocates appropriate personnel in consultation with Outside Directors and provides them with
relevant documents and information as necessary.

2.

Matters on Functions of Business Execution, Auditing, Oversight, Nomination andDetermination of Remuneration, etc. (Overview of the Current Corporate Governance
System) updated<Matters concerning functions of business execution>
The following systems are in place to ensure rational decision-making and business execution by the Board of
Directors.
In principle, the Board of Directors meets once a month to report on the status of the execution of duties byDirectors and to resolve matters stipulated by laws and regulations, the Articles of Incorporation, and the Rules of theBoard of Directors.
In principle, the Executive Committee meets once a week to deliberate important business execution decisions,matters to be discussed by the Board of Directors, and other important matters.
<Matters concerning functions of audit and supervision>
The following systems are in place to strengthen corporate governance and monitoring functions.
Outside Directors attend meetings of the Board of Directors, supervise the appropriateness and fairness of its
decision-making from an independent standpoint, and audit the business execution of Directors and the legality andappropriateness of their decision-making based on the audit policy established by the Audit and Supervisory Committee.
Appointment of Outside Directors who meet the requirements for Independent Directors and possess knowledgeof legal, accounting, or tax affairs.
To ensure compliance with laws and regulations and the effectiveness of business operations, the Internal Audit
Office verifies and evaluates the business operations at each division and subsidiary company and conducts audits toimprove internal controls from a standpoint independent from other business execution.
With regard to accounting audits, the Company has concluded an audit contract with Ernst & Young ShinNihon
LLC. The certified public accountants who perform the accounting audit duties are as follows.
Name of certified public accountants
Designated limited liability partner: Ryo Kayama
Designated limited liability partner: Kiyoto Tanaka
The composition of assistances for the audit duties: 6 certified public accountants and 18 staff.
<Matters concerning functions of nomination and remuneration decisions>Nomination of Director Candidates
The nomination of Director candidates is determined by the Board of Directors, based on the consultation withand advice from the Nomination and Remuneration Advisory Committee, the majority of which is composed of25

Independent Outside Directors, to ensure objectivity, fairness, and transparency. Candidates for Directors serving as
members of the Audit and Supervisory Committee are nominated by the Board of Directors with the consent of the Audit
and Supervisory Committee.
Determination of Director Remuneration
The determination policy and procedure of the Director remuneration are described in the section of this report
entitled “II. 1 Director Remuneration, Disclosure of Policy on Determining Remuneration Amount and Calculation
Methods.”3.

Reason for Adopting the Current Corporate Governance System
With the aim of enhancing further the Company’s corporate governance, a partial revision was made to the

Articles of Incorporation at the 13th General Shareholder Meeting held on June 24, 2016, and on the same date, theCompany thereby transitioned from a company with an Auditor and Supervisory Board to one with an Audit andSupervisory Committee. In this way, the Board of Directors delegates authority for business execution to theRepresentative Directors, etc., thereby realizing timely and decisive decision-makings of management. The Board of
Directors discusses management strategies and management issues in a broader and substantive manner and strengthens
the supervisory function for business execution. At the Audit and Supervisory Committee, the Committee members who
have voting rights of the Board of Directors (all Independent Outside Directors) conduct audit duties to improve theeffectiveness of audits and supervision.
In addition, the Company established the Nomination and Remuneration Advisory Committee in December 2018.
The committee is an advisory body to the Board of Directors, which was established to deliberate on thenomination/dismissal of Directors (including the appointment/dismissal of the Representative Directors and other senior
management), remuneration for Directors who are not the Audit and Supervisory Committee members, succession plans
for the CEO, and other important matters of the Group. Since May 2021, the committee has been responsible fordetermining the amount and the timing of remuneration for Each Director who is not a member of the Audit andSupervisory Committee.
Furthermore, in order to communicate and coordinate with the management team and to cooperate with the Audit
and Supervisory Committee members who are Independent Outside Directors, the Lead Independent Outside Director isselected by mutual election of Independent Outside Directors.
Most of the important decisions regarding the Company’s business execution are made at the Board of Directors
and the Executive Committee. The Board of Directors, which consists of five Directors including three Outside Directors
meets once a month in principle, and extraordinary meetings are held as necessary. For the purpose of supplementing
decision-makings on other important matters, the Executive Committee, which is composed of Directors who are not the
Audit and Supervisory Committee members, executive officers and division heads who execute important business
operations, is held once a week in principle. In accordance with the internal rules such as the Rules of the Board of
Directors, the Rules of the Executive Committee, and the Rules of Authorities, decisions are made on business execution
and the status of business execution is monitored. Directors who are the Audit and Supervisory Committee members also
attend the Executive Committee meetings as observers when necessary.

