2 019...Restrictions on Transfer of Shares (Rule 205, Item 10 of the Regulations)..... 70 11....

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Tokyo Stock Exchange

Table of Contents

-1-

Table of Contents

Introduction ..............................................................................................1

Legend: ...................................................................................................2

I About Listing ...........................................................................................3

1. Benefits of Listing ..................................................................................................... 3

(1) Smooth and Diversified Fundraising ······················································· 3

(2) Enhance Corporate Value ···································································· 3

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

Motivation ······················································································· 3

2. Mechanism for Initial Listing...................................................................................... 4

(1) Mechanism for Initial Listing ································································· 4

(2) Composition of Market ········································································ 5

3. Parties Involved in Listing and Their Roles................................................................ 7

(1) Securities Companies········································································· 7

(2) Certified Public Accountants (Auditing Firms) (CPAs) ··································· 7

(3) Shareholder Services Agent ································································· 8

4. Steps to be Taken Before Listing............................................................................... 9

(1) Before the Listing Application······························································ 11

(2) Preliminary Review ·········································································· 13

(3) Listing Application ··········································································· 16

(4) Listing Examination·········································································· 18

(5) After TSE’s Listing Approval ······························································· 20

(6) Follow-ups after Listing ····································································· 21

II Formal Requirements (relating to Rule 205 of the Regulations) .................. 27

1. Number of Shareholders (Rule 205, Item 1 of the Regulations)............................... 32

2. Tradable Shares (Rule 205, Item 2 of the Regulations) ........................................... 37

a. Number of Tradable Shares ······························································· 37

b. Market Capitalization of Tradable Shares ··············································· 42

c. The Number of Tradable Shares as a Percentage of Total Shares of Listed

Stock ··························································································· 43

3. Market Capitalization (Rule 205, Item 3 of the Regulations) .................................... 48

4. Number of Consecutive Years of Conducting Business ........................................... 49

5. Amount of Net Assets (Rule 205, Item 5 of the Regulations) ................................... 50

6. Amount of Profits and Market Capitalization (Rule 205, Item 6 of the Regulations) . 52

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7. False Statement or Adverse Opinion and Audit by a Listed Company Audit Firm (Rule

205, Item 7 and Item 7-2 of the Regulations) .......................................................... 59

(1) False Statement and Adverse Opinion, etc. ············································· 59

(2) Audit by a Listed Company Audit Firm ··················································· 64

8. Establishment of Shareholder Services Agent (Rule 205, Item 8 of the Regulations). 66

9. Share Unit and Classes of Stock (Rule 205, item 9 and Item 9-2 of the Regulations) 67

(1) Share Unit····················································································· 67

(2) Classes of Stock ············································································· 69

10. Restrictions on Transfer of Shares (Rule 205, Item 10 of the Regulations) .............. 70

11. Handling at Designated Book-Entry Transfer Institution (Rule 205, Item 11 of the

Regulations) ........................................................................................................... 71

12. Expected Implementation of Merger, etc. (Rule 205, item 12 of the Regulations) .... 72

13. Assignment of the Stock to the First Section at Initial Listing (Rule 210, Paragraph 1 of

the Regulations) ..................................................................................................... 75

14. List of Share Prices Used for Initial Listing and Assignment to the First Section ...... 76

III Listing Examination (Relating to Rule 207 of the Regulations) ................... 79

1. Corporate Continuity and Profitability (Rule 207, Paragraph 1, Item 1 of the

Regulations) ........................................................................................................... 83

2. Soundness of Corporate Management (Rule 207, Paragraph 1, Item 2 of the

Regulations) ........................................................................................................... 91

3. Effectiveness of Corporate Governance and Internal Management System of an

Enterprise (Rule 207, Paragraph 1, Item 3 of the Regulations) ............................. 105

4. Fairness of Disclosures of Corporate Information, etc. (Rule 207, Paragraph 1, Item 4

of the Regulations) ............................................................................................... 119

5. Other Matters Deemed Necessary by the Exchange from the Viewpoint of the Public

Interest or the Protection of Investors (Rule 207, Paragraph 1, Item 5 of the Securities

Listing Regulation) ................................................................................................ 128

IV Listing Examination Q&A .................................................................... 167

1. Corporate Continuity and Profitability ...................................................................... 167

2. Soundness of Corporate Management.................................................................... 172

3. Effectiveness of Corporate Governance and Internal Management System of an

Enterprise ............................................................................................................. 181

4. Appropriateness of Disclosure of Corporate Profile, Risk Information, etc. .............. 189

5. Other Matters Deemed Necessary by the Exchange from the Viewpoint of the Public

Interest or the Protection of Investors ................................................................... 192

V Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. of Offered

Stocks Through Third Party Allotment................................................. 194

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1. Receipt or Transfer of Shares, etc. before Listing.................................................. 196

(1) Descriptions Concerning the Status of Changes in Shares before Listing ········196

(2) Retention, etc. of the Record of Changes in Ownership of Stocks, etc. Before

Listing ·························································································197

2. Allotment of Offered Stocks by Third Party Allotment, etc. Before Listing .............. 198

(1) Regulations on Allotment of Offered Stocks by Third-Party Allotment, etc. ······198

(2) Regulations on Allotment and Holding of Offered Subscription Warrants by

Third Party Allotment, etc.·································································208

(3) Regulations on Allotment and Holding of Subscription Warrants as Stock

Option·························································································211

(4) Descriptions of the Status of Offered Allotment of Shares, etc. by Third Party

Allotment ·····················································································217

VI Public Offering or Secondary Offering before Listing .............................. 219

Public Offering or Secondary Offering before Listing ................................................... 219

(1) Submission of Scheduled Plan for Public Offering or Secondary Offering········219

(2) Procedures for Public Offering, etc. Before Listing ···································219

(3) Determination of Offering Price ··························································220

(4) Allocation Pertaining to Public Offering, etc. Before Listing ·························222

(5) Submission of Notice of Execution of Public Offering or Secondary Offering,

etc. ····························································································223

(6) Other ··························································································224

VII Handling of Corporate Reorganization Event ....................................... 226

1. Merger .................................................................................................................. 227

2. Becoming a Holding Company.............................................................................. 229

3. Stock Swap........................................................................................................... 231

4. Company Split-up, Receipt of Business ................................................................ 233

VIII Assignment to the First Section ......................................................... 236

1. Steps to be Taken Before Assignment to the First Section....................................... 236

(1) Assignment to the 1st Section ····························································236

(2) Timing of Assignment to the 1st Section and the schedule thereof ················237

2. Criteria for Assignment to the 1st Section................................................................ 243

e. Number of Shareholders ··································································245

f. Number of Tradable Shares ······························································246

g. Trading Volume ·············································································248

h. Market Capitalization·······································································250

i. Amount of Net Assets ······································································251

j. Amount of Profit or Market Capitalization···············································253

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k. False Statement or Adverse Opinion, etc. ··············································257

l. Share Unit····················································································259

3. Details of Examination for Assignment to the 1st Section ........................................ 260

IX Alteration of Markets .......................................................................... 261

1. Steps to be Taken Before Alteration of Markets ..................................................... 261

(1) Alteration of Markets ·······································································261

(2) Timing of Alteration and Procedures ····················································262

2. Criteria for Alteration of Markets............................................................................ 268

(1) Number of Shareholders ··································································275

(2) Tradable Shares ············································································276

(3) Trading Volume ·············································································279

(4) Market Capitalization·······································································281

(5) Number of Consecutive Years of Conducting a Business ···························282

(6) Amount of Net Assets ······································································283

(7) Amount of Profit or Market Capitalization···············································285

(8) False Statement or Adverse opinion, etc.···············································289

(9) Establishment of a Shareholder Services Agent ······································289

(10) Shares Unit ··················································································289

(11) Restriction on Transfer of Shares ························································289

(12) Handling by the Designated Book-Entry Transfer Institution ························290

(13) Expected Implementation of Merger, etc.···············································290

3. Nature of Examination for Alteration of Markets .................................................... 291

X Listing Fees ....................................................................................... 292

1. Listing Examination Fees ........................................................................................ 292

2. Initial Listing Fees ................................................................................................... 293

3. Fees to be Paid by Listed Companies ..................................................................... 295

(1) Annual Fees for Maintaining Listing ·····················································295

(2) Fees for Issuance of New Shares, etc. after Listing ··································298

(3) Fees for Listing of Shares of New Stock ················································300

(4) Fees for Merger, etc. ·······································································301

4. Fees for Assignment to the 1st Section and Alteration of Markets ........................... 300

(1) Assignment to the 1st section ····························································300

(2) Alteration to the 2nd or 1st section from Mothers ·····································301

(3) Alteration to the 2nd or 1st section from JASDAQ ····································302

XI IPO Center (Support Given to Prospective Issuers) ............................... 303

1. Assistance Activities through Visits to Individual Companies and Consultation ...... 303

2. Seminars for Prospective Issuers ......................................................................... 303

Table of Contents

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3. Mail Magazine ...................................................................................................... 303

A Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks)

..................................................................................................... 307

List of Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks) ..... 307

(1) Documents, etc. to be Filed for Initial Listing Application (Japanese Stocks) ····307

(2) Securities Report for Initial Listing ·······················································334

Guide to Completing the Securities Report for Initial Listing Application (Part II) ......... 337

B Documents, etc. to be Filed for Assignment to the First Section Market

Application ...................................................................................... 404

List of Documents, etc. to be Filed for Assignment to the First Section Market Application

(Japanese Stocks) ................................................................................................ 403

C Documents, etc. to be Filed for Alteration of Markets Application .............. 416

List of Documents, etc. to be Filed for Alteration of Markets Application (Japanese

Stocks) ................................................................................................................. 416

Introduction

-1-

Introduction

A company can benefit from listing of its stock on a stock market by gaining access to smooth and

diversified fundraising, enhanced credit quality and profile of companies, etc. On the other hand, the

listing of shares means that the company will be a choice of investments by a large number of

investors, including individual investors.

Thus Tokyo Stock Exchange, Inc. requires a company which applies for listing to meet certain

eligibility for listing of its stock (listing eligibility) from the perspective of investor protection, and will

implement the examination of listing application in accordance with the standards for listing

examination.

Any company considering listing its stock is required to fully understand the standards for listing

examination and to prepare itself for meeting criteria for listing by improving internal management

and control system before filing the listing application.

This booklet is issued in order to help any company considering the listing of its shares on the

market and other parties involved in the listing to fully understand the standards for listing

examination as it illustrates key points of standards for listing examination and procedures related to

the listing examination in a way that is very understandable. We strongly hope that this booklet will

be useful when you consider listing your shares on the market. If any regulations and rules are

revised after this booklet is issued, we will update the “New Listing Guidebook” with a comparison

table between the previous and revised regulations on our website

(http://www.jpx.co.jp/equities/listing-on-tse/new/guide/index.html).

October 2019

Tokyo Stock Exchange, Inc.

Legend:

-2-

Legend:

TSE: Tokyo Stock Exchange

JPXR: Japan Exchange Regulation

Regulations: Securities Listing Regulations

Rules: Enforcement Rules for Securities Listing Regulations

Guidelines: Guidelines for Listing Examination, etc.

Copyright 2019, Tokyo Stock Exchange, Inc. (TSE). All rights reserved. The contents of this booklet

are protected under the Copyright Act. No reproduction, copy, transmission, modification or sales of

all or a part of the contents shall be permitted without prior written permission. Doing so is regarded

as the breach of the copyright retained by TSE. In addition, the contents may be modified or

abolished without any prior notice.

I About Listing

-3-

I About Listing

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.

I About Listing

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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 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.

I About Listing

-5-

(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 collective ly

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.

* Please refer to the “New Listing Guidebook Mothers” for listing on Mothers and the

“New Listing Guidebook JASDAQ” for listing on JASDAQ.

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.

I About Listing

-6-

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.

I About Listing

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3. Parties Involved in Listing and Their Roles

(1) Securities Companies

There are a number of tasks that need to be completed by a securities company before

listing. At the stage of preparation for listing, the securities company will provide advice to

the applicant on capital policy and internal systems and also carry out the examination of the

corporate profile of the applicant to determine whether the securities company can perform

the required listing procedures for listing and underwrite the public offering and secondary

offering (underwriting examination). When the securities company decides to underwrite the

public offering and secondary offering, it has to implement a series of tasks according to the

listing schedule. Even after the applicant successfully lists their shares on the market, it will

assist the applicant in various aspects, including raising secondary funds and investor

relation or IR activities.

The securities companies that assist the applicant in carrying out various tasks for listing

procedures are called an “underwriter” (If the securities company is a TSE’s member, it is

also called a “trading participant”). The main underwriter among them is called the “lead

underwriter (lead trading participant)”. A securities company which enters into a prime

contract for underwriting for public offering, etc. with the applicant is called the “prime

underwriter (prime trading participant).”

(2) Certified Public Accountants (Auditing Firms) (CPAs)

Certified public accountants (auditing firms) express their audit opinion on the appl icant’s

financial statements to be submitted to TSE, in compliance with the Securities Listing

Regulations. They will also advise the applicant on its accounting practices and internal

management.

