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Tokyo Stock Exchange

New Listing Guidebookfor Foreign Companies20172017

Table of Contents

1

2017 New Listing Guidebook for Foreign Companies

Table of Contents

Table of Contents ................................................................................................................................... 1

1. Benefits of Listing .............................................................................................................................. 6

(1) Smooth and Diversified Fundraising ........................................................................................ 6

(2) Enhance Corporate Value ........................................................................................................... 6

(3) Improve its Internal Management System and Enhance the Employees’ Motivation

.......................................................................................................................................................... 6

2. Mechanism for Initial Listing .......................................................................................................... 6

(1) Mechanism for Initial Listing ..................................................................................................... 6

(2) Composition of Market ................................................................................................................ 7

3. Overview of the Initial Listing and Disclosure Systems ............................................................ 8

(1) Listing Schedule ........................................................................................................................... 9

(2) Roles of Each Party Involved in an IPO ................................................................................ 10

(3) Lead Underwriters ..................................................................................................................... 12

(4) Rules and Regulations on the Disclosure System on the Secondary Market ................ 13

a. Statutory Disclosure ................................................................................................................ 13

b. Timely Disclosure ..................................................................................................................... 13

(5) Commitment to IR ..................................................................................................................... 14

4. Listing Examination by TSE (Primary Listing) ........................................................................... 15

(1) Main Markets (TSE 1st Section and 2nd Section)(Primary Listing) ................................... 15

a. Formal Requirements .............................................................................................................. 15

b. Eligibility Requirements .......................................................................................................... 19

c. Documents to be Filed ............................................................................................................. 24

(2) Mothers (Primary Listing) ........................................................................................................ 29




(3) JASDAQ Market (Primary Listing) .......................................................................................... 44


b. Eligibility Requirements (Standard Market) ....................................................................... 47

c. Eligibility Requirements (Growth Market) .......................................................................... 56

d. Documents to be Filed ............................................................................................................. 65

(4) Listing Examination Schedule (Primary Listing) ................................................................. 71

5. Listing Examination by TSE (Multiple Listing) ........................................................................... 72

(1) Main Markets (TSE 1st Section and 2nd Section)(Multiple Listing) ................................ 72


b. Eligibility Requirements and Special Exceptions to Multiple Listing of Foreign

Companies ................................................................................................................................. 73


(2) Mothers (Multiple Listing)........................................................................................................ 74

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(3) JASDAQ Market (Multiple Listing) .......................................................................................... 75

a. Formal Requirements (Standard and Growth Markets) ................................................... 75

b. Eligibility Requirements (Standard and Growth Markets) .............................................. 75


(4) Listing Examination Schedule (Multiple Listing) ................................................................ 76

6. Listing of JDR .................................................................................................................................... 77

(1) What is JDR? ............................................................................................................................... 77

(2) JDR Issue Scheme ..................................................................................................................... 78

(3) Listing of Stock via JDR ............................................................................................................ 79

(4) Handling of DRs under the Formal Requirements .............................................................. 79

7. Finance through Listing (Public Offering and Secondary Offering) ...................................... 80

(1) Procedure for Public Offering, etc. for Listing ..................................................................... 80

(2) Finance Schedule on Listing (in the case of an Unlisted Company)................................ 81

8. Statutory Disclosure ........................................................................................................................ 82

(1) Offering Disclosure .................................................................................................................... 82

a. Securities Registration Statement ........................................................................................ 82

b. Obligation of Preparation and Delivery of Prospectus ..................................................... 84

(2) Continuous Disclosure .............................................................................................................. 86

a. Annual Securities Report ........................................................................................................ 86

b. Internal Control Report ........................................................................................................... 86

c. Quarterly Securities Report .................................................................................................... 88

d. Confirmation Letter .................................................................................................................. 89

e. Extraordinary Report ............................................................................................................... 90

(3) Accounting Standards Applied to and Audit Certificate on Financial Documents ........ 91

a. Accounting Standards .............................................................................................................. 91

b. Audit Certificate ........................................................................................................................ 92

(4) English Language Disclosure System .................................................................................... 94

a. Outline ........................................................................................................................................ 94

b. Documents Eligible for the English-Language Disclosure ............................................... 94

c. Requirements for the English-Language Disclosure ......................................................... 95

d. Supplementary Documents .................................................................................................... 95

e. Attachments .............................................................................................................................. 96

f. Submission Deadline ................................................................................................................ 97

9. Shareholder Services and Book-Entry Transfer Systems for Foreign Stocks, etc. ............. 98

(1) Custody and Book-Entry Transfer Systems for Foreign Stocks, etc. ............................... 98

(2) Dividend Payment ...................................................................................................................... 98

(3) Record Date of Shareholders Eligible for Dividend ............................................................. 98

(4) Other Rights such as Subscription Warrants ....................................................................... 99

(5) Exercise of Voting Rights at General Shareholders Meetings .......................................... 99

(6) Book-Entry Transfers from JASDEC to Securities Companies ........................................ 100

(7) Handling under TSE Listing Administration Rules ............................................................ 101

a. Selection of Agent and Entity Responsible for Handling Information in Japan ........ 101

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b. Setting Up Offices for Handling Exercise, etc. .................................................................. 101

c. Ensuring Appropriate Shareholder Services and Dividend Payment Services ........... 101

d. Notification and Public Notice of Period or Date for Rights Allotment ....................... 102

e. Notification of Decision Concerning Depositories, etc. Pertaining to Listed Foreign

Stock Depositary Receipts, etc. .......................................................................................... 103

10. Overview of Listed Company Compliance .............................................................................. 104

(1) Overview of Timely Disclosure System ............................................................................... 104

a. Significance of Timely Disclosure ........................................................................................ 104

b. Overview of the Rules Concerning Timely Disclosure of Corporate Information ..... 104

c. Notes on Using TDnet ............................................................................................................ 115

d. Overview of Trading Halt System ....................................................................................... 117

e. Outline of System for Issuing Alerts .................................................................................. 119

f. Disclosure to Clarify Content of Unclear Information ..................................................... 121

(2) Practical Guide for Timely Disclosure .................................................................................. 123

a. Matters to Note regarding Need for Disclosure ............................................................... 123

b. Matters to Note regarding the Disclosure Schedule ....................................................... 127

c. Matters to Note regarding Preparation of Disclosure Documents ............................... 130

d. Disclosure regarding Postponement/ Change/ Correction/ Progress of Disclosed

Matters ..................................................................................................................................... 133

e. Others........................................................................................................................................ 133

(3) Practical Handling of Timely Disclosure of Corporate Information for Listed Foreign

Companies.................................................................................................................................. 134

a. Changes in Laws and Regulations, etc. of the Home Country concerning the Company

System ...................................................................................................................................... 136

b. A Fact that Occurs in a Foreign Country that Has Material Impact on the Circulation of

a Listed Stock, etc. or a Foreign Stock Depositary Receipt, etc. .................................. 136

c. Fact of Decision or Occurrence with Material Impact on Rights, etc. Related to Listed

Foreign Stock Depositary Receipt, etc., ............................................................................ 137

(4) Code of Corporate Conduct .................................................................................................... 138

a. Overview of Code of Corporate Conduct ........................................................................... 138

b. Handling of Code of Corporate Conduct of Listed Foreign Companies ....................... 138

c. Matters to be Observed ......................................................................................................... 141

d. Matters Desired to Be Observed (Matters to be Addressed) ......................................... 144

e. Measures for enforcing the Code of Corporate Conduct and reporting requirement

................................................................................................................................................... 145

f. Japan’s Corporate Governance Code................................................................................... 146

(5) Submission of Documents, etc. ............................................................................................. 162

a. Corporate Governance Report ............................................................................................. 162

b. Notice Concerning Submission of Foreign Company Registration Statement, etc. . 162

(6) Mothers Global ......................................................................................................................... 162

(7) Disciplinary Actions against Listed Companies ................................................................. 165

a. Overview................................................................................................................................... 165

b. Examination Related to the Disclosure of Corporate Information .............................. 166

c. Disciplinary Actions or Measures to Ensure Effectiveness ............................................. 167

d. Principle of Equity Finance ................................................................................................... 178

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e. Duty of CPAs, etc.to Cooperate with the Exchange, Which Seeks Explanations of CPAs,

etc. ............................................................................................................................................ 180

f. Examination and Inspection of Securities Trading, etc. ................................................. 181

(8) Delisting ..................................................................................................................................... 182

11. Delisting Criteria (Primary Listing) ......................................................................................... 183

(1) Main Markets (TSE 1st Section and 2nd Section)(Primary Listing) .............................. 183

(2) Mothers (Primary Listing) ...................................................................................................... 188

(3) JASDAQ (Standard Market) (Primary Listing) ................................................................... 194

(4) JASDAQ (Growth Market) (Primary Listing) ...................................................................... 199

12. Delisting Criteria (Multiple Listing) ......................................................................................... 204

(1) Main Markets (TSE 1st Section and 2nd Section)(Multiple Listing) .............................. 204

(2) Mothers (Multiple Listing)...................................................................................................... 207

(3) JASDAQ (Standard and Growth Markets) (Multiple Listing) .......................................... 210

13. Listing Fees ................................................................................................................................... 211

(1) Fees for Initial Listing on TSE ............................................................................................... 211

(2) Annual Listing Fee (Main Market (First & Second Sections) and Mothers) ................. 212

(3) Annual Listing Fee (JASDAQ) ................................................................................................ 213

(4) Fees for Listing on Tokyo PRO Market ................................................................................ 213

14. Securities Taxation System (Japanese Investors Investing in TSE Listed Foreign Stocks)

............................................................................................................................................................... 214

(1) Taxation for Individual Investors ......................................................................................... 214

(2) Taxation on Corporations ....................................................................................................... 215

(3) Taxation on Deemed Dividend .............................................................................................. 216

(4) Consumption Tax ..................................................................................................................... 216

15. Q&A ................................................................................................................................................ 217

(1) Insider Trading Regulations .................................................................................................. 217

(2) Tender Offer Rules (TOB Rules) ............................................................................................ 217

(3) Large Shareholding Reporting System ................................................................................ 217

(4) Listing on TSE through the Establishment of a Japanese Company ............................. 218

A. Forms of Documents, etc. to be Filed for Initial Listing Application (Foreign Stocks) ... 219

(1) Confirmation Report prior to Initial Listing Application (for Applicant Company) .... 219

(2) Confirmation Report prior to Initial Listing Application (for Trading Participant

Handling Matters) .................................................................................................................... 227

B. Tokyo Stock Exchange Listing by US Companies .................................................................... 232

(1) Overview of Disclosure Requirements for Primary Listing on Tokyo Stock Exchange by

US Companies ........................................................................................................................... 232

a. Offering Disclosure ................................................................................................................ 232

b. Continuous Disclosure .......................................................................................................... 232

(2) Securities Taxation System ................................................................................................... 236

a. Japanese Investors Investing in TSE Listed US Stocks .................................................. 236

b. US Investors Investing in TSE Listed US Stocks .............................................................. 237

Legend

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Legend

TSE: Tokyo Stock Exchange

JPX Regulation: Japan Exchange Regulation

Act: Financial Instruments and Exchange Act

Rules for the Act: Enforcement Rules for the Financial Instruments and Exchange Act

Ordinance: Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc.

Regulations: Securities Listing Regulations

Rules: Enforcement Rules for Securities Listing Regulations

Guidelines: Guidelines Concerning Listing Examinations, etc.

Primary Listing: Listing other than Multiple Listing

Multiple Listing: Listing or continuous trading on foreign financial instruments exchange(s), etc., or

equivalent to this. (1) With respect to a foreign stock, a foreign stock depositary

receipt representing a right pertaining to said foreign stock is listed or continuously

traded on a foreign financial instruments exchange, etc.; (2) With respect to a foreign

stock depositary receipt, a foreign stock represented by said foreign stock depositary

receipt is listed or continuously traded on a foreign financial instruments exchange,

etc.; and (3) With respect to a foreign stock trust beneficiary certificate, a foreign

stock that is a trust asset of the foreign stock trust beneficiary certificate or a foreign

stock depositary receipt representing a right pertaining to said foreign stock is listed or

continuously traded on a foreign financial instruments exchange, etc.

JDR: Japanese Depositary Receipt

(A beneficial interest in trust issuing beneficiary certificates whose trust assets are

foreign stock certificates, etc., as defined in the Trust Act (Act No. 108 of 2006)

provided in Rule 2, paragraph 1, item 14 of the Financial Instruments and Exchange

Act.)

1. Benefits of Listing

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1. Benefits of Listing

By listing on Tokyo Stock Exchange (TSE), your company can:

(1) Smooth and Diversified Fundraising

Once listed on TSE, your company will have access to direct finance by capital increase by issuing shares

at a market price through publicly offering stock or issuing subscription warrants, corporate bonds with

subscription warrants, etc. Our highly liquid market can bring more efficient and diverse fund-raising

capacity for your company to grow further.

(2)Enhance Corporate Value

Coverage by media, including market news of newspapers, will allow your company to enhance its

corporate and product reputation in Japan. The company will be able to retain and attract excellent

people as well.

(3)Improve its Internal Management System and Enhance the Employees’ Motivation

Corporate disclosure will allow investors and other third parties to examine your company’s corporate

management. Therefore, your company has obligations to continue to improve and strengthen its

management system as well as its internal management. Becoming a public company will also help boost

the morale of the officers and employees of the company.

Please keep in mind that since the shares of stocks issued by a listed company will be a choice of

investment by a large number of public investors, going public also involves taking on new social

responsibilities and duties for the purpose of protection of investors. It will be required, among other

things, to disclose earnings information and corporate profile in an appropriate and timely manner.

2. Mechanism for Initial Listing

(1)Mechanism for Initial Listing

Listing of stock is effected on the basis of application filed by a company issuing the stock (hereinafter

referred to as an “applicant”). When the stock is listed, it will be an investment choice for a large number

of general investors. Thus, TSE (Note) will examine whether an applicant is eligible for listing on TSE from

the perspective of investor protection. TSE has developed and set forth various regulations and rules for

initial listing. The listing examination will be conducted by assessing whether the requirements in the

regulations and rules are satisfied. (“Securities Listing Regulations” and “Enforcement Rules for Securities

Listing Regulations,” etc.) by which the examination will be conducted. When the examination results

reveal that the applicant is eligible for listing, TSE will approve and announce the listing of applicant,

following which the stock will eventually be listed on TSE.

Various rules concerning initial listing comprise “Securities Listing Regulations,” “Enforcement Rules for

2. Mechanism for Initial Listing

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Securities Listing Regulations” and “Guidelines for Listing Examinations, etc.” The standards for listing

examination specified by various rules provide for “Formal Requirements” which specify quantitative

requirements for the number of shareholders, amount of profit, etc. and standards for “Substantive

Examination Standards” which represent the qualitative criteria for assessing disclosure systems,

corporate governance practices and so on. Please refer to “II Formal Requirements” and “III Listing

Examination,” respectively, in this booklet.

As a result of listing examination, when an applicant is determined to meet the eligibility for listing, TSE

will approve and announce the listing of the applicant. Subsequently the applicant will be listed through

the process of public offering or secondary offering.

Note: Actual examination will be conducted by JPXR to which the role of examination is delegated by TSE.

(2)Composition of Market

TSE operates five markets of the First Section, Second Section, Mothers, JASDAQ and TOKYO PRO

Market.

1) First Section and Second Section

The First and Second Sections represent the main boards of TSE where leading large and second tier

Japanese and foreign companies are listed. Especially the First Section is viewed as one of the top rank

markets in terms of the size and liquidity, as foreign investors account for a large portion of equity trading.

The First and Second Sections are collectively referred to as the “Main Markets.”

2) Mothers

Mothers offers a trading market for companies with growth potential which aim to be reassigned to the

First Section in near future. Thus TSE requires applicants to demonstrate high growth potential. Whether

an applicant has growth potential or not shall be assessed and determined by lead underwriters on the

basis of its business model or business environment. As the objective of Mothers is to offer financing

opportunities for many companies with growth potential, Mothers has no restrictions on the size or

business category of applicants. After successfully listing their stock on Mothers, many have satisfied the

criteria for alteration to the First Section and listed their stock on the First Section.

3) JASDAQ

JASDAQ is a market characterized by the three concepts of (1) reliability, (2) innovativeness and (3)

region and internationalization. JASDAQ is split into the “Standard” market for growth companies with a

certain size and business performance and the “Growth” market for companies with stronger future

growth potential and unique technologies or business models.

Furthermore, any company which successfully lists its stock can change its listed market according to the

stage of business development and growth after initial listing as follows.

3. Overview of the Initial Listing and Disclosure Systems

8

Assignment to the First Section or alteration thereto requires an application by a listed company, which

has to receive the re-examination of the application. The examination thereof will be implemented in

accordance with the examination procedures for the listing on the main board of the TSE markets.


TSE and JPX Regulation, the organization entrusted by TSE to perform listing examination, assess

whether applicants satisfy quantitative criteria and numerical thresholds required by the Regulations

based on the listing application filed by the applicant. In performing the listing examination, JPX

Regulation focuses on the applicant’s abilities to contribute to fair price formation, the appropriate

distribution of shares of stock in the market, the public interest, and investor protection. When a

listing is determined to be appropriate based on comprehensive examination and evaluation, TSE will

authorize the applicant to list its stock on TSE.

As noted above, an applicant can identify and address potential roadblocks in a listing examination

by engaging a consultant before the listing application is filed. When examining a listing application

from a foreign company, TSE closely considers the legal system and conventions in practice in the

applicant’s home country. As such, TSE will address the listing application filed by foreign companies

more flexibly than Japanese applicants.

Foreign companies can also list on TSE via depository receipts (JDRs, ADRs, or GDRs). (Please see

section 8 for details.)


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(1) Listing Schedule

When a foreign company files an application for listing on TSE, the listing examination will require

about three months1. After listing approval by TSE, about one month will be required for public

offering procedures (the IPO). An applicant therefore needs four months, as a rule, from the listing

application date to the first day of listing. For details on the listing examination performed by JPX

Regulation, please see sections 6 and 7.

The period for preparing the listing application and period for the underwriting examination may

vary, depending on the internal systems and underwriting policies of the underwriting securities firm.

1 Listing schedule for foreign companies may vary depending on legal basis for foundation, applicable accounting standards, and so on.


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Listing Schedule

(2) Roles of Each Party Involved in an IPO

The following are the key parties in Japan and the home country who support the listing of a

foreign company on TSE. These participants work together closely during the preliminary listing

process to support preparations for a listing.


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Lead Underwriter

(TSE trading

participant)

A lead underwriter is comprehensively involved in the procedures and

preparations for listing overall. It provides underwriting business by

entering into a lead underwriting agreement with an issuer and provides

advice and consultation on the listing and listing schedule. At the time of

listing, the lead underwriter submits a Sponsor’s Letter of Recommendation

to TSE.

Legal Firm A legal firm checks and reviews listing-related matters from a legal

perspective and prepares a legal opinion. It also helps the applicant

prepare disclosure documents. After listing, it discloses corporate

information as a legal representative of the listed foreign company.

Audit Firm2

(foreign audit firm,

etc.)

An audit firm provides advice on the design and implementation of the

accounting organization and financial statements and also audits the

financial statements (expression of an audit opinion).

TSE TSE explains its listing system to companies, IPO-related parties, and so

on, and provides preliminary or prior consultation on the listing.

Trust and Banking

company

A trust and banking company acts as a shareholder services agent for

Japanese shareholders after the listing and may act as a dividend payment

bank to provide services related to dividend payment. If a foreign company

lists through JDRs, the trust and banking company will be responsible for

the issuance of the JDRs. Please see section 8 for details on listing through

JDRs.

2 Please see section 10 (3) for details on accounting standards and audit certificate.


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(3) Lead Underwriters

The securities companies that assist the applicant with the various tasks for listing are called

“underwriters.” The main underwriter is called the “lead underwriter (lead trading participant).” The

lead underwriter is required to file a Sponsor’s Letter of Recommendation with TSE for the

applicant’s listing on TSE.

The following securities companies have sufficient experience as lead underwriters and

established systems that have been duly evaluated and approved.

Reference: List of possible lead underwriters3

- Daiwa Securities Co.Ltd.

- Goldman Sachs Japan Co., Ltd.

- H.S. SECURITIES CO., LTD.

- Ichiyoshi Securities Co., Ltd.

- Japan Asia Securities Co.,Ltd.

- JPMorgan Securities Japan Co., Ltd.

- Merrill Lynch Japan Securities Co., Ltd.

- Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

- Mizuho Securities Co., Ltd.

- Monex, Inc.

- Nomura Securities Co., Ltd.

- OKASAN SECURITIES CO., LTD.

- SBI SECURITIES Co., Ltd.

- SMBC Friend Securities Co., Ltd.

- SMBC Nikko Securities Inc.

- Tokai Tokyo Securities Co., Ltd.

- TOYO SECURITIES CO., LTD.

- UBS Securities Japan Co., Ltd.

3 As of March 31, 2016 (alphabetical order). This list should not be construed as a recommendation for applicants to enter into transactions with specific companies. TSE will give no guarantees on the involvement or decisions of securities companies or the performance of securities companies with respect to the preparation or success of an initial listing.


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(4) Rules and Regulations on the Disclosure System on the Secondary Market

Information used for decisions on the value of securities must be accurate, fair, and disclosed in a

timely manner to ensure that investors can invest in securities based on reasonable judgment. For

this purpose, the Financial Instruments and Exchange Act prescribes requirements for information

disclosure in the corporate profiles of issuers (statutory disclosure) and TSE prescribes requirements

on timely disclosure by listed companies in the Regulations (timely disclosure).

a. Statutory Disclosure

Companies listed on TSE are required to electronically submit securities reports, quarterly reports,

etc. outlining their financial position, and business lines and performance to the Japanese Prime

Minister (in practice, to the local Finance Bureau.) The submitted securities reports, etc. are then

entered into EDINET (Electronic Disclosure for Investors’ NETwork) for public inspection and made

available to investors via the Internet. Please see the details in section 10.

b. Timely Disclosure

In addition to statutory disclosure, companies listed on TSE are obliged to promptly disclose

decisions and events that may greatly affect investor decisions, in accordance with the Regulations

and other relevant rules. Please see the details in section 12 (1).

Such information will then be released to the media and investors via the Internet and TSE’s online

disclosure system, TDnet (Timely Disclosure Network).


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(5) Commitment to IR

In addition to statutory and timely disclosures, TSE encourages all listed companies to engage in

IR activities that enable them to communicate with investors about their corporate status. The

Regulations require, for example, that Mothers listed companies hold meetings with investors to

explain their company profiles and affairs twice a year. Many TSE-listed companies have

implemented individual IR activities that go considerably further.

Active IR activities are a secure way to enhance corporate brand value and companies can strongly

benefit from a listing on TSE.

4. Listing Examination by TSE (Primary Listing)

15


There are two types of requirements by which the company will be examined to list its stock

encompassed by the so called Listing Requirements: “Formal Requirements” and “Eligibility

Requirements”. TSE examines the company, which meets “Formal Requirements” and conducts an

examination on in under “Eligibility Requirements.”

In application of the rules and regulations of the Exchange to a foreign country or a foreign

corporation where the foreign country or the foreign corporation is an issuer, etc. of a listed security,

the Exchange shall take into account legal systems, practices and customs, etc. in such foreign

country or the country, etc. of the foreign corporation.

[Rule 7 of the Regulations]

(1) Main Markets (TSE 1st Section and 2nd Section)(Primary Listing)

a. Formal Requirements

Item Requirements

1st Section 2nd Section

1. Number of shareholders

(expected at listing)

[Rule 206, Paragraph 1, Item 1 of

the Regulations]

[Rule 205, Item 1 of the

Regulations]


the Regulations]

2,200 shareholders or more 800 shareholders or more

2. Number of tradable

shares



the Regulations]


Regulations]


the Regulations]

The following a. through c. must

be satisfied:

a. The number of tradable

shares : 20,000 units or more;

b. The market capitalization of

the tradable shares: 1 billion

yen or more; and

(in principle, the value derived

by the expected price at the

time of public offering for the

purpose of listing by the

number of tradable shares

expected at the time of listing)

The following a. through c. must be

satisfied:

a. The number of tradable shares:

4,000 units or more;

b. The market capitalization of the

tradable shares: 1 billion yen or

more; and

(in principle, the value derived

by the expected price at the

time of public offering for the

purpose of listing by the

number of tradable shares

expected at the time of listing)


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c. The number of tradable shares

(as a percentage of the total

number of issued shares

outstanding): 35% or more

c. The number of tradable shares

(as a percentage of the total

number of issued shares

outstanding): 30% or more

3. Market capitalization



the Regulations]


Regulations]


the Regulations]

25 billion yen or more

(The market capitalization is, in

principle, determined by

multiplying the number of listed

shares expected at the time of

listing by the prospective prices

for public offering or secondary

offering)


(The market capitalization is, in

principle, determined by

multiplying the number of listed

shares expected at the time of

listing by the prospective prices for

public offering or secondary

offering)

4. Number of consecutive

years of conducting

business


the Regulations]


Regulations]

The business activities have been continuously carried out by setting

up a board of directors (meaning an institution corresponding to this in

cases of a foreign company) since a day before the day which is three

(3) years prior to the end of a business year immediately prior to the

business year containing the initial listing application day

5. Amount of net assets



the Regulations]


Regulations]

The amount of consolidated net assets: 1 billion yen or more

(in addition, the amount of non-consolidated net assets are not

negative)

6. Amount of profits and

market capitalization

(Amount of profits

calculated based on the

consolidated income

statement. Market

capitalization is expected

at listing)


the Regulations]


Regulations]

The following a. or b. must be satisfied:

a. The total amount of profits in the last two (2) years: 500 million yen

or more; and

b. The market capitalization: 50 billion yen or more

In addition, sales for the last year: 10 billion yen or more


17

7. False statement or

adverse opinion, etc.


the Regulations]


Regulations]

The following a. through c. must be satisfied:

a. No false statement is made in the securities reports, etc. for each

business year or each consolidated accounting year which ended

in the last two (2) years;

b. The audit report attached to financial statements, etc. for each

business year or each consolidated accounting year which ended

in the last two (2) years (excluding a business year and a

consolidated accounting year which ended in the last year)

contains an "unqualified opinion" or a "qualified opinion with

exceptions" of certified public accountants, etc.; and

c. The audit report attached to financial statements, etc. for the

business year and consolidated accounting year which ended in

the last year contain, as a general rule, an "unqualified opinion" of

certified public accountants, etc.

8. Expected

implementation of merger,

etc


the Regulations]


Regulations]

The merger, etc. shall not fall under the following a. and b.:

a. Where a merger, demerger, making other company a subsidiary or

making a subsidiary a non-subsidiary or transfer of a business to or

from other entity is scheduled to be carried out on or after the

initial listing application day and within two (2) years from the end

of the most recent business year before such day, and, in addition,

where TSE deems that an initial listing applicant will cease to be a

substantial surviving company by such an act;

provided, however, that the same shall not apply where the

Enforcement Rules so specify; and

b. Where a merger in which an initial listing applicant becomes a

dissolution company, a stock swap or a stock transfer whereby it

becomes a wholly-owned subsidiary of another company is

expected to be carried out within two (2) years from the end of the

business year immediately prior to the business year containing the

initial listing application day (except cases where such acts are

scheduled to be carried out before the listing day).

9. Handling by a

book-entry transfer

institution


the Regulations]


a. Said issue shall be subject to the custody and book-entry transfer

operation for foreign stocks, etc. or the book-entry transfer

operation of the designated book-entry transfer institution; and


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b. Said issue is expected to become so by the time of listing

10. Restriction on transfer

of stocks, etc.


the Regulations]


a. There is no restriction on transfer of a foreign stock, etc. pertaining

to an initial listing application; and

b. It is expected that there will be no restriction by the time of listing;

provided, however, that the same shall not apply to cases where

imposing a restriction on transfer of a foreign stock, etc. is deemed

necessary to receive application of provisions of laws in its home

country or a case equivalent to this and, in addition, where its

details are deemed not to hinder trading in TSE market

11. Deposit agreement,

etc.


the Regulations]

[Rule 213, Paragraph 3 of the

Rules]

Where an initial listing applicant is an applicant for initial listing of a

foreign stock depositary receipt, etc., the deposit agreement, etc.

concerning a foreign stock depositary receipt, etc. and any other

agreement pertaining to an initial listing application shall be those

entered into pursuant following a. or b.:

a. Foreign stock depositary receipts: Said deposit agreement, etc. is to

be concluded among the initial listing applicant, the depository, etc.

pertaining to said foreign stock depositary receipts, and holders of

said foreign stock depositary receipts; and

b. Foreign stock trust beneficiary certificates: Said deposit agreement,

etc. is to be concluded between the depository, etc. pertaining to

said foreign stock trust beneficiary certificates and holders of said

foreign stock trust beneficiary certificates; and the initial listing

applicant has concluded a contract deemed appropriate by TSE


19

b. Eligibility Requirements

Item Requirements

1. Corporate continuity

and profitability

A business is operated

continuously and a stable

revenue base is present


the Regulations]

[II, 7 of Guidelines]

(1) Profit and loss and income and expenditure in consolidated

financial statements of an initial listing applicant have not

deteriorated.

In this case, even where such profit and loss or income and

expenditure have deteriorated, where they are deemed not to

impair sound continuity of management activities of the corporate

group of the initial listing applicant, it shall be treated as if such

profit and loss or income and expenditure have not deteriorated

(2) Management activities of the corporate group of an initial listing

applicant are in a state enumerated in the following a. and b.:

a. There is no material obstacle to the execution of management

activities of the corporate group; and

b. The structure of the corporate group does not seriously hinder the

continuous execution of business activities

(3) Concerning the matters which are the premises of the main

business activities of the corporate group of an initial listing

applicant, there is no factor which hinders their continuity

(4) There is no factor which seriously hinders the management and

administration of the corporate group of an initial listing applicant.

2. Soundness of corporate

management

A business is carried out

fairly and faithfully


the Regulations]


(1) The corporate group of an initial listing applicant is recognized not

to give or enjoy profit wrongfully through a trading act or any other

management activities with related parties and other specified

entities, in light of the matters enumerated in the following a. and

b. and other matters:

a. Where a transaction has been conducted between the corporate

group of an initial listing applicant and its related parties and/or any

other specified entities, and such transaction has rationality of

continuing being carried out and reasonability of trading terms

including trading prices

b. Benefits of the corporate group of an initial listing applicant are not

lost wrongfully because related parties and any other specified


20

entities of the corporate group of an initial listing applicant give

priority to their own benefits

(2) Where an initial listing applicant has a parent company, etc.,

management activities of the corporate group of an initial listing

applicant are recognized to be independent from such parent

company, etc. in light of the matters enumerated in the following a.

to c. or any other matters:

a. In light of the relationship between the business line of the

corporate group of an initial listing applicant and that of the

corporate group of the parent company, etc., the state of business

adjustment made by the corporate group of the parent company,

etc. and its possibility and any other matters, an initial listing

applicant is not recognized to be substantially a business division of

such parent company, etc.;

b. The corporate group of an initial listing applicant or that of a parent

company, etc. does not coerce or induce a trading act which

becomes disadvantageous to said parent company, etc. or the

corporate group of said initial listing applicant such as transactions

on markedly different terms from those of normal transactions; and

c. The state of receiving seconded persons of the corporate group of

an initial listing applicant is recognized not to heavily depend on the

parent company, etc. and not hinder continuous management

activities

3. Effectiveness of

corporate governance and

internal management

system of an enterprise

Corporate governance and

internal management

system are properly

prepared and functioning


the Regulations]


(1) The system to secure the execution of appropriate work duties of

officers of the corporate group of an initial listing applicant, and an

internal management system, etc. to carry out management

activities of the corporate group of the initial listing applicant are

recognized to be appropriately developed and operated

(2) The accounting system of the corporate group of an initial listing

applicant is recognized as appropriate from the viewpoint of

investor protection


21

4. Appropriateness of

disclosure of corporate

information, etc.

The applicant is in a status

where disclosure of the

corporate information, etc.

may be carried out in an

appropriate manner


the Regulations]


(1) The corporate group of an initial listing applicant is recognized to

be able to properly manage corporate information of facts, etc.

which will have a material effect on management, and a system for

making timely and appropriate disclosure to investors and the

preemptive prevention of insider trading is deemed to be

developed and operated appropriately

(2) Documents pertaining to disclosure of corporate information, out

of the initial listing application documents, are deemed to be

prepared in compliance with laws and regulations, and contain the

matters enumerated in the following a. and b. and other matters

a. The legal system of the home country, etc. of an initial listing

applicant, the financial condition and financial results of an initial

listing applicant and its corporate group, and matters which may

have a material effect on investment decisions of investors, such as

important matters, etc. concerning officers, major shareholders,

related companies, etc.; and

b. Matters enumerated in the following (a) to (d) pertaining to the

matters which are the premises of main business activities of the

corporate group of an initial listing applicant:

(a) Details of the matters which are the premises of main business

activities of the corporate group of an initial listing applicant;

(b) Where the validity period of permission, authorization, etc. and

any other time limit are specified by laws and regulations or

contract, etc., such time limit;

(c) Where cancellation, rescission, and any other event of

permission and authorization, etc. are stipulated by laws and

regulations or contract, etc., such fact and content; and

(d) The fact that there is no factor which hinder their continuity

concerning the matters which are the premises of main business

activities of the corporate group of an initial listing applicant, and

if there is such factor, the fact that it will have a material effect

on business activities;

(3) The corporate group of an initial listing applicant does not provide

distorted information disclosure on the actual state of the

corporate group of the initial listing applicant by conducting a

trading act with its related party or any other specified entity or

adjustment of stock ownership ratios, etc.;


22

(4) Where an initial listing applicant has a parent company, etc., the

following a. or b. shall be met on the premise that disclosure of

such parent company, etc. is valid:

a. A stock, etc. issued by a parent company, etc. of an initial listing

applicant is listed on a domestic financial instruments exchange

(including cases where a stock, etc. issued by such parent

company, etc. is listed or continuously traded on such foreign

financial instruments exchange, etc., and the state of disclosure on

corporate affairs in a country in which such parent company, etc.

or such foreign financial instruments exchange, etc. is located is

not deemed to markedly lack investor protection); and

b. An initial listing applicant can appropriately understand company

information such as facts and information concerning the parent

company, etc. which has a material effect on its management, and

the initial listing applicant pledges in writing that such parent

company, etc. agrees to its disclosure of company information

which has a material effect on its management, out of such

company information concerning the parent company, etc., to

investors in an appropriate manner;

5. Other matters deemed

necessary by TSE from the

viewpoint of the public

interest or the protection

of investors


the Regulations]


(1) The contents of the rights of shareholders or holders of foreign

stock depositary receipts, etc. and the state of their exercise are

deemed appropriate from the viewpoints of the public interest or

the protection of investors, because of the matters enumerated as

follows and other matters:

a. The contents of the rights of shareholders or holders of foreign

stock depositary receipts, etc., and their exercise are not

unreasonably restricted; and

b. Where an initial listing applicant has introduced a takeover defense

measure, the initial listing applicant complies with the matters

enumerated in the following (a) to (d):

(a) Sufficient disclosure:

The listed company shall make necessary and sufficient timely

disclosure concerning takeover defense measures;

(b) Transparency:

Conditions of implementation and abolishment of takeover

defense measures shall not depend on arbitrary decisions by the

management;

(c) Effect on the secondary market:

Takeover defense measures shall not include factors which may


23

cause extremely unstable price formation of a stock or any other

factors which may cause unpredictable damage to investors;

and

(d) Respect for shareholders’ rights:

Takeover defense measures shall give consideration to

shareholders’ rights and their exercise.

(2) The corporate group of an initial listing applicant does not have a

contention or dispute, etc. which would have a material effect on

management activities and business performance


prepare an internal system to prevent criminal and extremist

elements from being involved in management activities, and

making efforts to prevent such involvement, and their actual state

is recognized as appropriate from the viewpoints of the public

interest or the protection of investors

(4) Other cases deemed appropriate from the viewpoints of the public



24

c. Documents to be Filed

The following highlights the documents required to be filed for the purpose of the initial listing

application. Each of these documents is requested to be filed when the requirements for the filing

thereof are met. The following also includes the documents to be filed only for the purpose of

multiple listing. Please refer to the footnotes at the end of this paragraph with respect to

“Documents Required to be Filed only for the Purpose of Multiple Listing” and “Documents Not

Required to be Filed for the Purpose of Multiple Listing.”

(a) Documents to be filed at the time of conducting initial listing application

Number Documents to be filed

1 Preliminary application form for initial listing of securities

2 Application form for initial listing of securities

3 Written Oath relating to initial listing application

4 Articles of Incorporation (including by-laws)

5

Minutes of general shareholders’ meeting or the meeting of the Board of Directors concerning

the acquisition of shares of treasury stock, the disposal of shares of treasury stock and the

retirement of shares of treasury stock

6 Statement certifying no ties with anti-social forces

7 Written Recommendation (by listing approval date)

8 Sponsor’s letter of confirmation

9 Statement of specific considerations and focused matters during the process of instructions on

going public and underwriting examination

10 Statement concerning the matters which constitute the premise underlying major business

activities

11 Table of distribution of share ownership

(unnecessary if the company conducts offering) (Note 2)

12 Statement describing matters concerning controlling shareholders

13 Sample of foreign stock certificate and etc. (to be attached stock sample list)

14 Minutes of the meeting of the Board of Directors on initial listing application

15 Securities Report for Initial Listing Application (Part I)

16 A legal opinion

17 A copy of the document proving that the representative is a person with a legitimate authority

18 Document certifying the deposit agreement concerning depositary receipts, etc. for the new

listing application (Note 3)

19 A document certifying that the depository, etc. has agreed to the matters TSE deems necessary

for the new listing application (Note 3)

20

In case it has not passed at least two (2) years after the merger or the becoming a foreign

holding company to the initial listing application date to a day immediately prior to the listing

date, financial statements deemed necessary by TSE for listing examination

21 Table of Change in Number of Shareholders or of Holders of Foreign Stock Depositary Receipts,

etc. (Note 4）


25

22 A document certifying that the agent, etc. has been appointed or given informal consent to

accept the appointment

23 Documents describing the plan for the shareholder directed spin-off (Note 5)

24 Materials concerning the value of the stock pertaining to the initial listing application (Note 6)

25

Corporate Governance Report

(only for an initial listing applicant who makes an initial listing application of a domestic stock,

etc. and a foreign stock, etc. for which TSE is a main market)

26 Audit reports, interim audit reports or quarterly review reports （Excluding Applicants exempted

under the clause in Rule 204, Paragraph 6 of the Rules)

27 Summary audit ｒeports, summary interim audit reports or summary quarterly review reports

（Excluding Applicants exempted under the clause in the Rule 204, Paragraph 6 of the Rules)

28 Preliminary Initial Listing Application Report （prepared by the applicant）

29 Preliminary Initial Listing Application Report （prepared by the managing trading participant）

30 Corporate report（materials describing the Applicant's business and operation)

31 Materials sent to shareholders and official publications (including the notice of the general

shareholders' meeting) regarding the general shareholders' meetings in the past two (2) years

32

Documents (such as prospectuses) sent to shareholders regarding rights issues in the past two

(2) years or regarding most recent right issue in the past five (5) years where there is none in

the past two (2) years

33 A copy of the annual report sent to Shareholders or Holders of Foreign Stock Depositary

Receipts in the past five (5) years

34 A copy of the interim report and quarterly reports sent to Shareholders or Holders of Foreign

Stock Depositary Receipts in the past two (2) years

35 A copy of the securities report, annual report, interim report, quarterly reports and

extraordinary reports submitted to the Prime Minister etc. in the past two (2) years (Note 1)

36 A copy of the securities registration statement (including amendment thereto) submitted to the

Prime Minister etc. in the past two (2) years (Note 1)

37 News releases and newspaper publications regarding earnings announcements, dividend, stock

split, rights issue, and other material information in the past one (1) year

38 Relevant laws pertaining to the incorporation of the Applicant in the Applicant's jurisdiction

39 List of agenda of the meeting of the Board of Directors in the past two (2) years

40 A set of documents submitted by the Applicant to relevant authorities in relation to application

of tax refund

41 The check sheet regarding the legal framework of accounting and audit in the home country

submitted to the Financial Services Agency of Japan

42 Other matters deemed necessary by TSE for listing examination (Note 7)

(b) Documents to be filed at the time of making initial listing application (When an

applicant has a non-listed parent company, etc.)


43 Written document of the last financial information of non-listed parent company, etc. (Note 8)

44 Written confirmation concerning timely disclosure, etc. of parent company, etc. (Note 8)


26

(c) Documents to be filed at the time of making initial listing application (Where becoming a

subsidiary or merger, etc.)


45 Where merger during the recent one year or after the beginning of the business year in which

the listing application is filed, financial statements deemed necessary by TSE

46

Where becoming a subsidiary or non-subsidiary company during the recent one year or after

the beginning of the business year in which the listing application is filed, financial statements

deemed necessary by TSE

(d) Documents to be filed after making initial listing application where necessary

/applicable


47

Quarterly reports for Initial Listing Application where: (Note 1) (Note 2)

◆ The listing day falls anytime after three (3) months from the beginning of the business year

containing the initial listing application day, the Quarterly Report for Initial Listing

Application for the first quarter of said business year

◆ The listing day falls anytime after six (6) months from the beginning of the business year


Application for the second quarter of said business year

◆ The listing day falls anytime after nine (9) months from the beginning of the business year


Application for the third quarter of said business year

48

Quarterly balance sheet of the final day of the above period

(In cases where a management company is the entity preparing consolidated financial

statements)

49

Notice of board meeting resolutions or general shareholders' meeting resolutions during the

period from the first day of the business year containing the initial listing application day to the

listing day

50

Reports of corporate information having significant impact on the business of the initial listing

applicant during the period from the first day of the business year containing the initial listing

application day to the listing day

51

A copy of the following documents submitted to the Prime Minister etc. during the period from

the first day of the business year containing the initial listing application day to the listing day

(Note 1)

◆Securities registration statement （including amendment thereto）and document attached

thereto

◆Notice of effectiveness of securities registration statement

◆Securities notification (including amendment thereto) and document attached thereto


27

(e) Documents to be filed after making initial listing application where necessary /

applicable

(If there are shares that have not been issued as of the new listing application date in

the shares as of desired listing date)


52

A document certifying the resolution authorizing the issuance of such stocks, etc., a copy of the

securities notification, a copy of the notice of effectiveness of the securities registration

statement or a copy of shelf registration statement, or a copy of notification of receipt of

securities notification or a copy of notification of receipt of shelf registration notification, as well

as a document certifying completion of payment (certificate of registered matters, etc.) (Note

1)

53 Notification of initial listing application securities report amendment (at time of effect of

amended details)

(f) Documents to be filed after making initial listing application but no later than listing

approval is granted


54 Written Confirmation Regarding Compliance with Exchange Rules and Regulations

55

The written document containing the effect that the representative of such initial listing

applicant is aware that the Securities Report for Initial Listing Application (Part I) and other

documents do not contain any untrue statements

56

Corporate Governance Report (PDF version)


etc. and a foreign stock, etc. for which TSE is the main market)

57 The report containing risk information pertaining to the structure of the corporate group (Note

9)

58 Listing Agreement

59 Articles of incorporation (including by-laws)


61 Securities Report for Initial Listing Application (Part I) PDF version

62 Quarterly report of initial listing application (Note 1) (Note 2)

63 Quarterly report of initial listing application PDF version (Note 1) (Note 2)

64 Calculation of the expected market capitalization

65 Corporate Brochure of Applicant


28

(g) Documents to be filed by the applicant making a public offering, etc.


66 Expected public offering or secondary offering plan

67 Securities Registration Statement and its accompanying documents (Note 1)

68 Amendment of Securities Registration Statement (after the determination of the tentatively set

price range) (Note 1)(Note 10)

69 Amendment of Securities Registration Statement (after the determination of offering price)

(Note 1)

70 Notice on effectiveness of securities registration statement

71 Notice of Execution of public offering or secondary offering

72 Press release of notice of the determination of offering prices and the reasons, etc. therefor

73 Press release of notice of provisional conditions and the reasons for deciding them (Note 10)

74 Materials pertaining the determination of the assumed tentatively set price range

75 Materials pertaining the determination of the tentatively set price range

76 Materials pertaining the determination of offering price

77 Notification of the revisions of the Security Initial Listing Application Form

Note 1: In cases of submission to the Prime Minister, etc. via electronic data processing for disclosure (refers to electronic data

processing for disclosure as prescribed by Rule 27-30-2 of the Financial Instruments and Exchange Act), the submission of

such documents is not required.

Note 2: The applicant applying for a multiple listing need not submit the document.

Note 3: Only the applicant applying for a multiple listing needs to submit the document.

Note 4: Only the applicant applying for a listing of Foreign Stock Depositary Receipts needs to submit the document.

Note 5: Submission only required in cases of a company succeeding business due to a shareholder-directed split of a listed company,

which conducts initial listing application prior to such shareholder-directed split.

Note 6: In cases where the foreign stock, etc. pertaining to initial listing application is not listed or continuously traded on a

domestic financial instruments exchange or foreign financial instruments exchange, etc., submission is only required when

public offering or secondary offering will not be conducted for the foreign stock, etc. pertaining to initial listing application.

Note 7: There may be cases which require a copy of the "minutes of the board of directors meeting," "internal audit documents,"

"monthly performance management documents," "documents used in annual budget plan, medium-term management

plan, and planning," "important agreements," etc.

Note 8: The applicant needs to submit the document where none of the following is the case:

(1) the shares issued by the parent company, etc. are listed on a financial instruments exchange in Japan

(2) the shares issued by the parent company, etc. are listed or continuously traded on a foreign financial instruments

exchange, etc. and it is not deemed that disclosure status of the parent company, etc. in its home country, etc. is

seriously detrimental to investor protection.

(3) the parent company, etc. is subject to ongoing disclosure

(4) the parent company, etc. is subject to ongoing disclosure in its home country and such status is not deemed to be


Note 9: Submission only required in cases where TSE deems the corporate group to have a special composition.

Note 10: Submission only required in cases of direct listing.