26

In accordance with the audit policies and duties determined by the Audit and Supervisory Committee, Directors
who are the Audit and Supervisory Committee members receive reports from Directors who are not the Committee
members and employees on the status of their execution of duties, and request explanations and inspect important
approval documents as necessary. In addition, Directors who are the Audit and Supervisory Committee members work
closely with accounting auditors and the Internal Audit Office to maintain and improve the efficiency and ensure thelegality of corporate management. Therefore, we believe that the objectivity in management is ensured by the system
above.
The Company has adopted the current corporate governance system since it believes that it will be able to realize
the Group Mission and increase its corporate value over the long term through the following factors: rational decisionmaking and business execution by Directors, fully-functioning audits and supervision, and further strengthened corporate
governance.

27

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

Efforts to Vitalize the Annual General Shareholders Meetings and Facilitate the Exerciseof Voting Rights updated
Supplementary Explanation
Early Dispatch of the Convocation Notice ofThe convocation notice for the 21st Annual General Shareholders

the Annual General Shareholders Meeting

Meeting held on June 21, 2024 was sent on June 5, 2024. Prior to
the dispatch of the notice, it was disclosed on TDnet and theCompany’s website on May 28, 2024.

Allowing Electronic Exercise of Voting Rights

For the convenience of our shareholders, the Company allows theexercise of voting rights via their own personal computers or
smartphones.

Participation in Electronic Voting Platform and

The Company participates in the electronic voting platform for

Other Efforts to Enhance the Voting

institutional investors operated by ICJ, Inc.

Environment for Institutional Investors

2.

Providing Convocation Notice (Summary) in

The Company discloses a summary convocation notice in English

Englishon TDnet and the Company’s website.

IR Activities
Supplementary Explanation

Explanation byRepresentative

Preparation and Publication of

The Company has established an IR policy and discloses it

Disclosure Policy

on its website.

-

https://global.bm-sms.com/ir/ir_policy/
The Company holds quarterly briefings.

Available

Posting of IR Materials on

Annual securities reports, financial reports, convocation-

Websitenotices for General Shareholder Meeting, presentation

Regular Investor Briefings forAnalysts and Institutional
Investors

materials, and other materials are posted on the Company’s
IR web page: https://bm-sms.co.jp/ir/ (Japanese)
https://global.bm-sms.com/ir/ (English)
Establishment of a Section (Post)

The IR section is established under the Corporate Planningfor Investor Relations

Department of the Corporate Management Division.

28

-

3.

Measures to Ensure Due Respect for Stakeholders updated
Supplementary Explanation

Establishment of Internal Rules Stipulating

Based on the Group Mission of “to improve people’s quality of life

Respect for the Position of Stakeholders

by providing information infrastructure for an aging society,” theGroup strives to achieve sustainable growth and increase its
corporate value over the long term by valuing all stakeholders
including shareholders, customers, business partners, employees,
and local communities. To achieve this, we have established"Credo" and "SMS Business Guidelines" and are working to spreadthem to all employees through training at the time of joining thecompany.
Our basic stance toward each stakeholder is described in the sectionof this report entitled “I-1. (1) Ensuring the Rights of and Equality
among Shareholders” and “I-1. (2) Appropriate Cooperation with
Stakeholders Other Than Shareholders.”

Implementation of Environmental Preservation<Our approach to sustainability>

Activities and CSR Activities, etc.

The Group has established Management Philosophy of "continual
growth and contribution to society as an everlasting corporategroup" as what we pursue universally. We aim to increase the sum
total of our contributions to society by everlasting with growth.
SMS's Mission is “to improve people's quality of life by providing
information infrastructure suitable for an aging society.”
We believe that by working to solve the various social issues thatarise in an aging society as the foundation of our business, and byrealizing our Mission, we can contribute to the realization of asustainable society. By working to solve social issues through ourbusiness activities, we can achieve sustainable growth as acompany that is needed by society. Increasing our corporate value
over the long term through the accumulation of sustainable growthmore powerfully supports the realization of our Mission and leads
to the realization of a sustainable society.
In order to support and promote these activities that create sharedvalue with society, it is important to develop and strengthen the
management platform, taking into account the demands of society,including perspectives such as governance, human capital,
consideration for global environment, information security, respectfor human rights, and prevention of corruption/bribery.