For the purpose of Securities Listing Regulations, the applicant is required to submit an

audit report on financial statements attached to “Securities Report for Initial Listing

Application (Part 1) “hereinafter referred to as “Part 1” documents) as prescribed in the

Financial Instruments and Exchange Act.

I About Listing

-8-

(3) Shareholder Services Agent

A shareholder services agent is an entity which is required to be appointed in order to

implement smooth services related to shareholders. Their services include preparation of a

shareholders registry, and handling various rights granted to shareholders including voting

rights and dividend payments to shareholders. The applicant is required to outsource

services related to shareholders to a shareholder service agent or to receive preliminary

consent to the acceptance of services provided to shareholders from a shareholder service

agent by the date when the listing application is filed (please refer to section 8

“Establishment of Shareholder Services Agent” at II Formal Requirements.

I About Listing

-9-

4. Steps to be Taken Before Listing

In general, the following steps will be taken before the successful listing of stock.

Note: Actual examination will be effected by Tokyo Stock Exchange Self -Regulatory

Corporation to which the role of examination is delegated by TSE (hereinafter referred

to as “JPXR”).

Model schedule from listing application entry to listing approval

<First part>

1 Wed 1 Sat

2 Thu 2 Sun

3 Fri 3 Mon

4 Sat 4 Tue

5 Sun 5 Wed

6 Mon 6 Thu

7 Tue 7 Fri

8 Wed 8 Sat

9 Thu 9 Sun

10 Fri 10 Mon

11 Sat 11 Tue

12 Sun 12 Wed

13 Mon 13 Thu

14 Tue 14 Fri

15 Wed 15 Sat

16 Thu 16 Sun

17 Fri 17 Mon

18 Sat 18 Tue

19 Sun 19 Wed

20 Mon 20 Thu

21 Tue 21 Fri

22 Wed 22 Sat

23 Thu 23 Sun

24 Fri 24 Mon

25 Sat 25 Tue

26 Sun 26 Wed

27 Mon 27 Thu

28 Tue 28 Fri

29 Wed 29 Sat

30 Thu 30 Sun

31 Fri

First interview

Second presentation of questions

Receipt of answers to the first questions

First presentation of questions

Month X One month after month X

Listing application entry

Schedule coordination

Listing application, Receipt of “Part I” documents

and “Part II” Documents

Interview, Schedule coordination

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I About Listing

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<Second part>

1 Mon 1 Mon

2 Tue 2 Tue

3 Wed 3 Wed

4 Thu 4 Thu

5 Fri 5 Fri

6 Sat 6 Sat

7 Sun 7 Sun

8 Mon 8 Mon

9 Tue 9 Tue

10 Wed 10 Wed

11 Thu 11 Thu

12 Fri 12 Fri

13 Sat 13 Sat

14 Sun 14 Sun

15 Mon 15 Mon

16 Tue 16 Tue

17 Wed 17 Wed

18 Thu 18 Thu

19 Fri 19 Fri

20 Sat 20 Sat

21 Sun 21 Sun

22 Mon 22 Mon

23 Tue 23 Tue

24 Wed 24 Wed

25 Thu 25 Thu

26 Fri 26 Fri

27 Sat 27 Sat

28 Sun 28 Sun

29 Mon 29 Mon

30 Tue 30 Tue

31 Wed

Two month after month X Three month after month X

Third interview

Physical inspection

Receipt of answers to the second questions

various interview

Second interview

Third presentation of questions

Presentation by president

Listing approval

Receipt of answers to the third questions

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Note 1: For finance schedule after the approval of listing, please refer to “Model

schedule from the listing approval to listing” at the end of this chapter.

Note 2: The Sponsor’s Letter of Recommendation (prepared by lead underwriter) shall

be submitted at least three business days prior to the listing approval.

I About Listing

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(1) Before the Listing Application

Having its stock listed on a stock market means that a company will be a choice of

investment by a large number of investors.

It is therefore important for an applicant to prepare itself for the prospective IPO by

strengthening its revenue base, and improving management system, etc. The applicant is

primarily responsible for this preparation process and implements the process with

necessary assistance and advice offered by the applicant’s lead underwriter and audit firms.

Meanwhile, the standards for the listing examination will be applied to the profit level for the

period for two years preceding application year (Note 1). Thus an audit made by certified

public accountants (auditing firms) will be required in accordance with the Financial

Instruments and Exchange Act. In case of a non-listed company, the period to which the

standards apply represents the period during which some restrictions are imposed on

offered shares, etc. allotted to third parties including the requirements for continuous holding,

effective from the end of the previous year (Note 2).

Should you have any questions regarding examination standards, eligibility, etc., please

contact New Listings of TSE or the Listing Examination Division of JPXR either directly or

via your lead underwriter before the listing application (Note 3).

When all the required preparation work is complete, the lead underwriter makes an entry for

the listing application at least two weeks prior to the listing application (for the purpose of the

entry, the lead underwriter sends e-mail to TSE with the “Listing Application Entry Sheet”

attached including the descriptions of the trade name of the applicant; contact of the lead

underwriter; expected listing schedule (listing application date, listing approval date, listing

date) and other necessary matters (Note 4).

Note 1: Rule 205, Item 6 of the Regulations (see “6 Amount of profit or market capitalization”

in “II Formal Requirements”)

Note 2: When the end of the previous year is March 31, 2019, the date will be April 1, 2018.

Note 3: TSE will express its view on your questions in consideration of facts and

circumstances disclosed to TSE at the time of consultation. Therefore, if any fact not

disclosed at the time of consultation emerges or changes in conditions of the

I About Listing

-12-

applicant or environment surrounding the applicant, including any revision to the

criteria for listing, takes place subsequent to the consultation, some views derived

from the listing examination would likely be different from the views expressed by

TSE at the time of consultation.

Note 4: If TSE (i.e., New Listings of TSE or the Listing Examination Division of JPXR) is

concerned that some significant issues may take place in terms of substantive listing

examination criteria before the listing application, TSE believes that the applicant

must stand ready to clearly address these issues before the listing application.

I About Listing

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(2) Preliminary Review

When JPXR is satisfied with the explanations of the lead underwriter of matters related to (1)

appropriate instructions and advice on going public (2) no ties or relationship with any

anti-social or criminal organization, and (3) listing schedule, JPXR will accept the listing

application. The preliminary review takes place between the person in charge of the listing

application at the lead underwriter and the officials in charge of the examination at JPXR at

least one week prior to the acceptance of listing application.

1) Report on the Contents of Instructions on Going Public and Underwriting

Examination

Preliminary review focuses on the matters which the lead underwriter has specifically

considered during the process of instructions and advice on going public or underwriting

examination and matters it has confirmed in depth (including matters corrected or improved

during the preparation for going public). JPXR assesses these matters by the time of

listing application on the basis of the descriptions (draft permitted) included in the “Report

Related to the Contents of Instructions on Going Public and Underwriting Examination."

Practically the lead underwriter is requested at the preliminary review to discuss the matters

of special consideration in light of factors specific to the applicant such as lines and category

of business and the growth stage of the company and any other matters on which the lead

underwriter focused its considerations (e.g., design and implementation of significant

internal management system, adoption of special accounting treatments, existence of

material breach of laws and regulations, and characteristic risks associated with risks) on

the basis of the descriptions included in this report.

JPXR may request the lead underwriter to explain the reasons why it commenced its

instructions on going public and the timing thereof (the background why the lead underwriter

began contacting the applicant and its timing).

2) Ties with Anti-Social Forces

In evaluating any ties with any anti-social or criminal organizations, JPXR will review the

following points on the basis of “Draft of Sponsor’s Letter of Confirmation,” prepared by the

lead underwriter, and the “Draft of Declaration of No Association with Criminal

Organizations” prepared by the applicant to the effect that the applicant has no ties with any

I About Listing

-14-

criminal organizations (attached separately).

a. Scope of related persons for whom the lead underwriter checked their personal

records and backgrounds and attributes (board members, executive officers,

corporate auditors, shareholders and trading partners); the contents if the lead

underwriter considered the background for founding the initial listing applicant and

its customers, suppliers and other trading partners, and industry and trading

conventions specific to the applicant; and

b. Contents and nature of investigations to ensure that the applicant has no ties with

any anti-social forces (including the contents of investigations of assessments of

any customers, suppliers and other trading partners with initial listing applicant, if

any)

3) Review of Listing Schedule

While the lead underwriter presents the listing and finance schedule of the applicant, JPXR

will propose the examination schedule with a period of three months from the listing

application to listing approval based on the proposed schedule.

By the time of listing application, JPXR will coordinate the examination schedule as

appropriate such that the schedule will not be irrational in consideration of the routine and

ordinary business of the applicant.

Note 1: The three month period is usually identified as the standardized period subject to the

examination. However, in consideration of size of the applicant group, seasonality of

its business or routine businesses, a response period which is different from the

standardized period may be determined or the number of interviews might be

adjusted. As a result of adjustment, the overall period for the examination may

change.

The examination period will be determined assuming that no issues to be

specifically addressed would arise during the examination. Thus, it might be

extended if any unexpected issue is found during the examination or new facts

concerning the applicant are discovered including news of other media such as

press or provision of information from external parties.

Note 2: For any applicants expected to significantly influence the market or investors, the

Listing Examination Division of JPXR will reach a conclusion on the listing after

making several rounds of discussions at the Board of Directors. For example, such

I About Listing

-15-

applicants include:

- Privatized enterprise applicants;

- Applicants adopting any scheme requiring considerations in terms of corporate

governance such as the use of class stocks with voting rights;

- Re-listing applicant;

- Applicants concerned with compliance as a company of the applicant group or

those for which the management of the applicant committed a serious incident

or breached laws and regulations in the past;

- Other applicants requiring considerations for other issues; or

- Applicants with an expected market capitalization of 100 billion yen or more at

the time of listing.

For such applicants, a large number of issues must be discussed and assessed

during listing examination. Therefore TSE would request the applicants to allow for

one month or more in addition to the standard listing examination period.

Note 3: If the applicant has any matters to be coordinated with respect to the schedule

including the matters in Note 1 and Note 2 above, please consult JPXR beforehand

through the lead underwriter after consulting it.

Meanwhile, in case of preliminary review, the applicant is requested to submit the draft of

any pages in “Part II” documents responding to the questions made at the time of

acceptance of application before interviews at the time of listing application through the lead

underwriter will submit such draft.

I About Listing

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(3) Listing Application

Listing application can be classified into two categories: ordinary application and preliminary

application. The nature of examination is similar, but various procedures will differ between

ordinary application and preliminary application. The differences are as follows:

a. Ordinary Application

An ordinary application will be made after the completion of the general shareholders’

meeting for the previous year. Officers in charge of listing application and persons in charge

of contact of the applicant as well as officers of the lead underwriter in charge of listing

application will attend the meeting for the acceptance of listing application. At the time of

acceptance, JPXR will accept documents to be filed for the purpose of listing application and

examination officers will brief the applicant on the prospective listing examination and

overview of listing examination as well as practical procedures for examination (written

schedule and examination items will also be provided).

Then the applicant is requested to explain the reasons for listing applica tion, lines of

businesses, business environment, and status of officers, directors and shareholders. Then

the examination officers will make additional questions with reference to the explanation.

Expected questions are as follows:

[Questions at the time of acceptance of application]

1) Reasons for listing application

► You are requested to explain the reasons for applying for listing in a precise manner

(including purposes and expected effect).

2) History and lines of business

► You are requested to explain the lines of business and business model in a precise

manner. In making explanation, you are encouraged to use presentation materials, IR

materials, catalogs and brochures to be used for presenting your products as

appropriate.

► You are requested to explain the reasons for establishment of current businesses, the

purposes of the businesses and an up to date history (how the business model has

been developed). In making explanation, you are encouraged to use IR materials, “Part

I” documents and “Part II” documents as appropriate.

I About Listing

-17-

► With respect to major changes in business since establishment, you are encouraged to

use “Part II” documents to discuss events which have had a significant impact on the

business of your group in a precise manner.

3) Business environment

► You are encouraged to discuss the market size (if possible), recent developments in the

market (including market prices) and future prospectus.

► You are encouraged to discuss the characteristics of your company compared to peer

companies (if any).

4) Status of officers, directors and shareholders

► You are encouraged to use “Part II” documents to explain the status of incumbent

officers and directors with the outline of their careers and the reasons for their election.

► You are encouraged to use “Part I” and “Part II” documents to explain the background

and reasons for investments by large shareholders.

Expected date of listing application will be determined by consulting the lead underwriter in

advance.

b. Preliminary Application

Preliminary application practices represent an approach designed to mitigate adverse

aspects of listing application arising from the concentration of listing of stock. A preliminary

application can be filed during the three months preceding the end of application year. The

examination will be proceeded with on the basis of materials and documents required for the

preliminary examination (preliminary application form for listing of securities and drafts of

documents required for ordinary listing application). Then listing application will be newly

filed when the accounts are finalized for the previous year after the completion of the regular

general shareholders’ meeting (in case of any company listed or continuously traded on

another stock exchange, after the filing of the securities repor t).