Note 11: The applicant needs to submit documents pertaining a shelf registration, possession of a large volume of shares, and

tender offer that it makes after the beginning of the business year containing the initial listing application day


29

(2) Mothers (Primary Listing)


Item Requirements




the Regulations]


Regulations]

200 shareholders or more

2. Number of tradable

shares



the Regulations]


Regulations]


a. The number of tradable shares: 2,000 units or more;

b. The market capitalization of the tradable shares: 500 million yen

or more; and

(in principle, the value derived by the expected price at the time of

public offering for the purpose of listing by the number of tradable

shares expected at the time of listing)

c. The number of tradable shares (as a percentage of the total

number of issued shares outstanding): 25% or more

3. Implementation of

public offering


the Regulations]


Regulations]

The applicant must carry out a public offering of a stock, etc. of at

least 500 units pertaining to an initial listing application during the

period from the initial listing application day to the day preceding the

listing day




the Regulations]


Regulations]


(The market capitalization is, in principle, determined by multiplying

the prospective prices for public offering or secondary offering by the

number of listed shares expected at the time of listing)

5. Number of consecutive

years of business conduct


The applicant has conducted the business activities, setting up a

board of directors (meaning an institution corresponding to this in

cases of a foreign company) for at least a year before the initial listing

application day


30

the Regulations]


Regulations]

6. False statement or

adverse opinion, etc.


the Regulations]


Regulations]


a. The audit report attached to a "Securities Report for Initial Listing

Application" (excluding an audit report attached to financial

statements, etc. for the business year or the consolidated business

year ending in the last year) shall contain an "unqualified opinion"

or a "qualified opinion with exceptions" of certified public

accountants, etc.; provided, however, that the same shall not apply

to cases where the Enforcement Rules specify otherwise;

b. The audit report (limited to an audit report attached to financial

statements, etc. for the business year or the consolidated

business year ended in the last year), an interim audit report or a

quarterly review report attached to a "Securities Report for Initial

Listing Application" shall contain an "unqualified opinion", an

"opinion that the interim financial statements, etc. provide useful

information" or an "unqualified conclusion" of certified public

accountants, etc.; provided, however, that the same shall not apply

to cases specified by the Enforcement Rules; and

c. No false statement shall be made in a Securities Report, etc.

containing or making reference to financial statements, etc.,

interim financial statements, etc., or quarterly financial statements,

etc. pertaining to the audit report, the interim audit report, or the

quarterly review report prescribed by a. and the preceding b.;

7. Handling by a

book-entry transfer

institution


the Regulations]


the Regulations]


a. Said issue shall be subject to the custody and book-entry transfer

operation for foreign stocks, etc. or the book-entry transfer

operation of the designated book-entry transfer institution; and

b. Said issue is expected to become so by the time of listing

8. Restriction on transfer

of stocks, etc.


the Regulations]



a. There is no restriction on transfer of a foreign stock, etc. pertaining

to an initial listing application; and

b. It is expected that there will be no restriction by the time of listing;


31

the Regulations] provided, however, that the same shall not apply to cases where

imposing a restriction on transfer of a foreign stock, etc. is deemed

necessary to receive application of provisions of laws in its home

country or a case equivalent to this and, in addition, where its

details are deemed not to hinder trading in TSE market

9. Deposit agreement, etc.


the Regulations]


the Regulations]

[Rule 213, Paragraph 3 of the

Rules]

Where an initial listing applicant is an applicant for initial listing of a

foreign stock depositary receipt, etc., the deposit agreement, etc.

concerning a foreign stock depositary receipt, etc. and any other

agreement pertaining to an initial listing application shall be those

entered into pursuant following a. or b.:

a. Foreign stock depositary receipts: Said deposit agreement, etc. is to

be concluded among the initial listing applicant, the depository,

etc. pertaining to said foreign stock depositary receipts, and

holders of said foreign stock depositary receipts; and

b. Foreign stock trust beneficiary certificates: Said deposit agreement,

etc. is to be concluded between the depository, etc. pertaining to

said foreign stock trust beneficiary certificates and holders of said

foreign stock trust beneficiary certificates; and the initial listing

applicant has concluded a contract deemed appropriate by TSE


32


Item Requirements

1. Appropriateness of the


information, risk

information, etc.

The company is able to

make disclosure of the

corporate information, risk

information, etc. may be

carried out in an

appropriate manner


the Regulations]

[III, 2 of Guidelines]

(1) The corporate group of an initial listing applicant is deemed to be

able to properly manage corporate information of facts, etc. which

will have a material effect on management and to disclose it to

investors in a timely and appropriate manner, and a system for the

preemptive prevention of insider trading is deemed to be

eveloped and operated appropriately


of initial listing application documents, are deemed to be prepared

in compliance with laws and regulations, and contain the matters

enumerated in the following a to c and other matters appropriately

in consideration of the state of the business line and the business

condition of an initial listing applicant and its corporate group

a. Useful matters for investment decisions of investors such as

analysis and explanation pertaining to the state of financial

conditions, management performance & receipt and disbursement

of funds, the state of the related companies, the state of R&D

activities, the state of major shareholders, the state of officers &

employees, dividend policy, purposes of funds of an increase in

paid-in capital through a public offering concerning an initial listing

applicant and its corporate group;

b. Matters that should be considered as a risk factor of an initial listing

applicant, when investors make investment decisions, such as a

small number of years in business operations, the state of the

occurrence of cumulative losses or business losses, dependence on

a specified officer, the state of competition of business with other

companies, uncertainties of markets and technologies, the state of

support for the purpose of the administration of business from a

specified entity, etc., concerning an initial listing applicant; and

c. Matters enumerated in the following (a) to (d) with respect to

matters which are the premises of the main business activities of

an initial listing applicant and its corporate group:

(a) Details of the matters which are the premises of the main

business activities of an initial listing applicant and its corporate

group;

(b) Where the validity period of permission and authorization, etc.

and any other time limit is specified by laws and regulations or a



33

(c) Where cancellation, rescission and any other event of permission

and authorization, etc. are stipulated by laws and regulations or a

contract, etc., such fact; and

(d) The effect that there is no factor which hinder their continuity

concerning the matters which are the premises of the main


applicant, and if there is such factor, the effect that it will have a

material effect on business activities;

(3) The corporate group of an initial listing applicant does not make


corporate group of the initial listing applicant by carrying out a

trading act with its related party or any other specified entity or

adjustment of the stock ownership ratios, etc.

(4) Where an initial listing applicant has a parent company, etc., any

one of the following a or b shall be met on the premise that

disclosure of such parent company, etc. is valid;

provided, however, that the same shall not apply to cases where

the business relationship between the initial listing applicant and

such parent company, etc. is weak and, in addition, it is clear that

the ownership of the stock of the initial listing applicant by such

parent company, etc. is for the purpose of encouraging investment,

not for the substantial control of business activities of the initial

listing applicant:

a. A stock, etc. issued by a parent company, etc. of an initial listing

applicant is listed on a domestic financial instruments exchange

(including cases where a stock, etc. issued by such parent

company, etc. is listed or continuously traded on such foreign

financial instruments exchange, etc., and, the state of disclosure of

corporate information in a country in which such parent company,

etc. or such foreign financial instruments exchange, etc. is located

is not deemed to conspicuously lack investor protection); and

b. An initial listing applicant can appropriately understand company

information such as facts concerning the parent company, etc.

which has a material effect on its management, and the initial

listing applicant pledges in writing that such parent company, etc.

agrees to its disclosure of company information which has a

material effect on its management, out of such company

information concerning the parent company, etc., to investors in an

appropriate manner


34

(5) Where an initial listing company is a foreign company, the

accounting system adopted by the initial listing company shall be

deemed appropriate from the viewpoint of investor protection

(6) Where an initial listing company is a foreign company, and a stock,

etc. pertaining to such initial listing applicant is not listed or

continuously traded on a Foreign Financial Instruments Exchange,

etc., and the initial listing application is made only to TSE, the

"Securities Report for Initial Listing Application (Part I)" shall

contain matters enumerated in the following a. and b.:

a. Matters enumerated in the following (a) and (b) for a period from a

day one year prior counting from the end date of a business year

immediately prior to the initial listing application date to a day

immediately prior to the listing date:

(a) The state of new stock issues, or issues of subscription warrants

or subscription warrant securities by the method other than

allocation to shareholders; and

(b) The state of change in the ownership of the shares pertaining to a

stock, etc. by an entity with special interest, etc. (meaning an

entity as prescribed in i) and ii) of Item (31) of Paragraph 1 of

Rule 2 of the Cabinet Office Ordinance on Disclosure);

b. Where a holder of a stock, a subscription warrant or a subscription

warrant security has made an arrangement concerning the holding

of such securities for a certain period after listing with an initial

listing applicant or with a financial instruments broker-dealer which

enters into the principal underwriting agreement with an initial

listing applicant, such details.

2. Soundness of corporate

management

The company is carrying

out business in a fair and

faithful manner


the Regulations]


(1) The corporate group of an initial listing applicant is recognized, as

a general rule, not to give or enjoy profit wrongfully through a

trading act or any other management activities with relevant

parties or other specified entities, for the reason of the matters

enumerated in the following a. and b. and other matters:

a. Where a transaction has occurred between the corporate group of

an initial listing applicant and its relevant parties or any other

specified entities, and such transaction has rationality of continuing

the transaction, and trading terms including trading prices are

clearly not disadvantageous to the corporate group of an initial

listing applicant; and

b. Benefits of the corporate group of an initial listing applicant are not


35

lost wrongfully because relevant parties and any other specified

entities of the corporate group of an initial listing applicant give

priority to their own benefits;

(2) The mutual relationship of relatives of officers of an initial listing

applicant, its composition, actual situation of providing services or

the state of concurrent posts as officers and employees, etc. with

any other company, etc. are recognized not to impair the fair,

faithful and full execution of office duties or the implementation of

effective auditing as officers of such initial listing applicant. In this

case, where directors, accounting advisors or executive officers,

spouses of persons corresponding to these and relatives by blood

within the second degree of kinship and relatives by affinity take a

position as an auditor, a member of an auditing committee or any

other persons corresponding to these, it shall be deemed to impair

the implementation of an effective auditing



applicant are recognized to have independence from such parent

company, etc. for the reason of the matters enumerated in the

following a. to c. or any other matters:



corporate group of the parent company, etc., the state of business

adjustment made by the corporate group of the parent company,

etc. and its possibility and any other matters, an initial listing

applicant is not recognized to be substantially a business division of

such parent company, etc.;


company, etc., as a general rule, does not coerce or induce a

trading act which becomes disadvantageous to such parent

company, etc. or the corporate group of such initial listing

applicant, such as transactions under markedly different terms

from those of normal transactions in principle; and


an initial listing applicant is recognized not to excessively depend

on the parent company, etc. and not hinder continuing

management activities.


36

3. Effectiveness of


internal management

system of an

enterprise


internal management

system are developed in

accordance with the size,

corporate maturity, etc. of

the enterprise, and

functioning properly


the Regulations]


(1) The system to secure the execution of appropriate work duties of

officers of the corporate group of an initial listing applicant is

recognized to be reasonably developed and appropriately operated

in light of the matters enumerated in the following a and b and

other matters:

a. An initial listing applicant has an organizational plan and an officer

composition which is able to effectively conduct checking and

auditing concerning the execution of work duties of officers of the

corporate group of an initial listing applicant; and

b. Checking and auditing the execution of work duties of officers for

efficient management is carried out and functions effectively in the

corporate group of an initial listing applicant

(2) The internal management system is recognized to be reasonably

developed and appropriately operated for an initial listing applicant

and its corporate group to carry out effective management

activities for the reason of the matters enumerated in the following

a. and b. and other matters:

a. A necessary managerial and administrative body is reasonably

developed and appropriately operated to secure efficiency of

management activities and internal checking functions of the

corporate group of an initial listing applicant; and

b. An internal auditing system of the corporate group of an initial

listing applicant is reasonably developed and appropriately

operated;

(3) Necessary personnel are recognized to be competent to carry out

stable and continuing execution of management activities of the

corporate group of an initial listing applicant and to maintain its

internal management system;

(4) The corporate group of an initial listing applicant adopts

accounting treatment standards adaptable to its actual situation

and, in addition, a necessary accounting body is recognized as

being prepared and operated appropriately; and

(5) It is recognized that an effective system to comply with laws and

regulations, etc. concerning management activities and other

matters in the corporate group of an initial listing applicant is

prepared and operated appropriately, and that no material breach


37

of laws and regulations has recently been made, and no act which

is likely to become a material breach of laws and regulations in the

future is being carried out

4. Reasonableness of the

business plan

The listing applicant has

developed reasonable and

suitable business plans,

and has developed the

operating base necessary

for executing such

business plans, or there is

reasonable expectation

that it will develop such

operating base


the Regulations]


(1) The business plan of the business group of the initial listing

applicant is deemed to have taken into account the business

model, business environment, risk factors, etc. and appropriately

drawn up.

(2) The operating base necessary for executing the business plan of

the business group of the initial listing applicant is deemed to have

been developed or that there is reasonable expectation that such

operating base will be developed.




interest or the protection

of investors.


the Regulations]


(1) The contents of the rights of shareholders or holders of foreign

stock depositary receipts, etc. and the state of their exercise are

deemed appropriate from the viewpoints of the public interest or

the protection of investors, in light of the matters enumerated as

follows and other matters:

a. The contents of the rights of shareholders or holders of foreign

stock depositary receipts, etc. and their exercise are not

unreasonably restricted; and

b. Where an initial listing applicant has introduced a takeover defense

measure, the initial listing applicant complies with the matters

enumerated in the following (a) to (d):




(b) Transparency:

Conditions of implementation and abolishment of takeover

defense measures shall not depend on arbitrary decisions by the

management;



38



factors which may cause unpredictable damage to investors;

and




(2) The corporate group of an initial listing applicant does not have a

contention or dispute, etc. which would have a material effect on

management activities and business performance

(3) Concerning the matters which are the premises of the main


applicant, there is no factor which hinders their continuity


develop an internal system to prevent criminal and extremist

elements from being involved in management activities, and

making efforts to prevent such involvement and their actual state is

recognized as appropriate from the viewpoints of the public


(5) Other cases deemed appropriate from the viewpoints of the public



39



application. Each of such documents is requested to be filed when the requirements for the filing





(a) Documents to be filed at the time of conducting the initial listing application


1 Preliminary Application Form for initial listing of securities





6 Statement concerning the matters which constitute the premise underlying major business

activities

7 Table of Distribution of Share Ownership

(unnecessary if the company conducts offering) (Note 2)

8 Written document of the last financial information of non-listed parent company, etc. (Note 3)

9 Written confirmation concerning timely disclosure, etc. of parent company, etc.


11 Minutes of the Meeting of the Board of Directors on initial listing application

12 A legal opinion






16 Table of Change in Number of shareholders or of holders of Foreign Stock Depositary Receipts,

etc. (Note 5)





20 Sponsor’s Letter of Confirmation



22

Various explanatory materials concerning listing applicant: “Lines of business”; “Business plan

Going Forward”; “Nature of Transactions with Special Interested Party”; “Status of Industry and

Trading Partners”;

23 Statement of accounts of consolidated subsidiaries for the last two business years


40

24 Financial statements, etc. of merged companies in a merger transaction for the recent two

business years



27 Written confirmation concerning timely disclosure, etc.

28




29 Audit Reports, Interim Audit Reports or Quarterly Review Reports （Excluding applicants

exempted under the clause in Rule 211, Paragraph 6 of the Rules)

30 Summary Audit Reports, Summary Interim Audit Reports or Summary Quarterly Review Reports

(Excluding Applicants exempted under the clause in the Rule 211, Paragraph 6 of the Rules)



33 Corporate Report（materials describing the applicant's business and operation)

34 Materials sent to Shareholders and official publications (including the notice of the general

shareholders' meeting) regarding the General Shareholders' Meetings in the past two (2) years

35

Documents (such as prospectuses) sent to shareholders regarding rights issue in the past two



36 A copy of the Annual Report sent to shareholders or holders of Foreign Stock Depositary

Receipts in the past one (1) year

37 A copy of the Interim Report and Quarterly Reports sent to shareholders or holders of Foreign

Stock Depositary Receipts in the past one (1) year

38 A copy of the Securities Report, Annual Report, Interim Report, Quarterly Reports and

Extraordinary Reports submitted to the Prime Minister etc. in the past one (1) year (Note 1)

39 A copy of the Securities Registration Statement (including amendments thereto) submitted to

the Prime Minister etc. in the past one (1) year (Note 1)



41 Relevant laws pertaining to the incorporation of the applicant in the applicant's jurisdiction

42 List of Agenda of the Meeting of the Board of Directors in the past two (2) years

43 A set of documents submitted by the applicant to relevant authorities in relation to application

of tax refund



45 Sample of foreign stock certificates and etc. (to be attached stock sample list)

46 Other matters deemed necessary by TSE for listing examination (Note 8)


41

(b) Documents to be filed after the initial listing application where necessary /applicable


47

Quarterly Reports for Initial Listing Application where: (Note 1) (Note 2)

◆ The listing day falls anytime after three (3) months from the beginning of the business

year containing the initial listing application day, the Quarterly Report for Initial Listing








48

Quarterly balance sheet of the end day of the above period

(In cases where a management company is the entity preparing consolidated financial

statements) (Note 9)

49

Notice of board meeting resolutions or General Shareholders' Meeting resolutions during the


listing day

50




51



(Note 1)

◆Securities Registration Statement （including amendment thereto）and document attached

thereto

◆Notice of effectiveness of Securities Registration Statement


52 Notification of Initial Listing Application Securities Report Amendment (at time of effect of

amended details)


42

(c) Documents to be filed after the initial listing application but no later than listing

approval is granted







58





60




61 Quarterly Report of Initial Listing Application (Note 1)

62 Quarterly Report of Initial Listing Application PDF version (Note 1)


64 Drafted disclosures (matters concerning growth potential) as of listing date

(d) Documents to be filed by the applicant making a public offering, etc.


65 Expected Public Offering or Secondary Offering Plan



68 Press release of Notice of Provisional Conditions and the reasons for deciding them



price range) (Note 1)

71 Press release of Notice of the Determination of Offering Prices and the reasons, etc. therefor



(Note 1)

74 Notice on effectiveness of Securities Registration Statement

75 Notice of execution of Public Offering or Secondary Offering



43


processing for disclosure as prescribed by Article 27-30-2 of the Financial Instruments and Exchange Act), the submission

of such documents is not required.

Note 2: The applicant applying for a multiple listing need not submit the document.

Note 3: The applicant needs to submit the document where none of the following is the case:

(1) the shares issued by the parent company, etc. is listed on a financial instruments exchange in Japan

(2) the shares issued by the parent company, etc. is listed or continuously traded on a foreign financial instruments












Note 8: There may be cases which require a copy of the "Minutes of the Board of Directors Meeting," "Internal Audit Documents,"

"Monthly Performance Management Documents," "Documents Used in Annual Budget Plan, Medium-Term Management

Plan, and Planning," "Important Agreements," etc.

Note 9: Submission only required in cases where TSE deems the corporate group to have a special composition.




44

(3) JASDAQ Market (Primary Listing)


Item Requirement

Standard Growth



[Rule 216-4, Item 1-b of the

Regulations]

[Rule 216-7, Item 2 of the

Regulations]

200 shareholders or more (in

Japan)

200 shareholders or more (in

Japan)

2. Market capitalization of

tradable shares


[Rule 216-4, Item 2-a of the

Regulations]


Regulations]


Regulations]

500 million yen or more 500 million yen or more

3. Implementation of Public

Offering or Secondary

Offering


Regulations]


Regulations]

The applicant is required to implement public offering or secondary

offering of the higher of the number of shares described below and

10% of the number of listed shares expected at the time of listing

during the period from the listing application date to the day

preceding the listing date.

(a) Issues with a trading unit of 1,000 shares: one million shares

(b) Issues with a trading unit of 500 shares: 500,000 shares

(c) Issues with a trading unit of 100 shares: 100,000 shares

(d) Issues with a trading unit of 50 shares: 50,000 shares

(e) Issues with a trading unit of 10 shares: 10,000 shares

(f) Issues with a trading unit of 1 share: 1,000 shares


45

4. Net Asset Value



Regulations]


Regulations]


Regulations]


Regulations]

200 million yen or more Positive

5. Profits or Market

Capitalization

(Amount of profits

calculated based on the

consolidated income

statement. Market

capitalization is expected at

listing)


Regulations]


Regulations]

The following a. or b. must be

satisfied:

a. Profits during the most recent

year are at least JPY 100

million.

b. Market capitalization is

expected to reach JPY 5

billion by the time of listing.

―

6. Audit by listed company

audit firm, including false

statement or adverse

opinion


Regulations]


Regulations]

[Rule 212, Item 6 of the Regulations]

The following a. through d. must be satisfied:

a. No false statements in Securities Reports for the year ended

during the recent two years are identified.

b. The audit opinion on financial statements and so on for the

business year ended during the recent two years (excluding the

recent one year) is “unqualified and fair” or “qualified opinion

with exceptions.”

c. The audit opinion on financial statements and so on for the

business year ended during the recent one year is, in principle,

“unqualified and fair.”

d. If any stock of an applicant is listed on another financial

instruments exchange in Japan, it shall not meet both (a) and

(b) below.

(a) An internal control audit report for the business year ended

during the recent one year includes the statement that “no

assessment result can be expressed.”


46

(b) An internal control audit report for the business year ended

during the recent one year includes the statement that “any

opinion is refrained from being expressed.”

7. Treatment at designated

book-entry transfer

institution


Regulations]


Regulations]



a. The stock is subject to the foreign stock book-entry transfer or

book-entry transfer of the designated book-entry transfer

institution.

b. The stock is expected to be subject to the transfer as mentioned

above by the time of listing.

8. Restrictions on transfer of

stock


Regulations]


Regulations]



a. No restrictions have been imposed on the transfer of foreign

stock, etc. for which an initial listing application is filed.

b. No restrictions are expected be imposed by the listing;

provided, however that this criterion does not apply to cases

where imposing restrictions on the transfer of foreign stock is

required to meet the provisions of laws and regulations of a

home country and the nature of such restrictions is determined

not to impede trading on JASDAQ

9. Depository agreement,

etc.


Regulations]


Regulations]


[Rule 213, Paragraph 3 of the Rules]

If an initial listing applicant files an application for listing of foreign

stock depositary receipts, the depository agreement and other

agreements for foreign depository receipts for which the listing

applicant is filed shall meet the requirements of a and b below.

a. In the case of foreign stock depositary receipts, the depository

agreement will be entered into concerning the depository period

of the receipts and by and between the holders of the receipts.

b. In the case of foreign stock trust beneficiary certificates, the

depository agreement will be entered into concerning the

depository period of the certificates and by and between the

holders of certificates, and the initial listing applicant enters into

the agreement which TSE determines is appropriate.


47

b. Eligibility Requirements (Standard Market)

Item Requirements

1. Business continuity

There are no obstacles to

continuity of business

activities

[Rule 216-5, Paragraph 1, Item 1

of the Regulations]

[III-2, 2 of Guidelines]

(1) Outlook for business performance and financial condition of the

corporate group of an initial listing applicant do not hinder the

corporate continuity of the applicant in the future. In this case,

when falling under the following a. or b., the outlook for business

performance and financial condition shall be deemed to not hinder

corporate continuity.

a. Maintenance of the levels of recent business performance and

financial condition of the corporate group of an initial listing

applicant is reasonably expected.

b. In cases where the business performance or financial condition of

the corporate group of an initial listing applicant is deteriorating or

poor, such situation is deemed to improve in such way as the levels

of such performance and conditions are expected to recover or

improve in the future based on an objective fact(s).

(2) Management activities of the corporate group of an initial listing

applicant are deemed to be able to be carried out stably and

continuously in light of matters including those enumerated in the

following a. to d.:

a. Business activities of the corporate group of an initial listing

applicant can be conducted stably and continuously in light of

purchases, production, sales, and actual results of transactions

with customers and suppliers, as well as characteristics and

demand trends for manufactured products and services and the

state of performance of any other business.

b. Investment activities such as capital investment and business

investment, etc. of the corporate group of the initial listing

applicant do not hinder the continuity of management activities in

light of the trend and future outlook, etc. for its investment.

c. Financial activities such as fund-raising, etc. of the corporate group

of the initial listing applicant do not hinder the continuity of

management activities in light of the trend and future outlook, etc.

of its financial state.

d. With respect to the matters which are the basis of the main

business activities of the corporate group of the initial listing


48

applicant, there are no issues that will hinder the continuity of such

business activities.

2. Establishment of sound


internal management

system


internal management

system have been

established in

accordance with corporate

scale and function

effectively


of the Regulations]


(1) The system to ensure the appropriate execution of duties of

officers of the corporate group of the initial listing applicant is

deemed to be properly established and appropriately operated in

light of matters including those enumerated in the following a. and

b.:

a. An initial listing applicant has an organizational structure and an

officer composition which allow for effective checking and audit of

the execution of duties by officers of the corporate group of an

initial listing applicant. The listing examination in such case shall be

conducted in consideration of the state of compliance with matters

prescribed in the provisions of Rules 436-2 through 439 of the

Regulations.

b. Checking and audit of the execution of officer duties are carried out

and function effectively toward the efficient management of the

corporate group of an initial listing applicant.

(2) The mutual relationship between relatives of officers of an initial

listing applicant, its composition, the actual working situation or the

state of concurrent positions as officers and employees, etc. at

another company, etc. are deemed to not impair the fair, faithful,

and proper execution of officer duties or effective audit of such

initial listing applicant. In this case, where a spouse, blood relative

within the second degree of kinship, and relations by affinity of

directors, accounting advisors, executive officers, or persons

equivalent thereto assume a position as an auditor, a member of

an audit committee, or persons equivalent thereto, it shall be

deemed to impair effective audit.

(3) The corporate group of an initial listing applicant is deemed to

adopt accounting treatment standards suited to its actual situation

and, in addition, a necessary accounting structure is deemed to be

established and operated appropriately.

(4) An effective system for compliance with laws and regulations, etc.

concerning management activities and other matters in the

corporate group of an initial listing applicant is deemed to be


(5) The internal management system is deemed to be properly


49

established and appropriately operated so that an initial listing

applicant and its corporate group carry out effective management

activities in light of matters including those enumerated in the

following a. and b.:

a. A necessary managerial and administrative system is properly

established and appropriately operated to ensure efficiency of

management activities and internal check-and-balance functions of

the corporate group of an initial listing applicant.

b. An internal audit system of the corporate group of an initial listing

applicant is properly established and appropriately operated.

(6) Necessary personnel are deemed to be secured in order to carry

out stable and continuous execution of management activities and

maintenance of the internal management system of the corporate

group of an initial listing applicant.

3. Reliability of Corporate

Actions

Corporate actions which

cause market disorder are

not expected


of the Regulations]


(1) The corporate group of an initial listing applicant is deemed, as a

general rule, to not unfairly grant or enjoy benefits through a

transaction or any other management activities with relevant

parties or other specific entities in light of matters including those

enumerated in the following a. and b.:


an initial listing applicant and relevant parties or other specific

entities, and such transaction has reasonability of continuance, and

its terms including the transaction price are appropriate.

b. The interests of the corporate group of an initial listing applicant

are not unfairly undermined due to relevant parties or other

specific entities of the corporate group of an initial listing applicant

giving priority to their own interests.

(2) Where an initial listing applicant has a parent company, etc.

(excluding cases where such applicant is expected to cease to have

a parent company, etc. by the end of the first business year after

listing), management activities of the corporate group of an initial

listing applicant are deemed to be independent of such parent

company, etc. in light of matters including those enumerated in the

following a. to c.:


corporate group of the initial listing applicant and that of the


50

corporate group of the parent company, etc., the state and

possibility of business line adjustment made by the corporate

group of the parent company, etc. and any other matters, the

initial listing applicant is not deemed to be substantially a business

division of such parent company, etc.


company, etc., as a general rule, has not been coercing or inducing

transactions which will undermine the interests of such parent


applicant, such as transactions that have markedly different terms

from those of normal transactions


an initial listing applicant is deemed not to excessively depend on

the parent company, etc. and not hinder continuous management

activities.

(3) The management of the corporate group of an initial listing

applicant has insight into the responsibilities and significance of

being listed on a financial instruments market.

(4) An initial listing applicant shall not fall under any of the following a.

through c.

a. In case where the listing applicant plans to effect merger, divesture

of business, or become a subsidiary or non-subsidiary within three

years from the end of the business year following the initial listing

application date, TSE determines that the initial listing company

would not be a de facto surviving company through any of such

acts;

provided that this will not apply to cases where it is determined

that the merger is effected to make any company without

substance a surviving company and the divesture is determined to

be a divesture of business to receive the business from the parent

company.

b. The initial listing applicant plans to effect a merger where the initial

listing applicant becomes a dissolved company, a share exchange

or share transfer where the initial listing applicant becomes a fully

owned subsidiary of another company within three years from the

end of business year immediately preceding the initial listing

application date.


51

c. The initial listing applicant plans to delist its stock by means of

acquisition of all the shares by large shareholders, management,

employees or other specified persons or other means within three

years from the end of business year immediately preceding the

initial listing application date.

(5) Where an initial listing applicant has introduced a takeover

defense measure, the initial listing applicant complies with the

matters enumerated in the following (a) to (d):




(b) Transparency:

Conditions of implementation and abolishment of takeover defense

measures shall not depend on arbitrary decisions by the

management;




factors which may cause unpredictable damage to investors; and




(6) The corporate group of an initial listing applicant has developed a

corporate structure to prevent anti-social forces from intervening in

management activities and is making efforts to prevent such

intervention, and such efforts are deemed appropriate in light of

the public interest or investor protection.

(7) The corporate group of an initial listing applicant has not recently

committed material violations of laws and regulations or acts

against the public interest, and furthermore is deemed not to

conduct acts which are likely to become a material violation of laws

and regulations or work against the public interest in the future.



details, etc.

The company is capable of

appropriately disclosing

corporate details, etc.



will have a material impact on management and to disclose it to

investors in a timely and appropriate manner. Moreover, its system

for the preemptive prevention of insider trading is deemed to be

developed and operated appropriately.


52


of the Regulations]




in compliance with laws and regulations, and appropriately contain

the matters enumerated in the following a. to c. and other matters

in consideration of the state of the business line and the business

condition of an initial listing applicant and its corporate group:


analysis and explanation pertaining to the state of financial

condition, management performance, and receipt and

disbursement of funds, the state of related companies, the state of

research and development activities, the state of major

shareholders, the state of officers and employees, dividend policy,

and purposes of funds raised for capital increase through a public

offering with respect to an initial listing applicant and its corporate

group.

b. Matters that should be considered as risk factors of an initial listing

applicant when investors make investment decisions, such as the

small number of years in business operation, the state of

cumulative losses or business losses, dependence on a specific

officer, the state of competition for business with other companies,

uncertainties of markets and technologies, and the state of support

for the purpose of the administration of business from a specific

entity, etc., concerning an initial listing applicant.



an initial listing applicant and its corporate group:

(a) Details of the matters which are the premises of the main business

activities of an initial listing applicant and its corporate group;

(b) Where the validity period of permission and authorization, etc. and

any other time limit is specified by laws and regulations or a


(c) Where cancellation, rescission, and any other event of permission,

authorization, etc. are stipulated by laws and regulations or a

contract, etc., such fact; and

(d) The effect that there is no factor which hinders their continuity

concerning the matters which are the premises of the main


applicant, and if there is such factor, the effect that it will have a

material effect on business activities.




53


trading act with its relevant party or any other specific entity or

adjusting share ownership ratios, etc.

(4) If an initial listing applicant owns a company which in effect holds

a majority of voting rights of the initial listing applicant, the

disclosure on the company must be effective and meet either a. or

b. below;

provided that this will not apply to cases where the actual

relationship between the initial listing applicant and its apparent

major shareholding company is thin and the shareholding by the

majority shareholding company has been made for the fostering of

investment and has not been made for substantially controlling the

business activities of the initial listing applicant.

a. Stock, etc. issued by the majority shareholding company of an

initial listing applicant is listed on a domestic financial instruments

exchange (including cases where a stock, etc. issued by such

parent company, etc. is listed or continuously traded on such

foreign financial instruments exchange, etc., and the state of

disclosure on corporate affairs in a country in which such parent

company, etc. or such foreign financial instruments exchange, etc.

is located is not deemed to markedly lack investor protection).

b. The listing applicant can appropriately grasp the facts, etc.

concerning the majority shareholding company which may

significantly affect its management and the applicant undertakes in

writing that the majority shareholding company agrees to

appropriately disclose to investors any information of its corporate

information which may have significant effect on the management

of the initial listing applicant.



deemed appropriate from the viewpoint of investor protection.

(6) Where an initial listing company is a foreign company, the stock,


continuously traded on a foreign financial instruments exchange,

etc. and the initial listing application is made only to the Exchange,

the "Securities Report for Initial Listing Application (Part I)" shall


a. Matters enumerated in the following (a) and (b) for the period from


54

the day that falls one year prior to the end of the first business year

immediately before the initial listing application date to the day

immediately prior to the listing date

(a) The state of new stock issues, or issues of subscription warrants

or bonds with subscription warrants by a method other than

allocation to shareholders

(b) The state of change in the ownership of the shares pertaining to

the stock, etc. held by parties having special interests, etc.

b. Where a holder of a stock, a subscription warrant or a bond with

subscription warrants has made an arrangement concerning the

holding of such securities for a certain period after listing with an

initial listing applicant or with a financial instruments business

operator which enters into the principal underwriting agreement

with an initial listing applicant, such details.




interest or investor

protection


of the Regulations]


(1) The details of the rights of shareholders or holders of foreign stock

depositary receipts, etc. and the state of their exercise are not

unfairly restricted.

(2) The corporate group of an initial listing applicant does not have an

ongoing lawsuit or dispute, etc. which would have a material

impact on management activities and business performance.

(3) Where the domestic stock, etc. pertaining to an initial listing

applicant is shares without voting rights or shares with a small

number of voting rights, all of the following a. to f. shall be met:

a If a company is controlled with an extremely small ratio of equity

contribution, a scheme of shares without voting rights or a small

number of voting rights is expected to be dissolved.

b Where conflicts of interest arise between shareholders of different

classes, it is deemed that protection measures can be taken so that

shareholders of a domestic stock, etc. pertaining to such initial

listing applicant are not unfairly damaged.

c. Where the issuer of the domestic stock, etc. pertaining to such

initial listing application carries out a transaction with an entity

enumerated in the following (a) to (c) (including transactions, out

of transactions carried out between an entity enumerated in the

following (a) to (c) and such issuer on behalf of a third party and

those between such issuer and a third party, where an entity

enumerated in the following (a) to (c) has a material impact on

such issuer concerning such transactions), it is deemed that


55

measures to protect minority shareholders are expected to be able

to be taken:

(a) A parent company

(b) The controlling shareholders (excluding a parent company) and

their close relatives

(c) The company, etc. whose majority of voting rights are held by the

entities enumerated in the preceding (b) for their own account

that holds the majority of the voting rights on its own account and

a subsidiary of such company, etc.

d. Where the domestic stock, etc. pertaining to such initial listing

application are shares with a small number of voting rights, shares

with a large number of voting rights shall be converted to shares

with a small number of voting rights when the transfer of such

shares, etc. is carried out.

e. Where the domestic stock, etc. pertaining to such initial listing

application has preferential contents concerning dividends from

retained earnings, as a general rule, estimated profits for two (2)

years after the end of the business year immediately prior to listing

application date and a distributable amount as of the end of the

business year immediately prior to the listing application date are

deemed to be good, and it is expected that the issuer of such

domestic stock, etc. will record enough profits to carry out

dividends from retained earnings pertaining to such domestic

stock, etc.

f. The interests of shareholders and investors are deemed to be highly

unlikely to be undermined.

(4) It is deemed appropriate from the viewpoint of the public interest

or investor protection.


56

c. Eligibility Requirements (Growth Market)

Item Requirements

1. Corporate growth

potential

The company has growth

potential


Regulations]


(1) The profit/loss situation or financial condition of the corporate

group of the initial listing applicant is expected to rise. An initial

listing applicant that falls under the following a or b shall be

handled as being in a situation where its profit/loss situation or

financial condition is expected to rise.

a. From the business plan, it can reasonably be expected to achieve

sustainable growth from the fiscal year of the application.

b. In the case of a company that is an anticipatory investment

prospect expected to achieve sustainable growth in the future,

from the business plan, it is expected to achieve net income within

five (5) years counting from the fiscal year of the application.

(2) There are reasonable grounds for the competitive edge and

business environment on which the business plan is based.

(3) There are no questions regarding the current state or the basis for

plans for staff allocation in the company and construction of

facilities to achieve the business plan.

(4) There are no factors, regarding matters which are the premises of

the main business activities of the corporate group of the initial

listing applicant, will hinder the continuity of such matters.

2. Establishment of sound


internal management

systems in accordance

with the stage of growth


internal management

systems have been

established in accordance

with the company's stage

of growth and function

effectively


(1) The system to ensure the appropriate execution of duties of

officers of the corporate group of an initial listing applicant is

recognized to be properly developed and appropriately operated in

light of matters including those enumerated in the following a. and

b.:

a. Organ design and composition of executives whereby effective

check and balance functions will be provided for the execution of

duties of executives of the corporate group of the initial listing

applicant and effective audit can be performed.

b. Check and balance functions are implemented and audit is

performed for the execution of executives of the corporate group

of the initial listing applicant to ensure efficient management.


57

Regulations]


(2) The mutual relative relationship among officers of an initial listing

applicant, its composition, the actual working situation or the state

of concurrent positions as officers and employees, etc. at another

company, etc. are deemed not to impair the fair, faithful, and

proper execution of officer duties or effective audit of such initial

listing applicant. In this case, where a spouse, blood relative within

the second degree of kinship, and relations by affinity of directors,

accounting advisors, executive officers, or persons equivalent

thereto assume a position as an auditor, a member of an audit

committee, or persons equivalent thereto, it shall be deemed to

impair effective audit.

(3) The corporate group of an initial listing applicant is deemed to

adopt accounting standards suited to its actual situation and, in

addition, a necessary accounting structure is deemed to be


(4) It is recognized that an effective system to comply with laws and

regulations, etc. concerning management activities and other

matters in the corporate group of an initial listing applicant is

prepared and operated appropriately.

(5) The internal management system is deemed to be established

properly and operated appropriately so that an initial listing

applicant and its corporate group carry out effective management

activities in light of matters including those enumerated in the

following a. and b.:

a. A necessary managerial and administrative system required to

ensure efficiency of management activities and internal

check-and-balance functions of the corporate group of an initial

listing applicant have been properly established and appropriately

operated.

b. An internal audit system of the corporate group of an initial listing

applicant is properly established and appropriately operated.

(6) Necessary personnel are deemed to be secured in order to carry

out stable and continuous execution of management activities and

maintain the internal management system of the corporate group

of an initial listing applicant.


58

3. Reliability of Corporate

Actions

Corporate actions which

cause market disorder are

not expected


Regulations]


(1) The corporate group of an initial listing applicant is deemed, as a

general rule, to not unfairly grant to or enjoy benefits from relevant

parties or other specific entities through a transaction or any other

management activities in light of matters including those

enumerated in the following a. and b.:


an initial listing applicant and relevant parties or other specific

entities, and continuance of such transaction is reasonable and its

terms and conditions including the transaction price are not clearly

disadvantageous for the corporate group of an initial listing

applicant.

b. The interests of the corporate group of an initial listing applicant are

not unfairly undermined due to relevant parties and other specific

entities of the corporate group of an initial listing applicant giving

priority to their own interests.



applicant are deemed to be independent of such parent company,

etc. in light of matters including those enumerated in the following

a. to c.:



corporate group of the parent company, etc., the state and

possibility of business line adjustment made by the corporate

group of the parent company, etc. and any other matters, the

initial listing applicant is not deemed to be substantially a business

division of such parent company, etc.


company, etc., as a general rule, has not been coercing or inducing

transactions which will undermine the interests of such parent


applicant, such as transactions that have markedly different terms

and conditions from those of normal transactions


an initial listing applicant is deemed not to excessively depend on

the parent company, etc. and not hinder continuous management

activities.


59

(3) The management of the corporate group of an initial listing

applicant has insight into the responsibilities and significance of

being listed on a financial instruments market.

(4) An initial listing applicant shall not fall under any of the following a.

through c.

a. In case where the listing applicant plans to effect merger, divesture

of business, or become a subsidiary or non-subsidiary within three

years from the end of the business year following the initial listing

application date, TSE determines that the initial listing company

would not be a de facto surviving company through any of such

acts;

provided that this will not apply to cases where it is determined

that the merger is effected to make any company without

substance a surviving company and the divesture is determined to

be a divesture of business to receive the business from the parent

company.

b. The initial listing applicant plans to effect a merger where the initial

listing applicant becomes a dissolved company, a share exchange

or share transfer where the initial listing applicant becomes a fully

owned subsidiary of another company within three years from the

end of business year immediately preceding the initial listing

application date.

c. The initial listing applicant plans to delist its stock by means of

acquisition of all the shares by large shareholders, management,

employees or other specified persons or other means within three

years from the end of business year immediately preceding the

initial listing application date.

(5) Where an initial listing applicant has introduced a takeover

defense measure, the initial listing applicant complies with the

matters enumerated in the following (a) to (d):




(b) Transparency:

Conditions of implementation and abolishment of takeover defense

measures shall not depend on arbitrary decisions by the

management;



60



factors which may cause unpredictable damage to investors; and




(6) The corporate group of an initial listing applicant has developed a

corporate structure to prevent anti-social forces from intervening in

corporate activities, is making efforts to prevent such intervention,

and such efforts are deemed appropriate in light of the public

interest or investor protection.

(7) The corporate group of the initial listing applicant has not recently

committed material violations of laws and regulations or acts

against the public interest, and furthermore is not conducting acts

which are likely to become a material violation of laws and

regulations or work against the public interest in the future.



details, etc.

The company is capable of

appropriately disclosing

corporate details, etc.


Regulations]




will have a material impact on management and to disclose it to

investors in a timely and appropriate manner. Moreover, its system

for the preemptive prevention of insider trading is deemed to be

developed and operated appropriately.



in compliance with laws, regulations, etc., and appropriately

contain the matters enumerated in the following a. to c. and other

matters in consideration of the state of the business line and the

business condition of an initial listing applicant and its corporate

group:


technologies with growth potential, features of its business model,

business environment, schedule or state of progress until full

business launch, analysis and explanation pertaining to the state of

financial condition, management performance & receipt and

disbursement of funds, the state of the related companies, the

state of R&D activities, the state of major shareholders, the state of

officers & employees, dividend policy, and purposes of funds raised

for capital increase through a public offering concerning an initial

listing applicant and its corporate group.


61

b. Matters that should be considered as risk factors for an initial listing

applicant when investors make investment decisions, such as the

small number of years in business operation, the state of the

occurrence of cumulative losses or business losses, management

dependence on a specific officer, the state of competition for

business with other companies, uncertainties of markets and

technologies, and the state of support for the purpose of the

administration of business from a specific entity, etc., concerning

an initial listing applicant.



the corporate group of an initial listing applicant:

(a) Details of the matters which are the premises of the main


applicant

(b) Where the validity period of permission and authorization, etc.

and any other time limit is specified by laws and regulations or a

contract, etc., such time limit

(c) Where cancellation, rescission, and any other event of

permission and authorization, etc. are stipulated by laws and

regulations or a contract, etc., such fact

(d) With regard to the matters which are the premises of the main


applicant, the effect that there is no factor which hinders their

continuity, and if there is such factor, the effect that it will have

a material impact on business activities

(3) An initial listing applicant is able to appropriately develop a

medium-term management plan and hold briefings and other

sessions for investors.




trading act with its relevant party or any other specific entity or

adjusting share ownership ratios, etc.

(5) If an initial listing applicant owns a company which in effect holds

a majority of voting rights, the disclosure on the company must be

effective and meet either a. or b. below;

provided that this will not apply to cases where the actual

relationship between the initial listing applicant and its apparent


62

major shareholding company is thin and the shareholding by the

majority shareholding company has been made for the fostering of

investment and has not been made for substantially controlling the

business activities of the initial listing applicant.

a. Stock, etc. issued by the majority shareholding company of an

initial listing applicant is listed on a domestic financial instruments

exchange (including cases where a stock, etc. issued by such

parent company, etc. is listed or continuously traded on such

foreign financial instruments exchange, etc., and the state of

disclosure on corporate affairs in a country in which such parent

company, etc. or such foreign financial instruments exchange, etc.

is located is not deemed to markedly lack investor protection).

b. The listing applicant can appropriately grasp the facts, etc.

concerning the majority shareholding company which may

significantly affect its management and the applicant undertakes in

writing that the majority shareholding company agrees to

appropriately disclose to investors any information of its corporate

information which may have significant effect on the management

of the initial listing applicant.



deemed appropriate from the viewpoint of investor protection.

(7) Where an initial listing company is a foreign company, the stock,


continuously traded on a foreign financial instruments exchange,

etc. and the initial listing application is made only to the Exchange,

the "Securities Report for Initial Listing Application (Part I)" shall


a. Matters enumerated in the following (a) and (b) for the period from

the day that falls one year prior to the end of the first business year

immediately before the initial listing application date to the day

immediately prior to the listing date:

(a) The state of new stock issuance, or issuance of subscription

warrants or bonds with subscription warrants by a method other

than allocation to shareholders

(b) The state of change in the ownership of the shares pertaining to

the stock, etc. held by a party having special interests, etc.

b. Where a holder of a stock, a subscription warrant or a bond with


63

subscription warrants security has made an arrangement

concerning the holding of such securities for a certain period after

listing with an initial listing applicant or with a financial instruments

business operator which enters into the principal underwriting

agreement with an initial listing applicant, details of such

arrangement.




interest or investor

protection.


Regulations]


(1) The details of the rights of shareholders or holders of foreign stock

depositary receipts, etc. and the state of their exercise are not

unfairly restricted.

(2) The corporate group of an initial listing applicant does not have an

ongoing lawsuit or dispute, etc. which would have a material

impact on management activities or business performance.

(3) Where the domestic stock, etc. pertaining to an initial listing

application is shares without voting rights or shares with a small

number of voting rights, all of the following a. to f. shall be met:

a. If a company is controlled with an extremely small ratio of equity

contribution, a scheme of shares without voting rights or a small

number of voting rights is expected to be dissolved.

b. Where conflicts of interest arise between shareholders of different

classes, protection measures are deemed to be able to be taken so

that shareholders of the domestic stock, etc. pertaining to such

initial listing application are not unreasonably damaged.

c. Where the issuer of the domestic stock, etc. pertaining to such

initial listing application carries out a transaction with an entity

enumerated in the following (a) to (c) (including transactions, out

of transactions carried out between an entity enumerated in the

following (a) to (c) and such issuer on behalf of a third party and

those between such issuer and a third party, where an entity

enumerated in the following (a) to (c) has a material impact on

such issuer concerning such transactions), it is deemed that

protection measures for minority shareholders are expected to be

able to be taken:

(a) A parent company

(b) The controlling shareholders (excluding a parent company) and

their close relatives

(c) The company, etc. in the preceding (b) that holds the majority

of the voting rights on its own account and a subsidiary of such

company, etc.


64

d. Where the domestic stock, etc. pertaining to such initial listing

application is shares with a small number of voting rights, shares

with a large number of voting rights shall be converted to shares

with a small number of voting rights, when transfer, etc. of such

shares is carried out.

e. Where the domestic stock, etc. pertaining to such initial listing

application has preferential contents concerning dividends from

retained earnings, estimated income for two (2) years after the end

of the business year immediately prior to the listing application

date and a distributable amount as of the end of the business year

immediately prior to the listing application date are, as a general

rule, deemed to be good, and it is expected that the issuer of such

domestic stock, etc. will record enough income to carry out

dividends from retained earnings pertaining to such domestic

stock, etc.

f. The interests of shareholders and investors are deemed to be highly

unlikely to be undermined.