29

We will continue to earn our various stakeholders' trust and meettheir expectations and contribute to the realization of a sustainable
society through these activities.
<Environmental Initiatives>
The Group recognizes the importance of preserving the global
environment in order to realize a sustainable society, and is
working to address the issues related to climate change and reduce
the environmental impact of our business activities.
Details of these initiatives are disclosed on the Company’s website.
https://global.bm-sms.com/sustainability/environment/
Development of Policies on Information

The Company strives to ensure the timely, accurate, and fair

Provision to Stakeholders

disclosure of corporate information from the perspective ofinvestors and other stakeholders by complying with the Companies
Act, the Financial Instruments and Exchange Act and other relevantlaws and regulations and the rules set forth by the Tokyo Stock
Exchange, as well as by enhancing our internal systems andinvestor relations activities.

Other

The Group believes that it is important for employees to work ingood health both mentally and physically to realize the Group
Mission of “to improve people's quality of life by providing
information infrastructure for an aging society”. As a company
operating healthcare businesses, we also believe that employees'
awareness of their own health will lead to the provision of better
services.
To this end, we have established the Health Promotion Officedirectly under the CEO and are implementing various initiatives tomaintain and improve employee health and awareness.
The main initiatives for Health and Productivity Management are
disclosed on the Company’s website.
https://global.bm-sms.com/sustainability/employee-health
We were recognized in the Large Enterprise Category under the
Certified Health & Productivity Management Outstanding
Organization Recognition Program, jointly hosted by the Ministryof Economy, Trade and Industry (METI) and Japan Health Council
for the fifth consecutive year.

30IV. Matters related to Internal Control System, etc.
1.

Basic Views on the Internal Control System and its Development Status

updatedThe Company has set the following basic policy for internal control to establish the systems necessary to ensure
the appropriateness of its operations. The Board of Directors constantly evaluates the design and operation of the internal
control system in accordance with the basic policy and takes necessary remedial actions. In addition, the Board of
Directors reviews and revises this basic policy as necessary in response to changes in the business environment and otherfactors, and is committed to maintaining a legitimate and efficient system for business execution. The final revision was
resolved at the meeting of the Board of Directors held on April 26, 2024.
a.

System for ensuring that execution of duties by Directors and employees of the Company complies with laws andregulations as well as the Articles of Incorporation
1)

Compliance with laws and regulations, the Articles of Incorporation and societal norms is placed at the core ofmanagement, and in order to achieve thorough and continued improvement within the Group, a compliancesystem will be maintained and improved, determining policy related to compliance with laws and regulations,fostering a sense of ethics, and the Group-wide risk management.

2)

For the purpose of early detection and correction of violations of laws and regulations, and other complianceissues, the Group shall establish a whistle-blowing system with an internal reporting contact window and an
external reporting contact window that designates a legal counsel law office as the recipient of information,
aiming at early detection or prevention of issues.

3)

The Company has established rules related to risk management including compliance, and the department
responsible for risk management oversees all organizations handling compliance for the Group. The Executive
Committee conducts decision-making related to compliance activities and the details thereof are reported
regularly to the Board of Directors.

4)

The Internal Audit Office audits the status of compliance with laws and regulations, fostering a sense of ethics
and the Group-wide risk management, and reports its activities to the Board of Directors and the Audit andSupervisory Committee.

5)

The entire Group takes an unwavering stance toward completely eliminating relationships with anti-social
forces and organizations that threaten societal order and safety.

b.

System for storage and administration of information related to execution of duties by Directors of the Company
1)

The Company has established rules for the type of documents, period of retention and method of administration
for information related to the execution of duties of Directors and its administration, and after recording themin written or electronic media, shall store them along with materials used in management decisions.

2)

In preparation for the case of a request from Directors, the Company shall store and maintain records in an
appropriate, reliable, and easily searchable state, depending on the type and characteristics of the information,and shall maintain them in a viewable state.

31

c.

Provisions and other measures related to crisis management for loss at the Company
1)

The Company has defined rules on the policy for establishing and building a risk management system which
covers business activities of the Group, and recognizes the risks of business activities based on these rules. The
Company shall also conduct risk management according to importance, with a view toward impact andpotential for occurrence.