I About Listing

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(4) Listing Examination

Actual listing examination will be implemented as follows:

a. Interviews

The examiners will gain deeper understanding of the corporate profile of the applicant and

assess whether the applicant meets the Listing Criteria on the basis of documents filed at

the time of listing application. At that time, if there are any issues which the examiners

cannot understand clearly or any matters about which the examiners wish to know more,

they will present questions and ask the applicant to prepare responses to them. Then they

will hold interviews with the applicant on the basis of such responses. Three rounds of

interviews will usually be made not including the one at the time of listing application. When

the third round of interviews completes, if there remain issues to be clarified, additional

interviews may be requested.

b. Field Inspection

In general the examiners visit the head office, plants and business offices to more

thoroughly understand the substance of the applicant and confirm the appropriateness of

accounting by checking accounting vouchers and books.

c. Attending e-learning courses

Directors and officers of a listed company are required to have insights on a wide variety of

matters on company management. Especially, they are requested to attend e-learning

courses to help them deepen their understanding of the issues to which they have to pay

close attention during the examination period for a listing application. They include the

duties and attitudes of mind entailed in listing, the need to develop and appropriately

operate a management system meeting all the requirements of a listed company, suitable

attitude towards corporate governance as a listed company, and preventive measures

against insider trading, communication of information and issuance of trading

recommendations.

d. Interviews with Certified Public Accountants (CPAs)

The examiners hold interviews with certified public accountants that carry out the audit of the

applicant with a primary focus on the background for entering into an engagement letter,

communications with management, corporate auditors and others, status of design and

implementation of internal management system, accounting and disclosure system, etc. The

interviews will be conducted only with the Certified Public Accountants. Timing of execution

I About Listing

-19-

of the interviews will not be notified to an applicant and a lead underwriter.

e. Meeting with the President (CEO), the Company Auditors and the independent

director/auditor

For the purpose of meetings with the president (CEO), the examiners will visit the applicant

and meet the president (representative director, chief executives). During the interviews the

examiners will ask the following issues:

- The overview of the company and industry;

- What vision does the president as the management have on the operation and

management of the company;

- Measures to address investors (shareholders) when it becomes a listed company

(including IR activities);

- A policy, a current organizational framework and a management status regarding

corporate governance and compliance of an applicant; and

- Systems to disclose operating results and ensure control of internal information

During the interviews with company auditors, the examiners will, in principle, ask full time

company auditors of the status of audits they perform and any challenges faced by the

applicant.

In addition, during the interviews with independent director/auditor, the examiners will, in

principle, ask them of the following:

- Policies, present status and implementation conditions for the corporate governance

practices of the applicant;

- Management’s awareness of compliance issues;

- Status of development and improvement of environments for independent

director/auditor to execute their duties (provision of information, sufficient time to review,

etc.);

- How they assess the existence of transactions involving the management and check

and balance system over the transactions; and

- How they recognize the roles and functions, etc. expected of them after the listing.

In addition when the examiners find it necessary to have interviews with other officers on

any specific matter, they may have interviews with such other officers. If the applicant

appoints accounting advisors, the examiners may ask them of design and implementation of

accounting organization and their roles.

A six business day interval will be provided between the interview (final round) and the

I About Listing

-20-

meetings with the president and company auditors.

f. Presentation by the President

JPXR will ask the president (representative directors, chief executives) to visit JPXR and

make a presentation of the company in terms of the characteristics, management policies

and business plans, etc. of the company. Then JPXR will decide to proceed with the final

determination of the listing based on the result of questions and answers session regarding

them. In addition, the executive officers of JPXR will ask some questions concerning the

presentation and explain the issues the applicant should consider and the requests to be

satisfied when it becomes a listed company. Since such considerations and requests also

relate to the matters concerning disclosure systems required of a listed company, any

“officer in charge of information management” (Note) is requested to be present together

with the president.

Note: A listed company is required to appoint an “officer in charge of information

management” of the applicant form directors, executives or persons who are deemed

equivalent thereto and register the officer with JPXR. The officer is required to respond

to inquiries made by JPXR and make necessary communications concerning the

matters related to disclosure of corporate information. In practice the officer will be

the JPXR contact for the communication with JPXR and will be responsible for the

internal management and discloser of corporate information.

f. Internal Discussions in JPXR

Following the completion of the presentation by the president, JPXR will make the final

decision on the listing and the listing examination process will substantially complete. After

JPXR completes its internal procedures for the approval of listing, JPXR will inform the

applicant of TSE’s approval and explain the subsequent procedures to be followed.

(5) After TSE’s Listing Approval

a. Announcements of the Approval of Listing

TSE will announce the approval of listing of the applicant via its homepage. If any public

offering or secondary offering is effected, listing will be realized approximately four weeks

thereafter. If no public offering or secondary offering is effected as it has already listed its

stock on another stock exchange, listing will be realized one week after announcement of

the listing.

In the meantime, listing approval may be cancelled if any requirement of standards for the

I About Listing

-21-

listing examination is not satisfied as public offering or secondary offering is discontinued.

b. Meetings with TSE’s Listing Department and Market Surveillance and Compliance

Department of JPXR

Between the approval and the actual listing, the TSE Listing Department will meet the

company in order to introduce the TSE contact in charge of information management as well

as filing of disclosure package with TSE after listing, together with various procedures in

terms of timely disclosures and earnings announcement.

In order to prevent any insider trading, Market Surveillance and Compliance Department of

JPXR will explain the regulations on prevention of insider trading.

c. Public Offering and Secondary Offering

JPXR will assess whether the company meets criteria for liquidity (the number of

shareholders, criteria for shares traded on the secondary market, the number of shares

publicly offered and market capitalization) through the public offering and secondary offering.

In addition, JPXR ensures that for a company before listing, public offering, or public offering

and secondary offering have been carried out according to various rules set forth for public

offering and secondary offering, etc.

d. Listing

The Listing Contract entered into by and between the company and TSE requires the

company to comply with various rules set forth for timely disclosure, etc. effective from the

listing date. On the listing date, the recent financial information, etc. will be disclosed

through the TDnet as the “Earnings Release” (including the contents of future forecast

information (information related to the forecast for company’s future performance results

and financial position; the same shall apply hereinafter) if it is disclosed). A listing ceremony

will be held where TSE will present the company a memorial token of listing.

(6) Follow-ups after Listing

Given that a newly listed company is required to continuously carry out appropriate business

activities after listing, TSE will continue to follow up the business activities of the listed

company for approximately one year after listing. Such follow-ups will mainly focus on the

matters identified by TSE during the process of listing examination.

In practice TSE will continuously follow up material business activities after listing and the

status of matters requested by JPXR to be addressed during the process of listing

I About Listing

-22-

examination on the basis of timely disclosures. If necessary and appropriate, TSE will make

inquiries and interviews with the listed company and the lead underwriter.

As a result of the follow-ups, if TSE detects any inappropriate business activities after listing

or the some issues identified to be corrected in the listing examination remain uncorrected,

TSE will require improvements and corrections of such matters. In response to such

requirements, the listed company should provide a written response outlining the

prospective corrective measures.

Items to be monitored after listing may include:

[Material business activities after listing (examples)]

- Resignation of chief executive officer (such as president)

- Corporate reorganization through mergers and other transactions (stock swap, share

transfer, merger and split-up)

- Material business partnership or its termination

- Changes in the parent company, changes in controlling shareholders (excluding the

parent company) or changes in other related companies

[Issues detected during the examination process, to be addressed by the listed company

(examples)]

- Appropriate operation of internal management system improved during the period

subject to the examination

- Gradual decrease and elimination of transactions with related parties, which should

eventually be eliminated

[Timely disclosures after listing (examples)]

- Revision of future prospective information including earnings forecast

- Modifications and/or reviews of business plan and mid-term management plan

presented at the listing examination

Listed companies are encouraged to review and update the contents of the securities report,

as appropriate, after listing in consideration of external and internal environments

surrounding them.

As a part of TSE’s follow-ups after listing, it will ensure that listed companies have

appropriately reviewed and updated the securities reports filed after listing, especially the

I About Listing

-23-

section “Risks, etc. associated with business” in consideration of their specific conditions

and environments.

I About Listing

-24-

[Model Schedule form the Listing Approval to the Listing]

Note: The below is given only for reference. Actual financing schedule (pre-marketing period

or book building period, timing of the board meeting on the terms and conditions or the

filing of Securities Registration Report) may differ from one applicant to another.

(1) New Listing with Public Offering and Secondary Offering (Non-Listed Companies)

1 Sun 1 Wed

2 Mon 2 Thu

3 Tue 3 Fri

4 Wed 4 Sat

5 Thu 5 Sun

6 Fri 6 Mon

7 Sat 7 Tue

8 Sun 8 Wed

9 Mon 9 Thu

10 Tue 10 Fri

11 Wed 11 Sat

12 Thu 12 Sun

13 Fri 13 Mon

14 Sat 14 Tue

15 Sun 15 Wed

16 Mon 16 Thu

17 Tue 17 Fri

18 Wed 18 Sat

19 Thu 19 Sun

20 Fri 20 Mon

21 Sat 21 Tue

22 Sun 22 Wed

23 Mon 23 Thu

24 Tue 24 Fri

25 Wed 25 Sat

26 Thu 26 Sun

27 Fri 27 Mon

28 Sat 28 Tue

29 Sun 29 Wed

30 Mon 30 Thu

31 Tue 31 Fri

Month Y One month after month Y

Listing approval, resolution at the Board of

Directors to issue new shares, filing of

Securities Registration Statement (filing with

the Financial Services Agency by the

applicant)

Payment date and date when new shares

take effect

Listing date

Filing of (Primary) Amended Registration

Statement (filing with the Financial Services

Agency by the applicant)

Holiday

Meeting of the Board of Directors to

determine provisional terms and conditions

(payment amounts for the purpose of the

Companies Act)

Determination of issue prices and

underwriting prices

Date when the registration statements take

effect

Filing of (Secondary) Amended Registration

Statement (filing with the Financial Services

Agency by the applicant)

Su

bscri

pti

on

pe

rio

d

(4 b

usin

ess d

ays)

Pre

-ma

rke

tin

g p

eri

od

(9b

usin

ess d

ays)

Bo

ok

bu

ild

ing

pe

rio

d

(5 b

usin

ess d

ays)

15

da

ys o

r o

ve

r

I About Listing

-25-

(2) New Listing with Public Offering and Secondary Offering (Listed Companies)

1 Sun

2 Mon

3 Tue

4 Wed

5 Thu

6 Fri

7 Sat

8 Sun

9 Mon

10 Tue

11 Wed

12 Thu

13 Fri

14 Sat

15 Sun

16 Mon

17 Tue

18 Wed

19 Thu

20 Fri

21 Sat

22 Sun

23 Mon

24 Tue

25 Wed

26 Thu

27 Fri

28 Sat

29 Sun

30 Mon

31 Tue

Month Y

Listing approval, resolution at the Board of

Directors to issue new shares, filing of

Securities Registration Statement (filing with

the Financial Services Agency by the

applicant)

HolidayMeeting of the Board of Directors to

determine issue prices and underwriting

prices (payment amounts for the purpose of

the Companies Act)

Filing of Amended Registration Statement

(filing with the Financial Services Agency by

the applicant)

Date when the registration statements take

effect

Payment date and date when new shares

take effect

Listing date

Bo

ok

bu

ild

ing

pe

rio

d

(9b

usin

ess d

ays)

Su

bscri

pti

on

pe

rio

d

(4 b

usin

ess d

ays)

15

da

ys o

r o

ve

r

Note: For a company which satisfies the eligibility criteria for reference approach, the period

between the filing of Securities Registration Statement and the date when it takes

effect will be 7 days (the number of days may be extended to 30 days as appropriate).

I About Listing

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(3) New Listing without Public Offering and Secondary Offering (Listed Companies)

1 Sun

2 Mon

3 Tue

4 Wed

5 Thu

6 Fri

7 Sat

8 Sun

9 Mon

10 Tue

11 Wed

12 Thu

13 Fri

14 Sat

15 Sun

16 Mon

17 Tue

18 Wed

19 Thu

20 Fri

21 Sat

22 Sun

23 Mon

24 Tue

25 Wed

26 Thu

27 Fri

28 Sat

29 Sun

30 Mon

31 Tue

Listing approval

Month Y

Holiday

Listing date

( 1

we

ek)

Note: In case of current listed companies, approximately 1 week will be needed for the

purpose of dissemination of listing.

When a non-listed company lists its stock without effecting any public offering or

secondary offering, about one month after listing will be required for the purpose of

participating in electronic book-entry transfer systems.

II Formal Requirements (relating to Rule 205 of the Regulations)

-27-

II Formal Requirements (relating to Rule 205 of

the Regulations)

With respect to formal requirements for the purpose of listing application, it is essential that

an applicant meet the requirements of Rule 205 of the Securities Listing Regulations and

should not meet any criteria for non-acceptance of listing application as prescribed in

various rules set forth by TSE for public offering and secondary offering before listing (see

“V Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. of Offered Stocks

Through Third Party Allotment” and “VI Public Offering or Secondary Offering before

Listing).