(4) It is deemed appropriate from the viewpoint of the public interest

or investor protection.


65

d. Documents to be Filed


application. Each of such documents is requested to be filed when the requirements for the filing





(a) Documents to be filed at the time of conducting the initial listing application


1 Preliminary Application Form for initial listing of securities





6 Financial Statement of account for non-listed majority holding company, etc (Note 3)

7 Written statement of assurance of parent company’s concerning cooperation regarding listing

examination, etc. of parent company (Note 3)

8 Written statement of assurance of parent company’s concerning timely disclosure,

etc. of parent company (Note 3)


10 Minutes of the Meeting of the Board of Directors on initial listing application

11 A legal opinion






15 Table of Change in Number of shareholders or of holders of Foreign Stock Depositary Receipts,

etc. (Note 5)





19 Sponsor’s Letter of Confirmation



21 JASDAQ Listing Application Report



24 Written confirmation concerning timely disclosure, etc.


66

25 Audit Reports, Interim Audit Reports or Quarterly Review Reports （Excluding applicants

exempted under the clause in Rule 211, Paragraph 6 of the Rules)

26 Summary Audit Reports, Summary Interim Audit Reports or Summary Quarterly Review Reports

(Excluding Applicants exempted under the clause in the Rule 211, Paragraph 6 of the Rules)



29 Corporate Report（materials describing the applicant's business and operation)

30 Materials sent to Shareholders and official publications (including the notice of the general

shareholders' meeting) regarding the General Shareholders' Meetings in the past two (2) years

31

Documents (such as prospectuses) sent to shareholders regarding rights issue in the past two



32 A copy of the Annual Report sent to shareholders or holders of Foreign Stock Depositary

Receipts in the past one (1) year

33 A copy of the Interim Report and Quarterly Reports sent to shareholders or holders of Foreign

Stock Depositary Receipts in the past one (1) year

34 A copy of the Securities Report, Annual Report, Interim Report, Quarterly Reports and

Extraordinary Reports submitted to the Prime Minister etc. in the past one (1) year (Note 1)

35 A copy of the Securities Registration Statement (including amendments thereto) submitted to

the Prime Minister etc. in the past one (1) year (Note 1)



37 Relevant laws pertaining to the incorporation of the applicant in the applicant's jurisdiction

38 A set of documents submitted by the applicant to relevant authorities in relation to application

of tax refund



40 Sample of foreign stock certificates and etc. (to be attached stock sample list)

41 Written oath concerning matters relevant to the applicant

42

Financial statements and supplementary statements about the business year that the company

has not made its consolidated financial statements and/or non-consolidated financial

statements in last five years (copy) (Note 8)

43 List of meetings of Board of Directors for the last two years and the year in which the

application is filed (Note 8)

44 Minutes of meetings of Board of Directors for the latest year and the year in which the

application is filed (copy) (Note 8)

45 List of meetings of Board of Company Auditors for the last two years and the year in which the

application is filed (Note 8)

46 Minutes of meetings of Committee of Company Auditors for the latest and the year in which the


47

A series of company auditors’ (audit committee’s) audit materials ranging from the audit

planning and implementation to report, etc. for the latest year and application year (copy)

(Note 8)

48 Financial statements, business report or corporate tax return of related parties of the corporate

group of the applicant for each of the last two years (Note 8)


67

49 Monthly performance management data for the previous year and the year in which the


50

Annual budget plan and medium-term management plan and (the series of internal data used

for the preparation thereof) for the fiscal year in which the listing application is filed (copy)

(Note 8)

51 Contract which is important for Material contracts for the management

52 Management organization chart and assignment plan as of listing date (Note 8)

53 Catalogs and pamphlets for products, goods, and services, etc. (Note 8)

54 Flow chart (related to procurement and sales procedures) (Note 8)

55




56

JASDAQ Listing Application Report 15．(5) Materials were documenting the correspondence

described in the "management of timely disclosure materials, etc." (company regulation and

manuals, etc.)

57 A series of internal audit materials ranging from the audit planning and implementation to

report, etc. for the recent year and application year (copy)

58

Financial statements, business reports or a document submitted by the applicant to relevant

authorities in relation to application of tax refund of each fiscal year in the last two years of

related parties of the applicant company group. (Note 8) (Note 9)


68

(b) Documents to be filed after the initial listing application where necessary /applicable


59

Quarterly Reports for Initial Listing Application where: (Note 1) (Note 2)

◆ The listing day falls anytime after three (3) months from the beginning of the business

year containing the initial listing application day, the Quarterly Report for Initial Listing








60

Notice of board meeting resolutions or General Shareholders' Meeting resolutions during the


listing day

61




62



(Note 1)

◆Securities Registration Statement （including amendment thereto）and document attached

thereto

◆Notice of effectiveness of Securities Registration Statement


63 Notification of Initial Listing Application Securities Report Amendment (at time of effect of

amended details)


69

(c) Documents to be filed after the initial listing application but no later than listing

approval is granted







69 A document describing the matters relating to a controlling shareholder, etc PDF version

70 Financial Statement of account for non-listed majority holding company, etc PDF version (Note

3)

71





73




74 Quarterly Report of Initial Listing Application (Note 1)

75 Quarterly Report of Initial Listing Application PDF version (Note 1)


77 Drafted disclosures (matters concerning growth potential) as of listing date

(d) Documents to be filed by the applicant making a public offering, etc.


78 Expected Public Offering or Secondary Offering Plan



(accompanying documents of calculation of the expected market capitalization)

81 Press release of Notice of Provisional Conditions and the reasons for deciding them



price range) (Note 1)

84 Press release of Notice of the Determination of Offering Prices and the reasons, etc. therefor



(Note 1)

87 Notice on effectiveness of Securities Registration Statement

88 Notice of execution of Public Offering or Secondary Offering



70


processing for disclosure as prescribed by Article 27-30-2 of the Financial Instruments and Exchange Act), the submission

of such documents is not required.

Note 2: The latest quarterly report is only required in the business year containing the initial listing application day. The applicant

applying for a multiple listing need not submit the document.

Note 3: The applicant only needs to submit the document when an applicant has a non-listed majority holding company. However,

"Financial Statement of account for non-listed majority holding company, etc" and "Written statement of assurance of

parent company’s concerning timely disclosure, etc. of parent company" are needed to submit, where none of the following

is the case:

(1) the shares issued by the parent company, etc. is listed on a financial instruments exchange in Japan

(2) the shares issued by the parent company, etc. is listed or continuously traded on a foreign financial instruments










Note 7: In cases where the foreign stock, etc. pertaining to initial listing application is not listed or continuously traded on a

domestic financial instruments exchange or foreign financial instruments exchange, etc., submission is only required when

public offering or secondary offering will not be conducted for the foreign stock, etc. pertaining to initial listing application.

Note 8: When the company did not make the documents or is too difficult to made them due to a foreign company, please contact

New Listings, Tokyo Stock Exchange.

Note 9: Submission only required in cases where the applicant for “Growth Market”.




71

(4) Listing Examination Schedule (Primary Listing)

The listing examination schedule of stock of foreign companies may vary dependent on the legal

basis for foundation, accounting standards applied or whether the application relates to single or

multiple listing. For reference, the following shows a typical listing schedule for foreign companies.

The examination period for foreign companies may take three months from the acceptance of listing

application. Actual examination will be carried out by JPX Regulation entrusted by TSE to do so.

Standard Examination Schedule (Foreign companies)4, 5

4 The schedule shown here is a typical example and may be subject to change. 5 TSE shall examine the regulatory system of the home country of an applicant company in preliminary confirmation procedure. Note that, it may take longer time than the others when the applicant company is the first from its country to apply. Please refer to forms of "Confirmation Report prior to Initial Listing Application (for Applicant Company)" and "Confirmation Report prior to Initial Listing Application (for Trading Participant Handling Matters)" at A.

5. Listing Examination by TSE (Multiple Listing)

72


When a foreign company that is already listed on the market of its home country lists on TSE, it

shall be treated as a multiple listing. Subset of the listing criteria of multiple listing are different from

primary listing. The formal requirements and the eligibility requirements of each market are as

follows.

In application of the rules and regulations of TSE to a foreign country or a foreign corporation

where the foreign country or the foreign corporation is an issuer, etc. of a listed security, TSE shall

take into account legal systems, practices and customs, etc. in such foreign country or the country,

etc. of the foreign corporation.


(1) Main Markets (TSE 1st Section and 2nd Section)(Multiple Listing)


The formal requirements for the purpose of multiple listing are similar to those for the purpose of

primary listing in many aspects. However the following criteria differ from those for primary listing.

For the formal criteria for primary listing, please refer to Formal Criteria at section 6(1) a.

Item Requirements

TSE 1st Section TSE 2nd Section

Status of distribution of a

foreign stock, etc.6


the Regulations]

A remarkably large number of shares is deemed not to be held by

specific shareholders or holders of a foreign stock depositary receipt,

etc.

Tradable shares

(expected at listing)7


the Regulations]

[Rule 205, Item 2-a of the

Regulations]


Regulations]


Regulations]

The number of tradable shares :

20,000 units or more; and

The number of tradable shares :

4,000 units or more; and

6 Required for multiple listing. 7 The market capitalization of the tradable shares” and “The number of tradable shares (as a percentage of the total number of issued shares outstanding)”, which are required for primary listing, are not required for multiple listing.


73

b. Eligibility Requirements and Special Exceptions to Multiple Listing of Foreign Companies

The same eligibility requirements as those for primary listing will apply. For the requirements of

eligibility requirements, please refer to sections 6(1) b.

Where an initial listing applicant is a foreign company, and the main market of a foreign stock, etc.

issued by such initial listing applicant is other than TSE and, furthermore, where TSE deems it

appropriate in light of listing of securities, timely disclosure of the issuer of listed securities, delisting,

the state of the development and operation of the legal system and rules concerning listed securities

in such main market, they shall be treated as appropriate for all or part of the examination.

[II. 12 of the Guidelines]

In addition, “Special Exceptions to Multiple Listing Foreign Companies” is not for Mothers market or

JASDAQ market but for Main Markets (TSE 1st Section and 2nd Section).


The same documents as those for primary listing are required to be filed. For details, please refer

to section 6(1)c.


74

(2) Mothers (Multiple Listing)




For the formal criteria for primary listing, please refer to Formal Criteria at section 6 (2) a.

Item Requirements

Tradable shares8



the Regulations]


Regulations]

The number of tradable shares : 2,000 units or more; and



eligibility requirements, please refer to section 6 (2) b.



to section 6 (2) c.

8 “The market capitalization of the tradable shares” and “The number of tradable shares (as a percentage of the total number of issued shares outstanding)”, which are required for primary listing, are not required for multiple listing.


75

(3) JASDAQ Market (Multiple Listing)

a. Formal Requirements (Standard and Growth Markets)



For the formal criteria for primary listing, please refer to Formal Criteria at section 6 (3) a.

Item Multiple listing

(Standard and Growth) Primary listing

Implementation of

public offering or

secondary offering


Regulations]

― Public offering or secondary offering at the

higher of the number of shares described in

the division mentioned below or 10% of the

number of shares issued expected at the time

of listing shall be implemented during the

period from the listing application date to the

previous day of the listing date.

(a) Trading unit comprising 1,000 shares:

one million shares

(b) Trading unit comprising 500 shares:

500,000 shares

(c) Trading unit comprising 100 shares:

100,000 shares

(d) Trading unit comprising 50 shares:

50,000 shares

(e) Trading unit comprising 10 shares:

10,000 shares

(f) Trading unit comprising 1 shares: 1,000

shares

b. Eligibility Requirements (Standard and Growth Markets)


eligibility requirements, please refer to sections 6 (3) b and 6 (3) c.



to section 6 (3) d.


76

(4) Listing Examination Schedule (Multiple Listing)

Listing schedules of foreign companies may vary dependent on their legal basis for their

foundation and the accounting standards applied. For the listing schedule of foreign companies,

please refer to section 6 (4).

6. Listing of JDR

77

6. Listing of JDR

(1) What is JDR?

Japanese Depositary Receipt (JDR) is a beneficial interest in trust issuing beneficiary certificate

whose trust assets are foreign stocks, etc., as defined in the Trust Act (Act No. 108 of 2006) provided

in Rule 2, Paragraph 1, Item 14 of the Act. JDR is often called “Japanese ADR” or “Japanese GDR.”

In the United States and Europe, the depositary receipt scheme has traditionally allowed foreign

companies to list their stocks on US stock exchanges. In the United States, American Depositary

Receipts or ADRs are issued and listed on a US stock exchange pursuant to the laws of the United

States of America. In the United Kingdom, depositary receipts (Global Depositary Receipts or GDRs)

are issued and listed on UK stock exchanges mainly under the laws of European jurisdictions. A

depositary receipt represents a negotiable certificate issued by a depositary facility as a document

evidencing the stocks (hereinafter, “underlying stock”) deposited at the depositary facility located in

the home country in which the depositary receipt is issued, and it is listed as an alternative for the

underlying stock. This listing of shares via depositary receipt scheme is an effective fund-raising

mechanism for any foreign company whose underlying stock has difficulty or inconvenience in direct

listing in a foreign market (e.g. when foreign investors are restricted from acquiring underlying stock

of a company in the country, or when the governing laws in the country in which the underlying stock

is issued do not allow the issuer to list the underlying stock in any foreign stock exchange). JDR is

positioned as a Japanese version of depositary receipt. To be more precise, JDR is not a depositary

receipt but a beneficiary certificate.

In November 2007, TSE prepared listing rules for JDRs for foreign stocks, and made a partial

revision to the rules in February 2008. JDR is defined as “a foreign stock trust beneficiary certificate”

in the Rules (Rule 2, Item 10 of the Rules).

6. Listing of JDR

78

(2) JDR Issue Scheme

An example of JDR issue scheme is shown in the diagram below. The following procedures are

expected.

(1) Foreign Company assigns the stock (underlying stock) to a Securities Company (Type I

Financial Instruments Business Operator) which serves as Trustor

(2) Securities Company (Trustor) entrusts the underlying stock to a Trust Bank serving as Trustee.

(3) Trust Bank (Trustee) consigns the custody of the underlying stock to a Foreign Financial

Institution (Custodian).

(4) Trust Bank (Trustee) issues JDR for Trustor.

(5) & (6) Securities Company (Trustor) performs an IPO via JDR, and investors pay the value.

(7) After JDRs are listed on the TSE market, investors may buy and sell JDRs in the TSE market.

JDR Issue Scheme (Example)9

9 The above example indicates a basic scheme for JDR and does not exclude other schemes.

6. Listing of JDR

79

(3) Listing of Stock via JDR

When an issuer lists its stock on the TSE market via JDR scheme, the statutory disclosure under the

Financial Instruments and Exchange Act (See section 10) and the procedures under the listing rules

are almost the same as the case when listing the stock (underlying stock) directly on the TSE market.

Therefore, the Foreign Company is required to implement the statutory disclosure as issuer and also

to make a listing application to TSE as a listing applicant.

(4) Handling of DRs under the Formal Requirements

In addition to the JDR, listing of stock via GDR or ADR is also possible. There are two different types

of formal requirements on the cross-listing of stock via Depositary Receipt (“DR”): one is to assess the

underlying stock deposited in addition to the DR; and the other is to assess only the DR. The relevant

formal requirements are as shown below.

For your reference, the table below indicates the formal requirements in the case of cross-listing in

the main market (TSE First and Second Sections). The same will apply to cases of cross-listing in TSE

Mothers and JASDAQ markets.

Handling of DR

(JDR/ADR/GDR/etc.)

Reference: Listing Examination Criteria for

Main Markets (Multiple Listing)

TSE First Section TSE Second Section

Number of shareholders

(estimated as of listing

date)

Number of DR Holders

(on a world wide basis)

*JASDAQ only requires the

number of holders in Japan.

2,200 persons or

more 800 persons or more

Tradable shares

(estimated as of

listing date)

Significantly-large number of shares shall not

be held by a specific shareholder or owner of

foreign stock depositary receipts, etc.

(1) Number of tradable

shares

Outstanding number of

DRs


20,000 units or more 20,000 units or more

(2) Market capitalization

of tradable shares


DRs


―

(3) Ratio of tradable

shares to listed

shares


DRs


―

Market capitalization

(estimated as of listing

date)

Market capitalization of

all the outstanding

shares and DRs

(including the market

capitalization of other

class shares listed)

JPY 25 billion or more JPY 2 billion or more

(Reference) Deposit

agreement, etc. ―

Deposit agreement shall be concluded in the

case of foreign stock depositary receipt, etc.

7. Finance through Listing (Public Offering and Secondary Offering)

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(1) Procedure for Public Offering, etc. for Listing

Under TSE Rules, there are no special rules for foreign companies regarding the procedure of public

offering or secondary offering on listing. In general, foreign companies are required to take the same

procedures as Japanese companies. In addition, all the listing procedures in the past fifteen years

have been performed via book-building.10, 11

(i) Book-building (Survey on investors' demand for public offering, etc. before listing that is

conducted pursuant to TSE Rules).

(ii) Public offering, etc. through competitive bidding (Public offering, etc. before listing that is

conducted pursuant to TSE Rules)

[Rule 233 of the Rules]

10 There have been no cases where Rule 233 of the Rules applied to foreign companies. Therefore, foreign companies are not solely subject to the above procedures. 11 As far as a company incorporated in Japan goes, when a company allocates shares for subscription through third party allotment, etc. on and after the date one year prior to the final date of the fiscal year immediately before the listing application date, both the listing applicant and the person who received the allocation of shares are required to submit a notice in writing to TSE with regard to the continued holding of the shares for subscription and the state of holding of the shares when transferred and inquired by TSE and also submit a commitment in writing to TSE to the effect that they will affirm public inspection on the above document and the description or any other matters TSE considers necessary. In cases where the listing applicant fails to submit the document to TSE, TSE will refuse the listing application or cancel the approval. In addition, TSE’s accreditation as to whether the shares for subscription are allocated or not will be made on the basis of the due date of payment or the final date of the payment period with respect to the shares for subscription.


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(2) Finance Schedule on Listing (in the case of an Unlisted Company)

The chart below indicates a model schedule up to the listing of shares. As this schedule is only a

model, the actual finance schedule (including pre-marketing period, book-building period, board of

directors’ meeting for resolution of terms and conditions thereof, and timing of submission of

Securities Registration Statement) may differ according to each applicant.

8. Statutory Disclosure

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Statutory disclosure under the Financial Instruments and Exchange Act shall be classified into two

categories of disclosures: Offering Disclosure, which is required at the time of offering securities; and

Continuous Disclosure, which is required after offering or listing securities.

(1) Offering Disclosure

a. Securities Registration Statement

(a) Filing of Securities Registration Statement

In normal cases, IPOs (public offering and secondary offering) of shares of foreign

stock are conducted in the Japanese market before listing. In this case, before the

solicitation for subscription for sales of shares of foreign stock, the foreign company is

required to file the Securities Registration Statement with the Kanto Finance Bureau as

part of Offering Disclosure (stipulated in Article 4, Paragraph (1) of the Financial

Instruments and Exchange Act). The form of the Securities Registration Statement, the

matters to be described and required accompanying documents, etc. are defined by law

(please refer to section 10 (1) a (c)).

The Securities Registration Statement, other disclosure documents and the

accompanying documents shall be filed and made available to the public via an electronic

disclosure system called EDINET (Electronic Disclosure for Investors' NETwork), managed

by the Financial Services Agency.

Please keep in mind that the foreign company is required to appoint a standing proxy

for the purpose of filing the Securities Registration Statement (stipulated in Article 7,

Paragraph (1) of the Cabinet Office Ordinance on Disclosure of Information, etc.). In

practice, Japanese law firms are usually appointed for that purpose, and such law firms in

the capacity of standing proxy in Japan file the Securities Registration Statement on

behalf of foreign issuers.

(b) Prohibition of Solicitation before the Notification of Securities Registration

Statement and Transactions before the Effective Date

As stated above, as it is required to file the Securities Registration Statement with the

Kanto Finance Bureau before the solicitation for subscription for sales of shares of foreign

stock (Article 4, Paragraph (1) of the Financial Instruments and Exchange Act), such

solicitation to Japanese investors (promotion etc.) is prohibited before the filing of the

Securities Registration Statement.

In addition, it shall not be allowed to have Japanese investors acquire any shares of

foreign stock or sell any shares of foreign stock to Japanese investors before the

Securities Registration Statement takes effect (Article 15 of the Financial Instruments and

Exchange Act). The period required for the Securities Registration Statement to take

effect (waiting period) is usually fifteen (15) days (stipulated in Article 8, Paragraph (1) of

the same act).


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However, pre-hearing which refers to a preliminary hearing conducted by an issuer

and/or underwriters regarding the prospective of investors’ demand for the securities that

plans to offer or sale in advance should not be deemed as solicitation of securities,

together with targeting the Specified Investors (tokutei-toushika) or existing

shareholders holding 5% or more of all the voting securities of the issuer and taking

certain required measures (Consideration Points with respect to Disclosure of Corporate

Affairs, etc. (the Disclosure Guidelines 2-12-2)).

(c) Matters to be Described and Required Accompanying Documents, etc. of the

Securities Registration Statement

Foreign companies are required to file Form 7 of the Securities Registration Statement

(stipulated in Article 8, paragraph 1, item (4) of the Cabinet Office Ordinance on

Disclosure of Information, etc.). Description items required in Form 7 are as follows:

As stated above, foreign companies are required to include the financial statements for

the recent three years in “Part IV Additional Information” of the Securities Registration

Cover Page

Part I Information Concerning Securities

I Terms and Conditions of Primary Offering

II Terms and Conditions of Secondary Offering

III Special Description of Third Party Allotment

IV Other Description

Part II Corporate Information

I Outline of the Legal and Other Systems in the Home Country

II Outline of the Company

III Description of Business

IV Conditions of Facilities

V Description of the Company

VI Financial Conditions

(*)This includes the financial statements for the recent two or three years.

VII Trend of Foreign Exchange Rates

VIII Summary of Issuer's Share Handling, etc. in Japan

IV Reference Information of Issuer

Part III Information on Guarantor, etc.

(*)This is required for Guaranteed Bonds but is not required for

Foreign Stock.

Part IV Additional Information

(*) Financial statements for the recent five fiscal years other than

those listed in VI of Part II shall be posted; provided, however, that

this does not applicable to cases where financial statements for the

recent three fiscal years are posted in VI of Part II.


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Statement. For details of accounting standards and audit certificates of the financial

documents, please see section 10 (3).

In addition, foreign companies are required to file the following documents as

accompanying documents (Article 10, paragraph (1), item (4) of the Cabinet Office

Ordinance on Disclosure of Information, etc.).

1) Articles of Incorporation

2) Minutes of the board of directors' meeting, etc. (any of the following: a copy of

minutes of the board of directors’ meeting at which a resolution authorizing the

issuance of the securities; a copy of minutes of the board of directors’ meeting in the

case where a resolution of the shareholders’ meeting; a copy of minutes of the

shareholders’ meeting; or certificate evidencing a permission, approval or admission

by the administrative agency regarding the issuance）

3) A certificate of authorization related to changes in the amount of capital (a written

statement containing description sufficient to understand that the company obtained

permission, authorization, or approval from administrative agencies in cases where

such permission, authorization, or approval from administrative agencies is required

for changing the amount of capital of the company)

4) Trust agreement or other major contract (in case of JDR)

5) Certificate of incumbency (a written statement that proves that the representative of a

foreign company submitting such Securities Registration Statement is a person who

has legitimate authority regarding the registration of such offering or secondary

offering of the securities)

6) Power of attorney (a written statement that proves that such foreign company granted

the authority to represent the company for all acts regarding the registration of such

offering or secondary offering of securities to a party domiciled in Japan.)

7) Written legal opinion by a legal expert (certifying that the public offering or secondary

offering is legitimate and the statement contained in the Securities Registration

Statement is correct and accurate)

8) Certificate of authorization pursuant to the Foreign Exchange and Foreign Trade Act (a

written statement that proves that such foreign company obtained such permission in

cases where it is necessary pursuant to Article 21, Paragraph 1 or 2 of the Foreign

Exchange and Foreign Trade Act)

9) A copy of the principal underwriting agreement (a copy of the principal underwriting

agreement that was concluded between such foreign company and a financial

instruments business operator)

b. Obligation of Preparation and Delivery of Prospectus

An issuer who has filed the Securities Registration Statement shall prepare Prospectus

(stipulated in Article 13, paragraph (1) of the Cabinet Office Ordinance on Disclosure of

Information, etc.) and subsequently (or at the same time) deliver Prospectus to investors

(stipulated in Article 15, paragraph (2) of the Cabinet Office Ordinance on Disclosure of

Information, etc.)


85

Description items required to be included in Prospectus are almost the same as shown

above in the Securities Registration Statement. Therefore, in practice, the Securities

Registration Statement as amended to some extent could be used and delivered as the

Prospectus.


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(2) Continuous Disclosure

After listing, foreign companies are required to file Annual Securities Reports, Internal Control

Reports, Quarterly Securities Reports and Extraordinary Reports as part of Continuous Disclosure.

These disclosure documents and the accompanying documents shall be filed and disclosed via

EDINET consistent with the Securities Registration Statement. In addition, the practical submission

of the documents will be made by a standing proxy in Japan, which is also the same with the

Securities Registration Statement.

a. Annual Securities Report

Foreign companies whose shares of stock are listed on a Japanese stock exchange are

required to file Annual Securities Report to the Kanto Finance Bureau within six (6) month

after the end of each fiscal year (stipulated in Article 24, paragraph (1) of the Financial

Instruments and Exchange Act , Article 3-4 of the Order for Enforcement of the Financial

Instruments and Exchange Act).

However, foreign companies shall be allowed to extend the deadline for submission of

Annual Securities Reports by obtaining approval of the FSA Commissioner in cases where it is

deemed that they are unable to submit the reports by the deadline due to unavoidable reasons

such as the laws and regulations or practices in their home country (stipulated in Article 24,

paragraph (1) of the Financial Instruments and Exchange Act, Article 3-4 of the Order for

Enforcement of the Financial Instruments and Exchange Act, Article 15-2-2 of the Cabinet

Office Ordinance on Disclosure of Corporate Information, etc.).

Foreign companies are required to file Form 8 of Annual Securities Report (stipulated in

Article 15, Paragraph 2, Item a. of the Cabinet Office Ordinance on Disclosure of Information,

etc.). Description items required in Form 8 are almost the same as shown above in the

Securities Registration Statement (Form 7). However, “Part I Information Concerning

Securities” and “Part IV Additional Information” are not required in the Annual Securities

Report.

Foreign companies are required to include the financial documents for the most recent two

(2) fiscal years (the financial documents for the most recent fiscal year, in the case where the

financial documents for the most recent fiscal year include information equivalent to

comparative information, prescribed in the Ordinance on Consolidated Financial Statements or

the Ordinance on Financial Statements, etc., and the financial documents for the most recent

two (2) fiscal years have already been disclosed in past submissions of Securities Registration

Statements or Annual Securities Reports) in the Annual Report. For details of accounting

standards applied to and audit certificate on the financial documents, please see section 10

(3).

It is necessary to file the following documents as accompanying documents of the Annual

Securities Report (stipulated in Article 17, Paragraph (1), Item (2) of the Cabinet Office


1) Articles of Incorporation

2) Matters reported or resolved at ordinary general shareholders meeting (Annual Report,


87

etc.)

3) Copy of Trust agreement or other major contract (in case of JDR)


foreign company described in the Annual Securities Report is a person who has

legitimate authority regarding the submission of the Annual Securities Report)


the authority to represent the company for all acts regarding the submission of the

Annual Securities Report to a party domiciled in Japan.)

6) Written legal opinion by legal expert (certifying that the statement as to legal matters

contained in the Securities Registration Statement is correct and accurate)

7) (In cases where a foreign company submitted the Securities Registration Statement,

etc. with respect to bonds issued and outstanding) Copy of any agreement by the

foreign company and the other parties for the purpose that the foreign company will

entrust the credit management or acts for other creditors, the act for itself, or task for

the act for itself, and copy of agreement on payment of the principal and interest.

b. Internal Control Report

Listed companies are required to submit an Internal Control Report each year, together

with Annual Securities Report (stipulated in Article 24-4-1, Paragraph (1) of the Financial

Instruments and Exchange Act). The Internal Control Report is a report which is made by the

management for the purpose of validity assessment of the organization required to secure the

reliability of financial reporting.

In cases where a foreign issuer includes financial documents in the Annual Securities

Report in the home country or a third country and where the Commissioner of the Financial

Services Agency determines that such disclosure is appropriate in the light of the protection of

investors, the foreign issuer may submit the Internal Control Report disclosed in the home

country or third country to the Japanese authority as eligible Internal Control Report.

(Stipulated in Article 24-4-4, Paragraph (1) of the Financial Instruments and Exchange Act;

and Article 12 of the Cabinet Office Ordinance on Disclosure of Information, etc.). In fact,

there are past cases where Internal Control Reports disclosed in the United States, Korea and

Malaysia have been submitted in Japan.

This Internal Control Report shall be audited by an auditing firm, etc., including the auditing

firm which issued the notification to the Financial Services Agency (stipulated in Article 193-2,

Paragraph (2) of the Financial Instruments and Exchange Act). In the case where a company

submits its internal control report during the period of three years from the date on which the

company became an issuer of listed securities, the company is exempted from an obligation to

audit internal control reports (Stipulated in Article 193-2, Paragraph (2) of the Financial

Instruments and Exchange Act; and Article 35-3 of the Order for Enforcement of the Financial

Instruments and Exchange Act)12.

12 However, newly-listed companies that are deemed to exert a strong influence over the market or

over society or over the economy (such as those with capital amounts of 10 million yen or more, or

total liabilities of 100 billion yen or more) would not be subject to the exemption.


88

c. Quarterly Securities Report

Foreign listed companies are required to file Quarterly Securities Reports every three

months (Article 24-4-7, Paragraph (1) of the Financial Instruments and Exchange Act).

Therefore, Quarterly Securities Report shall consist of 1Q, 2Q, and 3Q securities reports. In

addition, the deadline for the submission of the Quarterly Securities Report is within forty-five

(45) days after the end of each quarterly period (Article 24-4-7, Paragraph (1) of the Financial

Instruments and Exchange Act; and Article 4 -2-10, Paragraph 3 of the Order for Enforcement

of the Financial Instruments and Exchange Act).

However, foreign companies shall be allowed to extend the deadline for submission of

Quarterly Securities Reports in cases where it is deemed that they are unable to submit the

reports by the deadline due to unavoidable reasons such as the laws and regulations or

practices in their home country (Article 24-4-7, Paragraph (1) of the Financial Instruments and

Exchange Act; and Article 17-15-2, Paragraph (1) of the Cabinet Office Ordinance on

Disclosure of Corporate Information, etc.).

Foreign issuers are required to file Form 9-3 of the Quarterly Securities Report (stipulated

in Article 17-15, Paragraph (1), Item (2) of the Cabinet Office Ordinance on Disclosure of

Information, etc.). Description items required in Form 9-3 are as follows:

Foreign companies are required to include quarterly financial statements in “V Financial

Conditions” of “Part I Corporate Information” as listed in the above table in the quarterly

reports. For details of accounting standards applied to and audit certificate on the financial

documents, please see section 9 (3).

Foreign companies are required to submit the following documents as accompanying

documents to Quarterly Securities Report (Article 17-15, Paragraph 3 of the Cabinet Office



foreign company described in the Quarterly Securities Report is a person who has

legitimate authority regarding the submission of the Quarterly Securities Report)


the authority to represent the company for all acts regarding the submission of the

Quarterly Securities Report to a party domiciled in Japan.)

Cover Page

Part I Corporate Information

I Outline of the Legal and Other Systems in the Home Country

II Outline of the Company

III Description of Business

IV Description of the Company

V Financial Conditions

VI Trend of Foreign Exchange Rates

Part II Information on Guarantor, etc.

(*) This is required for Guaranteed Bonds and is not required for Foreign

Stock.


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d. Confirmation Letter

Listed companies are required to submit to the Prime Minister a Confirmation Letter to the

effect that they confirmed these documents are in compliance with the applicable laws and

regulations (stipulated in Article 24-4-2 and Article 24-4-8 of the Financial Instruments and

Exchange Act). If a listing company has a Chief Financial Officer, the Confirmation Letter

requires a signature of the Chief Financial Officer as well as the Representative Director

(Stipulated in Article 17-10, Paragraph 1, Item (1) of the Cabinet Office Ordinance on

Disclosure of Information, etc.; Form 9-2).


90

e. Extraordinary Report

Listed companies are required to file an Extraordinary Report without delay when a

significant event exceeding prescribed criteria occurs (Article 24- 5, Paragraph (4) of the

Financial Instruments and Exchange Act).

Main events that are required for the submission of the Extraordinary Report are as listed

below; provided, however, that the submission of the Extraordinary Report is not required in

the case of minor events which do not meet certain conditions (Article 19 of the Cabinet Office


[Non-Consolidated Basis]

1) Public Offering or Secondary Offering of Securities in Foreign Market

2) Issuance of Privately Placed Securities

3) Issuance of Stock Options Not Required for Notification

4) Change in Parent Company or Specified Subsidiaries

5) Change in Major Shareholders

6) Occurrence of Significant Disaster

7) Filing or Settlement of Lawsuit

8) Determination of Stock Swap, Stock Transfer, Absorption-type Company Split,

Incorporation-type Company Split , or Consolidation-type Merger

9) Determination of Transfer or Acquisition of Key Business

10) Change of President or Representative Director

11) Commencement of Bankruptcy Proceedings, etc.

12) Occurrence of Large Uncollectible Claims

13) Occurrence of Event Significant Adverse Effect on Financial Condition and Results of

Operations

14) Occurrence or Change of Initial Public Offering Information

[Consolidated Basis]

1) Occurrence of Significant Disaster at Consolidated Subsidiary

2) Filing or Settlement of Lawsuit at Consolidated Subsidiary

3) Determination of Stock Swap, Stock Transfer, Absorption-type Company Split,

Incorporation-type Company Split , or Consolidation-type Merger at Consolidated

Subsidiary

4) Determination of Transfer or Acquisition of Key Business at Consolidated Subsidiary

5) Commencement of Bankruptcy Proceedings, etc. at Consolidated Subsidiary

6) Occurrence of Large Uncollectible Claims at Consolidated Subsidiary

7) Occurrence of Event Significant Adverse Effect on Financial Condition and Results of

Operations at Consolidated Subsidiary


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(3) Accounting Standards Applied to and Audit Certificate on Financial Documents

a. Accounting Standards

As stated above, foreign companies are required to include their financial statements in

Securities Registration Statement, Annual Securities Report and Quarterly Securities Report.

In the same way as Japanese companies, foreign companies may adopt US GAAP13 or J-GAAP

in consolidated financial statements (or non-consolidated financial statements if the company

does not submit consolidated financial statements) if they satisfy certain requirements.

However, in cases where the Commissioner of the Financial Services Agency determines

that such financial statements are appropriate in light of the public interest or the investor

protection, the foreign issuer may use the financial statements as disclosed in the home

country or another country. (Rule 131, Paragraph (1) & (2) of the Regulations for Financial

Documents; Article 85, Paragraph (1) & (2) of Quarterly Regulations for Financial documents)

Approval by the Commissioner of the Financial Services Agency will be made on a

case-by-case basis. However, in cases where a foreign company submits financial statements

that were approved by the Commissioner of the Financial Services Agency in the past, the

procedure to obtain approval could be simplified. The accounting standards approved by the

Commissioner of the Financial Services Agency in the past are as given below. Therefore, in

case of initial public offering, an foreign company is required to confirm whether the type of

financial document disclosed by the company in the home country or another country has

been approved by the Commissioner of the Financial Services Agency in the past or not.

13 For a company registered with the US Securities and Exchange Commission (“SEC”) that prepares consolidated financial statements in accordance with the terminology, forms, and preparation methods for issuance, etc. of American depositary receipts as required by SEC, it may apply said terminology, forms, and preparation methods in the submission of such consolidated financial statements as statutory filings if the Commissioner of the Financial Services Agency deems them to be sufficient in terms of the public interest and investor protection. However, this shall exclude items on which the Commissioner of the Financial Services Agency has deemed necessary to provide instruction. (Article 95 of the Ordinance on Consolidated Financial Statements)


92

・International Financial Reporting Standards (IFRS)

・Accounting principles generally accepted in the United States of America

・Accounting principles generally accepted in Canada

・Accounting principles generally accepted in Mexico

・Accounting principles generally accepted in the United Kingdom

・Accounting principles generally accepted in Ireland

・Accounting principles generally accepted in Germany

・Accounting principles generally accepted in France

・Accounting principles generally accepted in Holland

・Accounting principles generally accepted in Spain

・Accounting principles generally accepted in Italia

・Accounting principles generally accepted in Switzerland

・Accounting principles generally accepted in Luxembourg

・Accounting principles generally accepted in Sweden

・Accounting principles generally accepted in Finland

・Accounting principles generally accepted in Norway

・Accounting principles generally accepted in Korea

・Accounting principles generally accepted in Hong Kong

・Accounting principles generally accepted in Taiwan

・Accounting principles generally accepted in Australia

・Accounting principles generally accepted in Singapore

・Accounting principles generally accepted in Malaysia

b. Audit Certificate

In order to disclose financial statements in the Securities Registration Statement, Annual

Securities Report, and Quarterly Securities Report, it is necessary to obtain an audit certificate

issued by a certified public accountant or audit firm (Article 193-2, Paragraph 1 (body text) of

the Financial Instruments and Exchange Act; Article 1, Paragraph 1 and 7 of the Cabinet Office

Ordinance on Audit Certification of Financial Statements, etc.). However, in cases of foreign

companies, it is generally considered that an audit certificate or equivalent to that issued by a

foreign audit firm, etc. is deemed as eligible, as long as it is consistent with the audit

certificate in Japan (stipulated in Article 193-2, Paragraph (1), Item (1) of the Financial

Instruments and Exchange Act; Rule 35, Paragraph (2), Item (4) of the Order for Enforcement

of the Financial Instruments and Exchange Act; Article 1-2 of the Cabinet Office Ordinance on

Audit Certification of Financial Statements, etc.). Therefore, practically, foreign companies

may usually use audit certificates abroad (in other words, do not obtain new audit certificates

issued by a Japanese certified public accountant or auditing firm in Japan). However, in this

case, please keep in mind that it is necessary to file a prior notification to the Financial

Services Agency in order to be approved as “eligible foreign audit firm, etc.” (Article 193-2,

Paragraph (1), Item (1) of the Financial Instruments and Exchange Act; and Rule 1-3,

Paragraph (7) and Article 34-35, Paragraph (1) of the Certified Public Accountants Act).

On the other hand, it is not required to provide audit certificates on quarterly financial


93

statements that are disclosed in Quarterly Securities Report. However, in cases where such

quarterly financial statements are reviewed in home countries, some foreign companies

disclose the results of the reviews in Japan at their own discretion.


94

(4) English Language Disclosure System

a. Outline

The English-Language Disclosure System is a system which allows foreign companies to

submit English documents (limited to those which were actually disclosed in a foreign country

pursuant to laws and regulations, including rules of a stock exchange or an equivalent

institution, in the foreign country) in place of the Securities Registration Statement, Annual

Securities Report and other disclosure documents that are required to be submitted under the

Financial Instruments and Exchange Act Japanese documents, in cases where these English

documents are deemed not to be inadequate in consideration of the public interest and

investor protection in Japan.

In cases where a foreign company submits these English documents (including those which

are required as supplementary documents), such company shall be deemed to have submitted

Securities Registration Statement, Annual Securities Report and other disclosure documents,

with the same effect under the governing laws and regulations (Article 5, Paragraph 8 and

Article 24, Paragraph 11 of the Financial Instruments and Exchange Act and others).

The outline of the English Language Disclosure System will be discussed below. For further

discussion, please see “Preparation Procedure of Foreign Company Annual Securities Reports,

etc.” (1.5 version) as published on the website below.

http://www.jpx.co.jp/english/equities/products/foreign/en-disclosure/index.html

b. Documents Eligible for the English-Language Disclosure

Among the documents that are eligible for the English-Language disclosure, the important

items for foreign companies are as below:

Type of the disclosure documents Corresponding documents under the

English-Language Disclosure System

Securities Registration Statement (limited to

those prepared in the regular method) and its

amendment statements

Foreign Company Registration Statement

and supplementary documents as well as their


Annual Securities Report and its amendment

statements

Foreign Company Annual Securities Report



Quarterly Securities Report and its


Foreign Company Quarterly Securities

Report and supplementary documents as well as

their amendment statements

Confirmation Letter and its amended

Confirmation Letter

Foreign Company Confirmation Letter and

supplementary documents as well as their

amended Confirmation Letter

Internal Control Report and its amendment

statements

Foreign Company Internal Control Report



Extraordinary Report and its amendment

statements

Foreign Company Extraordinary Report and

its amendment statements


95

c. Requirements for the English-Language Disclosure

For the use of the English-Language Disclosure System, the requirements specified in the

followings in accordance with the classification of the documents listed in each item shall be

met.

A. Foreign Company Registration Statement, Foreign Company Annual Securities Report, and

Foreign Company Quarterly Securities Report, etc. (Article 5, Paragraph 6, Item 2 of the

Financial Instruments and Exchange Act, and Article 9-6, Paragraph 1 of the Cabinet Office

Ordinance on Disclosure of Information, etc.)

1) The document shall be prepared in English.

2) The documents were disclosed pursuant to the laws and regulations in the foreign

country.

3) The documents shall be deemed not to be inadequate by the FSA Commissioner in

consideration of the public interest and investor protection in Japan.

B. Foreign Company Internal Control Report and Foreign Company Confirmation Letter

Only a foreign company which submitted a Foreign Company Annual Securities Report may

submit a document containing matters required in the form of an Internal Control Report or

Foreign Company Confirmation Letter are provided in English (Article 24-4-2, Paragraph 6 and

Article 24-4-4, Paragraph 6 of the Financial Instruments and Exchange Act, etc.). Such

company shall be allowed to submit either a newly prepared document or an existing

document which was disclosed in a foreign country.

C. English Language Disclosure in lieu of Extraordinary Report

In cases where a foreign company satisfies the requirements in the following requirements

1) and 2), it may submit a document in which matters required in the form of the

Extraordinary Report are provided in English (Article 24-5, Paragraph 1 of the Financial

Instruments and Exchange Act, and Article 19-2-2 of the Cabinet Office Ordinance on

Disclosure of Information, etc.). Such company shall be allowed to submit either a newly

prepared document or an existing document which was disclosed in a foreign country.

1) The reason for submission is provided in Japanese.

2) The document shall be deemed not to be inadequate by FSA Commissioner in

consideration of the public interest and investor protection in Japan.

d. Supplementary Documents

For the purpose of English-Language Disclosure, foreign companies are required to submit

the following supplementary documents (Article 5, Paragraph 7 of the Financial Instruments

and Exchange Act, Article 9-7, Paragraphs 2 through 4, of the Cabinet Office Ordinance on

Disclosure of Information, etc.).

1) Japanese Translation of Summary on Specific Items

For example, with regards to Foreign Company Registration Statement, summary of

transition of major management indicators, etc., outline of business and risks in


96

business etc. are required to be translated into Japanese and attached as one of

supplementary documents.

2) Non-described items falling under the items for which Japanese translation of a

summary should be prepared.

In cases where there is no description for items which are required to be included in

each form corresponding to a Foreign Company Registration Statement, Foreign

Company Annual Securities Report, and Foreign Company Quarterly Securities Report,

etc., and such items fall under those for which a Japanese translation of a summary

should be prepared (specifically, the items enumerated in the preceding 1)), documents

which include such items in Japanese or English are required to be attached as

supplementary documents. A Japanese translation of a summary must be attached in

cases where these documents are prepared in English.

3) Non-described Items

In cases where there is no description for items which are required to be included in

each form equivalent to a Foreign Company Registration Statement, Foreign Company

Annual Securities Report and Foreign Company Quarterly Securities Report, etc.

(excluding the items specified in the above 2), documents which include such items in

Japanese or English are required to be attached as one of the supplementary

documents.

4) Comparison Table

For the Foreign Company Registration Statement, etc. (excluding the Foreign

Company Extraordinary Report), foreign companies are required to prepare a

comparison table for items in each corresponding form and those in the Foreign

Company Registration Statement, etc. (excluding the Foreign Company Extraordinary

Report) to be submitted.

5) Certificate of Incumbency and Power of Attorney, etc.

e. Attachments

The following documents are required to be attached to a Foreign Company Registration

Statement (Article 5, Paragraph 10 of the Financial Instruments and Exchange Act, and Article

10, paragraph 1, item 8 of the Cabinet Office Ordinance on Disclosure of Information, etc.).

1) Minutes of board of directors meetings, etc. (a copy of the minutes, etc. of board of

directors meetings or general shareholders’ meeting in cases where the issuance of the

securities is resolved at such board of directors meetings or general shareholders meeting,

or a written statement that proves that the company was authorized by administrative

agencies)

2) A certificate of authorization related to changes in the amount of capital (a written

statement containing description sufficient to understand that the company obtained

permission, authorization, or approval from administrative agencies in cases where such

permission, authorization, or approval from the administrative agencies is required for

changing the amount of capital of the company (including a designated corporation) due

to the issuance of such securities)

3) Copies of the trust agreement and other important agreements (in the case of JDR)


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4) Written legal opinion by a legal expert (written legal opinion by a legal expert on the

legality of such offering or secondary offering of securities)


foreign company submitting such Securities Registration Statement is a person who has

legitimate authority regarding the registration of such offering or secondary offering of the

securities)


the authority to represent the company for all acts regarding the registration of such

offering or secondary offering of securities to a party domiciled in Japan.)

7) Certificate of authorization pursuant to the Foreign Exchange and Foreign Trade Act (a

written statement that proves that such foreign company obtained such permission in

cases where it is necessary pursuant to Article 21, Paragraph 1 or 2 of the Foreign

Exchange and Foreign Trade Act)

8) A copy of the principal underwriting agreement (a copy of the principal underwriting

agreement that was concluded between such foreign company and a financial instruments

business operator)

f. Submission Deadline

With regard to a Foreign Company Annual Securities Report that will be submitted in lieu of

an Annual Securities Report, the foreign company is required to submit such report within four

months after the end of its fiscal year (Article 24, Paragraph 10 of the Financial Instruments

and Exchange Act; and Article 4-2-2 of the Order for Enforcement of the Financial Instruments

and Exchange Act). Please note that the period is shorter compared to cases where a foreign

company submits an Annual Securities Report. In contrast, a foreign company is allowed to

submit an Annual Securities Report within six months after the end of its fiscal year taking into

account the burden of translation into Japanese.