2)

The Company’s department responsible for risk management oversees all organizations handling risk
management for the Group, including with respect to information security, with important decision-making
related to risk management activities conducted at the Executive Committee, and the details thereof areregularly reported to the Board of Directors. The Sustainability Committee identifies and evaluates risks related
to sustainability. Identified risks are integrated into the group-wide risk management system in cooperation
with the department in charge of risk management.

3)

The Company has established a countermeasure policy for the Group in the case of a natural disaster, accident
or other critical event, and by determining the level of the crisis based on the policy and carrying out a rapid
response, prevents damage from growing and minimizes losses.

d.

System to ensure that execution of duties by Directors of the Company is carried out efficiently
1)

The Company has established its Audit and Supervisory Committee as a means of providing corporate
governance aimed at achieving highly effective and flexible execution of duties and strengthening of its
monitoring activities.

2)

In order to secure such highly effective and flexible execution of duties, the Company delegates part of theBoard of Directors’ authority to the Chief Executive Officer, etc., as well as to the Executive Officers and thepersons in charge of each department, etc., as and when necessary. Directors of the Company who are not the
Audit and Supervisory Committee members or Executive Officers conduct prompt sharing of information
through holding regular meetings on the progress of operations with each department, thereby implementing
appropriate management decisions in a timely manner. The duties, authority and responsibilities of officers andemployees shall be set forth in the regulations related to segregation of duties and limitations on authority.

3)

The Company’s Board of Directors formulates the overall strategy for the Group and engages in the making ofimportant decisions. In addition, each department and subsidiary takes the Group strategy into account when
formulating their own strategies. Through regular monitoring of the status of progress, the Board of Directors
ensures the execution of overall strategy for the Group as a whole.

4)

The Company has established its Executive Committee as an advisory body to the Chief Executive Officer,
comprised of Directors who are not the Audit and Supervisory Committee members, Executive Officers or
persons in charge of each department involved in the execution of key operations, and meetings of the
Executive Committee are regularly held with the aim of debating important matters related to the execution ofoperations, and thereby advances management efficiency through the sharing of management information.

5)

The corporate functional departments of the Company provide support to each department and subsidiary in
executing strategy as well as decision-making by the Board of Directors and the Executive Committee, in areas32

such as business planning, financial planning, management infrastructure, human resources development andrisk management. A similar structure is being built in key subsidiaries, aimed at optimizing support for therespective business strategies of each subsidiary through cooperation with the corporate functional departmentsof the Company.
e.

System to ensure the soundness and propriety of operations of the Company and its subsidiaries
1)

The Company has established policy rules regarding the business administration of subsidiaries, under which
important matters related to the business and financial situation of subsidiaries must be reported to theCompany, and important decision-making must be made with the approval of the Company, thereby realizing
appropriate business administration of subsidiaries.

2)

The Company has established departments responsible for the administration of subsidiaries, and conducts
administration through cooperation with persons in charge of administration of subsidiaries. Also, the Company
collects, organizes and retains the latest information regarding subsidiaries, and provides such information torelated parties as required.

3)

The internal reporting contact window set up by the Company can be used by all officers and employees in thedomestic Group, aimed at early detection or prevention of violations of the laws and regulations and othercompliance problems in the subsidiaries. The Company stipulates explicitly in its “Whistleblower Protection
Rules” that under no circumstances shall the Company invoke disadvantageous measures such as dismissal orre-assignment against any whistleblower who has made a report, citing the report as the reason for suchdisciplinary action.

4)f.

The Internal Audit Office conducts audits regarding the administration of subsidiaries and operations activities.

Matters related to Directors and employees that assist duties of the Company’s Audit and Supervisory Committee,
matters related to their independence from Directors who are not the Audit and Supervisory Committee members,
and a system to ensure the effectiveness of the Audit and Supervisory Committee’s instructions towards thoseassistants
1)

The Internal Audit Office assists in the duties of the Audit and Supervisory Committee.

2)

In order to ensure the independence of the Internal Audit Office member who assists in the duties of the Audit
and Supervisory Committee, the decision requiring the transfer of said member must be made with priorconsent from the Audit and Supervisory Committee.

3)

An assistant employee who receives instructions related to audit work from the Audit and Supervisory
Committee is not subject to instructions from Directors who are not the Audit and Supervisory Committee
members with respect to those instructions.

g.