This section focuses on the requirements of Rule 205 of the Securities Listing Regulations

(hereinafter referred to as the “formal requirements”).

JPXR will assess whether an applicant complies with formal requirements on the basis of

materials submitted by the applicant at the time of listing application.


-28-

List of Formal Requirements

Item Requirement

(1) Number of

shareholders

(by the time of

listing)

800 or more

(2) Number of tradable

shares

(by the time of

listing)

a. The number of tradable shares: 4,000 units or more

b. The market capitalization of the tradable shares: ¥1,000

million or more

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

number of issued shares outstanding): 30% or more of the

listed stocks, etc..

(3) Market

capitalization

(by the time of

listing)

¥2,000 million or more

(4) Number of

consecutive years

of conducting

business

The business activities have been continuously carried out by

setting up a board of directors 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

(by the time of

listing)


(net assets on a separate basis should not be negative)


-29-

(6) Amount of profit

and market

capitalization

(Profits represent

ordinary income on a

consolidated basis

while the market

capitalization

represents the value

expected at the

time of listing)

a. The total amount of profits in the recent two years shall be at

least ¥ 500 million or more;

b. Sales for the last year is expected to reach at least ¥10,000

million and the market capitalization is expected to reach at

least ¥50,000 million

(7) False statement or

adverse opinion,

etc. and audit by a

listed company

audit firm

(a. through d. must

be satisfied)

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

each of business years which ended during the last two years

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

business year which ended in the last two (2) years contains

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

of certified public accountants, etc.

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

business year which ended in the last year contain an

"unqualified opinion", in principle.

d. Where a stock, etc. pertaining to an initial listing applicant is

listed on any other financial instruments exchange in Japan,

such stock, etc. shall not meet either of (a) and (b) below:

(a) The internal management report pertaining to the business

year ending in the last year contains the fact that "appraisal

results cannot be provided" contained in; and

(b) The internal management audit report regarding the internal

management report pertaining to a business year ending in the

last year contains the fact that "no opinion is provided".


-30-

The financial statements, etc. for each business year or

consolidated accounting year ending in the last two (2) years as

well as the quarterly financial statements, etc. for a quarterly

accounting period in the business year or for a quarterly

consolidated accounting period in the consolidated accounting

year ending in the last year have undergone audit or quarterly

review equivalent to that in the provisions of Article 193-2 of the

Act by a listed company audit firm (including audit firms registered

in the list of associate registered audit firms based on the

Registration System for Listed Company Audit Firms of The

Japanese Institute of Certified Public Accountants (limited to those

which have undergone quality control reviews by The Japanese

Institute of Certified Public Accountants)) (excluding those deemed

inappropriate by the Exchange).

(8) Establishment of a

shareholder

services agent

Shareholder services have been entrusted to an institution

specified by the Enforcement Rules as the applicant’s shareholder

services agent, or an informal consent of assurance the

entrustment of such shareholder services from the shareholder

services agent has been received. assurance

(9) Share unit and

classes of stock

The Share Unit shall be expected to be 100 shares at the time of

listing

Stocks, etc. pertaining to a listing application shall meet any one of

a. to c. below:

a. In the case of a company issuing one class of stock with voting

rights, said stock with voting rights;

b. In the case of a company issuing multiple classes of stock with

voting rights, a class of stock with voting rights whose value of

rights, etc. to receive economic benefits including claim for

surplus dividend pertaining to the number of shares that

enables exercise of one voting right at a general shareholders

meeting with regard to important matters including selection

and dismissal of board members is higher than any other class

of stock;

c. Stock with no voting rights


-31-

(10) Restriction on

transfer of shares

Transfer of shares pertaining to an initial listing application is not

restricted or it is expected that there will be no restriction by the

time of listing.

(11) Handling by the

designated

book-entry transfer

institution

The relevant issue is subject to the book-entry transfer operation of

the designated book-entry transfer institution, or is likely to be so

by the time of listing

(12) Expected

implementation of

merger, etc.

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

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.

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).

The following elaborates on the requirements of each item under the forma l requirements.


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1. Number of Shareholders (Rule 205, Item 1 of the

Regulations)

The number of shareholders (this represents the number of persons holding a share unit or

more; the same shall apply hereinafter) is expected to reach at least 800 by the time o f

listing (Note 1, 2).

The criterion for the number of shareholders is designed to require that the ownership of

shares of an applicant is diversified.

For the purpose of this criterion, the number of shareholders is determined on the basis of

the number of shareholders as of the last record date (Note 3). The objective of this criterion

is to ensure smooth distribution and fair price formation of stocks after listing. If this criterion

is not met as of the last record date, the satisfaction thereof by the time of listing will suffice.

Note 1: Where an applicant adopts the number of shares per Share Unit, one unit means the

number of shares, and if the applicant does not adopt any number, one unit refers to

one share.

Note 2: If the applicant issues any depository receipts (DRs) denoting rights, etc. attached to

stock certificates and other similar instruments, the number of persons who hold

DRs denoting rights equivalent to those attached to stock certificates comprising

one trading unit or more can be included in counting the number of shareholders.

Note 3: “Record date” means the record date prescribed by the Company Act of Japan or

Act on Preferred Equity Contribution of Japan and the base date when the

convocation notice of the general shareholders’ meeting is issued by a book-entry

transfer institution prescribed by Rule 2, Paragraph 2 of the Act on Book-Entry

Transfer of Corporate Bonds, Shares, etc. (hereinafter referred to as the

“Book-Entry Transfer Act”) pursuant to Article 151, Paragraph 1 or Paragraph 8 of

the same Act (including cases where Article 235 of the same Act applies mutatis

mutandis).

Note 4: Unless the applicant accurately understands the latest status of shareholders as of


-33-

the record date, etc., the number of shareholders may be determined based on the

number of shareholders as of the immediately preceding record date when the

status of shareholders was fully understood.

In addition, if the applicant purchases its own stocks according to the resolution authorizing

the acquisition of own stocks or the applicant resolves at its board meeting to authorize the

disposal of its treasury shares owned by the applicant, the number of shareholders is

determined as follows:

1) Applicant Purchases its Own Stocks

The number of shareholders which reduces as a result of purchase of own stocks shall be

reduced from the number of shareholders as of the most recent record date. The number of

shareholders to be reduced is determined as follows:

<An applicant is a non-listed company>

The number of sellers pertaining to the resolution authorizing acquisition of own stocks

(excluding sellers who are certain not to sell any of their holding stocks, etc. in response to

the offer of said purchase).

<An applicant is a listed company>

The number of shareholders to be reduced is basically determined assuming that the

number of stocks held by a shareholder who holds the smallest number is reduced first.

This is typically carried out as follows.

- The number of shareholders to be reduced is determined by divid ing the number of

purchased own stocks by the average number of shares held per person classified into

the smallest trading unit category as per the table which shows the number of

shareholders for respective trading units.

- However, in cases where the number of own stocks purchased equals or exceeds the

number of shares held by the shareholders classified into the smallest trading unit

category, add the number of shareholders classified into the next smallest trading unit

category and repeat the same until the total of shares held by them exceeds the number

of treasury shares bought back, then count the number of shareholders up to the

categories just before the one exceeding the number of treasury shares bought back (a).


-34-

Next determine the number of shareholders obtained by dividing the number of shares

derived by deducting the number of in (a) from the number of treasury shares bought

back, by the average number of shares held per shareholder in the category exceeding

the number of treasury shares bought back (b). The number of shareholders to be

reduced will be the total of numbers of the shareholders in (a) and (b)

- When the number of selling shareholders can be confirmed on the basis of TOB report,

the number of shareholders reduced by such TOB transactions.


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Examples: Cases where the numbers of shareholders classified into respective categories

of trading units are as follows:

Sections

Shares comprising over one trading unit Shares

comprising

less than

one

trading

unit

Over

1,000

trading

units

or

more

Over

500

trading

units

or

more

Over

100

trading

units

or

more

Over

50

trading

units

or

more

Over

10

trading

units

or

more

Over

5

trading

units

or

more

Over

one

trading

unit

or

more

Total

Number of

shareholders

7

people 3 35 43 86 63 3,164 3,401

Number of

shares held

Units

24,055

1,847

7,837

2,762

1,760

388

3,862

42,511

399

Example 1: Where the number of treasury shares acquired is equivalent to the number of

shares comprising 2,000 trading units:

The number of shareholders to be reduced through the acquisition of treasury shares

=2,000 units÷(3,862 units÷3,164 people)

=1,638.5 people

⇒1,639 people (rounded up)

Example 2: Where the number of treasury shares acquired is equivalent to the number of

shares comprising 4,500 trading units

=3,164 people + 63 people + {(4,500 units - 3,862 units - 388 units)÷(1,760 units÷86

people)}

=3,227 people + {250 units÷(1,760 units÷86 people)}

=3,227 people + 12.2 people

⇒3,240 people (rounded up)

As indicated above, on the basis of the criterion for the number of shareholders, the number

of shareholders which is theoretically reduced is treated as the “number of shareholders to

be reduced through the acquisition of treasury shares”, if the applicant acquires treasury

shares after the latest record date.


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2) An Applicant Makes a Resolution Authorizing Disposal, etc. of Treasury

Stocks held

In cases where a resolution authorizing disposal, etc. of treasury stocks held relates to the

transfer to specified entities, the number of such persons shall be added to the number of

shareholders as of the record date as if they held the treasury stocks.

(Reference) Formula for determining the number of shareholders

Total number of shareholders holding shares comprising one trading unit or more

- ) the number of shareholders to be reduced when shares of treasury stock are acquired

based on a resolution to acquire shares of treasury stock

+) the number of shareholders expected to increase when the resolution is made that the

shares acquired will be transferred to specified entities

The number of shareholders


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2. Tradable Shares (Rule 205, Item 2 of the Regulations)

Tradable shares represent securities excluding stocks held by large shareholders or officers,

etc. and treasury stocks held by the applicant, whose holding is almost fixed and unlikely to

be publicly traded, from securities for which a listing application is filed.

The objective of this criterion is to ensure the number of tradable shares at a certain level

and limit to a certain level or below the number of listed shares unlikely to be publicly traded

as their holding is almost fixed.

Consistent with the criterion for the number of shareholders, for the purpose of this criterion,

the number of tradable shares will be, in principle, determined on the basis of the number as

of the immediately preceding record date (details below).

The objective of this criterion is also to ensure smooth distribution and fair price formation of

stock certificates after listing. Even if this criterion is not met as of the immediately preceding

record date, the satisfaction thereof by the time of listing will suffice.

In practice, the applicant is required to meet the requirements from (1) to (3) below:

Note: A domestic company that is listed or will list on a foreign financial instruments

exchange would be accepted if it meets any one of the formal requirements of the

market capitalization of tradable shares and the number of tradable shares as a

percentage of total shares of listed stock. For a foreign company that is listed or will

list on a foreign financial instruments exchange, the formal requirements will be

handled in a similar manner. To prevent abuse of these provisions, the applicant shall

be checked, through the substantive examination, on whether it has or is sufficiently

likely to secure adequate liquidity in the foreign financial exchange.

a. Number of Tradable Shares

The number of tradable shares is expected to reach at least 4,000 share units by the time of

listing.

► Calculation of the number of tradable shares


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The number of tradable shares is determined as the difference between the total number of

shares outstanding of the applicant as of the last record date and the aggregated number of

shares certificates which are not traded actively.

Note: If an applicant has resolved at its Board of Directors to authorize the cancellation of

treasury stocks held, the number of stocks would be deducted from the number of

stocks for which the listing application is filed as they were cancelled even though

they are not cancelled as of the record date.

<Number of shares certificates which are not actively traded>

The applicant aggregates the numbers of stocks which JPXR determines are not traded

actively. In practice, the numbers of stocks held by the persons mentioned below will be

aggregated. Meanwhile, the numbers of stocks held by the same persons should not be

counted twice (Note 1).

- Applicant (shares of treasury stock owned by the applicant) (Notes 2, 3, 4 and 5)

- Officers of the applicant (the Board of Directors, accounting advisors ((including

employees of an accounting advisor who are in charge of accounting advice if the

accounting advisor is a corporation), company auditors, and executive officers (including

governor, auditor, and a person who can be regarded as equivalent thereto), including

the share ownership plan of directors and officers)company auditor

- Spouse and relatives by blood within the second degree of kinship of an officer of the

applicant

- Company for which spouses and relatives by blood within the second degree of kinship

of officers of the applicant hold the majority of voting rights held by all the shareholders

- Related companies of the applicant (related companies defined in Rule 8, Paragraph 8

of the Regulations on Terminology, Forms and Methods of Preparation of Financial

Statements (hereinafter referred to as the “Financial Statements Regulations”)

- Shareholders or associations holding 10% or more of the number of securities (Note 6)

Note 1: Suppose that President A is an officer of the applicant who holds 20% of shares

eligible for listing application. When the number of shares held by A is added to “the

number of shares held by officers of the applicant,” it will not be added to the number

of shares held by “shareholders or associations holding 10% or more of the number

of securities.”]