In principle, foreign companies are required to submit other English-Language Disclosure

documents by the same deadline as Japanese companies.

9. Shareholder Services and Book-Entry Transfer Systems for Foreign Stocks, etc.

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9. Shareholder Services and Book-Entry Transfer Systems for

Foreign Stocks, etc.14

(1) Custody and Book-Entry Transfer Systems for Foreign Stocks, etc.

Foreign stocks are settled under the business regulations relating to the depository and

book-entry transfers for foreign stocks, etc. of Japan Securities Depository Center, Inc. (JASDEC).

In this system, securities companies and banks, etc. establish participant accounts in JASDEC and

general investors establish customer accounts in securities companies or banks, etc. in accordance

with the rules of JASDEC and TSE. Regular transactions of foreign stocks listed on the TSE market

are settled, in the same way as domestic stocks, via book-entry transfer on the fourth business day

counting from the trade day (T+3) based on the system for custody and book-entry transfer for

foreign stocks, etc. of JASDEC.

Please also visit JASDEC's website for description of custody and book-entry transfer system for

foreign stocks, etc. (http://www.jasdec.com/system/foreign/)

The physical certificates of foreign stocks are not brought into Japan but are held in custody in

the foreign depository designated by JASDEC. The shareholdings of beneficial shareholders

(customers who actually own the foreign stocks, etc.) are recorded in the relevant customer

accounts.

(2) Dividend Payment

The foreign depository receives dividends from listed foreign companies on behalf of JASDEC

and transfers the corresponding amount to the dividend-paying bank in Japan (trust bank or major

retail bank). When the dividend-paying bank receives dividends, it distributes the dividends to the

beneficial shareholders on the relevant lists of the beneficial shareholders according to the

instructions from shareholder services agents (trust banks). These distributions of dividends are

made by crediting the accounts designated by beneficial shareholders or sent in the form of postal

money orders.

Dividend payments are made in Japanese yen. As a general rule, conversion into Japanese yen

is calculated using the Telegraphic Transfer Buying (TTB) rate on the day when the dividend-paying

bank receives the dividends.

(3) Record Date of Shareholders Eligible for Dividend

In the case of registered stocks, the record date shall, as a general rule, be the same as that in

the home market. For the most of bearer stocks, the record date on the TSE market shall be one

business day prior to the dividend payment date in the home market. Dividends will be paid to the

beneficial stockholders as of record date.

14 Please refer to the following TSE website regarding stock administration and clearing rules for foreign stocks. http://www.tse.or.jp/english/rules/clearing/clearing.html


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(4) Other Rights such as Subscription Warrants

In cases where subscription warrants are granted, if a beneficial shareholder wishes to

subscribe for new shares and pays for them through a participant, JASDEC exercises the

subscription warrants and receives the new shares which are then credited to the customer

account of the beneficial shareholder. Such payment is generally made in Japanese yen.

On the other hand, if a beneficial shareholder does not wish to subscribe for new shares or

JASDEC determines that it is unable to exercise the rights taking into account factors such as the

payment schedule in the home country, JASDEC collectively sells all such subscription warrants in

the home market of the listed foreign company and pays sales proceeds to the beneficial

shareholders via shareholder services agents. In addition, in the case of a stock listed only on the

TSE market, if a corresponding subscription warrants market is opened at TSE, JASDEC will not

collectively sell all subscription warrants and the beneficial shareholder may sell the subscription

warrants in such market.

New shares, which are allotted due to a stock split or gratis allotment, etc., shall be received by

JASDEC and credited to the costumer account of the corresponding beneficial shareholder.

However, JASDEC will sell fractional shares in the home market of the listed foreign company and

pay sales proceeds to the relevant beneficial shareholders via shareholder services agents.

Note that, if there is no market to sell the relevant rights, there may be no choice other than to

abandon such rights.

(5) Exercise of Voting Rights at General Shareholders Meetings

Voting rights at general shareholders meetings are exercised by JASDEC in accordance with

instructions issued by beneficial shareholders (submission of instruction for the proxy exercise of

voting rights). If no instruction is issued by a beneficial shareholder, JASDEC will not exercise the

corresponding voting right.

In addition, in cases where the record date for a general shareholders meeting is set in the

home country, the same date is set as record date in Japan. Documents such as notice of

convening a general shareholders meeting and form for instruction for the proxy exercise of voting

rights are sent to the beneficial shareholders as of the record date. Beneficial shareholders are able

to exercise their voting rights referring to such documents.

However, even though a record date is set, in cases where procedures, such as sending of

notice of convening a general shareholders meeting to beneficial shareholders, are deemed

difficult due to the limited schedule, such beneficial shareholder will be required to perform

procedures to exercise the voting right through the shareholder services agent within the period

published by the company in the newspapers.

In the case of a company which does not set a record date for the general shareholders

meeting, a beneficial shareholder intending to exercise his/her voting right should perform the

procedures within the period published by the company in newspapers.

For your information, TSE has defined “Framework Improvement to Facilitate Exercise of Voting

Rights for Listed Foreign Companies” as a measure in line with the Code of Corporate Conduct. For

details, please see section 12 (3) c (d).


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(6) Book-Entry Transfers from JASDEC to Securities Companies

Foreign stocks bought on the TSE market can be sold in any other market where the foreign

company is listed. In this case, the shareholder will be able to sell his/her shares after transfer of

custody under the custodian of JASDEC to that of a securities company, etc. is completed. In

addition, in cases where TSE decides to delist a foreign stock, such stock will also be transferred

from a foreign custodian of JASDEC to that of a securities company, etc.

Workflow of Shareholder Services and Dividend Payments


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(7) Handling under TSE Listing Administration Rules

Based on the shareholder services and book-entry transfer systems as discussed above, listed

foreign companies shall assume the following obligations:

a. Selection of Agent and Entity Responsible for Handling Information in Japan

〔Selection of Agent of the Company in Japan〕

A listed foreign company is obliged to select a person as agent in Japan who has an address

or residence in Japan and has the authority to deputize or represent such listed foreign company

with respect to all acts in relation to TSE.

The agent in Japan shall, in principle, be selected from amongst the officers and employees of

the listed foreign company. However, if selection from such officers and employees is difficult,

the agent shall be a person approved by TSE.


〔Listed Foreign Companies, etc. with a main market listing on TSE〕

It is assumed that a listed foreign company with a main market listing on TSE has a large

number of shareholders in Japan. Therefore, in principle, such listed foreign company shall

select a person responsible for handling of information amongst the directors, executive officers

or equivalent senior persons residing in Japan and notify TSE of such person responsible for

handling of information for the purpose of ensuring smooth communication and reporting in

reply to inquiries from TSE.

The person responsible for handling of information shall be not only in charge of liaison

pertaining to reporting to TSE but also engaged in internal management of important corporate

information and timely disclosure.

In addition, the person responsible for handling of information may reside in a home country

or countries other than Japan, as long as he/she can ensure smooth reporting structure with

TSE. For details, please consult with TSE in advance.


b. Setting Up Offices for Handling Exercise, etc.

A listed foreign company who is an issuer of a listed convertible bond shall set up an exercise

handling office or agency office for a subscription warrant pertaining to a listed convertible bond

in Chuo-ku, Chiyoda-ku or Minato-ku in Tokyo or any of the places specified by TSE.


c. Ensuring Appropriate Shareholder Services and Dividend Payment Services

A listed foreign company shall ensure that shareholder services and dividend payment

services for beneficial shareholders of foreign stocks, etc. will be carried out appropriately in

each of the following items.


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A. Notice shall be made in Japanese as to measures taken by a listed foreign company

(including depository facilities, etc. pertaining to listed foreign stock depositary receipts,

etc., if the listed foreign company is an issuer of listed foreign stock depositary receipts,

etc.) with respect to surplus dividends, granting of subscription warrants, and other rights

or interests of shareholders.

* The notice may be made by public notice in Japan (which shall be carried out in a

manner similar to public notice carried out by an issuer of listed domestic stocks), by a

method subject to the prior approval of TSE in which the notice is kept at an office of

the shareholder services agent, or by other methods that are prescribed by TSE.

B. Notice shall be made in Japanese for Business Reports, such as Annual Securities Reports,

Interim Securities Reports, and Quarterly Securities Reports (Quarterly Securities Reports

may replace Interim Securities Reports).

* These reports may be summarized or replaced by other reports pursuant to the

provisions of TSE. However, when the listed foreign company does not provide such

notice to the shareholders, these notices are not required.


d. Notification and Public Notice of Period or Date for Rights Allotment

Where a listed foreign company decides a period or a date to determine those who may

exercise voting rights, those who receive dividends or allocation of a stock, or those who may

exercise rights as shareholders (in cases of an issuer of a listed foreign stock depositary receipt,

etc., where a depository, etc. pertaining to the listed foreign stock depository security, etc.

decides a period or a date to determine entities who may exercise rights concerning such

foreign depositary receipt, etc.), the listed foreign company shall notify TSE of such period or

date two (2) weeks before such period or date (where the deadline of notification and public

notice required in the home country, etc. of such listed foreign company is earlier than a day two

(2) weeks prior to such period or date, prior to such deadline) and, in addition, shall make public

notice in Japan; provided, however, that it may omit such public notice in the cases listed below:

A. Public notice of a period or date that is determined to fix the persons who are entitled to

exercise the voting rights at a general shareholders meeting, if applicable; provided,

however, that the documents necessary to exercise voting rights are delivered to beneficial

shareholders before the date of said general shareholders meeting;

B. Public notice of the period or date that has been determined in advance to fix the persons

who are entitled to receive dividends, if applicable;

C. Public notice of the period or date that is determined to fix the persons who are entitled to

exercise rights, from amongst those that are impossible or extremely difficult to exercise in

Japan, that are deemed by TSE to have particularly low economic value; and

D. Public notice of matters that correspond to matters to be publicized through public notice,

if such matters are disclosed in a manner prescribed by TSE.



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e. Notification of Decision Concerning Depositories, etc. Pertaining to Listed Foreign

Stock Depositary Receipts, etc.

Where a dividend or a subscription warrant or any other right is given to a foreign stock

pertaining to a right representing a listed foreign stock depositary receipt, etc., if a depositary,

etc. pertaining to the listed foreign stock depositary receipt, etc. makes decision on how to deal

with such right, etc. concerning such foreign stock depositary receipt, etc., the issuer shall

immediately notify TSE thereof.


10. Overview of Listed Company Compliance

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(1) Overview of Timely Disclosure System

a. Significance of Timely Disclosure

A financial instruments market functions to contribute to the development of the national economy

through the proper and efficient linking of asset management via securities by the public and stable,

long-term fund-raising via the issue of securities by companies. In order for a market to fulfill this role,

it is vital to maintain investors' confidence in the fairness and soundness of the market, as well as

provide appropriate information on securities required for investment decisions.

Rules for statutory disclosure (securities registration statement, securities report, quarterly

financial reports, etc.) based on the Financial Instruments and Exchange Act as discussed in section

10 (Securities Registration Statement, Annual Securities Report, and Quarterly Securities Report, etc.)

as well as rules for timely disclosure in financial instruments exchanges co-exist and serve the function

of providing information required for investment decision-making. Timely disclosure rules are

established pursuant to the rules of a financial instruments exchange for the purpose of providing

investors with important corporate information from listed companies. These disclosures are

characterized by their widespread and timely transmission to investors, through either the media or

Timely Disclosure network (TDnet).

Because of the large impact corporate information occurring minute-to-minute has on trading,

timely disclosure is extremely vital to investors. Particularly, during this period of dynamic changes to

the corporate environment where investors need access to accurate information, timely disclosure is

becoming increasingly important as a quick, accurate, and fair means of providing the latest corporate

information.

Timely disclosure of corporate information should be initiated by each listed company responsible

for the function. Therefore, each listed company is required to recognize the significance and

importance of timely disclosure of corporate information and maintain a faithful stance to fulfill the

disclosure, and at the same time, is required to prepare and improve its internal structure to carry out

disclosure in a timely and appropriate manner.

TSE prescribes requirements on timely disclosure about corporate information in the Securities

Listing Regulations (hereinafter referred to as the "Regulations") and requires each listed company to

disclose important corporate information, with the basic understanding that timely and appropriate

disclosure of corporate information lies at the foundations of a sound financial instruments market.

b. Overview of the Rules Concerning Timely Disclosure of Corporate Information

(a) Basic Principle Concerning Faithful Execution of Services

The Regulations stipulate the obligations of listed companies, including but not limited to

strengthening prompt, accurate and fair disclosure of corporate information at all times from the

viewpoint of investors with full recognition that timely and appropriate disclosure of corporate

information to investors is the foundation of a sound financial instruments market. Each listed

company is required to understand the meaning of this basic principle to the full extent, carry

out faithful services and work on pro-active timely disclosure.



105

(b) Maintenance of Timely Disclosure Structure

Appropriate and timely disclosure of important corporate information upholds an important

role for investors as basic premise of self-responsibility in investments in the financial

instruments market. Therefore, each listed company needs to conduct effective internal

structure so as to fulfill appropriate information disclosure.

In preparing and improving a timely disclosure structure appropriately, the following three

points are especially important:

A. Management of each listed company should indicate a clear stance and policy on the

importance of corporate information disclosure in person in order to maintain and manage

timely disclosure structure effectively, and also enlighten employees about the clear stance

and policy.

B. Clarifying key points to be accomplished for the purpose of conducting timely disclosure in an

appropriate manner.

C. Conducting monitoring of the timely disclosure structure by the internal audit division,

director and company auditor (audit committee or similar bodies in the case of a company

with committees) so as to manage and maintain the structure in appropriate manner.

Outline of a listed company's timely disclosure structure is included in the report containing

matters concerning corporate governance, and this information is publicly-available on the TSE

homepage (corporate governance information service), etc.

(c) Corporate Information Required for Timely Disclosure

Corporate information required for timely disclosure includes information related to the

company's business, operations, or performance which has a significant effect on securities

investment decisions.

The Regulations stipulate that a listed company is obliged to immediately disclose any items,

excluding those falling under any of criteria items having insignificant influence on investors’

decision-making as in the Rules (hereinafter, “De minimis Criteria”). Since a listed foreign

company should pay careful attention that it is required to disclose any item in a timely manner,

even though it is not clear whether it falls under the De minimis Criteria or not.

When applying the rules and regulations of TSE to a foreign country or a foreign corporation

where the foreign country or the foreign corporation is an issuer, etc. of a listed security, TSE

shall take into account legal systems, practices and customs, etc. in such foreign country or the

country, etc. of the foreign corporation as well.



106

〔Corporate Information Required for Timely Disclosure〕

i. Listed Company Information

(i) Decisions by Listed Companies

・ Offering of issued shares, treasury shares to be disposed of, issued subscription

warrants, or offering to entities who will subscribe to treasury subscription warrants

to be disposed of, or a secondary offering of shares or subscription warrants

・ Shelf-registration or commencement of a demand survey

・ Decrease in amount of capital

・ Decrease in amount of capital reserve or profit reserve

・ Acquisition of own stock

・ Gratis allotment of shares or gratis allotment of subscription warrants

・ Shelf-registration concerning gratis allotment of subscription warrants or

commencement of a demand survey or a survey on intention to exercise the

warrants

・ Stock split or reverse stock split

・ Issue of stock options

・ Dividend from surplus

・ Stock swap, stock transfer, merger, demerger

・ Takeover bid or takeover bid for own shares

・ Announcement of opinions about a takeover bid, etc.

・ Transfer or acquisition of all or part of a business

・ Dissolution (excluding dissolution by means of merger)

・ Commercialization of a new product or new technology

・ Business alliance or dissolution of business alliance

・ Transfer or acquisition of shares or equity interest accompanied by a change in a

subsidiary or other matters accompanied by a change in a subsidiary

・ Transfer or acquisition of fixed assets, lease of fixed assets

・ Suspension or abolition of all or part of a business

・ Application for delisting

・ Petition for commencement of bankruptcy proceedings, commencement of

rehabilitation proceedings, or commencement of reorganization proceedings

・ Commencement of a new business

・ Change in representative directors or representative executive officers

・ Rationalization such as personnel reduction

・ Change in a trade name or a corporate name

・ Change in the number of shares for a share unit of a stock, or abolition/introduction

of provisions for the number of shares for a share unit

・ Change in accounting period (change in the end date of the business year)

・ Petition to the Prime Minister stating an excess of liabilities or possibility of the halt

of repayment of deposit, etc. (Petition pursuant to the provisions of Article 74,

Paragraph 5 of the Deposit Insurance Act)

・ Petition for mediation in accordance with specified mediation procedures pursuant

to the Act on Specified Mediation for Promoting Adjustment of Specified Liabilities,

etc.


107

・ Advanced redemption of a listed bond or convocation of a bondholders meeting and

any other important matters related to rights pertaining to listed bonds

・ Change in certified public accountants, etc.

・ Putting notes on matters related to the going concern assumption

・ Submission of application for approval of deadline extension for submission of

Annual Securities Report or Quarterly Securities Report

・ Cancellation of entrustment of shareholding services to a shareholding service proxy

institution

・ Submission of internal control reports containing content to the effect that there is a

material deficiency or that the evaluation result cannot be stated

・ Amendment to the articles of incorporation

・ Acquisition of all classified stocks subject to whole acquisition clause

・ Approval or rejection of a special controlling shareholder’s request for sale of shares,

etc.

・ Other important matters related to listed company operations, business, assets, or

listed company stock certificates, etc.

(ii) Facts which Occurred for a Listed Company

・ Loss arising from a disaster or damage which occurs in the course of business

execution

・ Change in major shareholders or the largest shareholder

・ Fact which causes delisting

・ Filing of a lawsuit or a court decision

・ Petition for a provisional disposition or decision on such petition, etc.

・ Cancellation of a license, suspension of a business or any other disciplinary action

corresponding to these on the basis of laws and regulations by an administrative

agency or accusation of violation of laws and regulations by an administrative

agency

・ Change in a parent company, change in controlling shareholders (excluding a parent

company) or change in other related company

・ Petition or notification for commencement of bankruptcy proceedings,

commencement of rehabilitation proceedings, commencement of reorganization

proceedings, or execution of enterprise mortgage

・ Dishonor of a bill or check or suspension of trading by a clearing house


rehabilitation proceedings, commencement of reorganization proceedings, or

execution of enterprise mortgage pertaining to a parent company, etc.

・ Default on obligations or delay in collection

・ Suspension of trade with a business partner

・ Financial support, such as exemption of obligations

・ Discovery of natural resources

・ Special controlling shareholder’s request for sale of shares, etc.

・ Claim for suspension of issue of stock or subscription warrants

・ Demand for convocation of a general shareholders meeting

・ Unrealized loss of securities held


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・ Acceleration of obligations pertaining to a corporate bond

・ Convocation of a meeting of bondholders for a listed bond, etc. and other important

facts pertaining to rights of a listed bond, etc.

・ Change in certified public accountants, etc.

・ Delay in submission of Annual Securities Report or Quarterly Securities Report

・ Approval and etc. of deadline extension for submission of Annual Securities Report

or Quarterly Securities Report

・ The fact that an audit report attached to financial statements, etc. contains an

"adverse opinion", "opinions are not expressed", or a "qualified opinion" with

making issues concerning a going concern assumption as exceptions

・ An internal control audit report contains an "adverse opinion" or the fact that

"opinions are not expressed"

・ Receipt, etc. of a notice of canceling a shareholder services agent agreement

・ Other important matters related to operation, business or assets of such listed

company or related to a listed stock certificates, etc.

(iii) Listed Company Earnings Information

・ Earnings Reports (Kessan Tanshin)

・ Quarterly Earnings Reports (Shihanki Kessan Tanshin)

(iv) Amendments, etc. to Performance Estimates or Dividend Estimates of Listed

Company

・ Amendments to performance estimates, differences in estimates and earnings

values

・ Dividend estimate or amendment to dividend estimate

(v) Other Information

・ Disclosure related to lowering the size of investment units

・ Disclosure of the status of membership in Financial Accounting Standards

Foundation

・ Disclosure of status of conversion or exercise of MSCB, etc.

・ Disclosure of matters relating to controlling shareholder, etc.

・ Earnings information of unlisted parent company, etc.

・ Disclosure related to delisting, etc.

ii．Information on Subsidiaries

(i) Decisions by Subsidiaries

・ Stock swap, stock transfer, merger, demerger

・ A takeover bid or a takeover bid for own shares

・ Transfer or acquisition of all or part of a business

・ Dissolution (excluding dissolution by means of merger)

・ Commercialization of a new product or new technology

・ Business alliance or dissolution of business alliance

・ Transfer or acquisition of shares or equity interest accompanied by change in a

sub-subsidiary, or other matters accompanied by change in a sub-subsidiary


109

・ Transfer or acquisition of fixed assets, lease of fixed assets

・ Suspension or abolition of all or part of a business


rehabilitation proceedings, or commencement of reorganization proceedings

・ Commencement of a new business

・ Change in trade name or corporate name

・ Petition to the Prime Minister stating an excess of liabilities or possibility of the halt

of repayment of deposit, etc. (Petition pursuant to the provisions of Article 74,

Paragraph 5 of the Deposit Insurance Act)

・ Petition for mediation in accordance with specified mediation procedures pursuant

to the Act on Specified Mediation for Promoting Adjustment of Specified Liabilities,

etc.

・ Other important matters related to operation, business or assets of a subsidiary of

such listed company

(ii) Facts which Occurred for a Subsidiary

・ Loss arising from a disaster or damage which occurs in the course of business

execution

・ Filing of a lawsuit or a court decision

・ Petition for a provisional disposition or decision on such petition, etc.

・ Cancellation of a license, suspension of a business or any other disciplinary action

corresponding to these on the basis of laws and regulations by an administrative

agency or accusation of violation of laws and regulations by an administrative

agency

・ Petition or notification for commencement of bankruptcy proceedings,

commencement of rehabilitation proceedings, commencement of reorganization

proceedings, or execution of enterprise mortgage

・ Dishonor of a bill or check or suspension of trading by a clearing house


rehabilitation proceedings, commencement of reorganization proceedings, or

execution of enterprise mortgage pertaining to a sub-subsidiary

・ Default on obligations or delay in collection

・ Suspension of trade with a business partner

・ Financial support, such as exemption of obligations

・ Discovery of natural resources

・ Other important matters related to operation, business or assets of such subsidiary

(iii) Amendment, etc. to Performance Estimates of Subsidiary

(Amendment to Performance Estimate of Subsidiary, Difference in Estimate and

Earnings Values, etc.)


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〔Implementation of Timely and Appropriate Disclosure of Corporate Information〕

The provisions defined in the Regulations state the minimum requirements, methods, etc.

that a listed company should observe with respect to timely disclosure of corporate information,

etc., and a listed company shall not use the provisions of the same section as an excuse for

failures to disclose corporate information in a more timely and appropriate manner. A listed

company is urged to make a proactive timely disclosure of corporate information in any event

that is assumed to have influence on investors’ decision making in the light of each individual

situation of such event which occurred with the listed company.

[Rule 411-2 of the Regulations]

For example, when an event falls under the following case examples, it is appropriate to

regard that it is significant in the light of investment decision-making even though it may fall

into the De minimis Criteria.

(d) Disclosure Timing

Listed companies are obliged to disclose any important information immediately upon

decision or occurrence pursuant to the Regulations.

As for disclosure timing, listed companies are required to make a judgment based on actual

conditions without heavily depending on any formal aspects, such as resolution of board of

directors’ meeting. Concretely, any facts of decision made by a listed company shall be disclosed

immediately upon resolution or decision by an organization body with substantial authorization

to make a decision to perform operations of the company. On the other hand, any facts of

occurrence to be caused by external factors shall be disclosed upon recognition of the

occurrence.

・ In cases where a decision or occurrence of a corporate event is expected to cause

the listed company to turn business around or vice versa for and after the fiscal

year to which the decision or occurrence of the corporate event belongs.

・ In cases where a decision or occurrence of a corporate event is expected to bring

about a significant change in fundamentals of the listed company related to its

management, operations and properties, including but not limited to a change in

business organization or earnings structure thereof.

・ In cases where separate facts of decision or occurrence that fall under the same

disclosure items are deemed to collectively have material impact on the listed

company in light of continuity or connection on the whole, even though each of

events does not fall under the criteria of corporate information required for timely

disclosure (in the case that combination of separates events falls under the criteria

of the corporate information required for timely disclosure).


111

Given that quick disclosure to investors is required with respect to timely disclosure of

corporate information, listed companies are required to disclose the information immediately

upon occurrence, irrespective of trading hours.

(e) Matters to be Described in Disclosure Documents (Disclosure Matters)

It is extremely important to make a disclosure document that fully and accurately describes

corporate information because timely disclosure is the basis for providing material for investors

to properly understand the situation and make investment decisions.

The Enforcement Rules includes the following matters as requiring disclosure. (TSE may

deem disclosure as inappropriate if it is found lacking in matters corresponding to the following.)

a. Reason behind the decision by the listed company or how and why it was made

b. Summary of decided facts and facts that occurred

c. Future prospects related to decided facts and facts that occurred

d. Other matters that are deemed by TSE to have material significance on investment

decisions

[Rule 402-2, Paragraph 1 of the Enforcement Rules]

A listed company is required to comply with following matters pertaining to timely disclosure

of corporate information and shall pay careful attention in preparing disclosure documents.

・ The contents of the information to be disclosed do not contain false statements.

・ The information to be disclosed is not lacking information deemed to be significant to


・ The information will not cause misunderstanding regarding investment decisions.

・ The information is not found lacking in appropriateness in any other way.

[Rule 412, Paragraph 1 of the Regulations]

* Even though this guide book only describes certain matters, this does not contradict the

above points regarding whether disclosure is lacking in information deemed important for

investment decisions and will not cause misunderstanding regarding investment decision.

Whether it is material information for investment decisions or may cause

misunderstanding in investment decisions are judged on a case-by-case basis.

(f) Examinations Pertaining to Disclosure of Corporate Information

JPX Regulation conducts examinations concerning disclosure of corporate information based

on the Regulations when JPX Regulation deems it is necessary and appropriate for ensuring the

adequacy of disclosure of company information.

The examination is carried out for disclosure of material corporate information from the

following points of view. In case where a disclosure document has any problem concerning the

following points, such disclosure may be regarded as inappropriate.


112

・ Whether or not the timing of disclosure is appropriate

・ Whether or not the details of disclosed information are false

・ Whether or not the disclosed information lacks information deemed important for

investment decisions

・ Whether or not the disclosed information gives rise to misunderstandings for investment

decisions

・ Whether or not the disclosure is lacking in appropriateness

[Rule 412, Paragraph 2 of the Regulations, II of the Guidelines]

(g) Prior Explanation on Corporate Information before Disclosure of Corporate

Information

If a listed company decides, for the smooth implementation of timely disclosure of material

corporate information, to disclose the corporate information based on the Rules 402 to 411-2

and 416, the listed company is required to explain the contents of the disclosure to TSE before

the corporate information is disclosed.


At TSE, each listed company has a TSE-side staff responsible for disclosure. When a listed

company registers a disclosure document via TDnet, TSE will call the person responsible for

disclosure at the listed company to ask for an explanation of the contents (generally within 30

minutes). Therefore, the person (not limited to the one responsible for handling information)

should wait for a call from TSE.

(h) Matters to Note Concerning Publication of Corporate Information on Listed

Company’s Own Website

When a listed company intends to save corporate information requiring timely disclosure in a

public directory (meaning in folders on web servers, which are accessible to outsiders via the

Internet), it is obliged to take necessary measures, including not saving it before the corporate

information has been disclosed or, in the case the information is to be saved before disclosure is

carried out, to implement access controls by setting a password, etc. so that outsiders would not

be able to access the information easily.


Timely disclosure matters include information which falls under the "material facts" in the

insider trading regulations. If outsiders can access the information easily before the scheduled

disclosure time, they may use such information to carry out trading. As a result, that may

significantly undermine the fairness of the financial instruments market. Therefore, a listed

company is required to take appropriate measures.

In addition, a listed company is encouraged to establish internal rules concerning the

publication of corporate information on its own website. The rules should be made known

throughout the company, and there should also be regular inspections on compliance.


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(i) Method of Disclosure of Corporate Information

Disclosure of corporate information shall be carried out using TDnet.


TDnet functions as an integrated electronic system jointly used by Japanese financial

instruments exchanges for the purpose of achieving fairer, faster, and more extensive timely

disclosure of corporate information. Specifically, on the day when performing a timely disclosure,

listed companies are required to register disclosure documents via TDnet Online Registration

System, make a reply to an inquiry from TSE and make a prior explanation to TSE. Later, at the

specified disclosure time after completion of TSE disclosure process, the registered disclosure

documents are transmitted to a lot of media institutions via TDnet. At the same time, it is also

posted to the Timely Disclosure Information Browsing Service, a website created by TSE, and

the corporate information is made available for public inspection on the browsing service.

* Posting documents to the Timely Disclosure Information Browsing Service constitutes

one of the publication measures under insider trading regulations. By posting corporate

information to this service, listed companies are able to execute the publication measures

pertaining to material facts under insider trading regulations such as the fact concerning

tender offers (limited to those (Tender Offer for Share Certificates, etc. by Issuer)

pertaining to tender offer prescribed in Article 27-22-2, Paragraph 1 of the Financial

Instruments and Exchange Act) simultaneously (Article 30 of the Order for Enforcement

of the Financial Instruments and Exchange Act).

(j) Report and Disclosure on Inquiry Concerning Corporate Information

A listed company is required to make an accurate report on an inquiry matter immediately, in

the case where TSE makes an inquiry on corporate information of a listed company where it

deems necessary. In the case where TSE deems that it is necessary and appropriate to disclose

a fact pertaining to the inquiry, a listed company shall disclose details immediately.


When a news report or rumor concerning a listed security or its issuer is circulated, or when

TSE receives an accusation from an outside party, TSE may make an inquiry to the listed

company about the authenticity of such circulated information, etc. The listed company is

required to make an accurate report to TSE. If TSE deems it necessary and appropriate for the

listed company to clarify the authenticity, TSE may request the listed company to disclose the

details of report. In such a case, the listed company is obliged to carry out disclosure

immediately.

Listed companies are reminded that non-action on a request for disclosure by TSE may

constitute a violation of the Regulations, furthermore, that it may hinder fair price formation in

the financial instruments market and cause to investors to lose confidence in them.


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On the other hand, when a news report or rumor concerning a listed security or its issuer is

circulated, TSE may issue an alert to inform investors. For details on the system for issuing

alerts, please refer to “Outline of system for issuing alerts”.

(k) Cancellation, modification, or correction of disclosed information

A listed company is required to disclose "cancellation of or change in a disclosed matter" in

the case of cancellations or changes of any material corporate information already disclosed,

and "addition, correction, or explanation of timely disclosure materials" in the case of

corrections.

In the case where a change or correction should be made to a disclosed earnings

report/quarterly earnings report, the listed company shall disclose details of such change or

correction, for example, as "correction of earnings report." However, in the case where a listed

company recognizes the need to change or correct the disclosed earnings information prior to

the submission of the securities report/quarterly securities report, it shall be sufficient to carry

out disclosure after submitting such report, except in cases where such changes or corrections

may have a remarkable effect on investment decisions.


In addition, regarding voluntary disclosure that is not under the Regulations, but is carried out

via TDnet based on a decision by the listed company, in the case where a change or correction

should be made to the content of disclosed information, the listed company is also required to

disclose the details of such change or correction.

(l) Notification of Person Responsible for Handling Information

A listed company is required to select a person responsible for handling information from

among its directors or any other person of similar capacity, and notify TSE of such person.


A person responsible for handling information means a liaison for reporting in response to

inquiries from TSE and other matters regarding the disclosure of corporate information.

Specifically, the person is the point of contact for TSE, and will be in charge of managing

material corporate information and carrying out disclosure.

When a listed company changes its person responsible for handling information, or alters the

contents (e.g. name, title, or contact information) of the notification, the listed company is

required to notify TSE immediately. In the case where alteration of the person responsible for

handling information is scheduled due to the re-election of board directors, etc., the listed

company may notify TSE in advance, describing the expected date of alteration.


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c. Notes on Using TDnet

TDnet functions as an integrated electronic system jointly used by Japanese financial instruments

exchanges for the purpose of achieving extensive corporate information which have influence on

investment decisions. TDnet is developed and operated by TSE.

Besides disclosure of corporate information to be carried out under the Regulations, a listed

company is encouraged to voluntarily disclose corporate information that may be useful for

investment decisions via TDnet from the point of view of disseminating information to investors. In

this case, as the information is registered as "Timely Disclosure Information" via TDnet, such

information will be disseminated to investors, directly through the "Corporate Announcement

Disclosure Service" operated by TSE, and indirectly through the media and information vendors.

In addition, TDnet is also available for the dissemination of corporate information that may not be

useful for investment decisions to the media and information vendors. If such information is registered

as "PR information, etc.," it is not posted to the "Corporate Announcement Disclosure Service" and is

disseminated only to the media and information vendors.

Due to the public purpose of TDnet, it is permitted to be connected to major media agencies and

information vendors directly. As such, posting to TDnet is, at the same time, recognized as a

"publication measure" under the insider trading regulations. Due to this situation, listed companies are

not permitted to register information that deviates from the intended purpose of publishing corporate

information for investment decisions. This includes expressing opinions in cases where there are

differences or conflicts of opinion with other parties.

The basic policy regarding appropriate usage of "Timely Disclosure Information" and "PR

information, etc." is as follows.

(a) Matters to be disclosed as "Timely Disclosure Information"

A listed company is required to disclose its corporate information as "timely disclosure

information" when the information is required to be disclosed under the Regulations.

On the other hand, in the case where a fact is expected to have a certain effect on business

performance, even though there is no disclosure obligation under the Regulations, or where

company information briefing materials, monthly business performance reports, materials

concerning corporate management policy are prepared, a listed company is encouraged to

disclose such information as "timely disclosure information" because it is regarded as useful for


(Note) Disclosure of corporate information as "timely disclosure information" is recognized as

disclosure for the purpose of providing information that is useful for investment

decisions. Therefore, referring to the practical handling of each disclosure item, etc., a

listed company shall take care to prepare disclosure material appropriately from the

viewpoint of providing material for investment decisions by describing matters

necessary for investors to understand and judge the fact appropriately.

(b) Matters to be disclosed as "PR information, etc."

Regarding corporate information which may have little effect on business performance and

usefulness in investment decisions, disclosure of such information is required to be carried out

as "PR information, etc." instead of "timely disclosure information."


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(c) Scope of "Timely Disclosure Information" and "PR Information, etc."

The scope for "Timely Disclosure Information" and "PR Information" is different in terms of

posting to "Company Announcements Disclosure Service" as shown in the table below.

Timely Disclosure

Information

PR

Information, etc.

Post to Company Announcements Disclosure

Service

Yes No

Display in Listed Company Search (Note 1) Yes Yes

Distribute to News Agencies & Information

Vendors

Yes Yes

TDnet Database Service Yes Yes

(Note 1) Disclosure information is shown in the listed company search on the day after

disclosure.


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d. Overview of Trading Halt System

TSE may halt trading of a listed security when TSE deems it necessary to do so from the

perspective of ensuring fair price formation and investor protection.

[Rule 29 of the Business Regulations]

(a) Reason for trading halt

Where information on a certain security or issuer that may have a significant effect on

investment decisions is revealed and details of such information are not clear and/or TSE deems

it necessary to inform the public.

(b) Duration of trading halt

i. In the case where a trading halt is implemented due to information that may have

significant effect on investment decisions, such as a merger of a listed company, and was

reported without official disclosure by the listed company, trading will resume, in principle,

fifteen (15) minutes after disclosure regarding the authenticity of such information by the

listed company.

ii. In the case where a trading halt is implemented due to information that may have a

significant effect on investment decisions, such as a merger concerning the listed company,

and for which the listed company has carried out timely disclosure, trading will resume, in

principle, fifteen (15) minutes after disclosure by the listed company.

iii. In the case where such corporate information falls under a reason for designation as a

Securities Under Supervision or Securities To Be Delisted, trading will resume as follows.

- Designation as Securities Under Supervision: Fifteen (15) minutes after TSE

announces the designation

- Designation as Securities To Be Delisted: On the business day following TSE's

announcement of the designation


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(c) In addition to the matters falling under a. above, the following matters shall also be

subject to a trading halt.

i. Where TSE deems that the state of trading is or is likely to be abnormal, or where TSE

deems that continuing trading is not appropriate from the viewpoint of the management of

trading

ii. Where a malfunction occurs in the trading system, or where TSE deems that continuing

trading is difficult due to a failure in the facilities of TSE pertaining to trading of a security,

and other cases

iii. Where TSE deems it necessary to inform the public that it may cancel a trade


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e. Outline of System for Issuing Alerts

TSE has a system for issuing alerts regarding information about securities or its issuers (hereinafter

referred to as "system for issuing alerts") if it deems necessary to inform investors. In particular, TSE

will issue an alert in the following situations where necessary: when unclear information (i.e., a leak or

rumor) that is deemed likely to have material impact on investment decisions (hereinafter referred to

as "unclear information") becomes available, when there are other circumstances regarding a security

or its issuer deemed to require particular attention.

[Rule 30 of the Business Regulations]

* The system for issuing alerts is not a penalty or measure to ensure the effectiveness of the

Regulations. It is aimed at allowing TSE to promptly and flexibly issue alerts regarding unclear

information in cases where time may be required before appropriate information disclosure can

be made or where only certain information can be disclosed immediately.

* Under the system, an alert is issued each time TSE deems it necessary and is not removed. As

such, multiple alerts may be issued for a single case on the day when the unclear information

becomes available, and alerts may be issued on subsequent days for the same unclear

information.

* Decisions on whether to issue an alert are made separately from decisions on whether to halt

trading.

(a) Cases where alerts are issued

Information "deemed likely to have material impact on investment decisions" includes, but is

not limited to, information related to equity financing, mergers and/or acquisitions, earnings

information that may lead to disclosure requirements for "adjustments to earnings forecasts or

figures," bankruptcy or voluntary liquidation, and false statements.

"Other circumstances regarding a security or its issuer deemed to require particular attention"

include, but are not limited to, when a listed company has not made disclosure regarding its

decisions, events, earnings information, or adjustments to earnings forecasts or figures within a

required period, or when TSE deems that a listed company has not clarified the content of the

unclear information, which may, without clarification, mislead investors.

As TSE issues an alert "if it deems necessary to inform investors," TSE would not always issue

an alert when a situation falls under one of examples above.

(b) Means of issuing alerts

Alerts will be issued by means including notices to trading participants, releases to the media,

and posts on the TSE website.

(c) Daily disclosure of outstanding margin trading

Where a stock, for which margin trading can be made, becomes subject to the alert as

prescribed in Rule 30 of the Business Rules, TSE may publicize its outstanding margin

transactions on a daily basis.

[Rule 2, Item 1 of the Rules on Regulatory Measures Concerning Securities Trading, etc. or Its

Brokerage]


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i. Subjecting an issue to daily disclosure

Where a situation falls under 1. or 2. below, and, in addition, where TSE deems that the

situation has a large impact on the price or trading volume of the relevant stock in the

auction trading session, TSE may make daily disclosure of outstanding margin trading on

the issue from the next business day.

(i) A listed company has not made disclosure regarding its decisions, events, earnings

information, or adjustments to earnings forecasts or figures within the required

period.

(ii) A listed company has not clarified the content of unclear information.

Even if a listed company makes appropriate disclosure, depending on the time of

disclosure, TSE may publish outstanding margin trading on the issue just for the next

business day.

ii. Removing the daily disclosure requirement

For an issue subject to daily disclosure pursuant to (a) above, if the issue falls under any

of the following cases, TSE may remove the daily disclosure requirement on the next

business day.

(i) Where the listed company makes appropriate disclosure

(ii) Where the issue falls under the criteria for removal of the daily disclosure requirement

specified in the guidelines concerning designation, etc. of daily disclosure issues

(iii) Where TSE deems it appropriate to remove the daily disclosure requirement,

including when an appropriate period of time has elapsed since the issue became

subject to daily disclosure


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f. Disclosure to Clarify Content of Unclear Information

When TSE makes an inquiry on speculation in the media or a rumor in the public domain on a

security or its issuer, the listed company is required to respond accurately. If TSE deems it necessary

and appropriate for the listed company to clarify the content of speculation in the media or rumors,

TSE may request the listed company to disclose the content of its response, in which case, the listed

company will be required to make immediate disclosure.

[Rule 415, Paragraphs 1 and 2 of the Regulations]

(a) Outline

Disclosure requests will be made from the perspective of whether speculation in the media or

rumors have material impact on investment decisions, regardless of whether the content of the

response from the listed company falls under the de minimis criteria for timely disclosure.

Where there is unclear information and the content of speculation in the media or rumors

have factual basis, the listed company shall be required to make appropriate disclosure on the

actual situation. If, on the other hand, the content is totally or partially untrue, it is required to

deny or otherwise make appropriate disclosure. Even if the listed company provides comments

on speculation in the media or rumors, for example "The company did not make such

disclosure" is not appropriate as disclosure contents because this comment does not clarify the

content of the unclear information or contribute to investment decisions. Listed companies are

required to make as in-depth disclosure as possible.

Referring back to the relationship between this and the system for issuing alerts, listed

companies should note that inquiries and disclosure requests may not necessarily be made

before an alert is issued. In particular, when unclear information becomes available during

auction trading, TSE may issue an alert to investors before making an inquiry or disclosure

request to the listed company.

Listed companies are reminded that non-action on a disclosure request may constitute a

violation of the Regulations. In addition, it would adversely affect price discovery in the financial

instruments market and lead to a loss of investor confidence in the listed company. In particular,

in order to avoid a situation where the company's relationship with a third party may prevent

clarification, the company is advised, at the outset of negotiations regarding merger, acquisition,

etc., to agree with the third party to disclose the status of negotiations in the case speculation in

the media or a rumor on the progress of negotiation talks is disseminated.

Furthermore, if the listed company had made disclosure to clarify the content of unclear

information, it shall also disclose any subsequent significant developments or changes in the

situation.

(b) Matters to note in the case where there is unclear information regarding equity

financing

When there is unclear information regarding equity financing, TSE may make an inquiry to

the listed company on the authenticity of such information or request the listed company to

carry out disclosure to clarify the authenticity of such information.

While a listed company should consider regulations on solicitation prior to registration under

the Financial Instruments and Exchange Act when it would like to disseminate information on

the equity financing prior to submitting security registration statement, 2-12 of the "Points of


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Attention Regarding Disclosure of Corporate Affairs, etc." provides that "disclosure which is

carried out under the articles of association of the exchange or other rules" "does not fall under

the category of Solicitation of Offers to Acquire or Solicitation of Offers to Buy." Therefore, it is

understood that even if a listed company carries out detailed disclosure concerning the status of

consideration on equity financing at TSE’s request, it does not breach the regulations on

solicitation prior to registration.

In the case where a listed company, in the so-called "comment" disclosure, makes detailed

disclosure of the status of consideration regarding equity financing, it is encouraged to clarify

that the disclosure material is not prepared for Solicitation of Offers to Acquire or Solicitation of

Offers to Buy by, for example, adding explanatory notes to the text as follows.

(Example)

(c) Matters to note in the case where there is unclear information regarding

earnings/business performance

When there is unclear information regarding earnings/business performance, TSE may also

make an inquiry to a listed company on the authenticity of such information or request a listed

company to carry out disclosure to clarify the authenticity of such information.

TSE generally requests to carry out disclosure in accordance with the timely disclosure criteria

for amendment of estimated value of business performance. In addition, TSE may also request

to carry out disclosure on the facts, including the authenticity of information, in the case where

there is a large difference between the unclear information and the actual situation or where

TSE deems that the unclear information may have material effect on investment decisions based

on the stock price or order trends. In the case where there is unclear information concerning

quarterly earnings or business performance, if the annual business performance can be

estimated from the content of such information, TSE may also request for disclosure on the

facts, including the authenticity of the unclear information.

As information regarding earnings is understood to be fixed through a series of processes,

such as audits/review of accounts by accounting auditors and auditors (audit committee

members), and account settlement operations at the listed company, etc., whether the listed

company can carry out detailed disclosure regarding the unclear information at the time of its

occurrence also depends on the circumstances.

Therefore, when there is unclear information regarding earnings or business performance,

the method of disclosure for clarifying the authenticity of the unclear information may not be

limited to the disclosure of a "comment." As disclosure concerning "adjustments to earnings

forecasts" and the advancement of schedule for disclosure of earnings results, etc. may be

available, please select an appropriate method, taking your company’s own circumstances into

consideration.

Note: This document was not prepared for the purpose of soliciting acquisition or sale.


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(2) Practical Guide for Timely Disclosure

When a listed company intends to carry out timely disclosure, it is required to go through the

process of (i) considering the need for timely disclosure, (ii) confirming the timely disclosure schedule,

etc., (iii) preparing the timely disclosure document, and (iv) carrying out timely disclosure.

This chapter describes the matters to note concerning the above mentioned procedures. The

general procedure for carrying out timely disclosure is as follows.

1. Considering the need for timely

disclosure

(i) To consider if the fact falls under any disclosure matter

(ii) To consider if the fact falls under the "de minimis criteria"

(iii) To consider if the fact falls under the basket clause

(iv) To consider making voluntary disclosure

2. Confirming the schedule (i) To check the timing of disclosure

(ii) To check the need and timing for prior consultation

(iii) To check the need for any operations concerning timely

disclosure

(iv) To check the need for submission of statutory disclosure

documents

3. Preparing disclosure document (i) To check "items to be disclosed" and "instruction for

preparation of disclosure document"

(ii) To prepare disclosure document using template document

form, etc.

(iii) To prepare PDF file for registration

4. Carrying out timely disclosure (i) To register disclosure document via TDnet

(ii) To publish disclosure document in the "Company

Announcement Disclosure Service"

(iii) To disseminate information via other media

* After a listed company carries out timely disclosure, it may be required to carry out disclosure

regarding postponement/ change/ correction/ progress of the disclosed matter.

* A listed company may be required to submit document(s) to TSE concerning timely disclosure.

a. Matters to Note regarding Need for Disclosure

(a) Basic Principle Concerning Faithful Execution of Services

When a listed company determines a matter related to operations, business or assets of said

listed company or said listed stock, etc. which has material effect on investment decisions or

such a matter occurs at the listed company, it may be required to carry out timely disclosure.

When you determine such a matter or when such a matter occurs, please consider if the

matter falls under any individual disclosure matter first. Each disclosure matter is prescribed in

the Regulations.