A framework for reporting made to the Company’s Audit and Supervisory Committee by the Company’s Directors
who are not the Audit and Supervisory Committee members and employees, and by the Company’s subsidiaries’
Directors, Corporate Auditors, other persons falling thereunder and employees

33

1)

In addition to statutory matters, if matters that may have a critical impact on the business, matters thought to bein violation of the laws and regulations or the Articles of Incorporation, matters that may result in a substantial
loss to the Company, or other matters that must be reported to the Audit and Supervisory Committee occur, theGroup’s Directors who are not the Audit and Supervisory Committee members and Corporate Auditors andemployees must promptly report the same to the Audit and Supervisory Committee, and the corporate
functional departments shall provide support to facilitate smooth reporting.

2)

The Internal Audit Office regularly reports the results of the internal audit and the circumstances of internalreporting contacts to the Audit and Supervisory Committee.

h.

Systems for ensuring that persons who report to the Company’s Audit and Supervisory Committee are not treated ina disadvantageous manner because of their reporting
1)

The Company stipulates explicitly in its “Whistleblower Protection Rules” that under no circumstances shallthe Company invoke disadvantageous measures such as dismissal or re-assignment against any person who hasmade a report to the Audit and Supervisory Committee, citing the report as the reason for such disciplinary
action.

i.

Matters regarding policies related to processing expenses/liabilities and prepayment/reimbursement of expenses
arising related to the execution of duties by the Company’s Audit and Supervisory Committee
1)With respect to expenses arising in relation to the execution of duties of by the Audit and Supervisory
Committee members and the Audit and Supervisory Committee, normal audit expenditures are included in theinitial budget and unplanned expenditures (except for those that are deemed to be clearly not required for the
execution of audit duties), shall be handled in a timely manner through advances and expense claims.

j.

System to ensure that audits by the Company’s Audit and Supervisory Committee are carried out in an efficientmanner
1)

The Audit and Supervisory Committee members have the authority to attend major meetings, as well as
meetings of the Board of Directors, may access important documents regarding the execution of duties, such as
approval documents, and may request explanation by Directors who are not the Audit and Supervisory
Committee members and employees.

2)

The Audit and Supervisory Committee shall conduct audits in cooperation with the Internal Audit Office. Also,
the Audit and Supervisory Committee shall hold regular meetings with the CEO and accounting auditors,
exchanging opinions and information therewith.

2.

Basic Views on System to Eliminate Anti-Social Forces and its Development Statusa.

The Company has set the measures against anti-social forces in “SMS Business Guideline” and implements
awareness-raising activities as necessary.

b.

The Company joins the Special Association for Prevention of Violence and other organizations and builds a system
to respond in cooperation with corporate law firms, other external experts, and relevant organizations.

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V.

Other

1.

Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures
Supplementary Explanation

Not Adopted

updatedThe Company believes that achieving sustainable growth and long-term enhancement of corporate value aswell as building good relationships with shareholders and investors through IR activities will lead to defend against
hostile takeovers, and accordingly has not adopted takeover response policies (anti-takeover measures.)2.

Other Matters Concerning Corporate Governance System
The Company believes it is essential to disclose company information to shareholders and investors in a timely

and appropriate manner in order to gain the social credibility and appropriate evaluation of the Group, and accordingly
has built an internal system for timely disclosure.
Information regarding material matters of the Group is, in principle, resolved at or reported to the Board of
Directors or the Executive Committee. Information regarding material matters is gathered by the secretariat of eachcommittee. The IR section determines the necessity of disclosure of information regarding material matters incooperation with the secretariat of each committee, finance section, risk management section and other sections, andconducts timely and appropriate disclosure with the approval of the information disclosure officers (the CEO and theCFO). Information regarding material matters is managed centrally by the risk management section.

35

Corporate Governance Structure

Disclosure Structure36

Skill Matrix of Directors
Notable Knowledge and Experiences
Name

Management

Business

International

Legal & Risk

Accounting

Knowledge

Experience

Management

& Tax

IT

ESG

Natsuki Goto(1)

〇

〇

〇

〇

〇

〇

〇

Masato Sugizaki(2)

〇

〇

〇

〇

〇

〇

〇

TomokiMatsubayashi(3)〇〇Toyotaro Suzumura (4)〇Nobuko Takagi(4)

〇

〇

〇

〇

Notes:(1) Representative Director and President (CEO)(2) Director(3) Lead Independent Outside Director (Chairperson of the Audit and Supervisory Committee)(4) Independent Outside Director (Member of the Audit and Supervisory Committee)

37〇〇