-39-

Note 2: The treasury shares to be excluded from the tradable shares represent the treasury

shares currently held by the applicant. Even if resolutions to acquire treasury shares

(resolutions prescribed in Article 156, Paragraph 1 of the Companies Act concerning

the acquisition of treasury shares (including cases where the Article would be

applicable by rewording pursuant to Article 165, Paragraph 3 of the same act; the

same shall apply hereinafter)) have been made, those which are not currently held

by the applicant cannot be included in the number of treasury shares.

Note 3: When the applicant has resolved at its board meeting to authorize the disposal of

shares of treasury stocks held by the applicant (*), the number of shares pertaining

to the resolution authorizing the disposal of treasury shares will be treated as if the

applicant did not hold them. Unless they are disposed of, the applicant deducts the

number of shares pertaining to the resolution from the number of shares of

treasury stocks held thereby.

* Resolution authorizing the disposal, etc. of treasury stocks refers to the resolution

specified in Articles 199, Paragraph 1 of the Companies Act concerning the disposal of

treasury stocks (including the decision of executive officers in case of companies with

committees system) or the resolutions specified in Article 795, Paragraph 1 of the

Companies Act when the applicant delivers its treasury shares in exchange for cash,

etc. in Article 749, Paragraph 1, Item 2, Article 758, Item 4 or Article 768, Paragraph 1,

Item 2 of the Companies Act (including the resolution of the Board of Directors on the

provisions of contracts for merger and acquisition, for divesture of a business to the

successor entity or for share exchange (including the decisions of executives in case of

companies with committees); the same shall apply hereinafter) where such resolution is

not required pursuant to Article 796, Paragraph 1 or Paragraph 3 of the Companies Act.

Note 4: When the applicant resolved at its board meeting to authorize the disposal, etc. of

treasury stocks held by the applicant after the recent record date and the resolution

was to transfer treasury stocks to some specified entities, the number of treasury

stocks is to be calculated as if such specified entities held the treasury stocks.

Therefore, when the transfer according to the resolution is made to the persons who

hold the stocks which JPXR determines are not actively traded, the number of

stocks to be transferred will be included in the number of stocks which are not

actively traded.


-40-

Note 5: When the applicant resolved at its board meeting to authorize the retirement, etc. of

treasury stocks held by the applicant, such treasury stocks are deemed to have

been retired and they would be deducted from the treasury stocks held after the

retirement even if they are yet to be cancelled.

(Reference)

Formula for determining the number of treasury stocks held by the applicant

The number of treasury stocks held (limited to those currently held)

-) the number of treasury stocks pertaining to the resolution authorizing the disposal,

etc. thereof

-) the number of treasury stocks retired

The number of treasury stocks held by the applicant

Note 6: Of the securities held by the persons who hold more than 10%, the following is

considered to be substantially the aggregation of a large number of small

investments. Thus they are included in the number of tradable shares and

excluded from the number of stocks not actively traded. In such cases, the

applicant is required to submit written documents certifying that such shares are

currently held by the persons below (e.g., written documents which show the

inclusion into securities investment trust or pension trust managed by an investment

advisor or a bank engaging in a trust business). Employee share ownership plans

shall not be included in the number of tradable shares when its percentage exceeds

10% and shall be treated as shares which are not actively traded.

► Securities included in an investment trust or pension trust and other securities included

in a trust that is organized for the purpose of investment management of trust assets by

an investment advisor or a bank engaging in the trust business, or an entity deemed

equivalent thereto who is authorized to manage investments of the trust assets under a

discretionary investment contract or other contracts, or pursuant to provisions of law;

► Securities held in the course of its business by an entity that engages in business

operations related to custody of assets of an investment corporation or foreign

investment corporation

► Securities held by a securities finance company or a financial instruments firm that

pertain to margin trading

► Securities in the account of a depository pertaining to depositary receipts (including

registered holders of the depository); or


-41-

► Other securities substantially held by entities other than an entity that holds 10% or

more of the total number of said security that are deemed appropriate.


-42-

b. Market Capitalization of Tradable Shares

Market capitalization of tradable shares is expected to be ¥1,000 million or more on the

listing date.

► Calculation of the market capitalization of tradable shares

The market capitalization is determined by multiplying the number of tradable shares (same

as the number of tradable shares in a above) by the share price. The following share prices

are used for the determination of market capitalization).

<Applicant is a non-listed company>

When an applicant effects public offering or secondary offering pertaining to the listing

application, “expected issue prices” are used for the calculation.

“Expected public offering or secondary offering prices” represent the prices used as basis

for the determination of the total amounts for offering value or secondary offering value

(so-called expected offering prices, expected secondary offering prices) of stocks described

in the Securities Registration Statement.

When an application does not effect public offering or secondary offering pertaining to the

listing application, the value assessed using the formula JPXR deems appropriate will be

used.

<Applicant is a listed company>


application, “expected offering price (Note 1)” or “the lowest price of the said stock, etc.

observed during the period one month prior to two days before the day on which the TSE

approves listing of the stock is used shares for the period of one month before two days prior

to the date when the listing is approved (Note 2)” is used, whichever is lower..

Note1: The day prior to two days before the day on which the TSE approves the listing is

decided on a calendar basis. For example, if the listing approval day is November

2, the period would be the one month from October 1 to October 31, irrespective of a

day of a week..

Note 2: The lowest price means the lowest price of final (closing) prices of trading days

during the period on the trading sessions of financial instruments exchanges in


-43-

Japan where the applicant’s shares are listed. Therefore, any indicative prices,

off-trading session prices or off-market prices are not viewed as the lowest price.

c. The Number of Tradable Shares as a Percentage of Total

Shares of Listed Stock

The number of tradable shares is expected to reach 30% or more of listed stock, etc. by the

time of listing.

► Calculation of tradable shares as a percentage of shares of listed stocks certificates

The percentage is determined by dividing the number of tradable shares (same as the

number at (1) above) by the number of shares for which the listing application is filed .

Note: The number of shares pertaining to the listing application represents the total number

of issued shares outstanding of the applicant expected on the listing date. It is

determined by adding or deducting expected changes in the number of shares by the

time of listing to or from the total number of issued shares outstanding as of the

immediately preceding record date.

(Reference) Calculation of tradable shares (example)

1) Number of shares for which the listing application is filed

Total number of issued shares outstanding as of the last record date = 12,325,000 shares

(A) (Share unit: 100 shares)

2) Number of shares not actively traded

a. Treasury stocks held

Number of treasury stocks

100,000


-44-

b. Large shareholders who hold 10% or more (underlined holders will not be added)

(In shares)

Name Attribute Number of shares

held (%) Reason for not adding

α Bank Business relation 1,972,000 (16.0%)

←Because of

investment trust unit (*)

←As added at section

(3)

Trust bank (trust unit)

1,848,750 (15.0%)

Mr. A

Representative

Director and

President

1,479,000 (12.0%)

Employee share

ownership plan 1,355,750 (11.0%)

* Any document certifying that shares are held in investment units must be submitted.

3. In addition to shares at b. above, any securities defined as those not actively traded in

the Enforcement Rules for the Securities Listing Regulations (*)

(In shares)

Name Attribute Number of shares held (%)

Mr. A Representative director and president 1,479,000 (12.0%)

Mr. B Senior managing director 123,250 (1.0%)

Mrs. C Wife of Mr. A 61,625 (0.5%)

β Limited

Company

Company whose majority of voting

rights is held by Mr. A 61,625 (0.5%)

Total 1,725,500 (14.0%)

* For details, please see <Number of shares certificates which are not actively traded> at (1)

Number of tradable shares above

= a. 100,000 shares + b. 3,327,750 shares + c. 1,725,500 shares = (B) 5,153,250 shares


-45-

3) Calculation of tradable shares

- Number of tradable shares (unit) (A) － (B)

(A) 12,325,000 shares － (B) 5,153,250 shares = 7,171,750 shares : 71,717 units

(fractions are disregarded)

- Ratio of tradable shares [(A)－(B)] / (A) x 100

[(A) 12,325,000 shares － (B) 5,153,250 shares] ÷ (A) 12,325,000 shares x 100 =

7,171,750 shares ÷ 12,325,000 shares x 100 = 58,1886 : 58.18%

<Increase in the number of shareholders and tradable shares: public offering or secondary

offering before listing>

The criterion for the number of shareholders and tradable shares is expected to be met on

the listing date, rather than the condition required to be satisfied at the time of listing

application.

Therefore, if the application does not meet this criterion as of the immediately preceding

record date, the listing application would be accepted if it would be expected to be met by


In this case, in order to increase the number of shareholders or tradable shares, the

applicant could effect public offering or secondary offering.

As of the immediately preceding record date, if:

- The number of shareholders is not 800 or more;

- The number of tradable shares does not represent 4,000 trading units or more800 or

does not account for 30% or more of shares of listed stock, or

- The market capitalization of tradable shares does not stand at ¥1,000 million or more,

The applicant needs to effect public offering or secondary offering, or off-auction distribution

(this refers to an off-auction distribution within below 50 trading units which is effected by a

company listed on another financial instruments exchange in Japan and on which

restrictions on buying are imposed).

Note 1: If an applicant meets the criterion for the number of shareholders or tradable shares

after the listing approval date by effecting public offering or secondary offering, or


-46-

off-auction distribution on another financial instruments exchange in Japan, the

applicant is required to submit to TSE the “Plan for Public offering or secondary

offering” or “Plan for Distribution with Restrictions Imposed” before effecting it or

“Notice of execution of public offering or secondary offering” or “Table of distribution

status of shares following restriction thereon” immediately after effecting it.

Note 2: If a company listed on another financial instruments exchange in Japan meets the

criterion for the number of shareholders or tradable shares by public offering or

secondary offering effected before the listing approval or off-auction distribution on

another exchange in Japan, the company is required to submit to TSE the “Notice of

execution of public offering or secondary offering” or “Table of distribution status of

shares following restriction thereon.”

Note 3: A non-trading participant or foreign securities company may only describe the

portion it accepts and underwrites under the contract with the applicant providing

for the report on public offering (sales) in the “Plan for Public offering or secondary

offering” or the “Notice of Public offering or secondary offering Effected.”

Note 4: For the purpose of the number of shareholders or tradable shares, “sales through

overallotment” (addition sales responsive to demands in public offering or

secondary offering) may be treated as follows.

- In case of public offering or secondary offering for which the “Notice of execution of

public offering or secondary offering” is submitted after the approval of initial listing

Criterion Handling

Tradable shares

Any movements of the number arising from the secondary

offering due to overallotment will not be taken into consideration. Number of

shareholders

- In cases of public offering or secondary offering for which “Notice of execution of public

offering or secondary offering” is submitted between the latest record date and the

approval of initial listing


-47-

Criterion Handling

Tradable shares

When a “Notice of execution of public offering or secondary

offering” including the description of movements due to the

exercise of rights attached to green shoe option, such changes

must be considered

Number of

shareholders

When a “Notice of execution of public offering or secondary

offering” including the description of movements arising from the

secondary offering due to overallotment, such changes must be

considered

Meanwhile if an applicant who has effected or expects to effect any public offering or

secondary offering acquires some its own stocks according to the resolution at the general

shareholders’ meeting authorizing the acquisition, it may conflict with the acquisition of

own stocks. Therefore the reasonableness of each act must be acknowledged. Even if it is

acknowledged to be reasonable, the acquisition of treasury shares before any public

offering or secondary offering may give rise to a problem in terms of regulations on insider

trading, so the applicant must fully consider the timing of acquisition of treasury shares and

the method thereof.

Note: When an applicant does not make any book building or auction-based public offering

or secondary offering at the time of listing (excluding any companies which have listed

their stock on another financial instruments exchange), JPXR requires that the

applicant should receive the consent of shareholders to sell a certain number of

shares in trading transaction where the first contracted price after listing is determined.

This requirement is to mitigate a temporary imbalance between demand and supply at

the trading transaction where the first contracted price after listing is determined and

implement a fair price formation. The level of sales will be determined on the basis of

the number of shares of listed stock.


-48-

3. Market Capitalization (Rule 205, Item 3 of the

Regulations)

It is required that the market capitalization on listing day is expected to be at least ¥2,000

million.

► Calculation method of market capitalization

The market capitalization will be determined by adding the value derived by multiplying the

number of shares of listed stock certificates expected at the time of listing (note) by the

share price, to the market capitalization related to all other shares issued by the applicant

(limited to those listed or continuously traded on another financial instruments exchange in

Japan or a foreign country). For the purpose of determination of market capitalization, the

following prices are to be used as share prices.

<Applicant is a non-listed company>

When an applicant effects public offering or secondary offering related to the listing

application, “expected public offering prices” are used for the calculation.

“Expected public offering or secondary offering prices” represent the prices used as basis

for the determination of the total amounts for public offering or secondary offering value

(so-called expected public offering prices, expected secondary offering prices) of stocks

described in the Securities Registration Statement.

When an applicant does not effect public offering or secondary offering pertaining to the

listing application, a value assessed using the formula TSE deems appropriate will be used.