* In the case where a fact falls under more than one disclosure matter

It is possible that a fact falls under more than one disclosure matter, depending on the

details of the fact of decision/occurrence. (For example, in the case where an allottee of a

third-party share allotment accompanying a capital and business alliance becomes a major


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shareholder, a single action (the implementation of the capital and business alliance) will

fall under three disclosure items, which are "offering to subscribe for new shares to be

issued," "business alliance" and "change in major shareholders." Also, in the case where a

listed company newly calculates estimated value in the current consolidated accounting

year as a result of consideration of the degree of effect given to the account record, etc.

caused by the fact of decision or occurrence, it may be required to carry out timely

disclosure of the "adjustment to earnings forecasts, etc." In these cases, it is also required

to consider if the fact falls under the de minimis criteria, etc. for the respective disclosure

matter.

* In the case where delisting has been determined

Even if a listed company is scheduled to be delisted, when it determines a fact which falls

under a disclosure matter or when a fact which falls under a disclosure matter occurs, the

listed company shall carry out timely disclosure.

(b) Considering whether a Fact Falls under the De Minimis Criteria

De minimis criteria are set for many disclosure matters. If a fact falls under the de minimis

criteria, in general, timely disclosure is not required. On the other hand, there is no "de minimis

criteria" for some disclosure matters, such as corporate reorganization and mergers.

A "de minimis criterion" may involve more than one requirement. (For example, the increase

or decrease in sales is within a certain range, and the increase or decrease in net assets is within

a certain range.) Only if a fact meets all of such requirements, the fact falls under the de minimis

criteria and timely disclosure is not required.

While many de minimis criteria are determined based on consolidated indicators, such as

consolidated sales amount, the de minimis criteria quoted from such criteria in the insider

trading regulations, in principle, are determined based on non-consolidated indicators, such as

sales amount (non-consolidated basis). Therefore, when a listed company considers whether a

fact falls under the de minimis criteria, it is necessary to confirm both of the consolidated

indicators and non-consolidated indicators.

* Cases where “Net Profit Attributable to Shareholders of the Parent Company” should be read

“Consolidated Net Profit”

Because of the recent amendments to the “Ordinance on Terminology, Forms, and

Preparation Methods of Consolidated Financial Statements”, which were in turn based on

amendments to the “Accounting Standard for Business Combination”, data previously

published under the category of “Net Profit” in consolidated financial statements prepared

according to Japanese accounting standards are now required to be published under the

category of “Net Profit Attributable to Shareholders of the Parent Company”. (This change

applies to all consolidated financial statements for fiscal years starting on or after April 1st,

2015.) Based on this change, Rules have been revised so as to use “Net Profit Attributable

to Shareholders of the Parent Company” instead of “Consolidated Net Profit” in the

assessment of de minimis criteria. (The revision has been implemented as of April 1st,

2015.) In accordance with these amendments, “Guidebook for Timely Disclosure of

Corporate Information” adopts the use of “Net Profit Attributable to Shareholders of the


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Parent Company” as the item to assess whether de minimis criteria are met. However, in

cases such as when Consolidated Net Profit is being used to assess whether de minimis

criteria are met in previous fiscal years, you should be aware that the “Net Profit

Attributable to Shareholders of the Parent Company” should be substituted with the

“Consolidated Net Profit” where applicable.

* In cases where it is not clear whether a fact falls under the de minimis criteria

In cases where it is not clear whether a fact falls under the de minimis criteria, the fact

should be considered to not fall under the de minimis criteria, and timely disclosure is

required. For example, in the case where it is difficult to calculate the amount of impact on

business performance caused by a fact of decision/fact of occurrence, timely disclosure

shall be carried out, unless the estimated maximum amount of impact still falls under the

de minimis criteria.

* In cases where a fact does not have material impact on business performance together with

the estimated amount of impact caused by another factor

Even if the aggregated amount of impact on business performance caused by a fact of

decision/occurrence (Fact A) and such amount of impact caused by another fact (Fact B)

falls under the de minimis criteria, timely disclosure shall be carried out if the estimated

amount of impact caused by Fact A does not fall under the de minimis criteria.

* In cases where the effect caused by a fact has already been included in the estimated value of

business performance

Even if the impact caused by a fact has already been reflected in the estimated value of

business performance, such a fact shall be disclosed if the estimated value of impact itself

does not fall under the de minimis criteria.

* In cases where a string of events involving more than one act is conducted

In cases where a listed company conducts a string of events involving more than one act

that falls under a specific fact of decision, even if each act falls under the de minimis criteria

prescribed in the Regulations, it is necessary to determine whether the overall impact of the

string of events falls under the de minimis criteria as far as it is deemed appropriate to

regard these as a string of events based on their aims, intention, and economic value.

* In cases where the amount of profit is small

TSE sets the disclosure criteria relating to the amount of profit for many disclosure

matters. In the case where the estimated value of impact on profit is more than 30% of

consolidated ordinary profit or net profit attributable to shareholders of the parent

company recorded for the most recent consolidated accounting year, timely disclosure shall

be carried out.

In cases where the amount of profit is small, however, special provisions are available.

The following cases fall under the special provisions.

(i) Regarding the criteria on net profit attributable to shareholders of the parent company

consolidated ordinary profit, in the case where the amount of consolidated ordinary

profit for the most recent consolidated accounting year is less than 2% of the amount


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of sales for the most recent consolidated accounting year, and

(ii) Regarding the criteria on net profit attributable to shareholders of the parent company,

in the case where the amount of consolidated net pr1ofit for the most recent

consolidated accounting year is less than 1% of the amount of sales for the most

recent consolidated accounting year.

* In the case of irregular accounting period

In the case of irregular accounting period accompanied by change in the settlement term

(A settlement term becomes longer or shorter than 12 months), eligibility for the de

minimis criteria is to be determined based on comparing the figures based on a 12-month

period.

For example, the calculation of the de minimis criteria for a 6-month settlement term is

as follows.

Reference value for the case where the most recent accounting year (X-1 year) introduced

irregular account settlement (6-month)

Net Profit Attributable to

Consolidated Shareholders of the

Net Sales (JPY) Parent Company (JPY)

X-2 year (12-month) 150 billion 13 billion

X-1 year (6-month) 80 billion 3 billion

X-1 year (after conversion) 160 billion 6 billion

Reference value for X year 160 billion 6 billion

* In the case where submission of extraordinary report is not necessary

As matters for timely disclosure and requirement for timely disclosure do not always

overlap with the grounds for submission of extraordinary report, it is possible that, even if

the submission of extraordinary report is not required, timely disclosure shall still be carried

out.

(c) Considering whether a Fact Falls under the Basket Clause

In addition to individual disclosure matters prescribed in the Regulations, in the case where a

listed company makes a decision regarding important matters related to operations, business or

assets of such listed company or such listed stock, etc. which have a material effect on

investment decisions, or such matters occur, timely disclosure shall be carried out (so called the

"basket clause").

Even if a fact (i) does not fall under any disclosure matter or (ii) falls under the de minimis

criteria while it falls under a disclosure matter, it is possible that such a fact falls under the

basket clause and timely disclosure shall be carried out. Therefore, when a listed company

considers the need for timely disclosure, it is required to consider the eligibility for the basket

clause.


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(d) Considering Making Voluntary Disclosure

Even if a listed company determines that timely disclosure is not necessary to be carried out

as a result of considerations in (a) to (c) above, it is still encouraged to consider making

disclosure on a voluntary basis from the point of view of timely and appropriate disclosure of

corporate information. For example, if a listed company discloses corporate information in a

foreign country in accordance with the laws, etc. of the country, it is desirable to make voluntary

disclosure from the point of view of fair information provision.

Even when voluntary disclosure is carried out, as far as the information is disclosed as "timely

disclosure information," such information is regarded to be provided to investors as information

useful for investment decisions. Therefore, in preparing disclosure documents, a listed company

is required to pay attention in order to make appropriate disclosure from the point of view of

providing information for investment decision with referring the "disclosure matter" and "notes

in disclosure and writing" for disclosure matters, etc. Regarding the timing of disclosure, please

carry out disclosure immediately after the decision is made or the fact occurs as timely

disclosure is carried out.

Also, after a listed company carries out voluntary disclosure, it is also required to make

disclosure when the company decides not to execute the disclosed matter, or when it is

necessary to change or correct the disclosed matter.

If you have questions about the need for disclosure, please contact TSE.

b. Matters to Note regarding the Disclosure Schedule

(a) Confirming the Time of Disclosure

(i) A practical way of thinking regarding the time of disclosure of fact of decisions

In cases where a body that decides a listed company’s business execution makes a decision

on carrying out a matter that falls under a material decision, the listed company shall carry out

disclosure immediately according to the provisions of the Regulations and the Enforcement

Rules.

The actual time of disclosure about a decision shall not be constrained by formal aspects,

such as a board meeting, and the time shall be determined according to the actual situation. In

general, a listed company is required to carry out disclosure at the stage where the body that

decides its business execution in practice effectively decides to carry out such matter. (A body

that decides a listed company’s business execution does not always mean the body that has

authority to make the ultimate decision according to the Companies Act.)

In practice, regarding matters to be resolved at a general shareholders meeting and matters

to be resolved at a board meeting, it is generally understood that timely disclosure is carried out

immediately after the resolution at board meeting, and regarding the matters on which the

president of the company has authority, it is also understood that timely disclosure is carried out

immediately after the decision is made by the president. If it is clear that other bodies or

executives decide such business execution in practice, however, timely disclosure shall be

carried out when such resolution/decision is made. Regarding matters to be resolved at a

general shareholders meeting, in general, it is necessary to carry out timely disclosure not after

the general shareholders meeting reaches a resolution, but immediately after the board meeting

resolves to make a proposal.


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Regarding the insider trading regulations, while a listed company is required to appropriately

manage information that may fall under material facts based on past cases from the stage

where a decision is made to start operations towards implementation (in some cases, prior to

such stage), it is not always required to carry out timely disclosure immediately at this stage.

* In the case where a basic agreement, etc. is concluded

Regarding organizational restructuring, such as merger, etc. and transfer of subsidiary,

etc., there are cases where a Memorandum of Understanding (hereinafter referred to as

"MOU") and/or Letter of Intent is concluded before a final contract is concluded. If these

acts are practically decided by conclusion of these MOU, etc., timely disclosure is necessary

to be carried out at this stage.

For example, however, in the case where such conclusion of MOU, etc. means just a

preliminary action, or a certain agreement to begin negotiations which may not necessarily

lead to the final agreement, or in the case where the disclosure of such conclusion of MOU

may cause the negotiations to collapse, timely disclosure may not be required. In addition,

please note that the need for disclosure is not determined by whether the MOU is legally

binding, or whether the ratio of the merger is described.

* In the case where administrative approval/permission is necessary

Even if the execution or implementation of an act related to corporate information

requires approval by the authority, in principal, timely disclosure is required to be carried

out when the listed company decides to execute the act. In such a case, it is required to

describe in the disclosure document that approval by authority is the condition for

execution/implementation.

* In the case where resolution at the board meeting of the counterparty has yet to be made

In the case where a listed company intends to conduct reorganization, etc. such as

merger, etc., it is possible that resolution of board of directors meeting at the other party

has not been completed at the time when the resolution of board of directors meeting at

the listed company has already been made, due to the different dates for the board

meeting at the listed company and the other party.

Even if the resolution of the board meeting has not been made at the other party, the

listed company shall carry out timely disclosure at the time when its decision making body

reaches a resolution on the execution of the operation. Therefore, if a listed company

intends to carry out timely disclosure at the same time as the resolution of the board

meeting of the other party, both parties should coordinate on the schedule, taking timely

disclosure into consideration.

(ii) A practical way of thinking about the timing of disclosure for occurred facts

A listed company shall carry out timely disclosure when material corporate information occurs

according to the provisions of the Regulations and the Enforcement Rules.

The disclosure is to be carried out at the time when the occurrence of such information is

recognized. Therefore, a listed company is encouraged to establish and maintain a system that

enables it to immediately recognize that a fact has occurred.


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(iii) A practical way of thinking about the timing of disclosure for amendments to

earnings forecasts, etc.

In the case where a listed company recalculates the forecasts for business performance for

the current consolidated accounting year (current business year), or fixes the details of account

settlement for the current consolidated accounting year (current business year), it shall carry

out timely disclosure concerning the amendment to its forecasts, etc.

* In the case where the whole picture of the act has not been decided or clarified at the time of

decision/occurrence

Even if the whole picture of the act has not been decided or the whole picture of the fact

has not been clarified, the listed company shall classify the facts into those that have been

fixed/clarified and those which have not been fixed/clarified, and then, carry out timely

disclosure concerning the facts that have been fixed/clarified. In addition, after such

disclosure is carried out, when the unfixed/unclarified fact becomes fixed/clarified, the

listed company shall carry out timely disclosure as "Progress of disclosed matter"

accordingly.

(b) To Confirm the Need and Timing for Prior Consultation

In the case where a listed company falls under any disclosure matter listed below under

certain conditions, it shall consult TSE at least 10 days (for an absorption type merger, etc. that

does not fall under the de minimis criteria for inappropriate mergers: 2 weeks before, for

introduction or exercise of takeover defense measure: 3 weeks before) prior to the scheduled

disclosure date.

・ Third Party Share Allotment

・ Issuance of MSCB, etc.

・ Introduction/Exercise of Takeover Defense Measures

・ Allotment of Share Options without Contribution

・ Reverse Stock Split that is Expected to Result in Delisting

・ Acts of Reorganization, such as Merger/Acquisition

・ Takeover Bid or Takeover Bid for Treasury Shares

・ Expression of Intent, etc. concerning Takeover Bid

・ Acquisition of all classified stocks subject to whole acquisition clause

・ Approval or rejection of a special controlling shareholder’s request for sale of shares, etc.

・ Assignment of independent auditors or directors who meet independence standards

・ Merger, etc. that does not Fall under the De Minimis Criteria concerning Inappropriate

Mergers

Regardless of whether an act falls under the list above, in the case where there are specific

matters to be taken into consideration concerning disclosure, including cases where the details

of the disclosure are different from the details that TSE require to be disclosed, where any

scheme with no precedent is being considered and where there are concerns over matters that

need to be observed, please provide sufficient time for prior consultation.


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Prior consultation is available by interview, telephone, and e-mail. If it is not clear whether

there is a need for prior consultation, please contact TSE.

(c) To confirm the need for any operations related to timely disclosure

Depending on the disclosure matter, there are some cases where certain procedures, such as

acquisition/submission of document, are required prior to timely disclosure.

For example, in the case where an act corresponds to a transaction with the controlling

shareholder, it is required to obtain the opinion from an entity that does not have any interest

with the controlling shareholder.

In addition, in the case of a third party share allotment that falls under a certain condition, it

is required to obtain the opinion from the third party or take procedures to confirm shareholder

intent.

(d) To confirm the need for submitting statutory disclosure document(s)

Depending on the disclosure matter, the securities registration statement or extraordinary

report is required to be submitted in addition to timely disclosure. (For the details, please

contact the Financial Service Agency or Local Finance Bureaus.)

Regardless of whether an extraordinary report has been submitted, in the case where the

body that decides a listed company’s business execution makes a decision, the listed company

shall carry out timely disclosure immediately.

However, in the case where timely disclosure is carried out prior to the submission of the

securities registration statement concerning corporate information that requires such

submission, such as issuance of new shares and subscription rights for new shares, the case

may be contrary to the regulation on prior solicitation. Therefore, please take care to avoid

causing such a situation by temporarily registering the extraordinary report with EDINET in

advance to confirm if the report is ready to be submitted.

c. Matters to Note regarding Preparation of Disclosure Documents

(a) Confirm "Disclosure Matters" and "General Instructions for Preparation"

In “Guidebook for Timely Disclosure of Corporate Information”, the details to be described for

disclosure (the "disclosure items") and the "general instructions for preparation" are explained

for each disclosure matter. In general, these disclosure items mean items that a listed company

is required to disclose in order to enable investors to make decisions pertaining to such

information. In principle, all of these items are required to be described in a disclosure

document. Therefore, in preparing a disclosure document, please confirm these disclosure

items and the general instructions for preparation first.

In addition to the prescribed disclosure items, it is required to describe the items, which are

necessary for investors to understand/judge the corporate information properly, in a disclosure

document.

On the other hand, in the case where false description is included in a disclosed document,

where information that is regarded as important for making investment decisions is insufficient


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in the disclosure document, or where the information in the disclosure document is misleading,

the disclosure may be subject to the measure prescribed in the Regulations.

Therefore, when a listed company prepares a disclosure document, the company is required

to confirm the facts carefully, and to prepare the disclosure document accurately without errors

or omissions.

* In the case where a fact falls under more than one disclosure matter

In the case where any corporate information falls under more than one disclosure matter,

if it is regarded appropriate to combine the matters into a single disclosure document so

that the investors will be able to understand and judge the information appropriately,

prepare a single disclosure document.

On the other hand, in the case where it is regarded appropriate to explain each matter

separately so that the investors will be able to understand and judge the information

appropriately, prepare a separate disclosure document, indicating the relationship between

any related facts.

In both cases, the listed company is encouraged to describe the prescribed disclosure

items concerning each disclosure matter in order to enable investors to understand and

judge the corporate information appropriately in accordance with the practical handling of

timely disclosure of corporate information described in this guidebook.

(b) Use of disclosure templates

For the convenience of listed companies in preparing disclosure documents, templates for

disclosure are published for each disclosure matter. While a listed company is able to cover all

disclosure items that are described in “Guidebook for Timely Disclosure of Corporate

Information” by preparing the timely disclosure documents in accordance with each template, it

does not mean that the listed company is required to base its disclosure on the templates. In

addition, even if an item is not required to be described in the disclosure form, as far as such

item may have material impact on investment decisions on a case-by-case basis, such item

needs to be disclosed appropriately.

Also, the TDnet database service enables its users to search past timely disclosure documents.

When a listed company prepares a disclosure document, it may be useful to search the

examples of other companies, and refer to such documents when making disclosure that is easy

for investors to understand. Since such documents disclosed by other companies are prepared

for the specific circumstances, the listed company should not simply use their content but

should take care to prepare disclosure documents and carry out timely disclosure in accordance

with its own situation.

(c) General Instructions for Preparation of Disclosure Documents

(i) Preparing disclosure documents on a consolidated basis

In principle, disclosure documents should be prepared using consolidated indicators.

In cases where there is no consolidated indicator, such as in the case of a listed company that

does not prepare consolidated financial statements, or in cases where it is more appropriate to

prepare them on a non-consolidated basis, disclosure documents may be prepared using


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non-consolidated indicators.

Figures for indicators described in disclosure documents should be distinguished between

consolidated and non-consolidated indicators.

(ii) Joint preparation of disclosure documents

While disclosure documents are generally prepared under the name of a single listed company,

it is acceptable to jointly prepare disclosure documents (for example, in the case where the

parent company and subsidiary are both listed). Even if a disclosure document is jointly

prepared, the disclosure document is regarded as disclosed by the listed company. Therefore,

please note that the listed company is fully responsible for the accuracy of the disclosure

document, including details concerning the other companies involved in joint preparations.

(iii) Preparing disclosure documents that are easy to understand

In order to make disclosure documents easier to understand, the following measures should

be considered.

・ For technical terms used in a specific business area or industry, add explanatory notes as

far as possible.

・ For the style of writing, avoid using terms that are difficult to understand as far as possible,

and describe concretely.

・ To try to use description that is easy to understand, as well as charts and diagrams.

・ For facts that have already been disclosed, specify the gist of such facts by quoting the date

and title of the related disclosure documents.

(iv) Preparing disclosure documents from the standpoint of fair provision of

information

A listed company is required to provide information to investors fairly. For example, if material

information that is not described in the disclosure document is disseminated at the press

conference that is held with timely disclosure, only certain investors will be able to obtain the

information, and this is unfair. In such a case, it may even be necessary to amend or correct the

details of the disclosure.

Therefore, in preparing disclosure documents, listed companies are encouraged to include

answers to expected questions from investors in disclosure documents in order to prevent

unequal access to information.

(v) Description of future outlook

In disclosure documents, listed companies are required to describe the expected impact of an

occurred fact or decision on business performance from the current business year and its future

outlook, depending on the disclosure matter.

In this regard, as to the expected impact on business performance from the current business

year, even if the aggregation of the impact on business performance from the current business

year by the fact and impact by other facts does not result in a material impact on business

performance, the listed company is required to describe details, including the impact of other

facts. In addition, even if the expected impact on business performance from the current year is

yet to be calculated, the listed company is encouraged to describe at least the scale and/or

degree of the impact.


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d. Disclosure regarding Postponement/ Change/ Correction/ Progress of Disclosed Matters

(a) Postponement of disclosed matters

In the case where a listed company decides not to carry out the matter concerning the

material corporate information that has been disclosed, it shall disclose to that effect as

"Postponement of the disclosed matter."

(b) Change/correction of disclosed matters

In the case where a change or correction should be made to the content of disclosed

information, a listed company shall disclose the details of such change or correction immediately,

as "Change of Disclosure Matter" and "Correction of Timely Disclosure Document."

(c) Progress of disclosed matters

Regarding disclosure details that are difficult to be disclosed at the time the matter was first

disclosed, a listed company is required to make disclosure as "Progress of Disclosure Matter"

immediately after such details become available for disclosure.

e. Others

(a) Information management regarding timely disclosure matters

In general, timely disclosure matters correspond to material facts in the insider trading

regulations. Therefore, listed companies are encouraged to thoroughly conduct information

management concerning timely disclosure matters in order to avoid insider trading by people

who have gained access to the information ahead of timely disclosure.

Listed companies are also required not to provide undisclosed information individually in the

course of everyday communications with parties, including customers, individual investors,

security analysts, and the media. Regardless of whether it is intended, if a listed company

provides undisclosed information individually, it is required to carry out disclosure concerning

such information via TDnet immediately from the point of view of fair disclosure.

In the case where media speculation or a rumor is circulating in the public domain, TSE may

issue an alert to the general public. For the details of the public announcement measure, please

refer to the “Outline of system for issuing alerts”.

(b) Documents to be submitted

Depending on the content of timely disclosure, listed companies are required to submit

document(s) to TSE before/after such timely disclosure.


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(3) Practical Handling of Timely Disclosure of Corporate Information for Listed Foreign

Companies

A listed foreign company (meaning an issuer of a foreign stock or foreign stock depositary receipt,

etc.; the same shall apply hereinafter) shall disclose the facts prescribed in Rule 402 through 405 of

the Regulations, in the same manner as a listed domestic company. In addition, based on Rule 407 of

the Regulations, there are items to be disclosed only by a listed foreign company such as changes in

laws and regulations of the home country concerning the company system.

On the other hand, as disclosure systems and procedures may vary depending on the home

country of the listed foreign company, it is not necessarily reasonable to apply a uniform measure.

Furthermore, foreign companies are also listed using diversified methods, including direct listing on

TSE and listing of foreign stock depository receipts. Therefore, under the Regulations, in applying the

rules and regulations of TSE to a listed foreign company, TSE shall take into account the legal systems,

business practices, and customs of the home country of the listed foreign company.


○ Facts that are decided by the listed company [Rule 402, Item 1 of the Regulations]

○ Facts that occurred at the listed company [Rule 402, Item 2 of the Regulations]

○ Earnings results of the listed company [Rule 404 of the Regulations]

○ Amendments to earnings/dividend forecasts of the listed company, etc. [Rule 405 of the

Regulations]

○ Information on subsidiaries, etc. [Rule 403 of the Regulations]

○ Information to be disclosed only by a listed foreign company [Rule 407 of the Regulations]

・ Changes in laws and regulations, etc. of the home country concerning the company system that

have material impact on shareholders (including holders of listed foreign stock depositary receipts,

etc.) or the company’s business performance

・ A fact that occurs in a foreign country that has material impact on the circulation of a listed foreign

stock, etc., or a foreign stock depositary receipt, etc. that represents a right pertaining to a listed

foreign stock, etc.

・ In addition to the above, a decision on a change in or termination of a deposit agreement, etc.

pertaining to a listed foreign stock depositary receipt, etc. or any other agreement, other matters

that have material impact on a right, etc. related to a listed foreign stock depositary receipt, etc., or

a fact that has material impact on such right, etc.

* When these provisions are applied to a foreign company that is conducting English-Language

Disclosure for statutory disclosure, "securities registration statement," "securities report,"

"quarterly report," "internal control report," and "extraordinary report" shall be read as

"foreign company registration statement," "foreign company report," "foreign company

quarterly report," "foreign company internal control report," and "foreign company

extraordinary report" respectively.

* Regarding the approval granted to an application for an extension of the deadline for filing

securities report/quarterly report, when a listed foreign company submits a document that

describes that the reasons for application for said approval have not been changed or no

longer exist according to Paragraph (5), Article 15-2-2 or Paragraph (5), Article 17-25 of the


135

Cabinet Office Ordinance on Disclosure of Corporate Information, it is required to make timely

disclosure to that effect as "Progress of Disclosed Information" that is a timely disclosure

matter of "Submission of application for an extension of the deadline for filing Securities

Report/Quarterly Report."

* A listed foreign company, for which TSE is the principal market, is encouraged to carry out

disclosure concerning earnings information, etc. in accordance with “Guidebook for Timely

Disclosure of Corporate Information”. In this case, among items that are uniformly required to

be described in the earnings report, "Basic approach toward Choice of Accounting Standard"

does not apply.

[Definitions of subsidiary, etc. and sub-subsidiary]

○ A "subsidiary, etc." means a subsidiary prescribed in Article 166, Paragraph (5) of the Financial

Instruments and Exchange Act, and in cases of a listed foreign company (limited to entities

deemed necessary by TSE), its subsidiary, affiliated company, or other entities deemed necessary

by TSE.

○ A "sub-subsidiary" means a sub-subsidiary prescribed in Article 29, Item (ii) of the Enforcement

Ordinance of the Financial Instruments and Exchange Act, and in cases of a listed foreign company

(limited to entities deemed necessary by TSE), it means a subsidiary, etc. of the subsidiary, etc.

[Timely disclosure of information regarding a company considered to be a capital-subordinate company,

etc.]

When TSE deems necessary, a listed foreign company is required to disclose information regarding a

capital-subordinate company, etc., including a fact of decision and fact of occurrence, etc.

A capital-subordinate company, etc. means, among affiliated companies based on human relations

and affiliated companies based on capital relations, a company considered to be substantially controlled

or owned by the listed foreign company.

Also, taking the example of a listing by a Chinese company that is conducting businesses in

industries that prohibit or restrict foreign investment, it is understood that more than a few

capital-subordinate companies, etc. may exist under such listed companies, and the relations among

the listed company, subsidiary companies, and capital-subordinate companies, etc. may depend on a

set of complicated contracts among them. In such a case, as it is predicted that the change in such

contract agreements may have material impact on the listed foreign company depending on the

substance of the change, information on such change is strongly recommended to be disclosed.


136

a. Changes in Laws and Regulations, etc. of the Home Country concerning the Company

System

(a) Disclosure Obligations under the Regulations

When changes in laws and regulations, etc. of the home country concerning the company

system that have material impact on shareholders (including holders of a listed foreign stock

depositary receipt, etc.) or the company’s business performance are made, a listed foreign

company shall disclose its details immediately.

[Rule 407, Paragraph 1, item 1 of the Regulations]

(Note) As for the cases of changes in laws and regulations, etc. of the home country

concerning the company system that have material impact on shareholders (including

holders of a listed foreign stock depositary receipt, etc.) or the company’s business

performance, restrictions on stock transfers, nationalization of corporations, etc. are

considered as examples.

(b) Items to be Disclosed and Notes on Disclosure/Descriptions

In disclosure material, prescribed items shall be indicated, and then, the details shall be

included so that investors can understand/judge the corporate information properly. In addition,

other than the prescribed items, items necessary for investors to understand/judge corporate

information properly shall also be described.

a. Details of changes in laws and regulations, etc. of the home country

b. Impact on shareholders or the company’s business performance caused by the changes in

laws and regulations, etc. of the home country

c. Other items necessary for investors to understand/judge the corporate information

properly

b. A Fact that Occurs in a Foreign Country that Has Material Impact on the Circulation of

a Listed Stock, etc. or a Foreign Stock Depositary Receipt, etc.


When a fact that has a material impact on the circulation of a listed foreign stock etc. or a

foreign stock depositary receipt, etc. that represents a right pertaining to a listed foreign stock,

etc. occurs in a foreign country, a listed foreign company shall disclose its details immediately.

[Rule 407, Paragraph 1, item 2 of the Regulations]

(Note) As for a fact that occurs in a foreign country that has material impact on the

circulation of a listed foreign stock, etc. or a foreign stock depositary receipt, etc. that

represents a right pertaining to a listed foreign stock, etc., a takeover bid against the

stock, etc. of the listed foreign company made by an unlisted company and occurrence

of a fact that will cause delisting from an exchange other than TSE are considered as

examples.


In disclosure materials, prescribed items shall be indicated, and then, details shall be included

so that investors can understand/judge the corporate information properly. In addition, other


137

than the prescribed items, items necessary for investors to understand/judge corporate


a. Details of the fact

b. Impact on the circulation of the listed foreign stock, etc. caused by the fact

c. Other matters necessary for investors to understand/judge the corporate information

properly

c. Fact of Decision or Occurrence with Material Impact on Rights, etc. Related to Listed

Foreign Stock Depositary Receipt, etc.,


Where an issuer of a listed foreign stock depositary receipt, etc. has made a decision on a

change or termination of a deposit agreement, etc. or any other matters that have material

impact on a right, etc. related to the listed foreign stock depositary receipt, etc., or where a fact

that has material impact on such right, etc. has emerged, the issuer shall disclose details

immediately.



In disclosure materials, prescribed items shall be indicated, and then, details shall be included

so that investors can understand/judge the corporate information properly. In addition, other

than the prescribed items, items necessary for investors to understand/judge corporate


a. Details of the fact

b. Impact on the right, etc. related to the listed foreign stock depositary receipt, etc. by the

incident or fact

c. Other matters necessary for investors to understand/judge the corporate information

properly


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(4) Code of Corporate Conduct

a. Overview of Code of Corporate Conduct

A Listed company is required to keenly recognize that it is a member constituting the financial

instruments market and to improve disclosure of corporate information for the achievement of

transparency. In addition, it is also required to take the appropriate responses in corporate activity for

the purpose of protection of investors and appropriate fulfillment of market function. In the light of

these points, the Regulations defines the Code of Corporate Conduct consisting of “Matters to be

Observed” which clarify the minimum points to be adhered to as a listed companies and “Matters

Desired to Be Observed” which clearly specify the matters to be addressed by a listed company.

[Rule 432 through 452 of the Regulations]

b. Handling of Code of Corporate Conduct of Listed Foreign Companies

Provisions of “Matters to be Observed” applicable to listed foreign companies are: Rule 432

(Matters to be observed for third party allotment); Rule 433 (Prohibition of stock split, etc. which is

likely to disrupt the secondary market); Rule 434 (Matters to be observed pertaining to issuance of

MSCB, etc.); Rule 436 (Framework improvement to facilitate exercise of voting rights for listed foreign

companies; limited to a listed foreign company whose listed foreign stock, etc. is traded principally on

the TSE market); Rule 440 (Matters to be observed pertaining to introduction of takeover defense

measures); Rule 441 (Matters to be observed pertaining to disclosure of MBO, etc.); Rule 441-2

(Matters to be observed pertaining to significant transactions, etc. with controlling shareholder); Rule

442 (Prohibition of insider trading); Rule 443 (Exclusion of antisocial forces); and Rule 444 (Prohibition

of actions damaging to the function of the secondary market or shareholders’ rights). In addition,

provisions of “Matters Desired to be Observed” applicable to listed foreign companies are: Rule 445-3

(Respect for Corporate Governance Code); Rule 449 (System improvement for prevention of

occurrence of insider trading); Rule 450 (Development of system, etc. for excluding antisocial forces);

and Rule 452 (Fair provision of supplementary explanatory materials related to the details of account

settlement). Since the application of these items will be managed in consideration of legal systems

and practices, etc. of each home country of the relevant listed foreign company, please consult TSE

about the handling of these items, etc.


139

Matters to be Observed Japanese

Company

Foreign

Company

・ Matters to be observed for third party allotment (a) Applicable Applicable

・ Prohibition of stock split, gratis allotment of shares,

gratis allotment of subscription warrants, reverse stock

split, or change in the number of shares per share unit

which is likely to disrupt the secondary market or

infringe upon shareholder interests (b)

Applicable Applicable

・ Matters to be observed pertaining to issuance of MSCB,

etc. (c) Applicable Applicable

・ Exercise of voting rights in writing, etc. Applicable -

・ Framework improvement to facilitate exercise of voting

rights for listed foreign companies (d) - Applicable

・ Obligation to secure independent director(s)/auditor(s) Applicable -

・ Comply or Explain with Corporate Governance Code Applicable

・ Obligation to set up board of directors, board of auditors

or an audit committee and accounting auditors Applicable -

・ Obligation to appoint an accounting auditor as certified

public accountant, etc. conducting audit certification,

etc.

Applicable -

・ Obligation to develop system and structure necessary to

ensure appropriateness of business Applicable -

・ Matters to be observed pertaining to introduction of

takeover defense measures (e) Applicable Applicable

・ Matters to be observed pertaining to disclosure of MBO,

etc. (f) Applicable Applicable

・ Matters to be observed pertaining to significant

transactions, etc. with controlling shareholder (g) Applicable Applicable

・ Audit by a listed company audit firm, etc. Applicable -

・ Prohibition of insider trading (h) Applicable Applicable

・ Exclusion of antisocial forces (i) Applicable Applicable

・ Prohibition of actions damaging to the function of the

secondary market or shareholders’ rights (j) Applicable Applicable


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Matters Desired to be Addressed

(matters to be addressed)

Japanese

Company

Foreign

Company

・ Efforts, etc. toward the shift to and maintenance of the

desired investment unit level Applicable -

・ Efforts, etc. toward unification of trading unit Applicable -

・ Respect for Corporate Governance Code (a) Applicable Applicable

・ Securing Independent Directors/Auditors as Directors

on the Board Applicable -

・ Preparation of an environment for the functioning of

independent directors/auditors Applicable -

・ Provision of information regarding independent

director(s)/auditor(s), etc. Applicable -

・ Framework improvement to facilitate exercise of voting

rights Applicable -

・ Documents to be delivered to shareholders owning

stock without voting rights Applicable -

・ System improvement for prevention of occurrence of

insider trading (b) Applicable Applicable

・ Development of system, etc. for excluding antisocial

forces (c) Applicable Applicable

・ Development of systems and structures to properly

respond to changes, etc. in accounting standards, etc. Applicable -

・ Fair provision of supplementary explanatory materials

related to the details of account settlement (d) Applicable Applicable


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c. Matters to be Observed

(a) Matters to be Observed for Third party allotment

When a listed company performs an allotment of stocks, etc. by third party allotment that would

(i) dilute the ratio of voting shares by twenty five (25) percent or more, or (ii) cause a controlling

shareholder to transfer the shares held, it shall, in principle, (a) receive opinion of a person who has

a specific degree of independence from the management regarding the necessity and suitability of

such allotment, or (b) confirm the intent of shareholders regarding such allotment by means such

as a resolution in the general shareholders meeting; provided, however, that the preceding

provisions shall not apply to cases where it is difficult for the listed company to conduct any of the

procedures enumerated in (a) or (b) due to reasons such as rapidly deteriorating financial

situations.

[Rule 432 of the Regulations; Rule 435-2, Paragraph 3 of the Rules]

(b) Prohibition of Stock Split, Gratis Allotment of Shares, Gratis Allotment of

Subscription Warrants, Reverse Stock Split, or Change in the Number of Shares Per

Share Unit which is likely to Disrupt the Secondary Market or Infringe upon

Shareholder Interests

A listed company shall not carry out a stock split, gratis allotment of shares, gratis allotment of

subscription warrants, reverse stock split, or change in the number of shares per share unit which

is likely to disrupt the secondary market or infringe upon shareholder interests.


(c) Matters to be Observed pertaining to Issuance of MSCB, etc.

When a listed company issues MSCB, etc., it shall take measures to restrict conversion or exercise

of MSCB, etc. by purchasers of MSCB, etc. In addition, a listed company shall not conduct actions

deemed by TSE as damaging to the function of the secondary market or the rights of shareholders.


(d) Framework Improvement to Facilitate Exercise of Voting Rights for Listed Foreign

Companies

In cases where a listed foreign company (limited to a listed foreign company whose listed foreign

stock, etc. is traded principally on the TSE market) convenes a general shareholders meeting, it

shall send an instruction sheet written in Japanese language (*1) and a reference document

containing so adequate content that a beneficial shareholder of a foreign stock certificate, etc. can

give instruction for an exercise of a voting right (*2) to beneficial shareholders of a foreign stock,

etc. by two (2) weeks prior to a day of such general shareholders meeting. In addition, since the


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application of these items will be managed in consideration of legal systems and practices, etc. of

each home country of the relevant listed foreign company, please consult TSE about the handling of

these items, etc.

(*1) Meaning a document by which a beneficial shareholder of a foreign stock, etc. gives

instructions for the exercise of voting rights.

(*2) Meaning a document containing matters that should serve as a reference regarding

instruction for the exercise of voting rights.


(e) Matters to be Observed Pertaining to Introduction of Takeover Defense Measures

In cases where a listed company introduces takeover defense measures (meaning decision of the

concrete substance of takeover defense measures such as making a resolution to issue new shares

or subscription warrants as takeover defense measures), it shall observe the matters referenced in

each of the following items:

ⅰ. Sufficient disclosure

The listed company shall make necessary and sufficient timely disclosure concerning

takeover defense measures.

ⅱ. Transparency

Conditions of implementation (meaning making the realization of an acquisition difficult

by executing the substance of takeover defense measures; the same shall apply hereinafter)

and abolishment (meaning canceling introduced takeover defense measures such as retiring

new shares or subscription warrants issued as takeover defense measures) of takeover

defense measures shall not depend on arbitrary decisions by the management.

ⅲ. Effect on the secondary market

Takeover defense measures shall not include factors which may cause extremely unstable

price formation of a stock or any other factors which may cause unpredictable damage to

investors.

ⅳ. Respect for shareholders’ rights

Takeover defense measures shall give consideration to shareholders’ rights and their

exercise.


(f) Matters to be Observed Pertaining to Disclosure of MBO, etc.

In cases where a listed company conducts the announcement of an opinion or representation to

shareholders relating to a takeover bid from an officer of the target of the takeover bid (including

takeover bids where the takeover bidder is conducting the bid based on the request of an officer of


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the target of the takeover bid and has a common interest with the officer of such target) or by a

controlling shareholder or other person defined by the Rules, timely disclosure shall be made in a

necessary and sufficient manner.

[Rule 441 and Rule 441-2 of the Regulations]

(g) Matters to be Observed Pertaining to Significant Transactions, etc. with Controlling

Shareholder

A listed company that has a controlling shareholder shall, in the cases where a body which

decides the business execution of such listed company or a subsidiary thereof makes a decision on

any significant transactions, etc. with a controlling shareholder and other persons specified by the

Rules, obtain opinion from a person who has no interest in such controlling shareholder, that the

relevant decision will not undermine interests of minority shareholders of such listed company. In

addition, it shall perform necessary and sufficient timely disclosure.

[Rule 441-2 of the Regulations; Rule 436-3 of the Rules]

A controlling shareholder means a parent company or an entity specified by the Rules as entity

which directly or indirectly holds a majority of the voting rights. The latter means a main

shareholder (other than the parent company) who holds the majority of voting rights of a listed

company after combining the voting rights held for its own account and the voting rights held by a

close relative of said main shareholder and a company, etc. (meaning a company, designated

corporation, partnership, or other similar entities (including foreign entities that are equivalent to

these entities); the same shall apply hereinafter) whose majority voting rights are held by said main

shareholder and the close relative specified in the preceding item, and a subsidiary of said company,

etc.

[Rule 2, Item 42-2 of the Regulations; Rule 3-2 of the Rules]

(h) Prohibition of Insider Trading

A listed company shall not allow its officers, agents, employees and other workers to conduct

insider trading (*) for such listed company’s account.

(*) Insider trading represents a transaction forbidden by Rule 166 and 167 of the Financial

Instruments and Exchange Act. The same applies hereinafter.


In addition, “Matters Desired to be Observed” include “System Improvement for Prevention of

Occurrence of Insider Trading.” Please also refer to the corresponding section.


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(i) Exclusion of Antisocial Forces

In cases where it has become clear that a listed company has relationships prescribed above as

those in which the listed company is involved with antisocial forces, and where TSE deems that

such condition has considerably damaged shareholders and investors trust in the market, the listed

company shall be delisted.

[Rule 601, Paragraph 1, item 19 of the Regulations; Rule 601, Paragraph 15 and Rule 436-4 of the

Rules]

In addition, “Matters Desired to be Observed” include “Development of System, etc. for Excluding

Antisocial Forces.” Please also refer to the corresponding section.

(j) Prohibition of Actions Damaging to the Function of the Secondary Market or

Shareholders’ Rights

A listed company shall, in addition to observing the individual provisions listed as “Matters to be

Observed” in the Code of Corporate Conduct, not conduct actions deemed by TSE as damaging to

the function of the secondary market or the rights of shareholders.


This is defined as a so-called basket clause of “Matters to be Observed” in the Code of Corporate

Conduct. Therefore, a listed company shall not, in addition to observing the individual provisions

listed as “Matters to be Observed” in the Code of Corporate Conduct, conduct any quasi-actions in

the light of the intent and purpose of the Code of Corporate Conduct.

d. Matters Desired to Be Observed (Matters to be Addressed)

(a) Respect for Corporate Governance Code

Listed companies shall respect for sense and ethos of the "Corporate Governance Code" and

address the enhancement of their corporate governance.

[Rule 445-3 of the Regulations]

(b) System Improvement for Prevention of Occurrence of Insider Trading

A listed company shall endeavor to prepare and maintain a required information management

system to prevent insider trading by its officers, agents, employees and other workers.


In addition, “Matters to be Observed” include “Prohibition of Insider Trading.” Please also refer to

the corresponding section.


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(c) Development of System, etc. for Excluding Anti-Social Forces

A listed company shall endeavor to develop a company structure to prevent damage due to

anti-social forces including criminal and extremist elements and to prevent the intervention of

anti-social forces against individual corporate activities.


In addition, “Matters to be Observed” include “Exclusion of Antisocial Forces.” Please also refer to

the corresponding section.

(d) Fair Provision of Supplementary Explanatory Materials Related to the Details of

Account Settlement

A listed company shall make efforts to ensure the fair provision of supplementary explanatory

materials on the details of the account settlement disclosed pursuant to the provisions of Rule 404

(Earnings Reports, etc.) when preparing and providing such materials to investors.


e. Measures for enforcing the Code of Corporate Conduct and reporting requirement

TSE may impose measures to ensure the effectiveness of the Code of Corporate Conduct if TSE

deems that a listed company has violated a matter to be observed. Measures available to TSE include

publicizing the fact of the violation, imposing a listing agreement violation penalty, requesting an

improvement report/improvement status report, and designating the stock as a security on alert.

Listed foreign companies shall report to TSE when it falls under the following condition:

・ Where a listed foreign company (limited to those whose principal market is TSE) violates the Code

of Corporate Conduct regarding improving systems to facilitate rights exercise.


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f. Japan’s Corporate Governance Code

Japan’s Corporate Governance Code

In this Corporate Governance Code, “corporate governance” means a structure for transparent, fair,

timely and decisive decision-making by companies, with due attention to the needs and perspectives of

shareholders and also customers, employees and local communities.

This Corporate Governance Code establishes fundamental principles for effective corporate governance

at listed companies in Japan. It is expected that the Code’s appropriate implementation will contribute to

the development and success of companies, investors and the Japanese economy as a whole through

individual companies’ self-motivated actions so as to achieve sustainable growth and increase corporate

value over the mid- to long-term.

General Principles

Securing the Rights and Equal Treatment of Shareholders

1. Companies should take appropriate measures to fully secure shareholder rights and develop an

environment in which shareholders can exercise their rights appropriately and effectively.

In addition, companies should secure effective equal treatment of shareholders.

Given their particular sensitivities, adequate consideration should be given to the issues and

concerns of minority shareholders and foreign shareholders for the effective exercise of shareholder

rights and effective equal treatment of shareholders.

Appropriate Cooperation with Stakeholders Other Than Shareholders

2. Companies should fully recognize that their sustainable growth and the creation of mid- to long-term

corporate value are brought as a result of the provision of resources and contributions made by a

range of stakeholders, including employees, customers, business partners, creditors and local

communities. As such, companies should endeavor to appropriately cooperate with these

stakeholders.

The board and the management should exercise their leadership in establishing a corporate culture

where the rights and positions of stakeholders are respected and sound business ethics are ensured.

Ensuring Appropriate Information Disclosure and Transparency

3. Companies should appropriately make information disclosure in compliance with the relevant laws

and regulations, but should also strive to actively provide information beyond that required by law.

This includes both financial information, such as financial standing and operating results, and

non-financial information, such as business strategies and business issues, risk, and governance.

The board should recognize that disclosed information will serve as the basis for constructive

dialogue with shareholders, and therefore ensure that such information, particularly non-financial

information, is accurate, clear and useful.

Responsibilities of the Board

4. Given its fiduciary responsibility and accountability to shareholders, in order to promote sustainable

corporate growth and the increase of corporate value over the mid- to long-term and enhance


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earnings power and capital efficiency, the board should appropriately fulfill its roles and

responsibilities, including:

(1) Setting the broad direction of corporate strategy;

(2) Establishing an environment where appropriate risk-taking by the senior management is

supported; and

(3) Carrying out effective oversight of directors and the management (including shikkoyaku and

so-called shikkoyakuin) from an independent and objective standpoint.

Such roles and responsibilities should be equally and appropriately fulfilled regardless of the form of

corporate organization – i.e., Company with Kansayaku Board (where a part of these roles and

responsibilities are performed by kansayaku and the kansayaku board), Company with Three

Committees (Nomination, Audit and Remuneration), or Company with Supervisory Committee.

Dialogue with Shareholders

5. In order to contribute to sustainable growth and the increase of corporate value over the mid- to

long-term, companies should engage in constructive dialogue with shareholders even outside the

general shareholder meeting.

During such dialogue, senior management and directors, including outside directors, should listen to

the views of shareholders and pay due attention to their interests and concerns, clearly explain

business policies to shareholders in an understandable manner so as to gain their support, and work

for developing a balanced understanding of the positions of shareholders and other stakeholders and

acting accordingly.

Section 1: Securing the Rights and Equal Treatment of Shareholders

General Principle 1

Companies should take appropriate measures to fully secure shareholder rights and

develop an environment in which shareholders can exercise their rights appropriately and

effectively.

In addition, companies should secure effective equal treatment of shareholders.

Given their particular sensitivities, adequate consideration should be given to the issues

and concerns of minority shareholders and foreign shareholders for the effective exercise of

shareholder rights and effective equal treatment of shareholders.

Notes

Companies have various stakeholders, including shareholders. Without appropriate cooperation with

these stakeholders, it would be difficult for companies to achieve sustainable growth. Suppliers of capital

are an important cornerstone, and shareholders are the primary starting point for corporate governance

discipline. Companies should secure appropriate cooperation with shareholders and strive toward the

achievement of sustainable growth by fully securing shareholder rights and providing for the smooth

exercise thereof.

In addition, the Companies Act requires companies to equally treat shareholders based on the class

and number of shares they hold. Gaining broad confidence of shareholders that they receive equal

treatment will also contribute to strengthening support from the suppliers of capital.


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Principle 1.1 Securing the Rights of Shareholders

Companies should take appropriate measures to fully secure shareholder rights, including voting

rights at the general shareholder meeting.

Supplementary Principles

1.1.1 When the board recognizes that a considerable number of votes have been cast against a

proposal by the company and the proposal was approved, it should analyze the reasons behind

opposing votes and why many shareholders opposed, and should consider the need for

shareholder dialogue and other measures.

1.1.2 When proposing to shareholders that certain powers of the general shareholder meeting be

delegated to the board, companies should consider whether the board is adequately constituted

to fulfill its corporate governance roles and responsibilities. If a company determines that the

board is indeed adequately constituted, then it should recognize that such delegation may be

desirable from the perspectives of agile decision-making and expertise in business judgment.

1.1.3 Given the importance of shareholder rights, companies should ensure that the exercise of

shareholder rights is not impeded. In particular, adequate consideration should be given to the

special rights that are recognized for minority shareholders with respect to companies and their

officers, including the right to seek an injunction against illegal activities or the right to file a

shareholder lawsuit, since the exercise of these rights tend to be prone to issues and concerns.

Principle 1.2 Exercise of Shareholder Rights at General Shareholder Meetings

Companies should recognize that general shareholder meetings are an opportunity for constructive

dialogue with shareholders, and should therefore take appropriate measures to ensure the exercise of

shareholder rights at such meetings.


1.2.1 Companies should provide accurate information to shareholders as necessary in order to facilitate

appropriate decision-making at general shareholder meetings.

1.2.2 While ensuring the accuracy of content, companies should strive to send convening notices for

general shareholder meetings early enough to give shareholders sufficient time to consider the

agenda. During the period between the board approval of convening the general shareholder

meeting and sending the convening notice, information included in the convening notice should

be disclosed by electronic means such as through TDnet15 or on the company’s website.

1.2.3 The determination of the date of the general shareholder meeting and any associated dates

should be made in consideration of facilitating sufficient constructive dialogue with shareholders

and ensuring the accuracy of information necessary for such dialogue.

15 TDnet: The Tokyo Stock Exchange operates a real-time internet service (Timely Disclosure

network) which distributes the information provided by listed companies on a timely basis in

accordance with its listing rules.


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1.2.4 Bearing in mind the number of institutional and foreign shareholders, companies should take

steps for the creation of an infrastructure allowing electronic voting, including the use of the

Electronic Voting Platform, and the provision of English translations of the convening notices of

general shareholder meeting.

1.2.5 In order to prepare for cases where institutional investors who hold shares in street name express

an interest in advance of the general shareholder meeting in attending the general shareholder

meeting or exercising voting rights, companies should work with the trust bank (shintaku ginko)

and/or custodial institutions to consider such possibility.

Principle 1.3 Basic Strategy for Capital Policy

Because capital policy may have a significant effect on shareholder returns, companies should

explain their basic strategy with respect to their capital policy.

Principle 1.4 Cross-Shareholdings

When companies hold shares of other listed companies as cross-shareholdings16, they should

disclose their policy with respect to doing so. In addition, the board should examine the mid- to long-term

economic rationale and future outlook of major cross-shareholdings on an annual basis, taking into

consideration both associated risks and returns. The annual examination should result in the board's

detailed explanation of the objective and rationale behind cross-shareholdings.

Companies should establish and disclose standards with respect to the voting rights as to their

cross-shareholdings.

Principle 1.5 Anti-Takeover Measures

Anti-takeover measures must not have any objective associated with entrenchment of the

management or the board. With respect to the adoption or implementation of anti-takeover measures,

the board and kansayaku17 should carefully examine their necessity and rationale in light of their

fiduciary responsibility to shareholders, ensure appropriate procedures, and provide sufficient

explanation to shareholders.

Supplementary Principle

1.5.1 In case of a tender offer, companies should clearly explain the position of the board, including any

counteroffers, and should not take measures that would frustrate shareholder rights to sell their

shares in response to the tender offer.

16 Cross-shareholding: There are cases where listed companies hold the shares of other listed

companies for reasons other than pure investment purposes, for example, to strengthen business

relationships. Cross-shareholdings here include not only mutual shareholdings but also unilateral

ones. 17 Kansayaku: See Notes to the General Principle 4.


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Principle 1.6 Capital Policy that May Harm Shareholder Interests

With respect to a company's capital policy that results in the change of control or in significant

dilution, including share offerings and management buyouts, the board and kansayaku should, in order

not to unfairly harm the existing shareholders’ interests, carefully examine the necessity and rationale

from the perspective of their fiduciary responsibility to shareholders, should ensure appropriate

procedures, and provide sufficient explanation to shareholders.

Principle 1.7 Related Party Transactions

When a company engages in transactions with its directors or major shareholders (i.e., related party

transactions), in order to ensure that such transactions do not harm the interests of the company or the

common interests of its shareholders and prevent any concerns with respect to such harm, the board

should establish appropriate procedures beforehand in proportion to the importance and characteristics

of the transaction. In addition to their use by the board in approving and monitoring such transactions,

these procedures should be disclosed.

Section 2: Appropriate Cooperation with Stakeholders Other Than Shareholders

General Principle 2

Companies should fully recognize that their sustainable growth and the creation of mid-

to long-term corporate value are brought about as a result of the provision of resources and

contributions made by a range of stakeholders, including employees, customers, business

partners, creditors and local communities. As such, companies should endeavor to

appropriately cooperate with these stakeholders. The board and the management should

exercise their leadership in establishing a corporate culture where the rights and positions

of stakeholders are respected and sound business ethics are ensured.

Notes

Companies have a variety of important stakeholders besides shareholders. These stakeholders

include internal parties such as employees and external parties such as customers, business partners and

creditors. In addition, local communities form the foundation for the on-going business activities of

companies. Companies should fully recognize that appropriate cooperation with these stakeholders is

indispensable in achieving sustainable growth and increasing corporate value over the mid- to long-term.

Given the recent and growing interest in social and environmental problems worldwide, taking positive

and proactive measures toward ESG (environmental, social and governance) matters may also be

included as part of this cooperation.

The appropriate actions of companies based on the recognition of their stakeholder responsibilities

will benefit the entire economy and society, which will in turn contribute to producing further benefits to

companies, thereby creating a virtuous cycle.


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Principle 2.1 Business Principles as the Foundation of Corporate Value Creation Over the

Mid- to Long-Term

Guided by their position concerning social responsibility, companies should undertake their

businesses in order to create value for all stakeholders while increasing corporate value over the mid- to

long-term. To this end, companies should draft and maintain business principles that will become the

basis for such activities.

Principle 2.2 Code of Conduct

Companies should draft and implement a code of conduct for employees in order to express their

values with respect to appropriate cooperation with and serving the interests of stakeholders and

carrying out sound and ethical business activities. The board should be responsible for drafting and

revising the code of conduct, and should ensure its compliance broadly across the organization, including

the front line of domestic and global operations.


2.2.1 The board should review regularly (or where appropriate) whether or not the code of conduct is

being widely implemented. The review should focus on the substantive assessment of whether

the company’s corporate culture truly embraces the intent and spirit of the code of conduct, and

not solely on the form of implementation and compliance.

Principle 2.3 Sustainability Issues, Including Social and Environmental Matters

Companies should take appropriate measures to address sustainability issues, including social and

environmental matters.


2.3.1 With the recognition that dealing with sustainability issues is an important element of risk

management, the board should take appropriate actions to this end. Given the increasing

demand and interest with respect to sustainability issues in recent years, the board should

consider addressing these matters positively and proactively.

Principle 2.4 Ensuring Diversity, Including Active Participation of Women

Companies should recognize that the existence of diverse perspectives and values reflecting a

variety of experiences, skills and characteristics is a strength that supports their sustainable growth. As

such, companies should promote diversity of personnel, including the active participation of women.

Principle 2.5 Whistleblowing

Companies should establish an appropriate framework for whistleblowing such that employees can

report illegal or inappropriate behavior, disclosures, or any other serious concerns without fear of

suffering from disadvantageous treatment. Also, the framework should allow for an objective assessment

and appropriate response to the reported issues, and the board should be responsible for both

establishing this framework, and ensuring and monitoring its enforcement.


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2.5.1 As a part of establishing a framework for whistleblowing, companies should establish a point of

contact that is independent of the management (for example, a panel consisting of outside

directors18 and outside kansayaku19). In addition, rules should be established to secure the

confidentiality of the information provider and prohibit any disadvantageous treatment.

Section 3: Ensuring Appropriate Information Disclosure and Transparency

General Principle 3

Companies should appropriately make information disclosure in compliance with the

relevant laws and regulations, but should also strive to actively provide information beyond

that required by law. This includes both financial information, such as financial standing

and operating results, and non-financial information, such as business strategies and

business issues, risk and governance.

The board should recognize that disclosed information will serve as the basis for

constructive dialogue with shareholders, and therefore ensure that such information,

particularly non-financial information, is accurate, clear and useful.

Notes

Companies are legally required to disclose a wide range of information. The timely and appropriate

disclosure of information in accordance with the relevant laws and regulations is essential for investor

protection and securing market confidence. The board, kansayaku, the kansayaku board6 and external

auditors all bear an important responsibility in this regard, starting with the establishment of an

appropriate internal control system as to financial information.

Companies should actively strive to provide information other than what is required by laws and

regulations.

It has been noted that while the quantitative part of financial statements of Japanese companies

conform to a standard format and therefore excel with respect to comparability, qualitative and

non-financial information is often boiler-plate and lacking in detail, therefore less valuable. The board

should actively commit to ensure that disclosed information, including non-financial information, is as

valuable and useful as possible.

Irrespective of whether the disclosed information is required by law, the appropriate provision of

information is an effective means to develop a shared awareness and understanding with shareholders

and other stakeholders, in particular given that as outsiders they suffer from information asymmetry.

18 Outside director: A director who satisfies certain requirements such as not holding specific

positions, including the position of executive director, in the company or its subsidiaries (Article 2,

Paragraph 15 of the Companies Act). Furthermore, matters such as not holding a specific position

in the parent company or other subsidiaries and not having specific kinship ties with controlling

shareholders will be also required for outside directors after the 2014 amendments to the

Companies Act. 19 Outside kansayaku: A kansayaku who satisfies certain requirements such as not holding specific

positions, including the position of director, in the company or its subsidiaries (Article 2, Paragraph

16 of the Companies Act). Furthermore, matters such as not holding a specific position in the

parent company or other subsidiaries and not having specific kinship ties with controlling

shareholders will be also required for outside kansayaku after the 2014 amendments to the

Companies Act.


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Appropriate information disclosure will also contribute to constructive dialogue based on Japan’s

Stewardship Code.

Principle 3.1 Full Disclosure

In addition to making information disclosure in compliance with relevant laws and regulations,

companies should disclose and proactively provide the information listed below (along with the

disclosures specified by the principles of the Code) in order to enhance transparency and fairness in

decision-making and ensure effective corporate governance:

i) Company objectives (e.g., business principles), business strategies and business plans;

ii) Basic views and guidelines on corporate governance based on each of the principles of the

Code;

iii) Board policies and procedures in determining the remuneration of the senior management and

directors;

iv) Board policies and procedures in the appointment of the senior management and the

nomination of directors and kansayaku candidates; and

v) Explanations with respect to the individual appointments and nominations based on iv).


3.1.1 These disclosures should add value for investors, and the board should ensure that information is

not boiler-plate or lacking in detail.

3.1.2 Bearing in mind the number of foreign shareholders, companies should, to the extent reasonable,

take steps for providing English language disclosures.

Principle 3.2 External Auditors

External auditors and companies should recognize the responsibility that external auditors owe

toward shareholders and investors, and take appropriate steps to secure the proper execution of audits.


3.2.1 The kansayaku board should, at minimum, ensure the following:

i) Establish standards for the appropriate selection of external auditor candidates and proper

evaluation of external auditors; and

ii) Verify whether external auditors possess necessary independence and expertise to fulfill their

responsibilities.

3.2.2 The board and the kansayaku board should, at minimum, ensure the following:

i) Give adequate time to ensure high quality audits;

ii) Ensure that external auditors have access, such as via interviews, to the senior management

including the CEO and the CFO;

iii) Ensure adequate coordination between external auditors and each of the kansayaku (including

attendance at the kansayaku board meetings), the internal audit department and outside

directors; and

iv) Ensure that the company is constituted in the way that it can adequately respond to any

misconduct, inadequacies or concerns identified by the external auditors.


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Section 4: Responsibilities of the Board

General Principle 4

Given its fiduciary responsibility and accountability to shareholders, in order to promote

sustainable corporate growth and the increase of corporate value over the mid- to

long-term and enhance earnings power and capital efficiency, the board should

appropriately fulfill its roles and responsibilities, including:

(1) Setting the broad direction of corporate strategy;

(2) Establishing an environment where appropriate risk-taking by the senior

management is supported; and

(3) Carrying out effective oversight of directors and the management (including

shikkoyaku20 and so-called shikkoyakuin21) from an independent and objective

standpoint.

Such roles and responsibilities should be equally and appropriately fulfilled regardless

of the form of corporate organization – i.e., Company with Kansayaku Board (where a part

of these roles and responsibilities are performed by kansayaku and the kansayaku board),

Company with Three Committees (Nomination, Audit and Remuneration) or Company with

Supervisory Committee.

Notes

Companies may choose one of three main forms of organizational structure under the Companies

Act (Revised in 2014): Company with Kansayaku Board, Company with Three Committees (Nomination,

Audit and Remuneration), or Company with Supervisory Committee. A Company with Kansayaku Board is

a system unique to Japan in which certain governance functions are assumed by the board, kansayaku

and the kansayaku board. Under this system, kansayaku audit the performance of duties by directors and

the management and have investigation power by law. Also, to secure both independence and high-level

information gathering power, not less than half of kansayaku, as appointed at the general shareholder

meeting, must be outside kansayaku, and at least one full-time kansayaku must also be appointed. The

latter two forms of organizational structure are similar to companies in other countries where committees

are established under the board and assigned certain responsibilities with the aim of strengthening

monitoring functions. Irrespective of which form of organizational structure is adopted, what is important

is that the various institutions within the company effectively and fully execute their responsibilities

through creativity and ingenuity.

One of the major objectives of establishing the Code is to promote transparent, fair, timely and

decisive decision-making by Japanese companies. The possibility cannot be ruled out that, due to

changes in the external environment or other factors, a decision made by a company ultimately results in

losses for the company. In such a circumstance, the reasonableness of the decision-making process at

20 Shikkoyaku: According to the Companies Act, Companies with Three Committees (Nomination,

Audit and Remuneration) must appoint one or more shikkoyaku from directors or non-directors by

a resolution of the board and delegate business administration to shikkoyaku. Also, authority to

make certain kinds of business decisions may be delegated to shikkoyaku. 21 Shikkoyakuin: There are cases where a Company with Kansayaku Board or a Company with

Supervisory Committee creates positions with the title of “shikkoyakuin” for persons who are

delegated by the board a certain range of discretion regarding business administration. Unlike

shikkoyaku in Companies with Three Committees (Nomination, Audit and Remuneration),

shikkoyakuin is not a statutory position.


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the time of the decision is generally considered an important factor in determining whether or not the

management and directors should owe personal liability for damages. The Code includes principles and

practices that are expected to contribute to such a reasonable decision-making process, and promote

transparency, fairness, timeliness and decisiveness as well.

Principle 4.1 Roles and Responsibilities of the Board (1)

The board should view the establishment of corporate goals (business principles, etc.) and the

setting of strategic direction as one major aspect of its roles and responsibilities. It should engage in

constructive discussion with respect to specific business strategies and business plans, and ensure that

major operational decisions are based on the company’s strategic direction.


4.1.1 The board should clearly specify its own decisions as well as both the scope and content of the

matters delegated to the management, and disclose a brief summary thereof.

4.1.2 Recognizing that a mid-term business plan (chuuki keiei keikaku) is a commitment to

shareholders, the board and the senior management should do their best to achieve the plan.

Should the company fail to deliver on its mid-term business plan, the reasons underlying the

failure of achievement as well as the company’s actions should be fully analyzed, an appropriate

explanation should be given to shareholders, and analytic findings should be reflected in a plan

for the ensuing years.

4.1.3 Based on the company objectives (business principles, etc.) and specific business strategies, the

board should engage in the appropriate oversight of succession planning for the CEO and other

top executives.


The board should view the establishment of an environment that supports appropriate risk-taking by

the senior management as a major aspect of its roles and responsibilities. It should welcome proposals

from the management based on healthy entrepreneurship, fully examine such proposals from an

independent and objective standpoint with the aim of securing accountability, and support timely and

decisive decision-making by the senior management when approved plans are implemented.

Also, the remuneration of the management should include incentives such that it reflects mid- to

long-term business results and potential risks, as well as promotes healthy entrepreneurship.


4.2.1 In order for management remuneration to operate as a healthy incentive for sustainable growth,

the proportion linked to mid- to long-term results and the balance of cash and stock should be set

appropriately.


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The board should view the effective oversight of the management and directors from an

independent and objective standpoint as a major aspect of its roles and responsibilities. It should

appropriately evaluate company performance and reflect the evaluation in its assessment of the senior

management.

In addition, the board should engage in oversight activities in order to ensure timely and accurate

information disclosure, and should establish appropriate internal control and risk management systems.

Also, the board should appropriately deal with any conflict of interests that may arise between the

company and its related parties, including the management and controlling shareholders.


4.3.1 The board should ensure that the appointment and dismissal of the senior management are

based on highly transparent and fair procedures and reflect the results of company performance.

4.3.2 The establishment of effective internal control and proactive risk management systems for

compliance and financial reporting has the potential of supporting sound risk-taking. The board

should place priority on the appropriate establishment of such systems and the oversight of

whether they effectively operate, and should not limit itself to the examination of compliance with

respect to specific business operations.

Principle 4.4 Roles and Responsibilities of Kansayaku and the Kansayaku Board

Kansayaku and the kansayaku board should bear in mind their fiduciary responsibilities to

shareholders and make decisions from an independent and objective standpoint when executing their

roles and responsibilities including the audit of the performance of directors’ duties, appointment and

dismissal of external auditors and the determination of auditor remuneration.

Although so-called “defensive functions,” such as business and accounting audits, are part of the

roles and responsibilities expected of kansayaku and the kansayaku board, in order to fully perform their

duties, it would not be appropriate for kansayaku and the kansayaku board to interpret the scope of their

function too narrowly, and they should positively and proactively exercise their rights and express their

views at board meetings and to the management.


4.4.1 Given that not less than half of the kansayaku board must be composed of outside kansayaku and

that at least one full-time kansayaku must be appointed in accordance with the Companies Act,

the kansayaku board should, from the perspective of fully executing its roles and responsibilities,

increase its effectiveness through an organizational combination of the independence of the

former and the information gathering power of the latter. In addition, kansayaku or the

kansayaku board should secure cooperation with outside directors so that such directors can

strengthen their capacity to collect information without having their independence jeopardized.


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Principle 4.5 Fiduciary Responsibilities of Directors and Kansayaku

With due attention to their fiduciary responsibilities to shareholders, the directors, kansayaku and

the management of companies should secure the appropriate cooperation with stakeholders and act in

the interest of the company and the common interests of its shareholders.

Principle 4.6 Business Execution and Oversight of the Management

In order to ensure effective, independent and objective oversight of the management by the board,

companies should consider utilizing directors who are neither involved in business execution nor have

close ties with the management.

Principle 4.7 Roles and Responsibilities of Independent Directors

Companies should make effective use of independent directors22, taking into consideration the

expectations listed below with respect to their roles and responsibilities:

i) Provision of advice on business policies and business improvement based on their knowledge

and experience with the aim to promote sustainable corporate growth and increase corporate

value over the mid- to long-term;

ii) Monitoring of the management through important decision-making at the board including the

appointment and dismissal of the senior management;

iii) Monitoring of conflicts of interest between the company and the management or controlling

shareholders; and

iv) Appropriately representing the views of minority shareholders and other stakeholders in the

boardroom from a standpoint independent of the management and controlling shareholders.

Principle 4.8 Effective Use of Independent Directors

Independent directors should fulfill their roles and responsibilities with the aim of contributing to

sustainable growth of companies and increasing corporate value over the mid- to long-term. Companies

should therefore appoint at least two independent directors that sufficiently have such qualities.

Irrespective of the above, if a company in its own judgement believes it needs to appoint at least

one-third of directors as independent directors based on a broad consideration of factors such as the

industry, company size, business characteristics, organizational structure and circumstances surrounding

the company, it should disclose a roadmap for doing so.


4.8.1 In order to actively contribute to discussions at the board, independent directors should endeavor

to exchange information and develop a shared awareness among themselves from an

independent and objective standpoint. Regular meetings consisting solely of independent

directors (executive sessions) would be one way of achieving this.

22 Independent director: The listing rules of securities exchanges provide that the outside directors,

as defined in the Companies Act, are independent directors where they satisfy independence

criteria of securities exchanges and the company determines that they do not have the possibility of

conflicts of interest with its shareholders.


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4.8.2 Independent directors should endeavor to establish a framework for communicating with the

management and for cooperating with kansayaku or the kansayaku board by, for example,

appointing the lead independent director from among themselves.

Principle 4.9 Independence Standards and Qualification for Independent Directors

Boards should establish and disclose independence standards aimed at securing effective

independence of independent directors, taking into consideration the independence criteria set by

securities exchanges. The board should endeavor to select independent director candidates who are

expected to contribute to frank, active and constructive discussions at board meetings.

Principle 4.10 Use of Optional Approach

In adopting the most appropriate organizational structure (as stipulated by the Companies Act) that

is suitable for a company’s specific characteristics, companies should employ optional approaches, as

necessary, to further enhance governance functions.


4.10.1 If the organizational structure of a company is either Company with Kansayaku Board or

Company with Supervisory Committee and independent directors do not compose a majority of

the board, in order to strengthen the independence, objectivity and accountability of board

functions on the matters of nomination and remuneration of the senior management and

directors, the company should seek appropriate involvement and advice from independent

directors in the examination of such important matters as nominations and remuneration by, for

example, establishing optional advisory committees under the board to which independent

directors make significant contributions.

Principle 4.11 Preconditions for Board and Kansayaku Board Effectiveness

The board should be well balanced in knowledge, experience and skills in order to fulfill its roles and

responsibilities, and it should be constituted in a manner to achieve both diversity and appropriate size.

In addition, at least one person who has appropriate expertise on finance and accounting should be

appointed as kansayaku.

The board should endeavor to improve its function by analyzing and evaluating effectiveness of the

board as a whole.


4.11.1 The board should have a view on the appropriate balance between knowledge, experience and

skills of the board as a whole, and also on diversity and appropriate board size. Consistent with its

view, the board should establish policies and procedures for nominating directors and disclose

them along with its view.

4.11.2 Outside directors, outside kansayaku, and other directors and kansayaku should devote sufficient

time and effort required to appropriately fulfill their respective roles and responsibilities.

Therefore, where directors and kansayaku also serve as directors, kansayaku or the management


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at other companies, such positions should be limited to a reasonable number and disclosed each

year.

4.11.3 Each year the board should analyze and evaluate its effectiveness as a whole, taking into

consideration the relevant matters, including the self-evaluations of each director. A summary of

the results should be disclosed.

Principle 4.12 Active Board Deliberations

The board should endeavor to foster a climate where free, open and constructive discussions and

exchanges of views take place, including the raising of concerns by outside directors.


4.12.1 The board should ensure the following in relation to the operation of board meetings and should

attempt to make deliberations active:

i) Materials for board meetings are distributed sufficiently in advance of the meeting date;

ii) In addition to board materials and as necessary, sufficient information is provided to directors

by the company (where appropriate, the information should be organized and/or analyzed to

promote easy understanding);

iii) The schedule of board meetings for the current year and anticipated agenda items are

determined in advance;

iv) The number of agenda items and the frequency of board meetings are set appropriately; and

v) Sufficient time for deliberations.

Principle 4.13 Information Gathering and Support Structure

In order to fulfill their roles and responsibilities, directors and kansayaku should proactively collect

information, and as necessary, request the company to provide them with additional information.

Also, companies should establish a support structure for directors and kansayaku, including

providing sufficient staff.

The board and the kansayaku board should verify whether information requested by directors and

kansayaku is provided smoothly.


4.13.1 Directors, including outside directors, should request the company to provide them with

additional information, where deemed necessary from the perspective of contributing to

transparent, fair, timely and decisive decision-making. In addition, kansayaku, including outside

kansayaku, should collect information appropriately, including the use of their statutory

investigation power.

4.13.2 Directors and kansayaku should consider consulting with external specialists at company expense,

where they deem it necessary.

4.13.3 Companies should ensure coordination between the internal audit department, directors and

kansayaku. In addition, companies should take measures to adequately provide necessary


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information to outside directors and outside kansayaku. One example would be the appointment

of an individual who is responsible for communicating and handling requests within the company

such that the requests for information about the company by outside directors and outside

kansayaku are appropriately processed.

Principle 4.14 Director and Kansayaku Training

New and incumbent directors and kansayaku should deepen their understanding of their roles and

responsibilities as a critical governance body at a company, and should endeavor to acquire and update

necessary knowledge and skills. Accordingly, companies should provide and arrange training

opportunities suitable to each director and kansayaku along with financial support for associated

expenses. The board should verify whether such opportunities and support are appropriately provided.


4.14.1 Directors and kansayaku, including outside directors and outside kansayaku, should be given the

opportunity when assuming their position to acquire necessary knowledge on the company’s

business, finances, organization and other matters, and fully understand the roles and

responsibilities, including legal liabilities, expected of them. Incumbent directors should also be

given a continuing opportunity to renew and update such knowledge as necessary.

4.14.2 Companies should disclose their training policy for directors and kansayaku.

Section 5: Dialogue with Shareholders

General Principle 5

In order to contribute to sustainable growth and the increase of corporate value over

the mid- to long-term, companies should engage in constructive dialogue with shareholders

even outside the general shareholder meeting.

During such dialogue, senior management and directors, including outside directors,

should listen to the views of shareholders and pay due attention to their interests and

concerns, clearly explain business policies to shareholders in an understandable manner so

as to gain their support, and work for developing a balanced understanding of the positions

of shareholders and other stakeholders and acting accordingly.

Notes

With the establishment of Japan’s Stewardship Code, institutional investors are encouraged to

engage in purposeful dialogue (engagement) based on the in-depth knowledge of investee companies

and their business environment.

Regularly engaging in dialogue with shareholders to gain their understanding of specific business

strategies and business plans and taking appropriate action when there are concerns are extraordinarily

useful for companies to strengthen the foundations of management legitimacy and support their efforts

to generate sustainable growth. Although the management and directors have opportunities to interact

and exchange views with employees, business partners and financial institutions on a daily basis, these

stakeholders are all creditors. In contrast, the management and directors typically have limited


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interactions with shareholders. If the senior management and directors give due attention to the views of

shareholders through dialogue, they can absorb views and analyses of business management from the

perspective of capital providers. Dialogue with shareholders should also inspire healthy entrepreneurship

in the management and directors and thereby contribute to sustainable corporate growth.

Principle 5.1 Policy for Constructive Dialogue with Shareholders

Companies should, positively and to the extent reasonable, respond to the requests from

shareholders to engage in dialogue (management meetings) so as to support sustainable growth and

increase corporate value over the mid- to long-term. The board should establish, approve and disclose

policies concerning the measures and organizational structures aimed at promoting constructive dialogue

with shareholders.


5.1.1 Taking the requests and interests of shareholders into consideration, to the extent reasonable,

the senior management and directors, including outside directors, should have a basic position to

engage in dialogue (management meetings) with shareholders.

5.1.2 At minimum, policies for promoting constructive dialogue with shareholders should include the

following:

i) Appointing a member of the management or a director who is responsible for overseeing and

ensuring that constructive dialogue takes place, including the matters stated in items ii) to v)

below;

ii) Measures to ensure positive cooperation between internal departments such as investor

relations, corporate planning, general affairs, corporate finance, accounting and legal affairs

with the aim of supporting dialogue;

iii) Measures to promote opportunities for dialogue aside from individual meetings (e.g., general

investor meetings and other IR activities);

iv) Measures to appropriately and effectively relay shareholder views and concerns learned

through dialogue to the senior management and the board; and

v) Measures to control insider information when engaging in dialogue.

5.1.3 Companies should endeavor to identify their shareholder ownership structure as necessary, and it

is desirable for shareholders to cooperate as much as possible in this process.

Principle 5.2 Establishing and Disclosing Business Strategy and Business Plan

When establishing and disclosing business strategies and business plans, companies should

articulate their earnings plans and capital policy, and present targets for profitability and capital efficiency.

Also, companies should provide explanations that are clear and logical to shareholders with respect to the

allocation of management resources and specific measures that will be taken in order to achieve their

plans and targets.


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(5) Submission of Documents, etc.

a. Corporate Governance Report

A listed foreign company whose principal market is TSE shall, in the same way as a listed

domestic company, submit a corporate governance report that describes the company’s approach

toward corporate governance, and when any change has occurred in the contents, it shall also

submit without delay a document that describes the details of such changes.

Submitted corporate governance reports are published on the TSE website.

[Outline of Contents]

(1) Basic approach to corporate governance and basic information about the initial listing

applicant including capital structure, corporate attributes, etc.;

(2) Status of the corporate governance system including business management organization

pertaining to management decision making, execution, and oversight;

(3) Implementation status of measures to protect the interests of shareholders and other

stakeholders;

(4) Basic approach to and implementation status of the internal control system; and

(5) Other matters deemed necessary by TSE.


* Regarding the descriptions in the report, TSE shall take into account the legal systems, etc. of

the home country.

b. Notice Concerning Submission of Foreign Company Registration Statement, etc.

In the case where a listed foreign company decides, for the first time, to submit a Foreign

Company Registration Statement, etc. (meaning the Foreign Company Registration Statement, etc.

prescribed in Article 117, Paragraph (1), Item (25) of the Cabinet Office Ordinance regarding

Financial Instruments Business (Cabinet Office Ordinance No.52 of 2007)) to the Prime Minister, etc.

it is required to submit a document that describes of that effect and the expected submission date

of such Foreign Company Registration Statement, etc. to TSE immediately after such decision is

made.

[Rule 424 of the Enforcement Rules]

* In the case where a listed foreign company that has been submitting a Foreign Company

Registration Statement, etc., decides to cease submitting Foreign Company Registration

Statements, etc., it is required to advise TSE to that effect and provide the date that it will

submit the Securities Registration Statement, etc. (statutory disclosure documents in

Japanese)

(6) Mothers Global

Since December 1, 2006, foreign stocks and foreign stock depositary receipts, etc. listed on the

Mothers market of TSE have been collectively called "Mothers Global." This sub-category was

introduced, from the viewpoint of expressing more clearly the character of foreign companies listed


163

on Mothers, with the intent of promoting the listing of growth companies from Asia and other

foreign countries In this sense, TSE makes efforts to offer information, such as the character of

each issue, etc. to investors through a website prepared specially for providing information on

Mothers Global companies.

Mothers Global website

URL: http://www.jpx.co.jp/equities/products/foreign/mothers/index.html


164

[Example of information on Mothers Global website]

Name of listed foreign

Company (Code, Listing

Date)

Principal

listed

market

Country of

incorporation

Whether there is a company

operating the main business in the

listed foreign company's corporate

group that has no capital

relationship with the listed foreign

company.

Main

business

region

Type of

issue

(stock or

depository

receipt)

Governing

law

Whether there is a company that is

not a subsidiary company, and that

is an object for timely disclosure in

accordance with the provision of

Rule 402, Item 1.q of the

Regulations. (attach PDF file)

Risk

factors

XYZ Corporation

(XXXX, DD/MM/YY)

TSE US Nil US

Stock US laws Nil Nil; PDF PDF

A listed foreign company shall provide sufficient information for the table above. For risk factors

(PDF file), please prepare the document by abstracting the "Risk of business, etc." section of the

securities report for new listing application (Part I) (include the company name and date of

submission).


165

(7) Disciplinary Actions against Listed Companies

The Regulations define that in cases where a listed company violates or infringes the Regulations,

TSE may take effective measures to ensure the effectiveness of the punishment against such

violation, etc., including designation of securities on alert, submission of improvement report and

improvement status report, designation to disclosure-in-question securities, publication of such

violation fact, and imposition of listing agreement violation penalty.

a. Overview

Self-regulation operations on financial instruments exchange comprise the following:

− Listing examination to examine the soundness of the financial position and corporate

management of an unlisted company;

− Listing supervision to examine whether a listed company falls under any of the criteria for

delisting;

− Inspection to test and ensure the soundness of and confidence in trading participants

charged with trade execution and settlement on the Exchange market; and

− Trading examination and inspection carried out to surveil for unfair trading practices such

as market manipulation, insider trading, etc.

Japan Exchange Group has Tokyo Stock Exchange, Inc. (the Exchange) and Osaka Exchange, Inc.,

both of which run markets on financial instruments exchanges, and Japan Exchange Regulation

(JPX-R) designed to perform self-regulation operations under its auspices. By entrusting JPX-R

independent of both Exchanges with self-regulation operations, the independence of the

self-regulation function will certainly be strengthened. By using a holding company, the effectiveness

of self-regulation function will certainly be ensured through the adequate collaboration between the

Exchanges charged with market operations and JPX-R charged with self-regulation practices.

Tokyo Stock Exchange as a market operator carries out overall businesses related to the operation

of the Exchange financial instruments market, with the exception of the businesses entrusted to JPX-R.

The Listing Department of the Exchange provides various consultations and advice to listed companies

as a consultation window and carries out various procedures for listed securities such as listing section

reassignment, while additionally developing and implementing plans for listing and disclosure

systems.

Meanwhile, the Exchange has entrusted self-regulation operations for listed company compliance,

etc. to JPX-R, and the Listed Company Compliance Department performs those self-regulation

operations.

Specifically, the self-regulation operations include:

(1) Examination of disclosures of corporate information based on the regulations of Part 2, Chapter

4, Section 2 of the Securities Listing Regulations;

(2) Examination of compliance with the code of corporate conduct based on the regulations of Part

2, Chapter 4, Section 2 of the Securities Listing Regulations;

(3) Examination to ensure the effectiveness in relation to listing agreement violation penalties,

public announcement measures, the submission of improvement reports, the designation as a

security on alert, etc.


166

(4) Examination focused on delisting based on criteria for inappropriate mergers, false statements

or adverse opinions, listing agreement violations, undue restrictions on the rights of

shareholders, public interest and investors protection

The Listing Department of the Exchange assesses the results of these examinations, etc. carried

out by JPX-R to determine delisting, regulatory or disciplinary actions, and other measures for listed

companies.

The Exchange has also entrusted JPX-R with a survey to ensure the fairness of the trading of

securities, etc. on the Exchange market. Based on the survey results, the Examination and Inspection

Department of JPX-R carries out examinations relating to any trading likely to violate laws and

regulations or other rules, including insider trading.

b. Examination Related to the Disclosure of Corporate Information

Disclosure examinations in accordance with the requirements of Part 2, Chapter 4, Section 2 of

Securities Listing Regulations shall be carried out in light of the following (1) to (5) concerning

disclosure of material corporate information:

(1) Whether or not the timing of disclosure is appropriate;

(2) Whether or not the details of disclosed information are false;

(3) Whether or not disclosed information lacks information deemed important for investment

decisions;

(4) Whether or not disclosed information gives rise to misunderstandings for investment

decisions; and

(5) Whether or not disclosed information lacks appropriateness of disclosure

【Guidelines for Listed Companies Compliance, etc. II 2】

Where the Exchange makes an inquiry of corporate information of a listed company by deeming

that it is necessary to do so, such listed company shall make an accurate report on an inquiry matter

immediately. The listed company is also required to make an accurate report on an inquiry matter

immediately made by JPX-R.

【Rule 415 Paragraph 1 of Securities Listing Regulations;

Rule 3 Paragraph 2 of the same regulations】


167

c. Disciplinary Actions or Measures to Ensure Effectiveness

Securities Listing Regulations provide that the Exchange may designate any listed company as

Securities on Alert, require submission of improvement report and public announcement measures

or charge listing agreement violation penalty for any listed company in violation of Securities Listing

Regulations in order to ensure effectiveness.

〔Measures to ensure effectiveness〕

(a) Designation system as a security on alert

When any one of the following items is met by a listed company and TSE deems highly necessary

for it to improve its internal management system, TSE should designate the securities, etc. issued

by the listed company as a security on alert.

・ When the Exchange does not determine that a listed company meets each item of the following

though it previously assessed that the listed company was likely to do so:

Rule 601, Paragraph 1, Item 9-2 of Securities Listing Regulations

Damage to sound transactions with controlling shareholders

Rule 601, Paragraph 1, Item 12 of Securities Listing Regulations Breach of listing agreement, etc.

Rule 601, Paragraph 1, Item 19 of Securities Listing Regulations Involvement of Anti-Social Forces

Rule 601, Paragraph 1, Item 20 of Securities Listing Regulations Public interest or the protection of investors

・ When a listed company meets any one of the following:

<False statement>

A listed company made any false statement in its securities report (Rule 2, Item 30 of

Securities Listing Regulations)

<Adverse opinion>

Where, in audit reports attached to financial statements, etc. or quarterly review reports

attached to quarterly financial statements, etc. a certified public accountant, etc. expresses an

"adverse opinion" or the fact that "opinions are not expressed" in an audit report, or a

"negative conclusion" or the fact that "conclusion is not expressed" in a quarterly review report

(in cases of a specified business company, an "opinion that interim financial statements, etc.

do not provide useful information" or the fact that "opinions are not expressed");

* However, excluding cases where the fact that "opinions are not expressed" or the fact

that "conclusion is stated, and such statements are made due to reasons not attributable

to the listed company, such as act of providence;

・ Where the Exchange deems that a listed company has violated the provisions;

・ Where the Exchange deems that a listed company has violated the “Matters to be Observed for”

○Measures involving penalty

・Public announcement measure

・Listing agreement violation penalty

○Improvement measures

・ Improvement report and improvement

status report

・ Designation of securities on alert


168

the code of corporate conduct;

・ Where the Exchange deems it will not recognize improvement in the execution of improvement

measures and operating conditions in a listed company which has submitted an improvement

report pertaining to the timely disclosure and code of corporate conduct

A listed company which is the issuer of a listed stock, etc. designated as a security on alert shall

submit a document specified by the Enforcement Rules that contains the status of the internal

management system, etc. (hereinafter referred to as a "Written Confirmation of Internal

Management System") promptly after one (1) year has elapsed since such designation. The

“Written Confirmation of Internal Management System" is required to be prepared pursuant to

“"Securities Report for Initial Listing Application(Part II)” prescribed in Rule 204, Paragraph 1, Item

4 of the Enforcement Rules for Securities Listing Examination; provided that the submission of

documents specified by the Exchange will suffice when it deems unnecessary the submission of

documents pursuant to “Securities Report for Initial Listing Application (Part II)” if the audit report

contains the fact that no opinion is provided due to any problems relating to the going concern

assumption.

The Exchange shall conduct examination on the internal management system, etc. on the basis of

the substance of the “Written Confirmation of Internal Management System”. Where the Exchange

deems that there is no problem in the internal management system, etc., the Exchange shall cancel

the designation as a security on alert; provided that the Exchange deems that there are problems

on the Internal Management System where the listed company does not submit the submitted the

“Written Confirmation of Internal Management System”, or that the contents described in the

“Written Confirmation of Internal Management System” provided are apparently inadequate.

When the Exchange deems necessary and makes an inquiry of the internal management system,

etc. to a listed company that is an issuer of a listed stock, etc., for which designation as a security on

alert continued, the listed company shall accurately make reports on inquired matters promptly.

JPX-R entrusted by the Exchange with the self-regulation operations will also make similar inquiries.

The listed company shall accurately make reports on inquired matters promptly in the same manner

to the Exchange. The examination of the internal management system, etc. described above shall

consider the matters reported against the enquiries.

Where the Exchange does not deem that there is a problem in the internal management system,

etc., the Exchange shall cancel the designation as a security on alert. However where the Exchange

deems that there is still a problem in the internal management system, etc., it continues the

designation as a security on alert.

A listed company that is an issuer of a listed stock, etc., for which designation as a security on

alert continued must resubmit the Written Confirmation of Internal Management System promptly

after one (1) year and six (6) months have elapsed since the designation.

The Exchange will make the examination based on the substances, etc. of resubmitted Written

Confirmation of Internal Management System, etc.

【Rule 501 of Securities Listing Regulations;

Rule3, Paragraph 2 of the same regulations】


169

The designation as a security on alert will be made in comprehensive consideration of the

following matters and others.

Case where a listed company is likely to meet the criteria for delisting;

- The details, the background, the cause, and the actual state of affairs relating to the event

that the Exchange deems likely to fall under the criteria for delisting;

Case where a listed company is likely to meet the criteria for false statement or adverse

opinion, etc.;

- The period, amount of money, actual state, and impact on stock prices pertaining to false

statements or adverse opinion, etc. in securities reports, etc.

- The act, involvement of company-related parties, and development and administration of

internal management system that are causes of false statements or adverse opinion, etc., in

securities reports, etc.,

Case where the Exchange deems that a listed company violates the provisions on timely

disclosure;

- The materiality of information timely disclosed for investment decisions

- The background, cause, and circumstances of a listed company that violated the provisions

on timely disclosure

- State of compliance in the past with the provisions on timely disclosure

Case where the Exchange deems that a listed company violates the provisions on the “Matters

to be Observed” for the code of corporate conduct;

- The details, the background, the cause, and the actual state of affairs relating to the

violations of the “Matters to be Observed” for the code of corporate conduct;

Case where an improvement report is submitted;

- The details, the background, the cause, and the actual state of affairs relating to the event

on which the Exchange requests submission of an improvement report

- The state of implementation and operation of improvement measures described in an

improvement report

【Guidelines for Listed Company Compliance, etc. III 1】

The assessment of whether there is a problem in the internal management system, etc. for the

cancellation of the designation as a security on alert shall be made in comprehensive consideration

of the matters described below and other matters.

- The state of the system and implementation of audit concerning business execution by

internal audit and audit by auditors, etc.;

- The state of internal management system such as the organization of the business

administration or establishment of internal rules;


170

- The state of administration of corporate information such as facts that have a significant

impact on management, and the state of timely disclosure system pertaining to such

corporate information;

- The state of the system to ensure compliance with the provisions concerning the ““Matters to

be Observed” for the code of corporate conduct

- The state of development and operation of internal organizations concerning preparation of

securities reports and other accounting related matters;

- The state of compliance with laws, regulations, etc.; and

- The state of compliance with the provisions concerning listed company compliance, etc. after

the designation as a security on alert

【Guidelines for Listed Company Compliance, etc. III 2】

If a listed company that is an issuer of a listed stock, etc., for which designation as a security on

alert meets any one of the following, the stock will be delisted:

- Where the Exchange deems that the internal management system, etc. of the listed

company has not been improved within one (1) year and six (6) months from the designation

as a security on alert (limited to cases where the Exchange deems that the improvement is

no longer expected);

- Where the Exchange deems that the internal management system, etc. of the listed

company has not been improved within one (1) year and six (6) months from the designation

as a security on alert;

- Where the Exchange deems that improvement of the internal management system, etc. of

the listed company can no longer be expected

【Rule 601, Paragraph 1, Item 11-2 of Securities Listing Regulations】

(b) Improvement report system and improvement status report system

1) Submission of improvement report and its availability for the public inspection

【Improvement report: application of designation as a security on alert (image)】

* Improvement report system is a measure before the designation as a security on alert is made

Sub

missio

n o

f

imp

rovem

ent rep

ort

Deems that no

improvement has

not been made

Deems that

improvement has

been made

Designation as a security on

alert is applicable

No additional improvement

measures are necessary


171

2) Submission of improvement report pertaining to timely disclosure and code of

corporate conduct

In the cases provided in the following items and where the Exchange deems that improvement is

highly necessary, the Exchange may request that the listed company submit a report which contains

its background and improvement measures (hereinafter referred to as an "Improvement Report").

In such cases the listed company is required to submit the improvement report promptly.

- Where the Exchange deems that a listed company has breached the provisions concerning

the timely disclosure; and

- Where the Exchange deems that a listed company has breached the provisions concerning

the “Matters to be Observed for” of the code of corporate conduct.

Where the Exchange deems that the contents of the Improvement Report submitted are

apparently inadequate, the Exchange may request such listed company to change it and resubmit

an Improvement Report. In such cases the listed company is required to submit the improvement

report promptly.

The Exchange may make the improvement report submitted available for the public

inspection and widely disseminate it through the Exchange website.

【Rule 502 of Securities Listing Regulations】

The necessity of submission of improvement report will be determined in comprehensive

consideration of the following:

In case of breach of provisions concerning timely disclosure

- Materiality of information made public as timely disclosure, etc., as information relating to

investment decisions; and

- The background, the cause, and the actual state of affairs relating to the circumstances

where timely disclosure was not made fairly; and

- The state of past compliance, etc. with the provisions concerning timely disclosure

【Guidelines for Listed Company Compliance, etc. III 3. (1)】

For example if a listed company falls under any one of the following, the Exchange considers it as

a determinant factor for the request of improvement report and in principle requires the listed

company to submit the improvement report..

i. It was deemed that unfair information disclosure was made for the past two years (delay in

disclosure or inadequate contents of disclosed information and Exchange deemed it necessary

for the listed company to improve the state though it did not deem it necessary to submit the

improvement report and the listed company submitted the document containing the

description of backgrounds and improvement measures (hereinafter “Background Document”).

However the listed company has committed a violation of the regulations at a similar or more

significant level;

ii. A listed company which submitted an improvement report during the past five years


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committed the violation of the regulations.

Furthermore, though the Exchange required a listed company to submit the Background

Document, the listed company did not do so promptly (within two weeks) or the contents thereof

were clearly inadequate, the Exchange considers them to be determinant factors for the request of

improvement report as other matters, and the Exchange requests the submission of improvement

report.

In case of breach of provisions concerning “Matters to be Observed”

- The background, the cause, and the actual state of affairs relating to the circumstances

where timely disclosure was not made fairly; and

- The state of past compliance, etc. with the provisions concerning timely disclosure

【Guidelines for Listed Company Compliance, etc. III 3. (2)】

Where the Exchange requests a listed company to submit the improvement report and the listed

company falls under any one of following, the listed company is determined to commit a material

breach of the listing agreement and shall be delisted.