<Applicant is a listed company>


application, “expected offering price (Note 1)” or “the lowest price of the said stock, etc.

observed during the period one month prior to two days before the day on which the TSE

approves listing of the stock is used shares for the period of one month before two days prior

to the date when the listing is approved (Note 2)” is used, whichever is lower.

Note1: The day prior to two days before the day on which the TSE approves the listing is


-49-



day of a week.





Note 3: In cases where a resolution authorizing cancellation of treasury stocks held by the

initial listing applicant has been passed, the number of listed stocks, etc. shall be

calculated by deeming that the treasury stocks pertaining to the resolution had been

cancelled by the initial listing applicant (Rule 212, Paragraph 1, Item 2 of the Rules).

4. Number of Consecutive Years of Conducting Business

The business activities have been continuously carried out by setting up a board of directors

since a day before the day which is three (3) years prior to the end of the previous year.

Note: When the last day of previous business year is March 31, 2019, 3 years prior to the

end of the previous year will be April 1, 2016. As a result, it is necessary for the

company to set up a board of directors before March 31, 2016.


-50-

5. Amount of Net Assets (Rule 205, Item 5 of the

Regulations)

The amount of net assets on the listing day is expected to reach at least ¥1,000 million.

JPXR will examine the following “amount of net assets on the listing day.”

a. When an applicant files a “quarterly financial statements for initial listing application”

or a copy thereof for the period after the beginning of application year, JPXR will

examine the amount of net assets at the end of immediately preceding quarterly

period (Note 1) described in the recent “quarterly financial statements for initial

listing application” or a copy thereof. When the applicant does not prepare any

consolidated quarterly financial statements, JPXR will examine the values on the

quarterly balance sheet (on a separate basis). In addition it is required that the

amount of net assets determined on the basis of quarterly balance sheets (on a

separate basis) (Note 2) should not be negative.

b. In cases other than a. above, JPXR will examine the amount of net assets as of the

end of the previous year described in the “Securities Report for Initial Listing

Application.” (Note 3). When the applicant does not prepare any consolidated

financial statements, JPXR will examine the values on the balance sheet (on a

separate basis). In addition it is required that the amount of net assets determined

on the basis of balance sheets (on a separate basis) (Note 4) should not be

negative.

Even when the amount of net assets does not meet the criterion, the applicant may subject

the amount of net assets added by expected cash inflows or actual cash inflows arising from

the public offering before listing to the examination. In this case, the applicant is required to

submit to TSE a “Statement of Net Assets” in the form required by JPXR including the

descriptions of the “amount of net assets as of the end of the immediately preceding

quarterly period or the previous year,” “expected cash inflows arising from public offering”

and “amount of net assets subject to the examination.”

Note 1: This value represents the value determined by deducting the values of subscription

warrants and non-controlling interests stated in the section of Net Assets from the


-51-

total amount determined by adding reserves, etc., prescribed in Article 60,

Paragraph 1 of the Quarterly Consolidated Financial Statements, etc. Rules to the

section of Net Assets in a quarterly consolidated balance sheet prepared under the

same rules.


warrants stated in the section of Net Assets from the total amount determined by

adding reserves, etc., prescribed in Article 53, Paragraph 1 of the Quarterly

Financial Statements, etc. Rules to the section of Net Assets in a quarterly balance

sheet prepared under the same rules.


warrants and non-controlling interests stated in the section of Net Assets from the

total amount determined by adding reserves, etc. prescribed in Article 45-2,

Paragraph 2 of the Consolidated Financial Statements, etc. Rules to the section of

Net Assets in a consolidated balance sheet prepared under the same rules.


warrants stated in the section of Net Assets from the total amount determined by

adding reserves, etc. prescribed in Article 54-3, Paragraph 1 of the Financial

Statements, etc. Rules to the section of Net Assets in the balance sheet prepared

under the same rules.

Note 5: If an applicant is an IFRS compliant company, the amount equivalent to the amount

of net assets shall be determined on the basis of quarterly consolidated balance

sheets or consolidated balance sheets.

► Treatment of “amount of profit” and “amount of net assets” according to the adoption of

accounting standards for retirement benefits

Exceptions to the determination of “amount of profit” and “amount of net assets” have been

provided under the accounting standards for retirement benefits (Rule 705 and 717 of the

Rules).


-52-

6. Amount of Profits and Market Capitalization (Rule 205,

Item 6 of the Regulations)

The following a. or b. must be satisfied:

a. The total amount of profits in the last two (2) years (hereinafter referred to as the

“profit criterion”) shall be at least ¥ 500 million yen;

b. The market capitalization as of the listing day is expected to reach at least ¥50,000

million yen.

<Application of profit criterion>

(Reproduced)

a. The total amount of profits in the last two (2) years (hereinafter referred to as the “profit

criterion”) shall be at least ¥ 500 million yen;

In the context of this criterion, the amount of profit determined based on the consolidated

income statement or consolidated statement of profit and loss and comprehensive income

(hereinafter referred to as the “consolidated income statement, etc.”) will be subject to the

examination (if there is any period subject to the examination where no consolidated

financial statements have been prepared, the amount of profit determined on the income

statement (on a separate basis) will be subject to the examination).

For the purpose of this paragraph, the “amount of profit” represents the amount determined

by adding or deducting the amount presented according to Article 65, Paragraph 3 of the

Consolidated Financial Statements, etc. Rules (so-called profit or loss arising from

non-controlling interests) to or from the ordinary income or ordinary loss presented

according to Article 61 of the same rules (in case of separate income statement, it

represents ordinary income or ordinary loss presented according to Article 95 of the same

rules).

Meanwhile the “amount of profit” will be determined as follows:

- In cases of a company listed on another financial instruments exchange in Japan or


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company making consistent disclosures

In determining the amount of profit for the year before the previous year, “consolidated

financial statements or financial statements for the previous year” included in the Securities

Registration Statement or Securities Report filed in the past will be used, rather than

“comparative information included in the consolidated financial statements or financial

statements for the previous year” described in the “Securities Report for Initial Listing

Application (Part I)” (hereinafter referred to as “Part I” in this paragraph). In this case, audit

report issued by certified public accountants or audit firm shall be attached to the

consolidated financial statements or financial statements for the year preceding the previous

fiscal year.

- In case of initial public offering (IPO)

“Part I” documents include the description of consolidated financial statements or financial

statements for the previous year and the year before the previous year, to which the

accounting standards for the previous fiscal year were applied. Thus, the determination of

the “amount of profit” uses the consolidated financial statements or financial statements for

these two periods will, in principle, be used.

Diagram: Consolidated financial statements or financial statements to be used for

determining the amount of profit

the year

before the

previous

year

　　　comparative information

(the year three years before

the application year)

accounting

standardsA

the previous

year

　comparative information

(the year before

the previous year)

accounting

standardsB B B (Note 4) B

In cases of a listed company or company making consistent

disclosuresIn cases of IPO

financial statements for the year before the previous year

financial statements for the previous year

financial statements for

the year before the

previous year

financial statements for the previous

year

*A; accounting standard for the year preceding the previous year

B; accounting standard for the previous year


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* In determining the amount of profit, the highlighted financial statements will be used.

Note 1: Application year starts from the end of the previous year. For example, for a

company where the previous year ends March 31, 2019, the “recent two years”

would be two years from April 1, 2017 through March 31, 2019. The same definition

of “recent” will be applied hereinafter.

Note 2: If the amount of profit is negative, such negative amount should be added. For

example, if the amounts of profit for the two years stands at a loss of ¥500 million

and income of ¥1,000 million, respectively, the amount of profit for the recent two

years would stand at an income of ¥500 million (¥500 million loss － ¥1,000 million

income).

Note 3: If a company voluntarily applies IFRS, the amount of profit should be the one

equivalent to the amount of profit determined (which is calculated on the basis of the

amount of profit before tax) based on the consolidated income statement.

Note 4: In cases of IPO, the “Part I” documents include the consolidated financial statements

or financial statements for the year before the previous year and the previous year,

to which the accounting standards for the previous year have applied. For the

purpose of determining the “amount of profit” for the year preceding the previous

year, the applicant might use the consolidated financial statements or financial

statements for the year before the previous year, to which the accounting

standards for the year preceding the previous year applied (including documents

TSE deems appropriate as they are similar to them in nature), rather than the

consolidated financial statements or financial statements for the year preceding the

previous year, to which the accounting standards for the previous year applied. In

such cases, the applicant is required to submit a statement by which the certified

public accountants or audit firm has expressed its audit opinion or opinion on

audited reports or financial values, etc.

Note 5: In the event that the amount of profit may be affected by the audit opinion of audit

firm or certified public accountants, the amount of profit adjusted based on such

opinion would be subjected to the examination, except for cases where the

non-adjusted amount is determined to be appropriate as a result of change to


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accounting standards.

Note 6: When the amount of profit for the period subject to the examination cannot be

determined simply adding the amount for each period as the applicant has changed

the length (balance sheet date) of the fiscal year, the amount of profit for the period

subject to the examination would be determined by proportionately dividing the

amounts of profit in the consolidated income statement or income statement, or

quarterly consolidated income statement or quarterly income statement by the

number of months. For example, if a company whose fiscal year ends on November

30 each year changes its balance sheet to March 31, 2018 after the completion of

the fiscal year ended November 30, 2017, and files a listing application making the

year ended March 31, 2019 the previous year, the amount of profit shall be

determined as follows:

Determination of annual amount of profit in case where the fiscal year (balance sheet

date) has been changed

Consolidatedaccounting year

Year ended March 31, 2018Year ended March 31, 2019(immediately

preceding accounting year)Number of

moths4 months 12 months

1Q(\500million)

3Q\300million

4Q\500million

April 1, 2018 to March 31, 201912 months

\1,000million

(Calculation in the case above)⇒1Q profit amount ; a = (\500million)

⇒2Q profit amount; b – a = (\600million)

⇒3Q profit amount ; c – b = \300million

⇒4Q profit amount; d – c = \500million

Amount of profit(loss)

(\300million)(\800million)

\400million* + (\800million) = (\400million)

Change of balance sheet date▼

Year ended November 30, 2017

12 months

(\1,000million)2Q(\600million)

Period for calculating profit

April 1, 2017 to March 31, 201812 months (8 months*) + (4months)

Profit for the 8 month period

2Q profit amount (proportion to the number of months) x 2/3 + (3Q profit amount) + (4Q profit amount)= (\600million) x 2/3 + \300million + \500million = \400 million

Amount of profit=(\400million)+\1,000million=\600million

* In these cases the amounts of profit will be determined based on the consolidated income statement and consolidated quarterly income statement.

Ordinary income in consolidated quarterly statement (consolidated quarterly period)= (\500million) (a)

Ordinary income in consolidated quarterly statement (cumulative consolidated quarterly periods to thesecond quarter)= (\1,100million) (b)

Ordinary income in consolidated quarterly statement (cumulative consolidated quarterly periods to thethird)= (\800million) (c)

Ordinary income in consolidated income statement (\300million)

► Treatment of “amount of profit” and “amount of net assets” as the accounting for

retirement benefits is applied


provided under the accounting standards for retirement benefits. (Rule 705 of the


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Regulations, Rule 717 of the Rules)

II Formal Requirements (relating to Rule 205 of t he Regulations)

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► Handling of a company whose rehabilitation is supported by Regional Economy

Vitalization Corporation of Japan (REVIC)

TSE has provided for the following exceptions to the criteria for the amount of profit or

market capitalization for the purpose of standards for the listing examination as Regional

Economy Vitalization Corporation of Japan (REVIC) was established (Rule 707 of the

Regulations and Rule 719 of the Rules).

- Companies eligible for the exceptions

Companies to which REVIC has decided to provide rehabilitation support (Note 1)

(hereinafter referred to as the “supported company”) will be eligible for the exceptional

treatment (Note 2).

Note 1: Support decision prescribed in Article 25, Paragraph 4 of the Act Concerning

Regional Economy Vitalization Corporation of Japan (REVIC) (Law No. 63 of

2009).

Note 2: The exceptional treatment excludes any company for which the support decision is

subsequently revoked after REVIC decided to provide support or the decision to

acquire any debts of the company is not made (this decision refers to the decision

to acquire debts as prescribed in Article 31, Paragraph 1 of the Act Concerning

Regional Economy Vitalization Corporation of Japan).

- Conditions for application

The exceptions are provided when stock issued by a supported company is delisted on TSE

after REVIC has decided to provide support, and if the company files an initial lis ting

application for the stock by making the business year commencing within five years from the

date when REVIC announces the decision to acquire the debts of the company as the

previous year.

- Contents

In filing an initial listing application, the “amount of profit or market capitalization” should

meet either a. or b. below:

a. The amount of profit for the recent one year stands at ¥400 million or more.

b. The sales for the recent one year are ¥10,000 million or more and the market

capitalization as of the listing day is expected to stand at ¥50,000 million or more.


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<Market capitalization criterion>

(Reproduced)

b. The sales for the recent one year shall be ¥10,000 million or more and the market

capitalization as of the listing day is expected to reach ¥50,000 million or more.

Note 1: For the determination of market capitalization, please refer to “Calculation Method of

Market Capitalization” in “3. Market Capitalization”.

Note 2: Sales represent the amount of sales included in the consolidated income statements,

etc. (income statement if during the period subject to the examination there is any

period when the applicant is not required to prepare consolidated financial

statements).

Note 3: When the amount of sales cannot be determined by simple aggregation as the

applicant has changed the fiscal year, the sales for the period subject to the

examination will be determined by proportionately dividing the amounts of profit in

consolidated income statements or income statements, or quarterly consolidated

income statements or quarterly income statements by the number of months.



opinion would be used for the examination purpose, except for cases where the

adjustment to the sales is made as a result of change to accounting standards made

by appropriate reasons. .

Note 5: When an applicant is demutualized into a joint stock company and if the period

subject to the examination includes any period before the demutualization, with

respect to the period before the demutualization, the amount equivalent to the

amount of profit determined based on the consolidated income statements for each

consolidated fiscal year of the mutual company and the sales stated in the income

statements for each consolidated fiscal period of the mutual company will be used

for the purpose of the examination.


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7. False Statement or Adverse Opinion and Audit by a Listed

Company Audit Firm (Rule 205, Item 7 and Item 7-2 of the

Regulations)

(1) False Statement and Adverse Opinion, etc.

1) False Statement

No false statement (Note 1) shall be made in a Securities Report, etc.(Note 2) containing or

making reference to financial statements, etc.(Note 3), interim financial statements, etc., or

quarterly financial statements, etc. pertaining to the audit report, the interim audit report, or

the quarterly review report for each of the last two years.

In addition, no false statement shall be made in quarterly financial statements, etc. (Note 4)

for the quarterly periods in each business year and quarterly consolidated financial

statements for the quarterly consolidated periods in each consolidated accounting year

which ended during the last two years.

Note 1: “False statement” represents statements included in securities reports, etc. whose

correction is deemed to be material as a correction order, order for the payment of

penalty or accusation is issued by the Prime Minister or the applicant issues an

amended registration statement.

Note 2: Securities report comprises:

- Securities registration statement and its accompanying documents, as well as reference

documents therefor;

- Shelf registration statement and its accompanying documents, as well as reference

documents therefor;

- Supplementary documents to Shelf Registration Statement and reference documents

therefor;

- Securities Report and its accompanying documents

- Half-year report;


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- Quarterly report; and

- Prospectus

Note 3: Financial statements, etc. represent financial statements and consolidated financial

statements.

Note 4: Quarterly financial statements, etc. represent quarterly financial statements or

quarterly consolidated financial statements (in case of specified business company,

including interim financial statements, etc.)

2) Adverse Opinion, etc.

Audit opinion issued by an audit firm, etc., shall, in principle, include:

- “Unqualified opinion” or “qualified opinion with exceptions” in the audit report (excluding

audit report attached to financial statements, etc. for business year or accounting year

which ended during the recent one year) attached to financial statements, etc. for each

business year and each consolidated fiscal year which end during the last two years;

- “Unqualified opinion” for the business year or consolidated accounting year in the audit

report attached to the financial statements, etc. for the business year or consolidated

accounting year which ended in the recent one year, and “unqualified conclusion (in

case of specified business company, including the “statement to the effect that interim

financial statements, etc. include useful information”) in the quarterly review report

attached to the quarterly financial statements for the quarterly accounting period in the

business year and for the quarterly consolidated accounting period for the consolidated

accounting year, which ended in the last year.

This is because the examination of the amount of profit, etc. shall be made on the basis of

financial statements, etc. prepared in accordance with fair accounting treatment, etc., and

because especially during the previous year, the applicant is required to address all the

accounting issues identified by the audit firm.

Meanwhile, if additional information is included in the audit report that there is a serious

doubt on a corporate continuity though an audit opinion represents an “unqualified opinion,”

for the purpose of examination, an applicant is required to eliminate any serious event, etc.

giving rise to any concern with a corporate continuity, as represented by the elimination of

the additional information on a corporate continuity in the quarterly review report, etc. during


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the so-called business year as Rule 207 of the Securities Listing Regulations requires that a

corporate continuity corporate continuity should be examined. In addition even if any

“adverse opinion” etc. is included in the report for the business year before the previous year

or consolidated accounting year due to a reason associated with a corporate continuity

(including “qualified opinion” for the business year and consolidated accounting year which

ends during the recent one year), the filing of listing application is possible. In such cases,

JPXR will review the background, etc. for the inclusion of such adverse opinion during the

course of examination.

Table: Outline of Criteria for Listing Application Concerning Audit Opinion

Audit report Quarterly review

report (Note 4)

Recent two

years

First year

Unqualified opinion or

qualified opinion

(Note 1) (Note 2)

-

Second year Unqualified opinion

(Note 3) (Note 4) Unqualified

conclusion

(Note 3) (Note 4)

The

previous

year

Unqualified opinion

(Note 3) (Note 4)

Note 1: For example, since an audit engagement letter was entered into after the beg inning

of the year before the previous year, the evaluation of adequacy of opening balances

was difficult or sufficient time required for audit was not taken. As a result, the audit

report for the year before the previous year expressed a qualified opinion. Even in

such cases, a listing application can be filed.


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Example: Successful listing in case of a “qualified opinion” expressed in the audit report, etc.

for the year before the previous year

Engagement letterPeriod subject to audit

March 31, 201X March 31, 201X+2 March 31, 201X+3March 31, 201X+1The year before the

previous yearThe previous year Application year

　　　　　　　▲

- Audit engagement letter was entered into in December 201X

- The audit report for the year before the previous year (year ended March 31, 201X+1)

expressed a “qualified opinion (*)”, and the audit report for the previous year (year

ended March 31, 201X+2) expressed an “unqualified opinion.”

- Descriptions in audit report

As the audit firm entered into the engagement letter on July xx, 201X, it could not attend the

physical counting of the inventory in the value of ¥ xxx million as of March 31, 201X.

The audit firm acknowledged that xxx Company’s financial statements fairly presented all

the significant aspects of financial position as of March 31, 201X+1 and operating results

and cash flows for the business year ended the same date in accordance with generally

accepted accounting principles in Japan, except for the effect of the above items on the

company’s financial statements.

Note 2: Even when the audit report expresses the refraining from the opinion due to any

events beyond the control of the applicant such as natural disaster and any event

associated with a corporate continuity, the applicant may file the application.

Note 3: If certified public accountants express a “qualified opinion” or “qualified opinion with

exceptive items” limited to comparative information, the applicant may fi le the

application.

Note 4: Unless “unqualified opinion” or “unqualified conclusion” is expressed due to any

event associated with a corporate continuity, the application can be filed.

Note 5: Even in case of a non-listed company making consistent disclosures which has

prepared a half-year report, quarterly report must be filed at the time of listing


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application. Therefore, for the purpose of formal requirements, the opinion included

in the quarterly review report to be submitted to JPXR will be subject to the

examination.

► Internal management report, etc.

For the handling of “internal management over financial reporting,” if stock certificates

related to an applicant are listed on another financial instruments exchange in Japan, it is

required that they do not meet the items both in 1) and 2) below:

1) The internal management report for the business year which ended during the recent

one year includes the statement of “inability to express assessment results.”

2) The internal management audit report on internal management report for the business

year which ended during the recent one year includes the statement of “inability to

express assessment results”*

* This shall not apply to cases where the audit certificate is exempted over the period

for which the applicant is allowed to elect to apply the exemption from the audit

certificate over the internal control report.


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(2) Audit by a Listed Company Audit Firm

The financial statement, etc., an interim financial statement, etc. or a quarterly financial

statement contained in or attached to a "Securities Report for Initial Listing Application" have

undergone audit, interim audit or quarterly review equivalent to that in the provisions of

Article 193-2 of the Act by a listed company audit firm (including audit firms registered in the

list of associate registered audit firms based on the Registration System for Listed Company

Audit Firms of The Japanese Institute of Certified Public Accountants (limited to those which

have undergone quality control reviews by The Japanese Institute of Certified Public

Accountants)) (excluding those deemed inappropriate by TSE). (Rule 205, Item 7-2 of the

Regulations)

Globalization of capital markets and business activities, sophistication of IT used by

companies, and adoption of international accounting standards, significant amendments to

accounting and auditing standards or exposed embellishments of large companies have

significantly changed the practices of CPAs. Thus reliability of audits performed by CPAs as

independent auditors over financial statements, etc. issued by companies must be further

enhanced.

Given evolving circumstances surrounding companies, accounting or auditing practices, a

more organized audit system than ever is required. It is not desirable that the same firms,

leaders or partners are engaged in the audits of the same company for a long time from the

perspective of independence.

Therefore, TSE requires an initial listing applicant to receive the audits of listed company

audit firms (including audit firms which are registered in the quasi-registered firms list

(limited only to those which have received the Quality Control Review of JICPA)) and to

have joint audits performed by audit firms and several CPAs.

In addition, in order to ensure an enhanced audit system and independence, TSE has

encouraged the Committee on Listed Company Audit Firms to select audit firms or joint CPA

offices as independent auditors, whose organizations have been registered as an audit firm

or joint CPA office and organization-level audit system has been properly designed and

implemented.

Meanwhile, TSE has not included the requirements for continuous audits in the listing

criteria, and the timing of conclusion of audit engagement letter is left to the decision of audit


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firm, etc.


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8. Establishment of Shareholder Services Agent (Rule 205,

Item 8 of the Regulations)

Shareholder services have been entrusted to an institution specified by the Enforcement

Rules as the applicant’s shareholder services agent (hereinafter referred to as a

"shareholder services agent approved by TSE"), or an informal consent of acceptance of the

entrustment of such shareholder services from the shareholder services agent has been

received; provided, however, that the same shall not apply to a shareholder services agent

approved by TSE.

Note: The shareholder services agent must have size and organizational functions such that

it could gain confidence of investors and provide conveniences to investors.

Shareholder services agents authorized by TSE include trust and banking companies,

Tokyo Securities Transfer Co., Ltd., Japan Securities Agent, Inc., and IR Japan, Inc.


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9. Share Unit and Classes of Stock (Rule 205, item 9 and

Item 9-2 of the Regulations)

(1) Share Unit

The Share Unit shall be expected to be 100 shares at the time of listing; provided, however,

that the same shall not apply to the cases specified by the Enforcement Rules (Note 1);

With a view to enhancing conveniences for market participants including investors, TSE

aims at eventually aligning the number of shares comprising one trading unit (Note 2) for all

the listed companies to 100 shares. In this regard, TSE encourages an initial listing

applicant to initially set the number of shares comprising one trading unit at 100 shares.

In practice, at the time of listing application, JPXR will check the existence of a trading unit

system and the number of shares comprising one trading unit on the basis of the rules

prescribed in the Articles of Incorporation and listing application documents including

certificates of registered items. When the applicant does not adopt any trading unit system

or it applies a trading unit system where the number of shares comprising one trading unit is

not 100 shares at the time of listing application, JPXR will require the applicant to adopt a

trading unit system or change the number of shares comprising one trading unit (Note 3).

Even if the applicant has listed its stock on another financial instruments exchange in Japan

or is a Green Sheet company designated by the Japan Securities Dealers Association, the

number of shares comprising one trading unit must be 100 shares.

Note 1: The cases specified by the Enforcement Rules include cases where a large number

of holders of fractional Share Units are expected to occur at the time of listing as in

the case when a mutual company converts into a stock corporation,

Note 2: Trading on financial instruments exchanges is effected in the integral multiple of the

unit determined for each company. This unit is referred to as the trading unit. Usually,

the trading unit relates to the number of shares comprising one unit in case of

companies adopting trading unit system while one share in case of those not

adopting the system.


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Note 3: The applicant is required to amend documents associated with the listing application

including Articles of Incorporation, a certified copy of the commercial register,

various internal rules and “Part I” documents with respect to the adoption of trading

unit system and submit them during the period for the listing examination.

Note 4: Procedures required to adopt the number of shares per Share Unit system and

change the number of shares per Share Unit are as summarized in the table below:

Table: Procedures for changing the number of shares comprising one trading unit to 100

shares

Treatment of shares

comprising unit Procedures

Increase and setting Special resolution at the general meeting of shareholders

Increase and setting effected

concurrently with share split

Split ratio equals or

exceeds increase

or setting ratio of

the number of

shares comprising

one trading unit

No increase

in the total

number of

issued shares

outstanding is

required.

Resolution of the Board of Directors

Required

Two or more

classes of shares

have been issued

Special resolution

at the general

shareholders’

meeting

Two or more

classes of shares

have not been

issued

Resolution of the

Board of

Directors

Below the above Special resolution at the general shareholders’

meeting

Only decrease Resolution of the Board of Directors

Decrease effected concurrent

with the share consolidation Special resolution at the general shareholders’ meeting


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(2) Classes of Stock

Japanese stock certificates for which a listing application is filed shall, in principle, be one of

stock certificates mentioned in a. to c. below.

a. In the case of a company issuing one class of stock with voting rights, said stock

with voting rights;

b. In the case of a company issuing multiple classes of stock with voting rights, a class

of stock with voting rights whose value of rights, etc. to receive economic benefits

including claim for surplus dividend pertaining to the number of shares that enables

exercise of one voting right at a general shareholders meeting with regard to

important matters including selection and dismissal of board members is higher

than any other class of stock;

c. Stock with non-voting rights

Note: In case of stock mentioned b. above, it is assumed that there are no other class of

shares other than it for which the listing application is filed.