- Though the Exchange notifies a listed company of the submission, etc. of the improvement

report and establishes the submission date, the company does not submit an Improvement

Report by the established date and time; and

- Though the Exchange requires a listed company to submit the improvement report, the

Exchange deems that the improvement of state of disclosure of corporate information is no

longer expected.

【Rule 601, Paragraph 1, Item 12 of Securities Listing Regulations;

Rule 601, Paragraph 11, Items 1 and 2 of Enforcement Rule】

3) Improvement status report pertaining to timely disclosure and code of corporate

conduct

- A listed company which submitted an Improvement Report shall promptly submit an

Improvement Status Report containing the status of implementation and operation of the

improvement measures after six (6) months from the submission of such Improvement

Report.

- In this case, where the Exchange deems that the contents of the Improvement Status Report

are clearly inadequate, it will request the change of contents and require the resubmission of

the Improvement Status Report. In such cases the listed company shall be required to

submit the Improvement Status Report promptly. The Exchange will make the

Improvement Status Report submitted available for the public inspection and disseminate it

through the Exchange website.

- When a listed company is required to submit the Improvement Status Report, the Exchange

may request the submission of necessary data or make them available for the public

inspection or make necessary inquiries or interviews in order to confirm the status of

implementation and operation of implementation measures and if the Exchange deems that


173

the contents included in the Improvement Status Report are clearly inadequate, the

Exchange shall request the listed company which submitted the Improvement Status Report

to resubmit the Improvement Report.

In addition to the above, the listed company which submitted the Improvement Report is required

to submit the Improvement Status Report pertaining to the implementation and operation of

improvement measures for five (5) years from the submission of the Improvement Status Report

whenever the Exchange deems necessary.

Furthermore, if the Exchange makes any inquiry to the listed company which submitted the

Improvement Report concerning the implementation and operation of implementation measures

when the Exchange deems necessary, the listed company shall make accurate reports on inquired

matters. The JPX-R which is entrusted by the Exchange with the self-regulation operations may

make similar inquiries. In such case the listed company is required to make accurate reports on

the inquired matters in the manner similar to the Exchange promptly.

【Rule 503 of Securities Listing Regulations; Rule 3, Paragraph 2 of the same regulations】

4) Improvement Report pertaining to the submission of documents

Where the Exchange deems that a listed company did not appropriately make the submission of

documents or in case of a listed company in MOTHERS or JASDAQ Growth section, it did not

properly make holding of presentation pursuant to the Securities Listing Regulations, and deems

that the necessity of improvement is high, the Exchange may request the listed company to submit

the Improvement Report. In such cases the listed company is required to submit the Improvement

Report promptly.

In addition where the Exchange deems that the contents of the Improvement Report are clearly

inadequate, the Exchange can request the listed company to change the contents and resubmit the

Improvement Report. In such cases the listed company is also required to submit the

Improvement Report promptly.


5) Improvement Report pertaining to the affirmation related to third-party

allotment, etc.

Where a listed company does not appropriately provide a report on the transfer of an offered

stock allotted by third-party allotment, etc. and its affirmation, etc. on the basis of the provisions of

Rule 422, the Exchange may request such listed company to submit the Improvement Report.

The Exchange may make such report available for the public inspection if the Exchange deems it

necessary and appropriate.


(c) Public Announcement Measures

In cases referred to in each of the following items, the Exchange may make a public


174

announcement of such information if the Exchange deems this necessary:

- Where the Exchange deems that a listed company has breached the provisions pertaining

to timely disclosure;

- Where the Exchange deems that a listed company has breached the provisions pertaining to

the “Matters to be Observed for” of the code of corporate conduct; and

- Where a listed company breaches the provisions of Article 331, Article 335, Article 337, or

Article 400 of the Companies Act.


The Exchange decides the necessity of public announcement measures in comprehensive

consideration of the following:

In case of breach of provisions concerning timely disclosure

- Materiality of information made public as timely disclosure, etc., as information relating to

investment decisions;

- The background, the cause, and the actual state of affairs relating to said violation of the

provisions of Chapter 4, Section 2 by a listed company; and

- The state of implementation measures such as a regulatory action taken by the Exchange in

response to said violation.

【Guidelines for Listed Company Compliance, etc. III 4.】

In case of breach of provisions concerning the “Matters to be Observed” for the code of

corporate conduct

<Matters to be observed for third-party allotment>

- The state of implementation and contents of the proceedings taken prescribed in the

provisions of each item of Rule 432 of the Regulations

<Stock split>

- The ratio of stock split, etc., the investment unit after completing stock split, etc. and any

other circumstances regarding the stock split, etc.

<Matters to be observed for issuance of MSCB etc.>

- The exercise terms, the quantity to be issued, the scale of dilution, the contents of the

measures taken in relation to the monthly exercise quantities with regard to MSCB, etc.

< Matters to be observed for appointment of independent directors/auditors>

- The status of a person(s) who is reported to the Exchange as being an independent

director(s)/auditor(s) by the issuer of a listed domestic stock pursuant to the provisions of

Rule 436-2 of the Enforcement Rules

<Matters to be observed for the adoption of takeover defense measures>

- The contents of takeover defense measures and the state of their disclosure;


175

<Matters to be observed for the disclosure of MBO transactions>

- The state of disclosure of measures to ensure fairness and prevent a conflict of interest

described in disclosure regarding public announcement of opinions in relation to a takeover

bid or presentation of such opinions to shareholders as defined in Rule 441 of the

Regulations

<Prevention of insider trading>

- The nature of violation of the provisions of Rule 442 of Securities Listing Regulations,

background, the cause, and the actual state of affairs relating to the event that give rise to

such violation and the state of development of the information management system required

for the prevention of insider trading

<Elimination of anti-social force>

- The state of development of the internal system for the prevention of involvement of

anti-social forces; and

<Prevention of damages to the function of secondary market or rights of shareholders>

- The state where the function of the secondary market or shareholder rights are undermined.


(d) Listing Agreement Violation Penalty

The Exchange has established the listing agreement violation penalty when a listed company

violates the listing agreement at the level in which such violation does not result in delisting. The

listing agreement violation penalty aims to enhance effectiveness of various listing related

regulations and rules and would be applied to any violation acts which the Exchange deems to

undermine the confidence of shareholders and investors in the Exchange market.

The enhancement of effectiveness of various listing related rules is essential for the benefits of

shareholders and investors, but also is considered to be essential to listed companies from the

perspective of contribution to the quality of market and maintenance of their reputation. The

Exchange encourages listed companies to abide by various listing related rules by fully

understanding the purpose of the system.

Outline of listing agreement violation penalty

In cases provided in each of the following items, if the Exchange deems that said listed

company has undermined the confidence of shareholders and investors in the Exchange

market, the Exchange may claim payment of a listing agreement violation penalty against said

listed company. In this case, the Exchange shall make a public announcement of such

information.

- Where the Exchange deems that a listed company has breached the provisions pertinent

to timely disclosure;

- Where the Exchange deems that a listed company has breached the “Matters to be

Observed ” for the code of corporate conduct; and


176

- In addition to the cases provided in the preceding two items, where the Exchange

deems that a listed company has breached the Securities Listing Regulations or other

regulations.


A decision on whether or not to impose the listing agreement violation penalty shall be made in

comprehensive consideration of the matters assessed in deciding whether the public announcement

measures should be implemented. The decision on the public announcement measures and claim

for the listing agreement penalty shall be made based on the assessment of whether such violation

undermines the confidence of shareholders and investors on the Exchange market.


Since the objective of this system is to enhance the effectiveness of listing regulations, it is not

designed to apply to immaterial violating acts. Therefore the system does not apply to the breach

of requirements for timely disclosure which does not trigger the submission of improvement report

or the breach caused by a listed company which simply forget submitting relevant documents.

Violation acts to which the listing agreement violation penalty may apply include:

- Where a listed company whose stock is designated as a security on alert amended the

earnings report which had already amended in the past as an inappropriate accounting

treatment was identified; or

- Where a listed company whose stock is designated as a security on alert did not carry out

necessary procedures which were required at the time of third-party allotment with dilution

ratio of 25% or more or expected change in controlling shareholders (Securities Listing

Regulations Rule 432).

- These acts apparently violate the requirements of timely disclosure or code of corporate

conduct. If a listed company makes such act, it certainly undermines the confidence in the

Exchange markets and listed companies as a whole. The listing agreement violation

penalty applies to these cases.

The Exchange is certainly to improve the illustration of any violation acts to which the penalty

applies to enhance the foreseeability of such acts by showing specific incidents to which the penalty

applies.


177

The amount of the listing agreement violation penalty shall be calculated for each issue of listed

stocks, etc. in accordance with the following table;

Market Section, etc.

Market Capitalization

1st Section 2nd Section Mothers Foreign stocks, etc.

(excluding listed

companies whose

main market is the

Exchange and

JASDAQ-listed

companies)

JPY 5 bil. or less JPY 19.2 mil. JPY 14.4 mil. JPY 9.6 mil. JPY 2.4 mil.

Over JPY 5 bil., but

JPY 25 bil. or less

JPY 33.6 mil. JPY 28.8 mil. JPY 24 mil. JPY 4.8 mil.


JPY 50 bil. or less

JPY 48 mil. JPY 43.2 mil. JPY 38.4 mil. JPY 9.6 mil.


JPY 250 bil. or less

JPY 62.4 mil JPY 57.6mil. JPY 52.8 mil JPY 12 mil.


JPY 500 bil. or less

JPY 76.8 mil. JPY 72 mil JPY 67.2 mil. JPY 14.4 mil.

Over JPY 500 bil. JPY 91.2 mil JPY 86.4 mil. JPY 81.6 mil. JPY 16.8 mil.

Market Section, etc.

Market Capitalization

JASDAQ

JPY 100 bil. or less JPY 20 mil.

Over JPY 100 bil. JPY 24 mil.

(Note) Listed market capitalization shall be calculated as specified in the following items

- Domestic stocks, etc.

Listed market capitalization is calculated, using (i) the last price on the last day of the

auction session in December immediately prior to the day on which the Exchange

decided to claim the listing agreement violation penalty (if no transaction is executed in

the auction session on such last day, the last price in the auction session on the most

recent day prior to such last day on which transactions are executed) and (ii) the

number of listed domestic shares, etc. at the end of February. However, if the claim for

the listing agreement violation penalty is decided before the last day of auction

sessions in December that arrives for the first time after listing, the market

capitalization on the day of listing is used for such calculation. In addition, adjustments

due to a stock split, gratis allotment of share, or reverse stock split shall be made as

specified the Exchange.

- Foreign stocks, etc.

Listed market capitalization is calculated by using (i) the last price on the last day of

the auction session on the last day of the business year immediately prior to the day on

which the Exchange decided to claim the listing agreement violation penalty (if no


178

transaction is executed in the auction session on such last day, the base price on such

day) and (ii) the number of listed foreign shares, etc. on such day. However, if the claim

for the listing agreement violation penalty is decided before the last day of the business

year that arrives for the first time after listing, the market capitalization on the day of

listing is used for such calculation.

A listed company shall pay the amount specified in the preceding item by the last day of the

month immediately following the month containing the day on which the Exchange required

payment of the listing agreement violation penalty. In cases where a listed company fails to pay the

listing agreement violation penalty by the due date, the Exchange may charge the delinquency

damages.

d. Principle of Equity Finance

The financing of a listed company using equity finance should be respected as it utilizes the

inherent function of the capital market. It would be inappropriate, however, to simply assume that

any act is justified insofar as it stays within the bounds of laws and regulations or the Exchange

regulations and rules.

In order to address ever-evolving circumstances surrounding the capital market, the Exchange is

certainly required to revise regulations and rules as appropriate in response to such evolution.

Notwithstanding its efforts to do so, some incidents unmanageable under the scope of the revised

regulations and rules will inevitably take place. While JPX-R carries out self-regulation operations,

some listed companies deem that mere compliance with regulations and rules, no matter how

superficial, serves as sufficient justification for their acts. In some cases, several equity finance

transactions which may not instantly be alleged to violate the laws and regulations or the

Exchange regulations and rules are carried out and the proceeds from the transactions are used not

for the original business purposes but ultimately for the benefits of specific persons or corporations.

In order to address these conditions and circumstances, JPX-R has noted that it would be effective

to combine a rule-based approach with a principle-based approach. JPX-R thus developed what it

calls the “Principles of Equity Finance.”

(a) Principle-based approach

Principle-based approach mentioned herein refers to the approach where the principles which all

the listed companies must observe and share shall be confirmed and each would exercise its

normative consciousness derived from the principles to act independently, thereby improving the

quality of capital market as a whole.

In this context, the “Principles of Equity Finance” represent fundamental concepts which listed

companies must rely on in raising funds using capital markets beyond the minimum disciplines

specified in laws and regulations and the Exchange regulations and rules. Unlike rules, they would

not automatically bind the behaviors of listed companies or market participants.

* Even if a listed company does not fully meet the “Principles of Equity Finance”, no measures

would be imposed on the listed company without any reasonable reasons associate with the

Exchange regulations and rules.


179

(b) Expected effect of the “Principles of Equity Finance”

JPX-R expects that the following effect will be achieved as listed companies and market

participants share and implement the “Principles of Equity Finance.”

1) When there are no explicit rules or there is diversity in interpretations of regulations and

rules, listed companies may exercise management judgement to carry out equity finance

in reliance on fundamental notions guided by the Principles of Equity Finance.

2) Market participants including subscribers or securities companies, legal advisors, CPAs,

consultants and others who provide advice to listed companies may give advice such that

listed companies do not depart from the underlying concept of the “Principles of Equity

Finance,” by fully understanding them and may contribute to the appropriate management

decision of listed companies.

3) Shareholders and investors may rely on the Principles to assess the adequacy of equity

finance effected by listed companies and make more reasonable investment decisions.

4) Financial instruments exchange may carry out dialogues with listed companies or market

participants within the underlying concepts derived from the Principles while implementing

self-regulation operations. When financial instruments exchange interprets and applies

more general regulations and rules in the absence of directly applicable regulations and

rules, the underlying concepts derived from the Principles could guide its judgment and

financial instruments exchange could address specific situation more responsive to the

substances thereof.

(c) Nature of the “Principles of Equity Finance”

The Principles of Equity Finance have been developed based on principles comprising the

following four principles, which clearly define and embody the purposes and spirits underlying laws

and regulations and other rules pertaining to equity finance, then adding to various aspects and

perspectives acquired while JPX-R has carried out self-regulation operations. Any of principles

represents the underlying principle which should be and should previously have been shared and

applied by all the market participants.


180

Principles of Equity Finance

1. Contribute to the enhancement of enterprise value

It is reasonably certain that the funds procured are used effectively to improve the earnings

power of a listed company based on the assessment of the purpose of fund procurement, use

of funds, appropriation status of funds procured in the past, and earnings forecasts. The

performance results and financial position of the listed company do not give rise to any threat

to reasonable expectations.

The financing is expected to realize sustainable improvements in the enterprise value of the

listed company as sound management is carried out after the financing transaction.

2. No damage to the benefits of existing shareholders

The financing methodology, timing, and issuance terms are determined in full consideration of

potential dilution associated with the financing transaction and the impact of the transactions

on the secondary market. The transactions must be clearly explained to existing shareholders.

3. No threat to the fairness of or confidence in markets

Any entity or cooperating party who endeavors to obtain profit in any unfair manner should

not be allowed to participate in or trade on the capital market. No scheme should be

developed to obtain undue profit as a whole by combining transactions that may not instantly

be alleged to violate the Exchange regulations or rules on an individual basis.

4. Ensure transparency by disclosing information in a timely and adequate

manner

For information disclosure, timing is important. The information disclosed must be true and

consistent. The scope of the disclosure is sufficient and the explanations included with the

disclosed data, etc. must be straightforward and useful to the investment decisions of

shareholders and investors.

It must be demonstrated that the contents of disclosure will be adequate even after the

financing transaction is implemented.

e. Duty of CPAs, etc.to Cooperate with the Exchange, Which Seeks Explanations of CPAs,

etc.

Where the Exchange deems it necessary to decide the appropriateness pertaining to delisting of a

listed stock, etc. issued by such listed company and requests certified public accountants (CPAs),

etc. (including entities who were such certified public accountants, etc.) who carry out audit

certification, etc. of financial statements, etc. or quarterly financial statements, etc. to give

explanation on the circumstances, etc. , the listed company shall cooperate in this process so that

CPAs, etc. could readily provide such explanations, etc.

【Rule 606, Paragraph 1 of Securities Listing Regulations】

JPX-R carries out the operation entrusted to it by the Exchange may request a listed company to

provide similar explanations, etc. Whenever requested so, the listed company shall cooperate in the


181

process in the similar way to the Exchange.


Where the Exchange requests a listed company for the purpose of requiring such certified public

accountants, etc. to give explanation on the circumstances, etc., the listed company shall promptly

submit a document stating that such certified public accountants, etc. agree to give explanation on

the circumstances, etc.


Note: It should be noted that when a listed company refuses the submission of agreement

statement of the certified public accountants, etc. or delays it, such situation may meet the

provisions of Rule 601, Paragraph 1, Item 12 of the Securities Listing Agreement (Listing

Agreement Violation).

f. Examination and Inspection of Securities Trading, etc.

The Exchange has entrusted JPX-R with self-regulation operations pertaining to survey to ensure

fairness of trading of securities on the Exchange market, in addition to self-regulation operations for

the listing of securities. Accordingly, JPX-R (Examination and Inspection Department) carries out

the examination and inspection of trading pertinent to trading acts which violate relevant laws and

regulations, including insider trading.

(a) Duty to report the background for public announcement of corporate information

JPX-R (Examination and Inspection Department) shall inquire into the developments, etc. from

the occurrence of corporate information to the public announcement, to a listed company, where

JPX-R deems it necessary to carry out a survey in order to secure fairness of securities trading, etc.

【Rule 16, Paragraph 2 of JPX-R Business Regulations】

Where JPX-R entrusted by the Exchange with the self-regulation operations deems it necessary to

carry out a survey in order to ensure fairness of securities, trading, etc. and makes an inquiry into

listed stock, etc. including the developments, etc. from the occurrence of corporate information to

the public announcement, to a listed company by deeming that it is necessary for the purpose of

trading supervision, the listed company shall accurately report on the inquired matters.

【Rule 415, Paragraph 4, Item 1 of Securities Listing Regulations;

Rule 3, Paragraph 2 of the same regulations】

Where another domestic financial instruments exchange requests a listed company to provide

information concerning a listed company pertaining to information from the occurrence through the

public announcement of corporate information due to a survey in order to ensure fairness of

securities trading, etc. in such market, the listed company shall promptly make report on the

inquired matters.

【Rule 415, Paragraph 4, Item 2 of Securities Listing Regulations】


182

(b) Issuing warnings to listed companies

JPX-R (Trading Examination Department) may issue warnings to an issuer of a listed security,

where it deems that the act of such issuer of the listed security is an act in violation of laws and

regulations or an act which is likely to fall under the violation of laws and regulations or where it

concludes that the internal system (*) for the prevention of unfair trading with respect to corporate

information is not adequate and deems it necessary, as a result of the examination of securities

trading, etc.

Note: The internal system includes necessary systems to prevent insider trading, etc. by its

officers, agents, employees and other workers as specified by Rule 449 of Securities Listing

Regulations.


JPX-R shall require a listed company to report improvement measures, etc. by a document, where

it deems necessary when issuing warnings.


(8) Delisting

In cases where a listed stock, etc. falls under the Delisting Criteria for Listed Companies as

defined in the Regulations, it shall be delisted.

For details of the Delisting Criteria for Listed Companies, please refer to 13.

[Rule 601 through 612 of the Regulations]

11. Delisting Criteria (Primary Listing)

183


For the purpose of maintaining quality of certain level and liquidity as a market, we set up strict and

detailed delisting criteria. Delisting criteria for each market are as follows.

(1) Main Markets (TSE 1st Section and 2nd Section)(Primary Listing)

Item Requirement


[Rule 602, Paragraph 1, Item 1 of the

Regulations]


Regulations]

Where the number of shareholders is less than 400 as at the end of a

business year of a listed company, and the number does not reach at least

400 within a year.

2. Tradable shares


Regulations]


Regulations]

Where any of the following a. through c. is met;

provided, however, that the same shall not apply to cases where the

Enforcement Rules specify otherwise:

a. Where the number of tradable shares is less than 2,000 units as at the

end of a business year of a listed company and the number does not

reach at least 2,000 units within a year;

b. Where the market capitalization of the tradable shares is less than 500

million yen as at the end of a business year of a listed company and the

number does not reach at least 500 million yen within a year;

provided, however, that where the general market condition rapidly

deteriorates and TSE deems that this criterion is not appropriate, TSE

shall specify the criterion on a case by case basis; or

c. Where the number of tradable shares is less than 5% of the total

number of a listed stock, etc. as at the end of a business year of a listed

company and the listed company does not submit a scheduled plan of

public offering, secondary offering or distribution by a day specified by

the Enforcement Rules.

3. Trading volume


Regulations]


Regulations]

[Rule 601, Paragraph 2 of the Rules]

Where the following a. or b. is met;

provided, however, that the same shall not apply to cases where public

offering, secondary offering or off-auction distribution is carried out as

specified by the Enforcement Rules (Rule 601, Paragraph 2 of the

Enforcement Rules) within three (3) months after the following a. or b. is

met:

a. Where the average monthly trading volume of a listed stock, etc. for


184

each year ending December 31 is less than ten (10) units; or

b. Where no trade has been made for three (3) months before the end of

every month



Regulations]


Regulations]

Where the following a. or b. is met:

a. Where the market capitalization is less than one (1) billion yen and does

not reach at least one (1) billion yen within nine (9) months;


deteriorates and TSE deems that this criterion is not appropriate, other

criteria shall apply as specified by TSE on a case by case basis; or

b. Where the market capitalization of said stock, etc. is less than the

amount obtained by multiplying the number of the listed stock, etc. by

two (2) and does not reach at least such amount within three (3)

months

5. Liabilities in excess of assets


Regulations]


Regulations]

Where a listed company has liabilities in excess of assets as of the end of

the business year and the liabilities in excess of assets is not cleared

within a year;

provided, however, that this means cases where the liabilities in excess of

assets are not cleared within two (2) years if such listed company plans to

clear the liabilities in excess of assets within a year counting from a day

when such year passes by carrying out rehabilitation proceedings or

reorganization proceedings on the basis of the provisions of laws,

business revitalization based on Specific Certified Dispute Resolution

Procedures prescribed in Rule 2, Paragraph 25 of the Industrial

Revitalization Act, or workouts based on the "Guidelines for Multi-Creditor

Out-of-Court Workouts" formulated by the Study Group on Multi-Creditor

Out-of-Court Workouts (limited to cases deemed appropriate by TSE);

6. Suspension of bank

transactions


Regulations]


Regulations]

Where a bill, etc. issued by a listed company is dishonored and its bank

transactions are suspended or their suspension becomes certain

7. Bankruptcy proceedings,

rehabilitation proceedings or

reorganization proceedings


Regulations]

Where a listed company become necessary to enter its bankruptcy

proceedings, rehabilitation proceedings or reorganization proceedings on

the basis of the provisions of laws or where it falls under a situation

equivalent to these. In this case, it means circumstances where the

company discloses a restructuring plan prescribed by the Enforcement


185


Regulations]

Rules and the market capitalization does not reach at least one (1) billion

yen for a month counting from the day following the day on which such

restructuring plan is disclosed

8. Suspension of business

activities


Regulations]


Regulations]

Where a listed company suspends its business activities or where it falls

into a situation equivalent to this

9. Inappropriate merger, etc.


Regulations]


Regulations]

[Rule 208, Item 1, 3 and 5 of the

Regulations]

In cases of the following a. or b., where TSE deems that such a. or b. is

met:

a. Where a listed company carries out an absorption-type merger of an

unlisted company or an act specified by the Enforcement Rules as an

act classified as this:

Where TSE deems that such listed company is not a substantial

surviving company and such listed company does not satisfy the criteria

specified by the Enforcement Rules within three (3) years; or

b. Where a company is listed subject to the following (a) through (c); and

TSE deems that a listed company as prescribed by the following (a)

through (c) is not a substantial surviving company pertaining to such

company, and such company does not satisfy the criteria specified by

the Enforcement Rules within three (3) years:

(a) Where a listed stock, etc. is delisted due to dissolution caused by a

merger of a listed company on the Main Markets:

The newly created company or the surviving company, or the parent

company of the surviving company pertaining to such merger;

(b) Where a listed company on the Main Markets becomes a

wholly-owned subsidiary of another company by a stock swap, stock

transfer and other means or where it is specified by the Enforcement

Rules as a status equivalent to this:

Such other company or the parent of such other company;

(c) Where a listed company on the Main Market is delisted due to falling

under the case where a listed company on the Main Market ceases

to be the party to the listing agreement by making another company

succeed the listing agreement based on its agreement of a split by a

merger or a plan of a split by creating a new company at the time of

carrying out a shareholder directed spin-off:

Such other company

10. Damage to Sound

Transactions with Controlling

Where there is a change of a controlling shareholder due to private

placement, when TSE deems there is considerable damage to sound


186

Shareholder


Regulations]

[Rule 601, Paragraph 1, Item 9-2 of

the Regulations]

transactions with the controlling shareholder within the coming 3 years.

11. Delay in Submission of Annual

Securities Report or Quarterly

Securities Report


Regulations]


Regulations]

Where Annual Securities Report or Quarterly Securities Report to which an

audit report or a quarterly review report as specified in Article 3,

Paragraph 1 of the Cabinet Office Ordinance on Audit Certification

prepared by two (2) or more certified public accountants or an audit firm

is attached) is not submitted to the Prime Minister within one (1) month

after a period specified in the Financial Instruments and Exchange Act.

12. False Statement or Adverse

Opinion, etc.


Regulations]


Regulations]


a. Where a listed company makes a false statement in a securities report,

etc. and, in addition, TSE deems that its effect is material; or

b. Concerning an audit report attached to financial statements, etc. or a

Quarterly Review Report attached to Quarterly Financial Statements,

etc. of a listed company, where certified public accountants state an

"adverse opinion" or a fact that "opinions are not expressed" in an

audit report, and a "negative conclusion" or a fact that "conclusions are

not expressed" in a quarterly review report and, in addition, TSE deems

that such fact has a material impact.

13. Breach of Listing Agreement,

etc.


Regulations]


Regulations]

[Rule 601, Item 10 of the Rules]

Where the following a., b. or c. is met:

a. Where a listed company has committed a material breach of the listing

agreement as prescribed by the Enforcement Rules (Article 601,

Paragraph 10 of the Enforcement Rules);

b. Where a listed company has committed a material breach as to matters

taken on oath in the Written Oath submitted; or

c. Where a listed company ceases to be a party to the listing agreement.

14. Becoming a Wholly-Owned

Subsidiary


Regulations]


Regulations]

Where a listed company becomes a wholly-owned subsidiary of another

company by stock swap or stock transfer.

15. Unreasonable Restriction on Where the details of shareholders’ rights and their exercise are


187



Regulations]


Regulations]


unreasonably restricted as specified by the Enforcement Rules (Article

601, Paragraph 13 of the Enforcement Rules).

16. Whole Acquisition


Regulations]


Regulations]

Where a listed company acquires all shares pertaining to such stock.

17. Involvement of Anti-Social

Forces


Regulations]


Regulations]

Where it has become clear that a listed company has relationships

prescribed in the Enforcement Rules as those in which the listed company

is involved with anti-social forces, when TSE deems that such condition

has considerably damaged shareholders and investors trust in the market.

18. Handling by Designated

Book-Entry Transfer Institution


Regulations]

Where such security has ceased to be handled in the custody and

book-entry transfer operation of listed foreign stocks, etc. or the

book-entry transfer operation of a designated book-entry transfer

institution.

19. Restriction on Transfer of

Share Certificates, etc.


Regulations]

Where a listed foreign company imposes a transfer restriction on a listed

foreign stock, etc. issued by such company;


transfer restriction on a stock, etc. is deemed necessary to receive the

application of the provisions of laws and regulations of a home country or

in cases equivalent thereto where the details are deemed not to hinder

trading in the market of TSE.

20. Termination of Deposit

Agreement, etc.


Regulations]


Regulations]

Where a deposit agreement, etc. or any other agreement is terminated if a

listed foreign company is an issuer of such listed foreign stock depositary

receipt, etc.;

provided, however, that the same shall not apply to cases where such

deposit agreement, etc. or any other agreement is terminated because of

a change in a depository, etc. pertaining to a listed foreign stock

depositary receipt, etc.

21. Others


Regulations]


Regulations]

In addition to each of the preceding items, where TSE deems that

delisting of such security is appropriate for the public interest or the

protection of investors.


188

(2) Mothers (Primary Listing)

Item Requirement



Regulations]


Regulations]

Where the number of shareholders is less than 400 as at the end of a

business year of a listed company, and the number does not reach at least

400 within a year (within a period of ten (10) years since listing, where the

number is less than 150, and the number does not reach at least 150

within a year (where ten (10) years since listing elapse during such year,

at least 400))

2. Tradable shares


Regulations]


Regulations]

Where a listed domestic stock, etc. falls under any of the following a.

through c.;


Enforcement Rules specify otherwise:

a. Where the number of tradable shares is less than 2,000 units as at the

end of a business year of a listed company, and the number does not

reach at least 2,000 units within a year (within a period of ten (10)

years since listing, where the number is less than 1,000 units, and the

number does not reach at least 1,000 units within a year (where ten

(10) years since listing elapse during such year, at least 2,000 units));

b. Where the market capitalization of tradable shares is less than 500

million yen as of the end of a business year of a listed company, and it

does not reach 500 million yen within a year (within a period of ten (10)

years since listing, where it is less than 250 million yen, and it does not

reach at least 250 million yen within a year (where ten (10) years since

listing elapse during such year, at least 500 million yen));



shall prescribe on a case by case basis; or

c. Where the number of tradable shares is less than 5% of the total

number of a listed stock, etc. as at the end of a business year of a listed

company and the listed company does not submit a scheduled plan of

public offering, secondary offering or distribution with a quantitative

limit by the day specified by the Enforcement Rules;

3. Liabilities in excess of assets


Regulations]


Regulations]

Where a listed company has liabilities in excess of assets as at the end of

a business year (excluding cases where a listed company falls into

liabilities in excess of assets within three (3) years after listing) and the

liabilities in excess of assets do not cease within a year;

provided, however, that in cases where such listed company plans to clear

liabilities in excess of assets within a year counting from a day when such


189

year passes by undertaking rehabilitation proceedings or reorganization

proceedings pursuant to the provisions of laws, business revitalization

based on Specific Certified Dispute Resolution Procedures prescribed in

Article 2, Paragraph 25 of the Industrial Revitalization Act, or workouts

based on the "Guidelines for Multi-Creditor Out-of-Court Workouts"

formulated by the Study Group on Multi-Creditor Out-of-Court Workouts,

the liabilities in excess of assets is not cleared within two (2) years;

4. Sales


Regulations]


Regulations]

Where sales are less than 100 million yen in the last year (excluding cases

where the amount of profits is recorded in the last year and where sales

are less than 100 million yen in the last year within five (5) years after

listing). In this case, "the last year" shall be counted from the end of the

most recent business year



Regulations]


Regulations]


a. Where the market capitalization is less than one (1) billion yen, and it

does not reach at least one (1) billion yen within nine (9) months

(within a period of ten (10) years since listing, where it is less than 500

million yen and it does not reach at least 500 million yen within nine (9)

months (where ten (10) years since listing elapse during such nine (9)

months, at least one (1) billion yen));



shall prescribe on a case by case basis; or

b. Where the market capitalization of said stock, etc. is less than the

amount obtained by multiplying the number of the shares of the listed

stock by two (2) and does not reach a least such amount within three

(3) months;

6. Stock price


Regulations]

[Rule 603, Paragraph 1, Item 5-2 of the

Regulations]

Where, by the point of time when 3 years have elapsed since listing, the

stock price falls below 10% of the public offering price at the time of initial

listing, the price fails to recover to 10% or more of such public offering

price within 9 months;

provided, however, that this shall be handled as specified by TSE on a

case-by-case basis if TSE deems that application of the above standard is

inappropriate in consideration of changes in market trends and other

circumstances

7. Trading volume


Regulations]


Regulations]

Where the following a. or b. is met;

provided, however, that the same shall not apply to cases where public

offering, secondary offering or off-auction distribution is carried out as

specified by the Enforcement Rules (Article 601, Paragraph 2 of the

Enforcement Rules) within three (3) months after the following a. or b. is


190

met:

a. Where the average monthly trading volume of a listed stock, etc. for

each year ending December 31 is less than ten (10) units; or

b. Where no trade has been made for three (3) months before the end of

every month

8. Suspension of bank

transactions


Regulations]


Regulations]


transactions are suspended or their suspension becomes certain





Regulations]


Regulations]






Rules and the market capitalization does not reach at least one (1) billion

yen for a month counting from the day following the day on which such

restructuring plan is disclosed

10. Suspension of business

activities


Regulations]


Regulations]


into a situation equivalent to this

11. Inappropriate merger, etc.


Regulations]


Regulations]

[Rule 208, Item 1, 3 and 5 of the

Regulations]


met:













191
















Such other company

12. Damage to Sound


Shareholder


Regulations]

[Rule 601, Paragraph 1, Item 9-2 of

the Regulations]



transactions with the controlling shareholder within the coming 3 years



Securities Report


Regulations]


the Regulations]








Opinion, etc.


Regulations]


the Regulations]












192


etc.


Regulations]


the Regulations]










Subsidiary


Regulations]


the Regulations]



17. Unreasonable Restriction on



Regulations]


the Regulations]


the Rules]

Where the details of shareholders’ rights and their exercise are


601, Paragraph 13 of the Enforcement Rules).



Regulations]


the Regulations]



Forces


Regulations]


the Regulations]








Regulations]


Regulations]




institution.

21. Restriction on Transfer of Where a listed foreign company imposes a transfer restriction on a listed


193



Regulations]


Regulations]








Agreement, etc.


Regulations]


Regulations]



receipt, etc.;





23. Others


Regulations]


Regulations]





194

(3) JASDAQ (Standard Market) (Primary Listing)

Item Requirements

1. Stock Price

[Rule 604-3, Item 1 of the Regulations]

[Rule 604-2, Paragraph 1, Item 2 of the

Regulations]

In the event that stock price is less than JPY 10, it does not increase to JPY

10 or above within 3 months.

2. Corporate Performance



Regulations]

The operating income and the cash flow in operating activities for the 4

most recent consolidated fiscal years are negative and this state is not

resolved within 1 year (excluding cases where the 4 most recent

consolidated fiscal years includes the 5 fiscal years prior to the fiscal year

following that in which the company made its listing application).

3. Number of Shareholders



Regulations]

Where the number of shareholders is less than 150 in Japan as at the end

of a business year of a listed company, and the number does not reach at

least 150 within a year.

4. Tradable Shares



Regulations]

Where a listed stock falls under any of the following a. and b.

a. Where the number of tradable shares is less than 500,000 shares for

1,000-share unit stock, 250,000 shares for 500-share unit stock,

50,000 shares for 100-share unit stock, 25,000 shares for 50-share unit

stock, 5,000 shares for 10-share unit stock, and 500 shares for 1-share

unit stock, respectively, as of the end of a business year of a listed

company, and the number does not reach at least 500,000 shares for




unit stock, respectively, within a year;

b. Where the market capitalization of tradable shares is less than JPY250

million as of the end of a business year of a listed company, and it does

not reach JPY250 million within a year;



shall prescribe on a case by case basis;

5. Liabilities in Excess of Assets



Regulations]

Where a listed company has liabilities in excess of assets as of the end of

a business year and the liabilities in excess of assets do not cease within a

year.

6. Suspension of Bank Where a bill, etc. issued by a listed company is dishonored and its bank


195

Transactions



Regulations]

transactions are suspended or their suspension becomes certain.






Regulations]






Rules and the market capitalization does not reach at least JPY 500 million

for a month counting from the day following the day on which such

restructuring plan is disclosed.

8. Suspension of Business

Activities



Regulations]


into a situation equivalent to this.

9. Inappropriate Merger, etc.



Regulations]

[Rule 216-9, Item 1, 3 and 5 of the Reg

ulations]


met:
























196





Such other company

10. Damage to Sound


Shareholder



Regulations]






Securities Report



Regulations]








Opinion, etc.



the Regulations]












etc.



the Regulations]










197


Subsidiary



the Regulations]


company by stock swap or stock transfer





the Regulations]




601, Paragraph 13 of the Enforcement Rules)




the Regulations]



Forces



the Regulations]









Regulations]




institution.





Regulations]









Agreement, etc.



Regulations]


Regulations]



receipt, etc.;





21. Others





198


the Regulations]



199

(4) JASDAQ (Growth Market) (Primary Listing)

Item Requirements

1. Stock Price



Regulations]


Regulations]

In the event that stock price is less than JPY10, it does not increase to JPY

10 or above within 3 months.

2. Corporate Performance



Regulations]


Regulations]

The operating income and the cash flow in operating activities for the 4

most recent consolidated fiscal years are negative and this state is not

resolved within 1 year (excluding cases where the 4 most recent

consolidated fiscal years includes the 5 fiscal years prior to the fiscal year

following that in which the company made its listing application).

3. Operating Income



Regulations]

In the event where the operating income for the consolidated fiscal year

of a listing application is negative and the operating income for the 9 fiscal

years after it is listed are negative, the operating income of the listed

company's corporate group does not become positive within 1 year.




Regulations]

Where the number of shareholders is less than 150 in Japan as of the end

of a business year of a listed company, and the number does not reach at

least 150 within a year.

5. Tradable Shares



Regulations]

Where a listed stock falls under any of the following a. and b.

a. Where the number of tradable shares is less than 500,000 shares for




unit stock, respectively, as of the end of a business year of a listed

company, and the number does not reach at least 500,000 shares for




unit stock, respectively, within a year;

b. Where the market capitalization of tradable shares is less than JPY 250

million as at the end of a business year of a listed company, and it does

not reach JPY 250 million within a year;


deteriorates and TSE deems that this criterion is not appropriate, TSE e

shall prescribe on a case by case basis.


200

6. Liabilities in Excess of Assets



Regulations]

Where a listed company has liabilities in excess of assets as at the end of

a business year and the liabilities in excess of assets do not cease within a

year.

7. Suspension of Bank

Transactions



Regulations]


transactions are suspended or their suspension becomes certain.






Regulations]






Rules and the market capitalization does not reach at least JPY 500 million

for a month counting from the day following the day on which such

restructuring plan is disclosed.

9. Suspension of Business



Regulations]


into a situation equivalent to this.

10. Inappropriate Merger, etc.



Regulations]

[Rule 216-9, Item 1, 3 and 5 of the Reg

ulations]


met:





surviving company and such listed company does not satisfy the

criteria specified by the Enforcement Rules within three (3) years; or














201




under the case where a listed company on the Main Market ceases to

be the party to the listing agreement by making another company




Such other company

11. Damage to Sound


Shareholder



Regulations]






Securities Report



Regulations]


audit report or Quarterly Review Report as specified in Article 3,






Opinion, etc.



the Regulations]









not expressed" in a Quarterly Review Report and, in addition, TSE

deems that such fact has a material impact.


etc.



the Regulations]




agreement as prescribed by the Enforcement Rules (Rule 601,





202



Subsidiary



the Regulations]







the Regulations]



unreasonably restricted as specified by the Enforcement Rules (Rule 601,

Paragraph (xiii) of the Enforcement Rules).




the Regulations]



Forces



the Regulations]









Regulations]




institution.





Regulations]









Agreement, etc.



Regulations]


Regulations]



receipt, etc.;






203

22. Others



the Regulations]




12. Delisting Criteria (Multiple Listing)

204


For the purpose of maintaining market quality and liquidity at certain level, we set up strict and

detailed listing criteria. Listing criteria for each market are as follows.

(1) Main Markets (TSE 1st Section and 2nd Section)(Multiple Listing)

The delisting criteria for multiple listing are mostly same as the delisting criteria for primary listing,

however, the following criteria are different from each other. In addition, for the delisting criteria for

primary listing, please refer to sections at section 12 (1).

Item Multiple listing Primary Listing



Regulations]

[Rule 601, Paragraph 1, Item

1 of the Regulations]

None Where the number of shareholders is less

than 400 as at the end of the business

year of the listed company, and the

number does not reach at least 400

within a year

2. Number of Tradable

Shares


Regulations]


Regulations]

None Where a listed domestic stock, etc. falls

under any of the following a. through c.;

a. Where the number of tradable shares

is less than 2,000 units as at the end of

the business year of the listed

company, and the number does not

reach at least 2,000 units within a year

b. Where the market capitalization of

tradable shares is less than 500 million

yen as at the end of the business year

of the listed company, and it does not

reach 500 million yen within a year;

provided, however, that where the

general market condition rapidly

deteriorates and TSE deems that this

criterion is not appropriate, TSE shall

prescribe on a case by case basis; or

c. Where the number of tradable shares is

less than 5% of the total number of a

listed stock, etc. as at the end of the

business year of the listed company


205

and the listed company does not

submit a scheduled plan of public

offering, secondary offering, or

distribution with a quantitative limit by

the day specified by the Enforcement

Rules;

3. Trading Volume


Regulations]


Regulations]


None Where the following a. or b. is met;

provided, however that the same shall

not apply to cases where public offering,

secondary, offering, or off-auction

distribution is carried out as specified by

the Enforcement Rules (Rule 601(2) of

the Enforcement Rules) within three (3)

months after the following a. or b. is met:

a. Where the average monthly trading

volume of a listed stock, etc. for each

year ending December 31 is less than

ten (10) units; or

b. Where no trade has been made for

three (3) months before the end of

every month

4. Delisting from Foreign

Financial Instruments

Exchange, etc.


Regulations]

Where delisting of a listed foreign

stock, etc. from a foreign financial

instruments exchange, etc. is

decided or where TSE deems that

circumstances have changed to a

degree where market prices, etc. of

such listed foreign stock, etc. on a

foreign financial instruments

exchange, etc. cannot be obtained

immediately;

provided, however, that the same

shall not apply to cases where

delisting is deemed to be

inappropriate in consideration of

reasons for delisting such listed

foreign stock, etc. from a foreign

financial instruments exchange, etc.

or in consideration of the trading

status at TSE and any other event

None


206

5. Status of Trading


Regulations]

The status of trading in a listed

foreign stock, etc. is deemed to have

radically deteriorated as at the end

of a business year of a listed foreign

stock, etc.

None


207

(2) Mothers (Multiple Listing)

The delisting criteria for multiple listing are mostly same as the delisting criteria for primary listing,

however, the following criteria are different from each other. In addition, for the delisting criteria for

primary listing, please refer to sections at section 12 (2).

Item Multiple listing Primary listing



Regulations]


Regulations]

None Where the number of shareholders

is less than 400 as at the end of the

business year of the listed company,

and the number does not reach at

least 400 within a year (within a

period of ten (10) years since

listing, where the number is less

than 150, and the number does not

reach at least 150 within a year

(where ten (10) years since listing

elapsed during such year, at least

400))

2. Number of Tradable Shares


Regulations]


Regulations]

None Where a listed domestic stock, etc.

falls under any of the following a.

through c.;


shall not apply to cases where the

Enforcement Rules specify

otherwise:

a. Where the number of tradable

shares is less than 2,000 units as

at the end of the business year of

the listed company, and the

number does not reach at least

2,000 units within a year (within

a period of ten (10) years since

listing, where the number is less

than 1,000 units, and the

number does not reach at least

1,000 units within a year (where

ten (10) years since listing

elapsed during such year, at

least 2,000 units));

b. Where the market capitalization


208

of tradable shares is less than

500 million yen as at the end of

the business year of the listed

company, and it does not reach

500 million yen within a year

(within a period of ten (10) years

since listing, where it is less than

250 million yen, and it does not

reach at least 250 million yen

within a year (where ten (10)

years since listing elapsed during

such year, at least 500 million

yen));

provided, however, that where

the general market condition

rapidly deteriorates and TSE

deems that this criterion is not

appropriate, TSE shall prescribe

on a case by case basis; or

c. Where the number of tradable

shares is less than 5% of the

total number of the listed stock,

etc. as at the end of the business

year of the listed company and

the listed company does not

submit a scheduled plan of public

offering, secondary offering, or

distribution with a quantitative

limit by the day specified by the

Enforcement Rules;

3. Trading Volume


Regulations]


Regulations]

None Where the following a. or b. is met;



public offering, secondary offering

or off-auction distribution is carried

out as specified by the Enforcement

Rules (Rule 601(2) of the

Enforcement Rules) within three (3)

months after the following a. or b. is

met:

a. Where the average monthly

trading volume of a listed stock,

etc. for each year ending


209

December 31 is less than ten

(10) units; or

b. Where no trade has been made

for three (3) months before the

end of every month

4. Delisting from a Foreign

Financial Instruments

Exchange, etc.


Regulations]


the Regulations]

Where delisting of a listed foreign

stock, etc. from a foreign financial

instruments exchange, etc. is

decided or where TSE deems that

circumstances have changed to a

degree where market prices, etc. of

such listed foreign stock, etc. on a

foreign financial instruments

exchange, etc. cannot be obtained

immediately;



delisting is deemed to be

inappropriate in consideration of

reasons for delisting such listed

foreign stock, etc. from a foreign

financial instruments exchange, etc.

or in consideration of the trading

status at TSE and any other event

None

5. Status of Trading


Regulations]


the Regulations]

The status of trading in a listed

foreign stock, etc. is deemed to

have radically deteriorated as at the

end of a business year of a listed

foreign stock, etc.

None


210

(3) JASDAQ (Standard and Growth Markets) (Multiple Listing)

In the case of multiple listing the following criteria are required to be met in addition to the

satisfaction of criteria required for primary listing. In addition, for the delisting criteria for primary listing,

please refer to sections 12 (3) and 12 (4).

Item Requirements

Delisting from Foreign Financial

Instruments Exchange, etc.


Regulations]


Regulations]

When the delisting of foreign stock, etc. on a foreign financial instruments

and exchange is determined or TSE determines that the quoted prices of

stock, etc. on a foreign financial instruments and exchange can not be

observed immediately;

provided that this will not apply to cases where the delisting is determined

to be inappropriate in consideration of reason for delisting on the foreign

financial instruments and exchange and the status of distribution, and

other factors.

13. Listing Fees

211

13. Listing Fees

Consumption taxes and local consumption taxes will be levied on various dues and fees mentioned in

this chapter.

(1) Fees for Initial Listing on TSE

(Listing Examination Fee, Initial Listing Fee, and Public Offering/Secondary Offering Fee)

A foreign company, when applying for listing on TSE, shall pay fees consisting of listing

examination fee, initial listing fee, and public offering/sales fee.

When TSE is the main

market

When TSE is not

the main market

Mothers JASDAQ First Section

Second

Section

First & Second

Sections

Listing

Examination

Fee

¥4,000,000 ¥2,000,000 ¥2,000,000 ¥2,000,000

Initial Listing

Fee ¥15,000,000 ¥12,000,000

¥2,500,000

+ Fixed rate fee

(See below)

¥1,000,000 ¥6,000,000

Public

Offering/Sales

Fee

Number of new shares

offered×offer price×

(9/10,000)

Number of existing shares

sold×sales price×

(1/10,000)

―

Number of new

shares offered×offer

price× (9/10,000)

Number of existing

shares sold×sales

price× (1/10,000)

―

Furthermore, in cases where an applicant previously filed a listing application or preliminary

application and the applicant intends to file a re-application within three years counting from the

beginning date of the business year to which the most recent application date pertains (in case of

the preliminary application, the date which was described in the preliminary application form for

listing of securities as the date on which the listing application was expected to be filed), the listing

fees is expected to be halved.

When TSE implements a field visit or meeting, etc. at locations remote from Japan, in particular

including Europe, the United States, and so on, TSE will separately charge to the applicant the

amount equivalent to actual expenses incurred for the field visit and meeting purposes.

13. Listing Fees

212

Initial Listing Fee for Foreign Stock, etc. with a Main Market Listing on any Overseas

Exchange

Initial listing fee for foreign stock, etc. with a main market listing on any overseas exchange is

computed as 2.5 million yen plus a fixed rate fee as shown in the table below:

Ratio of number of foreign stock, etc.

held by individuals and legal entities

having address and residence in Japan to

the total number of listed foreign stock.

etc.

Initial Listing Fee

More than 5% ¥2,500,000＋Number of Listed Foreign Stock, etc.×

(225/10,000) ×1/10

More than 2% and less than or equal to

5%

¥2,500,000＋Number of Listed Foreign Stock, etc.×

(225/10,000) ×1/20

Less than or equal to 2% ¥2,500,000＋Number of Listed Foreign Stock, etc.×

(225/10,000) ×1/50

(2) Annual Listing Fee (Main Market (First & Second Sections) and Mothers)

After the listing on TSE, listed foreign companies shall pay the Annual Listing Fee, which shall be

the amount defined in the table below (tax excluded) plus TDnet usage fee of ¥120,000 (tax

excluded).

In addition, as for foreign companies listed in Mothers market, for the initial three (3) years after

the listing, the annual listing fee shall be half of the amount defined in the table below (tax excluded)

plus TDnet usage fee of ¥120,000 (tax excluded).

Market Cap at IPO

When TSE is the Main Market When TSE is not

the Main Market First Section Second

Section Mothers

Less than or equal to ¥5 billion ¥960,000 ¥720,000 ¥480,000 ¥120,000

More than ¥5 billion and less than

or equal to ¥25 billion ¥1,680,000 ¥1,440,000 ¥1,200,000 ¥240,000

More than ¥25 billion and less

than or equal to ¥50 billion ¥2,400,000 ¥2,160,000 ¥1,920,000 ¥480,000





More than ¥500 billion ¥4,560,000 ¥4,320,000 ¥4,080,000 ¥840,000

13. Listing Fees

213

(3) Annual Listing Fee (JASDAQ)

After listing on TSE, listed foreign companies shall pay the Annual Listing Fee, which shall be the

amount defined in the table below (tax excluded) plus TDnet usage fee of ¥85,000 (tax excluded).

Market Cap at IPO JASDAQ

¥100 billion or less ¥1,000,000

More than ¥100 billion ¥1,200,000

(4) Fees for Listing on Tokyo PRO Market

Initial listing fee, fee related to issuance, etc. of new shares at IPO and Annual Listing Fee on

TOKYO PRO Market are as shown in the table below:

When TSE is the Main

Market

When TSE is not the

Main Market

1. Initial Listing Fee ¥3,000,000

2. Fee related to issuance, etc. of new shares at IPO

Number of new shares offered×offer price×

(9/10,000)

Number of existing shares sold×sales price×

(1/10,000)

3. Annual Listing Fee

Market Cap at IPO

Less than or equal to ¥5 billion ¥480,000 ¥120,000

More than ¥5 billion and less than or equal to

¥25 billion ¥1,200,000 ¥240,000


¥50 billion ¥1,920,000 ¥480,000


¥250 billion ¥2,640,000 ¥600,000


¥500 billion ¥3,360,000 ¥720,000

More than ¥500 billion ¥4,080,000 ¥840,000


214

14. Securities Taxation System (Japanese Investors23 Investing in

TSE Listed Foreign Stocks)

In principle, the same taxation in domestic stock is applied to foreign stock. However please take note

of the following two items:

With regard to dividend income, the above tax rates shall be applicable to the amount after

deduction of income tax is imposed for the above-mentioned tax rates to the amount of money

after tax withheld at the source in the home country on the basis of tax rates provided by the tax

convention concluded between the home country of the listed foreign company and Japan. Please

note that this is applicable only to individuals and that exclusion from gross revenue in dividend

income is not applicable to institutional investors.

In the case where shares of stock of a subsidiary of a listed foreign company are allotted (spun

off) and where the allotment of shares meets the distribution of profits, it is subject to taxation

(the tax amount is determined based on the market value of shares of stock allotted). A

shareholder may choose to receive shares of the stock by paying the amount equivalent to the

withheld taxes on the allotted shares or receive the proceeds arising from the sales of the shares

without paying the amount equivalent to the withheld taxes (residual value after deducting the

amount equivalent to such taxes. The proceeds from the sale of the shares of stock are subject to

capital gain taxation. (Refer to Foreign Securities Account Agreement.)

(1) Taxation for Individual Investors

Item Taxation Method

Capital Gains associated with

Listed Shares, etc.

<January 1, 2014 through December 31, 2037>

20.315% Self-assessed separated taxation (Income tax & Special

reconstruction income tax: 15. 315%; Residential tax: 5%)

<January 1, 2038 and later>

20% Self-assessed separated taxation (Income tax 15%;

Residential tax 5%)

[Specified Account System]

Individuals are exempt from tax procedures because financial

instruments operators collect taxes on transactions via tax

withholding accounts (specified account for tax withholding).

However, the acceptance of specified account for listed stock

certificates, etc. held at general accounts, etc., ended on May 31,

2009.

[Aggregation of profit and loss and carry-forward on capital loss

23 Japanese nationals.


215

and dividend income]

Capital loss on sale of listed stock certificates, etc. via financial

instruments operator can be tax-deductible in order of capital

gain/loss of listed stock certificates, etc., capital gain/loss of

unlisted stock, dividend income of listed stock certificates, etc. (only

applicable to self-assessed separated taxation). Amount that cannot

be tax-deductible for the relevant year may be carried over for three

(3) years against the capital gains of listed stock certificates, etc. by

filing a tax return.

Dividend Income associated

with Listed Stock

<January 1, 2014 through December 31, 2037>

20. 315% Tax withholding (exempt from filing declaration) or

Self-assessed separated taxation

(Income tax & Special reconstruction income tax: 15. 315%;

Residential tax: 5%)

< January 1, 2038 and later >

20% Tax withholding (exempt from filing declaration) or

Self-assessed separated taxation

(income tax: 15%、residential tax: 5%)

(2) Taxation on Corporations


Dividend on Stock

Since there is no application of the exemption of dividends as a

general rule, taxation is combined in taxable income. However, if

applicable to the Foreign Dividend Exclusion System, the amount

equivalent to 95% of the dividend income is exempt from taxation.

Capital Gains on Sale of Stock

Certificates, etc.

Taxable (however, capital losses can be included in deductible

expenses)


216

(3) Taxation on Deemed Dividend

When money or other assets are granted due to merger, etc. and the aggregate value of such

money or other assets exceed the portion of capital stock out of the changes in net assets, the

excess value is taxable as Deemed Dividend.

(Note) Acquisition of new shares by share splitting is not taxable due to the abolishment of

taxation on Deemed Dividend on incorporation of earned surplus.

(4) Consumption Tax


Brokerage Commissions, etc. Taxable to the total amount of fees

Sales and Purchase of Securities Tax-exempt

Stock Dividend Untaxed

・ Although this material is prepared based on information deemed reliable, no guarantee is

made regarding the accuracy or completeness of the information.

・ This material is prepared based on the laws and regulations effective or applicable as of July

31, 2012, but they are subject to change depending on tax reforms in the future.

・ For practical tax treatments, please consult with your tax advisor or tax office.

15. Q&A

217

15. Q&A

(1) Insider Trading Regulations

Q. Tell me about the Insider Trading Regulations.

A. Foreign stocks, etc. trading and JDRs trading are subject to the Insider Trading Regulations. For

details, please refer to “FAQ on Consultation Examples for Insider Trading”published by Tokyo

Stock Exchange.

FAQ on Consultation Examples for Insider Trading (Japanese Only)

http://www.jpx.or.jp/self-regulatory-activities/ensuring/preventing/insider-faq.html

(2) Tender Offer Rules (TOB Rules)

Q. Tell me about Regulations on Tender Offer in Japan.

A. Tender Offer Rules (TOB Rules) are defined for Japanese stocks, etc. with the aim of ensuring

transparency and fairness for securities trading which would potentially affect control of a

company, etc. When a person (“Tender Offeror”) tries to purchase a large quantity of stock, etc.

through off-market trading, the Tender Offeror is required to disclose the tender offer period,

number of stocks to be purchased, price of shares and other relevant facts so as to provide the

shareholders with equal opportunities to sell the relevant stocks, etc. The Tender Offeror is

required to make such a tender offer with adequate disclosure, if any of the following conditions

apply:

・ When the stocks, etc. are purchased by a large number of persons (meaning more than ten

(10) persons during 60 days), and the number of shares owned to exceed five (5) percent of

the shares issued after the purchase; or

・ When the stocks, etc. are purchased by an extremely small number of persons (meaning ten

or fewer persons during 60 days), and the number of shares owned to exceed one-third of

the shares issued after the purchase.

(3) Large Shareholding Reporting System

Q. What’s the Large Shareholding Reporting System?

A. With regards to Japanese stocks, there are rules in Japan as indicated below with the aim of

notifying investors about the state of large shareholding of stocks, etc.:

・ A person who has become a holder of the listed stocks, etc. whose shareholding ratio exceeds

five (5) percent shall submit a large shareholding report within five (5) business days from

the reference date.

・ If the shareholding ratio of any such large shareholder later increases or decreases by more

than one (1) percent, the person shall file an amendment report within five business days.

Exceptional measure for reduction of reporting frequency is taken separately for institutional

investors engaging in a large amount of transactions in day-to-day business operations, such as

securities companies, banks, trust banks, insurance companies, investment trust companies and

investment advisory companies, etc. in consideration of their administrative workload.

15. Q&A

218

(4) Listing on TSE through the Establishment of a Japanese Company

Q. How is the setup of a company in Japan for the purpose of having its stock listed on

TSE treated?

A. Please refer to “New Listing Guidebook - 1st and 2nd sections”, “New Listing Guidebook –

Mothers” and “New Listing Guidebook – JASDAQ” in cases where a Japanese entity’s common

stock is listed on TSE. The New Listing Guidebook is available at:

http://www.jpx.co.jp/english/equities/listing-on-tse/new/guide/index.html

A. Forms of Documents, etc. to be Filed for Initial Listing Application (Foreign Stocks)

219

A. Forms of Documents, etc. to be Filed for Initial Listing Application

(Foreign Stocks)

(1) Confirmation Report prior to Initial Listing Application (for Applicant Company)

Confirmation Report prior to Initial Listing Application

(for Applicant Company)

Submitted: MM/DD/YYYY

To

President and CEO of Tokyo Stock Exchange, Inc.

Company name

Name and title of

representative

Name of

agent

Seal

Address and

contact details of

agent

(Note 1) Applied exchange rate: JPY XXX

(The middle rate between the telegraphic transfer selling rate and the telegraphic transfer buying

rate in Tokyo foreign exchange market as of MM/DD/YYYY)

(Note 2) In the case of an initial listing application for foreign stock depositary receipts (hereafter "DRs";

the same shall apply hereafter), please include matters concerning such DRs in a manner equivalent

to that of stocks.

[Matters for Attention]

The company shall agree to the following matters and state such fact at the beginning of each report.

1. After submitting this report, in cases where there is a change or addition in facts of such statements or

where there arises a new fact, the company shall report it accordingly to Tokyo Stock Exchange

(hereafter "TSE").

2. The company shall cooperate with TSE where it confirms the contents of this report.

(Reference Transaction)


220

3. The company shall not object to the provision of this report to Japan Securities Depository Center, Inc.

(hereafter "JASDEC"), and the utilization of its contents from the perspective of facilitating smooth

handling of securities issued by the company at JASDEC.

4. The company confirms that all matters stated in this report are true. Furthermore, where it is found that

any statement in this report is false, the company shall not object to any disposition made by TSE.

In addition, this report shall be written in Japanese.

I. Summary of Applicant Company

1. Governing law for incorporation and related laws and regulations

(1) Governing laws for incorporation

(2) Describe major matters which are subject to special regulations by the abovementioned laws in

comparison with a general company in terms of major laws and regulations, administrative guidance, etc.

that regulate the operations, etc. of the applicant company

2. Details of securities issued by the company other than the initial listing application stock, etc.

Where the applicant company has issued securities whose rights differ from those of the initial listing

application stock, etc., state details of rights included in such securities.

3. Relationship with the government in the home country (*) (permission and authorization, and

contractual and transactional relationship, etc.)

Where the applicant company and its major affiliates have permission or authorization from the

government in the home country, or are under contract or have transactions with the government, state

details of such permission, authorization, contracts or transactions. State whether the applicant company has

any special contracts or transactional relationship with the government.

* In addition to the country of incorporation of the applicant company, please include countries where

major businesses operate in the home country.

4. Relationship with major shareholders (holding 10% of voting rights) (holding ratio, contractual

and transactional relationship, etc.)

Where the applicant company and its major affiliates are under contract or have transactions with a major

shareholder, state details of such contracts or transactions. State whether the applicant company is under

contract or has transactions with special conditions for each contract or transaction in comparison with those

with other third parties.

5. Relationship with officers (Shareholding ratio, contractual and transactional relationship, etc.)

Where the applicant company and its major affiliates have a contract or transactional relationship with an

officer(s) of the applicant company (including companies in which the officer(s) make equity contributions,

describe details of such contracts or transactions). If the applicant company is under contract or has

transactions with special conditions for each contract or transaction in comparison with those with other

third parties.


221

6. Financial results for the most recent five years

State the financial results in the most recent five years and the main factors behind changes

Year ended in

MMMM

Year ended in

MMMM

Year ended in

MMMM

Year ended in

MMMM

Year ended

in MMMM

Sales

Operating income

Ordinary income

Extraordinary income

Extraordinary los

Net income before tax

Net in come

Total assets

Net assets

<Factors behind changes>

(Example) If changes are due to any of the following, describe a reason(s) for such changes

・ Where there was a large change from the previous year

・ Where performance shows a declining trend

・ Where there is an abnormal value due to a change(s) in accounting processing

・ Where there is the effect of a merger, or acquisition, etc.

(Note 1) If it is difficult to state results of 5 full years, results for less than five years are also allowed

(Note 2) Where financial documents include consolidated financial statements, state such consolidated figures.

Where financial documents do not include consolidated financial statements, state figures in financial

statements or combined financial statements.

7. Corporate reorganization

Where the applicant company has implemented or plans a major merger, transfer or acquisition of

business, making a company(s) its subsidiary, or disposition of a subsidiary(s) (hereafter collectively

"corporate reorganization"), state the purpose, specific method, and effect of the corporate reorganization.

8. Defense measures against hostile takeovers

Where the applicant company has introduced a takeover defense measure, or has plans to introduce or is

considering introducing such a measure, state the following matters.

(1) Date (or schedule) of introducing such measure

(2) Introduction procedure (including decision-making body)

(3) Outline

(i) Details of scheme

(ii) Trigger conditions and decision procedures (including decision-making body)

(iii) Conditions for non-implementation and decision procedures (including decision-making body)

(iv) Conditions for abolishing such measure and decision procedures

(4) Where, in the last three years, there has been a hostile takeover entity(s) and the takeover defense

measure was triggered, not implemented, or abolished, provide outlines of such cases. (Whether there

was a fact or rumor of a hostile takeover entity(s), attach a copy(s) of news articles related to such case)

(5) Legal system, etc. on hostile takeovers in the home country


222

9. Establishment of an agent and a person for handling information, or an entity responsible for

information handling

State the applicant company's possibility of appointing "the agent prescribed in Rule 426 of the Securities

Listing Regulations" and "the entity responsible for information handling prescribed in Rule 417" of the

same regulations (excluding cases where the main market of the listed shares or listed DRs issued by the

applicant company is not the TSE market), or a person for handling information (excluding cases where the

main market of the listed shares or listed DRs issued by the applicant company is not the TSE market.) for

appropriately issuing notices to TSE and conduct disclosure in Japan with regard to material facts.

(Note 1) Even though the material facts include "issuance, etc. of shares, "merger with other company(s), and

"cessation of business activity," the applicant company will be required to notify TSE of other matters

pursuant to Rule 407, etc. of the Securities Listing Regulations.

(Note 2) The agent prescribed in Rule 426 of the Securities Listing Regulations shall be appointed from among

the following persons:

・Officers or employees of a listed company(s)

・Officers or employees of a subsidiary or affiliate company(s)

・Attorneys-at-law

(Note 3) The person for handling information shall be able to communicate with TSE in Japanese or English,

and, as a general rule, satisfy the following items.

・Person handling disclosure of corporate information in the home country.

・Person handling disclosure of corporate information to the financial instruments

exchange in the home country.

10. Management of corporate information

State internal rules and structure to prevent insider trading and whether or not there is an actual case(s) of

insider trading which violated laws and regulations in the home country, etc.

11. Development and management of accounting system

State issues that were pointed out by an auditor(s) with regard to developments and operations of the

accounting system during the one year period prior to the application date, as well as the applicant

company's response to such issues. (Such developments and operations include "development of and

compliance with the accounting regulation" and "development of and compliance with the internal control

system and internal audit system," and also include that of consolidated subsidiaries, etc.)

12. Disclosure of earnings report and quarterly earnings report (The following documents are

required to be disclosed in Japanese in Japan)

With respect to earnings reports and quarterly earnings reports, state how many days it will take to

conduct disclosure after the end of the fiscal year or quarterly period.

13. Other

State that there is no issue in terms of the public interest or social nature.

II. Other Matters to be Confirmed

1. Stock Company System

(1) Stock System

(i) Restrictions on acquisition, transfer, and assignment of stocks as well as the governing laws and regulations or provisions of the articles of incorporation, etc. pertaining to such restrictions

a. Restrictions on domestic or overseas investors, the governing laws and regulations or provisions of

the articles of incorporation pertaining to such restrictions


223

b. Restrictions on foreign nominees and the governing laws and regulations, or provisions of the articles

of incorporation, etc. pertaining to such restrictions

c. Where there is a limit on the number of shares to be held, the method of understanding, identifying,

and proving the number of shares held by residents, and non-residents, etc. (including nominees)

whose share holdings are subject to restrictions

(ii) Rights, procedures, and restrictions related to dividend

a. Dividend payment schedule

Item Actual date, etc. Announcement date

Date of resolution by the board of

directors (Date of resolution by general

shareholders meeting)

－

Record date

Dividend amount per share

Dividend payment date

Ex-dividend date at the foreign financial

instruments exchange, etc.

－

(Note) State for the most recent two years and the year of the application. Where there is no information for

such years, state the latest information in the most recent five years. In addition, where a method

other than record date (share provision date) is used to fix the shareholders who have right to

dividend, state such method, actual cases, and announcement dates.

b. Provisions of laws and regulations or the articles of incorporation, etc. for date of fixing shareholders

eligible for dividend

c. The name of the body which has the authority to determine dividend payment (for example, the board

directors in the case of interim dividends, or the general shareholders meeting in the case of year-end

dividends)

d. Venue of dividend payment, payment method (route), and payment currency

e. Restrictions related to dividend payment

f. Oversight regulations in the foreign exchange market, such as restrictions on remittance of dividends

to Japan and conversion into Japanese yen

(2) General shareholders meeting

(i) Venue for the general shareholders meeting

(ii) Date and time for exercising voting rights at the general shareholders meet ings

Item Actual date Announcement date


directors

－

Record date

Date of the general shareholders meeting

(Note) State for the most recent two years and the year of the application. Where there is no information for



dividend, state such method, actual cases, and announcement dates.

(iii) Provisions of laws and regulation or the articles of incorporation, etc. pertaining to the date of fixing shareholders who can exercise voting rights


224

(iv) Restrictions on voting rights exercise by domestic and overseas investors, and the governing laws for such restrictions

(v) Restrictions on voting right exercise by proxy

(vi) Possibility of a system of non-uniformed exercise of voting rights

(vii) Method of exercising voting rights (ballot, etc.)

(viii) Notice of general shareholders meeting (convocation notice), deadline for notifying shareholders of documents and reference materials required for voting right exercise

(ix) Possibility of creating Japanese translation of documents and reference materials required for voting right exercise in order to allow beneficial shareholders in Japan sufficient time to give proxy voting instructions

(3) Issuance of new shares

(i) With respect to new share issuance, in addition to provisions of the company law in the home country, matters uniquely stipulated in the articles of incorporation

(ii) Possibility of sales of new shares, subscription warrants, subsidiary shares, etc. at venues such as a foreign market in cases of granting or allotting such shares, etc.

(iii) Oversight regulations on the foreign exchange market, such as restrictions on remittance of proceeds from selling such shares, etc. to Japan and restrictions on conversion into Japanese yen

(iv) Stock split (including stock dividend and bonus issue): Fill out the following items as well as resources (capital surplus, retained earnings, etc.) and difference of rights between new shares and pre-split shares.

Item Actual date, etc. Announcement date



shareholders meeting

－

Record date

Split ratio (with or without change in face

value)

Date of delivery of new shares

Ex-right date at the foreign financial


－

(Note) State for the most recent two years and the year of application. Where there is no information for



dividend, state such method, actual cases, and announcement dates


225

(v) Capital increase via allotment shares to shareholders (including rights offering): Fill out the following items as well as whether or not there is a subscription rights market, trading period, and difference of rights between new shares and pre-split shares.

Item Actual date, etc. Announcement Date



shareholders meeting)

－

Record date

Allotment ratio

Payment amount per share

Application period

Deadline for payment

Date of delivery of new shares

Ex-right date at the foreign financial


－

(Note 1) State for the most recent two years and the year of application. Where there is no information for


other than record date (share provision date) is used to fix shareholders who have right to dividend,

state such method, actual cases, and announcement dates.

(Note 2) Where there is no negotiability of subscription rights, state the governing provisions.

(vi) Form of capital increase conducted in the most recent two years and the year of application, schedule of the announcement until new share delivery, and procedures for payment (including those for reinvesting dividend, granting of options for stock dividend, etc., but excluding those stated in (iii) and (iv) above). Where there was no case during such period, state the latest information in the most recent five years.

(vii) The name of the institution having authority over new share issuance and the announcement method in the home country, etc.

2. Disclosure and notification

(1) State the possibility of notifying TSE by two weeks before for the deadline (record date), etc. for fixing

entities who can exercise shareholder rights or will receive new share allotment. (If it is difficult to

notify two weeks in advance, state the possibility of notifying TSE by the deadline for notification, etc.

required in the home country.)

(2) State where the applicant company has violated disclosure rules (laws and regulations in the home

country, etc. or rules and regulations of the exchange pertaining to corporate information disclosure.

3. Other matters that specially requested by TSE for confirmation in advance

III. Attached materials (if available, attach Japanese or English translation)

1. Company overview document (Documents which can understand an overview of the company such as,

Securities Report for Initial Listing Application (Part I), etc.): 1 copy

2. Notice to shareholders or announcement documents pertaining to general shareholders meetings in the

last two years (Notice of general shareholders meeting, etc.): 1 copy


226

3. Materials sent to shareholders about capital increase via allotment of shares to shareholders (including

rights offering) in the last two years (in cases where there is no such case during such two years, the last

among cases during the most recent five years (prospectus, etc.)): 1 copy

4. Annual reports sent to shareholders and holders of DRs during the most recent five years (for Mothers,

one year): 1 copy

5. Semi-annual reports and quarterly reports sent to shareholders and holders of foreign stock depositary

receipts during the most recent five years (for Mothers, one year): 1 copy

6. Securities reports, annual reports, semi-annual reports, quarterly reports, and extraordinary reports

submitted to the Prime Minister, etc. in the recent two years (for Mothers, one year): 1 copy

7. Securities registration statements (including amendment statements) submitted to the Prime Minister, etc.

in cases of public offering or secondary distribution of securities in the most recent two years (for

Mothers, one year): 1 copy

8. Press releases and newspaper announcements regarding the following items during the most recent year:

1 copy each

・ Announcement of financial results

・ Dividends

・ Stock splits

・ Capital increase via allotment of shares to shareholders (including rights offering)

・ Other material facts

DISCLAIMER: This translation may be used for reference purposes only. This English version is not an official translation of the

original Japanese document. In cases where any differences occur between the English version and the original Japanese version, the

Japanese version shall prevail. This translation is subject to change without notice. Tokyo Stock Exchange, Inc., Japan Exchange

Group, Inc., Osaka Securities Exchange Co., Ltd., Tokyo Stock Exchange Regulation and/or their affiliates shall individually or

jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or changes with

regard to this translation.

(July 16, 2014)


227

(2) Confirmation Report prior to Initial Listing Application (for Trading Participant Handling

Matters)

Confirmation Report prior to Initial Listing Application

(for Trading Participant Handling Matters)

Submitted: MM/DD/YYYY

To

President and CEO of Tokyo Stock Exchange, Inc.

Name of trading

participant

handling matters

Seal

Name and title of

representative

Seal

(Note 1) Applied exchange rate: JPY-----

(The middle rate between the telegraphic transfer selling rate and telegraphic transfer buying rate in

the Tokyo foreign exchange market as of MM/DD/YYYY.)

(Note 2) In the case of an initial listing application for foreign stock depositary receipts (hereafter "DRs";

the same shall apply hereafter), please include matters concerning such DRs in a manner equivalent

to that of stocks.

[Matters for Attention]

The company shall agree to the following matters and state such fact at the beginning of each report.

1. After submitting this report, in cases where there is a change or addition in facts of such statements or

where there arises a new fact, the company shall report it accordingly to Tokyo Stock Exchange

(hereafter "TSE").

2. The company shall cooperate with TSE where it confirms the contents of this report.

3. The company shall not object to the provision of this report to Japan Securities Depository Center, Inc.

(hereafter "JASDEC"), and the utilization of its contents from the perspective of facilitating smooth

handling of securities issued by the applicant company at JASDEC.

In addition, this report shall be written in Japanese.

(Reference Translation)


228

(Point for Attention regarding Report)

When content of the governing law and regulations, articles of incorporation and etc., are described in

this report, please also describe the number or place of relevant provisions of governing law and regulations,

articles of incorporation and etc.

I. Matters concerning Stock Company System

1. Stock System

(1) Rights and Obligations of Shareholders

(i) Rights of Shareholders

a. Single shareholder right (right to dividend, voting right, and residual claim, etc.)

b. Minority shareholder right (book inspection right, general shareholders meeting convocation right, etc.

(ii) Obligations of shareholders

(2) Stock acquisition, transfer, and assignment (i) Procedures for stock acquisition, transfer, and assignment

(ii) Restrictions on stock acquisition, transfer, and assignment

(3) Dividend (i) Dividend notice

(ii) Method of fixing shareholders

(iii) Restrictions related to dividend

(iv) Deadline for notifying the financial instruments exchange, etc. in the home country, etc. (Not required in cases where the company will only be listed on TSE or cases where any other TSE-listed foreign company is listed on the financial instruments exchange, etc. in the same home country as the company.)

2. Company Organization

(1) General Shareholders Meeting (i) Type of general shareholders meetings (annual, extraordinary, and class shareholders

meetings)

(ii) Matters to be put forth, matters to be reported and quorum for each type of general shareholders meetings

(iii) Method of fixing shareholders

(iv) Procedure for convening general shareholders meetings (method of issuing notice to shareholders and notice deadline) and deadline for notifying the financial instruments exchange, etc. in the home country, etc.

(v) Resolution method (types of resolutions, required number of voting rights for approval, voting by proxy, and carte-blanche in proxy voting)

(2) Directors and Representative directors (i) Procedure for appointing and removing directors, their authorities, obligations, and

responsibilities

(ii) Procedure for appointing and removing representative directors, their authorities, obligations , and responsibilities

(3) Authorities, obligations, and responsibilities of the board of directors


229

(4) Auditors and Board of Auditors (i) Procedure for appointing and removing auditors, their authorities (duties), obligations, and

responsibilities

(ii) Board of auditors' authorities (duties), obligations, and responsibilities

3. Procedures for Amending Articles of Incorporation

4. Issuance of New Shares

(1) Type and procedure of new share issuance and deadline for notifying the financial instruments exchange,

etc. in the home country, etc. (i) Issuance of shares via allotment to shareholders

(ii) Issuance of shares via a stock split (Incorporation of reserves to capital, stock dividend, etc.)

(iii) Issuance of shares by public offering, private placement, and other methods

(iv) Issuance of shares other than common shares

(2) Procedures for issuing subscription warrants, as well as methods for exercising such warrants and

assigning such warrants (If not available for assignment, such provisions)

5. Capital Reduction Method and Procedures

6. Procedures for Merger

7. Bankruptcy Legal System and Procedures

II. Disclosure System

1. Indirect Disclosure

(1) Statutory disclosure (i) Governing laws and regulations

(ii) Type and content of documents, submission period (deadline), entity for submission, and public inspection method

(2) Disclosure documents required by exchange (Not required in cases where the company will only be

listed on TSE) (i) Applied rules

(ii) Type and content of documents, submission period (deadline), entity for submission, and public inspection method

2. Direct Disclosure to Shareholders

(1) Statutory disclosure (i) Governing laws and regulations

(ii) Type and content of documents, submission (public announcement) period (deadline), entity for submission, and public inspection method

(2) Disclosure documents required by the exchange (Not required in cases where the company will only be

listed on TSE) (i) Applied rules


230

(ii) Type and content of document (public announcement), submission (public announcement) period (deadline), entity for submission, and public inspection method

3. Listing Supervision (Not required in cases where the company will only be listed on TSE)

(1) Procedures for trading halts and typical duration of a trading halt

(2) Delisting criteria and procedures

4. Penalties

Responsibility of, penalties on, and disciplinary actions against the related parties (officers of the issuer

company, accountants, attorneys-at-law, financial instruments business operators) in the case of a violation

of related laws and regulations or exchange rules, or other similar acts

III. Trading Supervision Rules and Systems (Not required in cases where the company will only be listed

on TSE)

1. Laws, Regulations, and Rules of the Exchange regarding Trading Supervision, and their Content

(1) Method for trade execution

(2) Daily price limits

(3) Procedures (schedule, etc.) for ex-rights (dividend, new share issuance) and applied provisions

2. Rules on Unfair Trading and Penalties

(1) Market manipulation

(2) Market stabilization

(3) Insider trading

(4) Tender offer

(5) Others

IV. Settlement System

1. Matters listed below regarding stock custody at the central depository or banks offering custody

services in the home country of the applicant company

(1) Method of exercising voting rights concerning shares in custody

(2) Dividend distribution method concerning shares in custody

(3) Form of holding shares (registered names of shares in custody, etc.) (In the case of dematerialized shares,

overview of registration system, etc.)

(4) Existence of causes which impede share deposit or withdrawal or rights acquisition such as delay of

rights transfer procedure in transfer of shares

2. Necessity of notification to or registration with the administrative authorities or the issuer

company in the case where a foreign nominee (JASDEC) puts shares in custody, or deposits to, or

withdraws from a local custodian or a bank.


231

V. Tax Regime

1. Tax on dividend

(1) Tax regime in the home country of the applicant company (any taxes, tax classification, tax rate, etc.)

(limited to those pertaining to Japanese beneficiaries)

(2) Necessity of refund application procedure

(3) Deadline and method of refund application procedure

(4) Availability of procedure of batch refund application for beneficial shareholders by JASDEC

(5) Refund payment period

(6) Possibility of receiving dividends for which reduced tax rates are applied from the outset in accordance

with tax treaties, without refund application procedure

2. Other Taxes

(1) Where JASDEC deposits to or withdraws from the custodian of JASDEC, or transfers to a JASDEC

nominee, any taxes applicable to parties that deposit or withdraw shares.

(2) Any taxes on transactions at exchanges

(3) Existence of capital gain tax, etc. on proceeds from selling subscription warrants (limited to those

pertaining to Japanese beneficial shareholders)

VI. Other Matters Specially Requested by the Exchange for Confirmation in Advance

VII. Attached Documents

1. Act(s) under which the applicant company was established (in Japanese or English translation)

2. A set of documents required for refund application procedure (If applicable)

3. A copy of the checklist submitted to the Financial Services Agency regarding the accounting and audit

systems in the home country, etc. (If applicable)

DISCLAIMER: This translation may be used for reference purposes only. This English version is not an official translation of the

original Japanese document. In cases where any differences occur between the English version and the original Japanese version, the

Japanese version shall prevail. This translation is subject to change without notice. Tokyo Stock Exchange, Inc., Japan Exchange

Group, Inc., Osaka Securities Exchange Co., Ltd., Tokyo Stock Exchange Regulation and/or their affiliates shall individually or

jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or changes with

regard to this translation.

(July 16, 2014)

B. Tokyo Stock Exchange Listing by US Companies

232


(1) Overview of Disclosure Requirements for Primary Listing on Tokyo Stock Exchange by

US Companies

When a US company conducts a primary listing on Tokyo Stock Exchange (TSE), the domestic US

statutory disclosures are generally implemented in addition to domestic Japanese statutory

disclosures. Like domestic Japanese disclosure, the statutory disclosure requirements determined by

the US Securities and Exchange Commission (SEC) involve two types of disclosure: offering disclosure

when stocks are issued, and subsequent continuous disclosure.

a. Offering Disclosure

In a public offering in the US, the issuer must submit a registration statement to the SEC

before selling, buying or applying to do so (Section 5 of US Securities Act of 1933 (hereinafter,

“Securities Act”)). The contents of the registration statement are provided under Section 7 of

the Securities Act and schedule A. Specifically, the content of accounting information,

including financial documents, is determined by Regulation S-X, and the content of

non-accounting information, including the issuer, conditions on distribution and use of

proceeds, and the registrant’s securities information, is provided by Regulation S-K. In the

case of a primary listing, even though no issuance of securities within the US is planned, an

issuer’s registration statement is typically submitted based on the relevant US regulations on

such securities transactions prior to an IPO of foreign company stocks in Japan24.

Regarding the registration statement, the forms of the statement are decided based

on the nature of the securities issuer. In the case of a US firm undertaking a primary

listing in Japan, a registration statement using Form S-1 is normally filed. Disclosure is

implemented by submitting Form S-1 and other disclosure documents, as well as their

attachments, through the EDGAR system.

b. Continuous Disclosure

An issuer that has submitted the registration statement in accordance with the

Securities Act must also submit annual, quarterly and extraordinary reports to the SEC in

compliance with the Securities Exchange Act of 1934 (hereinafter, “the Exchange Act”).

As with the registration statement, these disclosure documents and their attachments

are submitted through the EDGAR system for disclosure.

24 The SEC stipulates a safe harbor rule under Regulation S to the effect that the filing of a registration statement to the SEC shall not be required when shares are offered or distributed outside the United States. However, while non-US companies (foreign issuers) are comparatively easily qualified for an exemption from registration (Rule 903(b)(1) of the General Rules and Regulations promulgated under the Securities Act), US companies (domestic issuers) are bound by strict qualification requirements (requirements for registration exemption application when issuing equity-related securities (Rule 903(b)(3) of the General Rules and Regulations promulgated under the Securities Act). Seemingly, the application of the safe harbor rule would be difficult due to the background above.


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(a) Annual Reports

i. Annual Reports

An issuer that has submitted a registration statement must submit an annual report

each business year using Form 10-K (Section 13 of the Exchange Act).

The annual report includes information on the issuer, financial documents for the

business year concerned and discussions and analysis by managers of the firm’s financial

state, business performance, etc. This information on the issuer consists of more or less

the same content as that included in the registration statement at the time of issuance.

Depending on the public float of the company submitting the annual report, and

whether continuous disclosure has been performed to date, submission may be

required 60, 75, or 90 days after the end of the business year. Since an annual securities

report in Japan comparable to the US annual report is required to be filed within six

months of the end of the business year (Article 24, Paragraph (1) of the Financial

Instruments and Exchange Act; and Article 3-4 of the Order for Enforcement of the

Financial Instruments and Exchange Act), preparation of the former is normally based on

the annual report submitted in the US.

ii. Internal Control Reports

An issuer that undertakes a commitment to continuous disclosure is required to

establish and maintain appropriate internal control systems relevant to financial

reporting. An internal control report must be submitted as part of the annual report25.

Based on the Sarbanes-Oxley Act (hereinafter, “SOX”), the internal control report must

state the responsibility of the management for establishing and maintaining internal

control related to financial reporting and contain an assessment of the effectiveness of

internal controls, as well as a record showing that an accounting auditor has issued

certification of this evaluation. In addition, an accounting auditor who has issued an

audit report of an issuer is required to audit whether the management assessed the

effectiveness of internal controls in an appropriate manner or not.26

25 Since an audit control report is also required to be submitted together with an annual securities report in Japan, there are cases in which an internal control report submitted within the US can be approved to be filed in Japan instead of one produced domestically (Article 24-4-4, Paragraph (1) of the Financial Instruments and Exchange Act; and Article 12 of the Cabinet Office Ordinance on Disclosure of Information, etc.). 26 It is assumed that there would be a difference in timing between the United States and Japan with regards to the time when the obligation to audit the internal control report arises. This is partly because Emerging Growth Companies (issuer with net sales of $1 billion or less in the most recent accounting period) are not subject to the audit of the internal control report for five years at the longest under the Jumpstart Our Business Startups (JOBS) Act, and partly because each issuer is required to commence the audit of the internal control report from the business year following the that of listing shares even in the cases where the relevant issuer does not fall under the category of Emerging Growth Company or is not subject to the JOBS Act. In such cases, even if the obligation to audit the internal control report does not arise in the United States, the audit is voluntarily conducted in practice in consideration of the audit obligations defined in Japan.


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(b) Quarterly Reports

An issuer that has submitted a registration statement must submit a quarterly report

every three months using Form 10-Q (Article 13 of the Exchange Act and Exchange Act

Rule 13a-13).

The quarterly report indicates the issuer’s current status. The deadline for

submission can be either 40 or 45 days after the end of the quarter depending, as with

the annual report, on the public float of the issuing company and whether it has

engaged in continuous disclosure. In Japan, companies that submit quarterly reports

must do so within 45 days of the end of the quarter (Article 24-4-7, Paragraph (1) of the

Financial Instruments and Exchange Act). In order to submit quarterly reports required

domestically in both the US and Japan, it is necessary to prepare for submission of the

domestic Japanese quarterly report in parallel with preparations for the domestic US

report. In practice, however, given the differences in content between quarterly reports

in the US and those in Japan, as well as the time required to translate financial and other

documents, a submission deadline extension request can be filed for the Japanese

quarterly report (Article 24-4-7, Paragraph (1) of the Financial Instruments and Exchange

Act; and Article 17-15-2, Paragraph (1) of the Cabinet Office Ordinance on Disclosure of

Corporate Information, etc.).

(c) Certification, etc.

Under SOX, an issuer that undertakes a commitment to continuous disclosure is

required to include written confirmation in its annual and quarterly reports on the

appropriateness of the financial reporting and other information on the issuer’s financial

status and business operations included in the documentation disclosed with the reports.

Together with the pertinent disclosed documentation, the issuer is also required to file a

written statement certified by a CEO and CFO. The CEO and CFO should certify that the

financial status and business performance are appropriately presented in the disclosed

documentation, and the CEO and CFO are responsible for the establishment and

maintenance of internal control systems.

(d) Extraordinary Reports

In the event that a matter of significant to the issuing company occurs, the issuer

who has submitted a registration statement must submit an extraordinary report on the

important matter using Form 8-K, in principle, within four days of its occurrence (Article

13 of the Exchange Act and Exchange Act Rule 13a-11). The 8-K is triggered by certain

significant events in which additional information emerges regarding changes to the

firm’s financial or operational status. Specifically, these events may include (i) entering

into or terminating a material definitive contract not made in the ordinary course of

business of the issuer, (ii) initiation of bankruptcy proceedings, (iii) completion of

acquisition or disposition of important assets, (iv) notice of delisting or failure to satisfy

listing rules or standard, (v) change of certified public accountants, (vi) change of

corporate control, and (vii) departure of directors or certain officers, etc. Some of these


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items are similar to the domestic Japanese criteria requiring extraordinary reports.

Therefore, whenever an event occurs meriting an extraordinary report in either Japan or

the US, it is regarded as appropriate to confirm whether it will be necessary to submit an

extraordinary report in the other country as well.

(e) Regulation FD

Selective disclosure, by the issuer to a limited number of persons, of important

information regarding the issuer or the issuer’s securities is categorized under insider

trading and restricted under Regulation FD. These persons include brokers, dealers,

investment advisors, institutional investment managers, investment firms, and holders

of securities who can reasonably be expected to conduct transactions based on such

information. When disclosure to such persons is intentional, the relevant information

must be publicly disclosed simultaneously, and in cases where partial disclosure is

non-intentional, public disclosure must be accomplished promptly. Persons with a

fiduciary or confidentiality obligation to the issuer, however, are not obligated to

disclose the relevant information publicly. The method of disclosure is, in principle, in

accordance with Form 8-K.

(f) Procedures for submission of Earnings Reports, Form 10-K, Form 10-Q and Form 8-K

When an issuer listed on a stock exchange has determined the content of documents

for an accounting period, whether a business year, cumulative quarterly period,

consolidated fiscal year, or cumulative quarterly consolidated period, that issuer is

obligated to immediately disclose such content in the form of the earnings reports or

quarterly earnings reports prescribed by the exchange. In practice, disclosure in Japan of

earnings reports and quarterly earnings reports is executed at virtually the same time as

disclosure in the US using Forms 10-K and 10-Q. In addition, upon the disclosure in

Japan of earnings reports and quarterly earnings reports, notice of such disclosure and

its content are immediately disclosed in the US using Form 8-K.


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(2) Securities Taxation System

a. Japanese Investors27 Investing in TSE Listed US Stocks

(a) Income Subject to Withholding Tax and Applicable Tax Rates

In general, a thirty percent (30%) withholding tax will be deducted from fixed income for a certain

period of time payable to non-resident foreigners in the US (*1), foreign partnerships and foreign

legal entities that are not related to the business in the US. However, withholding tax rates are

reduced as follows pursuant to the US-Japan Tax Treaty (Internal Revenue Code (Section 1441 and

1442 of the Internal Revenue Code); hereinafter, “IRC”).

Dividends

Holding, for not less than 12 months, not less

than half of dividends Tax-exempt

10% or more but less than 50% 5%

Other than the above 10%

Interest Interest received from financial institutions Tax-exempt

Other 10%

*1. An expatriate in the US who is not a US citizen shall be deemed a resident of the US when

his/her length of stay exceeds 31 days and if the number of days determined by the following

formula exceeds 183 days.

Length of stay for the current year + Length of stay for the previous year × 1/3 + Length of stay

for the year before last × 1/6

(b) Application and Tax Payment Procedures

In the case where an employer that is subject to withholding income tax has unpaid taxes in

amounts of $2,000 or more as of the end of each quarter of a month, the employer shall be required

to pay the unpaid taxes within three (3) business days after the end of each quarter of a month. The

payment shall be made by electronic payment methods. A quarter of a month means each period

ending on 7th, 15th, 22th and the last day of each month. In addition, When the employer has

unpaid taxes in amounts of $200 or more but less than $2,000 as of the end of each month, it shall

pay the unpaid taxes within fifteen (15) days after month-end.

27 Japanese nationals.


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b. US Investors28 Investing in TSE Listed US Stocks

In general, investment in US companies listed on TSE shall be subject to the same taxation system for

investments in US companies listed on US securities markets, such as NYSE, NASDAQ and etc.

(a) Taxation on Individuals

Item Taxation method

Dividends

Tiered tax structure (federal tax)

Three tiers: 0, 15 and 20% (*1)

+

Comprehensive taxation (State and local government tax) (*1)

[In the case of New York City]

State tax: 4.00 to 8.82%

City tax: 2.55 to 3.40% + Additional tax of 14% of the tax imposed

Capital gains from sale of

stocks or similar financial

instruments

Tiered tax structure (federal tax)

Three tiers: 0, 15 and 20% (*1)(*2)

+

Comprehensive taxation (State and local government taxes) (*1)(*2)

[In the case of New York City]

State tax: 4.00 to 8.82%

City tax: 2.55 to 3.40%+Additional tax of 14% of the tax imposed

*1. Taxable income is computed by adding the items in order of employment and similar income,

dividend income, and long-term capital gains. On that basis, the following tax rates are imposed

on dividend income and long-term capital gains: (i) 0% on the portion in the bracket up to

$36,250; (ii) 15% on the portion in the bracket above $36,250; (iii) 20% on the portion in the

bracket above $400,000 (in the case of single-person households). Note that state and local

government tax rates vary depending on the state or local government.

*2. In the case of holding for 12 months or less, the tax rate shall be 10-39.6% plus state and local

government taxes.

28 US citizens and resident aliens.


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(b) Taxation on Business Entities

Item Taxation method

Dividends

Dividends received from domestic corporations shall be included in

gross income. However, the tax deduction will be allowed up to the

following percentages, depending on the ownership: (i) 100% of the

amount of dividends received (ownership of 80% or more); 80% thereof

(ownership of 20% or more but less than 80%); and (iii) 70% thereof

(ownership of less than 20%) (Section 243 of the IRC). Similarly, the tax

credit for dividends will be allowed up to the following percentages,

depending on the ownership: (i) 70% of the taxable amount (ownership

of less than 20%); and (ii) 80% thereof (ownership of 20% or more).

Furthermore, with respect to dividends received from a foreign

corporation in which the relevant business entity holds 10% or more of

ownership, out of the amount included in dividends, the business entity

may deduct the amount of US business-related income calculated by

multiplying the applicable percentage above (Section 245 of the IRC).

Capital gains from sale of

stocks or similar financial

instruments

Capital gains shall be included in gross income and subject to taxation

(Section 61 (a) of the IRC).

This section is prepared on the basis of reliable information resources, but no guarantee is made

as to accuracy or completeness of the information.

This material is prepared based on laws and regulations that are being enforced or are to be

enforced as of the end of January 2013, and may be subject to change due to future tax reforms.

2017 New Listing Guidebook for Foreign Companies

Date of issue: August 31, 2017

Publisher: Tokyo Stock Exchange, Inc.

New Listings

IPO Center

2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo

103-8220 Japan

URL: http://www.jpx.co.jp/english/

Copyright © Tokyo Stock Exchange, Inc. All rights reserved.