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10. Restrictions on Transfer of Shares (Rule 205, Item 10 of

the Regulations)

A joint stock company may impose restrictions on transfer of shares by virtue of the Articles

of Incorporation. However, financial instruments exchanges provide open marketplaces

where a large number of public investors can participate freely. Therefore, restrictions on

transfer of shares associated with any trading may conflict any rules set by the exchanges.

Therefore it is required that the applicant has not imposed restrictions on the transfer of

shares for which the listing application is filed or is expected to remove such restrictions by


So any applicant which has imposed certain restrictions on transfer of shares for which the

listing application is filed will be required to revise the Articles of Incorporation and submit

the certificate of revised registered items which reflects such revised items during the

examination period.

Note: An exception to this criterion would be provided when the transfer of stocks is

restricted by virtue of laws such as the Broadcasting Act or Aviation Act and if such

restrictions may not hamper trading on markets operated by TSE.


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11. Handling at Designated Book-Entry Transfer Institution

(Rule 205, Item 11 of the Regulations)

The stock of the applicant will be handled by a designated depository institution under the

Book-Entry Transfer Act. The designated book-entry transfer institution under the

Book-Entry Transfer Act is the Japan Securities Depository Center, Inc. (hereinafter referred

to as “JASDEC”).

Therefore it is required that the shares of an applicant are already handled by JASDEC or

are expected to be handled by JASDEC by the time of listing.

An applicant is required to dematerialize its stock certificates, such that they are eligible for

the book-entry transfer of JASDEC. So, if the applicant has issued materialized stock

certificates and has not completed the procedures for the dematerialization of stock

certificates, the applicant shall complete the procedures by the end of examination period.

After the listing approval (listing approval date, in principle), the applicant is required to

submit consent in the form designated by JASDEC to the effect that the applicant agrees

that JASDEC will handle its listed stocks.


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12. Expected Implementation of Merger, etc. (Rule 205, item

12 of the Regulations)

It is required that an applicant does not meet a. and b. below:

Item Descriptions

a. Merger, demerger, turning a company

into a subsidiary, or turning a subsidiary

into non-subsidiary company, receipt or

transfer of business

An applicant expects to effect any of the

following on or after the listing application

date and within two years from the end of

the previous year, and the applicant ceases

to be a substantive surviving company

through such transactions:

- Merger (Note)

- Demerger

- Turning another company into a

subsidiary of the applicant or turning the

applicant into a subsidiary of another

company (the applicant ceases to be a

parent company of another company)

- Receipt or transfer of business (Note)

b. Merger, stock swap or transfer of

shares

The applicant expects to effect a merger in

which the applicant will be dissolved, or

stock swap or transfer of shares which turns

the applicant into a wholly owned subsidiary

of another company within two years from

the end of the previous year (excluding

transactions expected to be implemented

before the listing date)

Note: These transactions include cases where a subsidiary of the applicant has

implemented or expects to implement any one of them.

The following outlines the nature thereof, respectively.


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a. Merger, split-up of company, turning a company into a subsidiary, or turning a

subsidiary into non-subsidiary company, receipt or transfer of business

If it is expected that a merger (Note 1) will take place within two years (Note 2) from the end

of the previous year, such that an applicant would substantively cease to be a surviving

company, the nature, financial conditions and management performance of the applicant

would dramatically change because of such act.

In such cases, TSE will not accept the listing application because it will be difficult to capture

the nature of the company after such act.

Note 1: Since this two years period does not include the “period from the beginning of

application year to the initial listing application date,” listing application would be

possible.

Note 2: Split-up of a company excludes a divesture of business where the applicant takes

over a business from a listed company (limited cases where a business taken over

from the listed company constitutes a main business of the applicant).

Even when a listing application would be accepted as the merger, etc. effected by an

applicant would not meet any one of the transactions mentioned above, JPXR may

separately require the applicant to submit additional data when JPXR determines that such

merger, etc. would give rise to significant influence. For more information, please refer to

“A1 (4) Handling of Reorganization for the Purpose of Examination; b. Documents to be

Submitted When Significant Influence Takes Place.”

b. Merger, stock swap or share transfer

A listed company may be delisted when the listed company is dissolved or it effects stock

swap or share transfer to make the listed company a 100% subsidiary of another company.

Thus, since it would not be desirable to permit any company expected to be delisted at the

time of listing application to list its stock, TSE would not accept any listing application

regardless of when the applicant expect to effects merger which results in the dissolution of

the applicant or stock swap or share transfer to make the listed company a subsidiary of

another company within two years from the end of the previous year.


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Note: However, if the applicant intends to reorganize the company before the listing date,

the listing application would be possible.


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13. Assignment of the Stock to the First Section at Initial

Listing (Rule 210, Paragraph 1 of the Regulations)

For a company which is an initial listing applicant and applies for the assignment of its stock

to the 1st

section, such assignment would be permitted if the company meets the

requirements of Rule 205 of the Securities Listing Regulations and satisfies the following

criteria.

It is expected that the number of shareholders will be 2,200 or more and the number of

tradable shares will constitute 20,000 trading units or more and account for 35% or more of

shares of listed stock by the time of listing and that the market capitalization on the listing

day will stand at ¥25,000 million or more.


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14. List of Share Prices Used for Initial Listing and

Assignment to the First Section

<An applicant is a non-listed company>

Item Underlying

regulations Used prices

Formal

Requirements

Market

capitalization

of tradable

shares

With

public

offering

and

secondary

offering

Rule 212,

Paragraph 2,

Item 2 of the

Rules

Expected public offering or

secondary offering prices

(prices which are used as the

basis for calculating the

expected total value of stock

or expected total value of

sales described in the

Securities Registration

Statement)

Market

capitalization

Rule 212,

Paragraph 3

of the Rules

Market

capitalization

of tradable

shares

Without

public

offering

and

secondary

offering

Rule 212,

Paragraph 2,

Item 2 of the

Rules

Assessment value of stock,

etc. calculated by using

formula TSE determines to be

reasonable

Market

capitalization

Rule 212,

Paragraph 3

of the Rules

Assignment

of stock to

the 1st

section at

initial listing

Market

capitalization

With

public

offering

and

secondary

offering

Rule 217,

Paragraph 2

of the Rules

Prices for public offering and

secondary offering

Without

public

offering

and

secondary

offering

Rule 217,

Paragraph 2

of the Rules

Assessment value of stock,

etc. calculated by using

formula TSE determines to be

reasonable


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< Applicant is a company already listed on another exchange>

Item Underlying

regulations Used prices

Formal

Requirements

Market

capitalization

of tradable

shares

With public

offering

and

secondary

offering

Rule 212,

Paragraph

2, Item 1(a)

of the Rules

a. Lowest

price during

the one

month from

the date

preceding the

day before

the listing

approval date

b. Expected

public offering

or secondary

offering price

Lower of a

and b

Market

capitalization

Rule 212,

Paragraph

3 of the

Rules

Market

capitalization

of tradable

shares

Without

public

offering

and

secondary

offering

Rule 212,

Paragraph

2, Item 1(b)

of the Rules

Lowest price on another

market during the one month

from the date preceding the

day before the listing approval

date (Note 1)

Market

capitalization

Rule 212,

Paragraph

3 of the

Rules

Assignment

of stock to

the 1st

section at

initial listing

(Note 2)

Market

capitalization

With public

offering

and

secondary

offering

Rule 217,

Paragraph

2 of the

Rules

a. Lowest

price during

the one

month from

the date

preceding the

day before

the listing

approval date

b. Expected

public offering

or secondary

Lower of a

and b


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offering price

Market

capitalization

Without

public

offering

and

secondary

offering

Rule 217,

Paragraph

2 of the

Rules

Lowest price on another

market during the one month

from the date preceding the

day before the listing approval

date (Note 1)

Note 1: The lowest price represents the lowest price of daily closing prices of the stock at

trading session on a financial instruments exchange in Japan (if there is no closing

price on a day, the price of the day will be included in the determination).

Note 2: Similar treatment shall apply to Assignment of stock to the 1st section at alteration of

Listing Market.

III Listing Examination (Relating to Rule 207 of the Regulations)

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III Listing Examination (Relating to Rule 207 of

the Regulations)

The examination will be made for the corporate group of an applicant (Note) which meets

the formal requirements (Rule 205 of the Securities Listing Regulations) based on the items

prescribed in Rule 207 of the Securities Listing Regulations (hereinafter referred to as the

“substantive examination standards”)

Note: The corporate group represents a group comprising the applicant, its subsidiaries and

affiliated companies.

Substantive examination standards comprise five eligibility criteria which should be satisfied

by listed companies. Actual standards to determine whether each eligibility criterion is met or

not are included in “Guidelines Concerning Listing Examination, etc.”.

In the actual examination, JPXR will mainly examine the matters described in the “Securities

Report for Initial Listing Application (Part I)” which an applicant files with TSE and assess the

status of compliance with standards through interviews and meeting with the applicant.

In the meantime, while it is determined that the corporate group of an applicant meets the

standards, JPXR may encourage the applicant to improve its corporate profile so that it will

be more suitable as a listed company.

The following summarizes the requirements of the listing criteria and key points of the listing

examination.


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List of Substantive Requirements of Examination Standards

Rule 207 of the Securities

Listing Regulations

Guidelines Concerning Listing Examination, etc. II 2 – 6

(summary)

1. Corporate continuity and

profitability:

A business is operated

continuously and a stable

revenue base is present

(1) The business plan of corporate group of an initial listing

applicant is appropriately drawn up in light of its

business model, business environment, risk factors,

etc.;

(2) The corporate group of an initial listing applicant is

reasonably expected to be able to maintain a stable

profit in the future;

(3) Management activities are recognized to be able to be

carried out stably and continuously

2. Soundness of corporate

management

A business is carried out

fairly and faithfully.

(1) An applicant is not deemed to give or enjoy profit

wrongfully through a trading act or any other

management activities with specified entities.

(2) The mutual relationship of relatives, the state of

concurrent posts with any other company are

recognized not to impair the fair, faithful and full

execution of office duties and effective implementation

of audit practices.

(3) When an applicant has a parent company, etc., its

management activities are recognized to have

independence from such parent company, etc.

3. Effectiveness of

corporate governance

and internal

management system of

an enterprise

Corporate governance and

internal management system

are developed in accordance

with the size, corporate

maturity and functioning

properly.

(1) The system to ensure the appropriate execution of

duties of officers of the corporate group of an initia l

listing applicant is recognized to be appropriately

prepared and operated.

(2) The internal management system is recognized to be

reasonably developed and appropriately operated to

carry out effect management activities.

(3) Necessary personnel are recognized to be competent to

carryout stable and continuing management activities.

(4) A listing applicant adopts accounting treatment

standards adaptable to its actual situation and in

addition, necessary accounting body is recognized as

being prepared and operated appropriately.


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

laws and regulations is prepared and operated

appropriately, and that no material breach of laws and

regulations has recently been made.

4. Appropriateness of

disclosure of corporate

profile, risk information,

etc.

The applicant is in a status

where disclosure of the

corporate information, etc.

may be carried out in an

appropriate manner

(1) The applicant is in a status where any corporate

information including facts which have a significant

impact on the management has been managed and

disclosed in a timely and appropriate manner. The

system to prevent any insider trading has appropriately

been designed and implemented.

(2) Documents for the disclosure of corporate information

have been prepared in accordance with laws and

regulations, and have prominently described any items

which may potentially have significant effect on

investment decisions of investors, items to be

considered as risk factors and items to be regarded as

significant premises for business activities, in an

understandable manner

(3) Any transactions between related parties and other

specified parties or adjustments for shareholding ratio

have not distorted the disclosure of the substance of the

corporate group.

(4) When a listing applicant has a parent company, etc., the

applicant is deemed to be able to appropriately

understand company information of the parent which

may significantly influence the management of the

applicant and to disclose the information to investors in a

timely and appropriate manner.

5. Other matters deemed

necessary by the

Exchange from the

viewpoint of the public

interest or the protection

of investors.

(1) The contents of the rights of shareholders and the state

of their exercise are deemed appropriate from the view

points of the public interest or the protection of

investors.

(2) The applicant does not have a contention or dispute,

etc. which would have a material; effect on the

management activities and business performance.

(3) The applicant is recognized to develop an internal

system to prevent criminal and extremist elements from


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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) When domestic stocks pertaining to initial listing

application are stocks with no voting rights (limited to

cases where there are no types of stocks other than the

domestic stocks for which the listing application is

made) or stocks with less voting rights, they must

satisfy each item enumerated in Guidelines II, 6. (4).

(5) When domestic stocks pertaining to initial listing

application are stocks with no voting rights (limited

cases to where there are stocks other than the

domestic stocks for which the listing application is

made), they must satisfy each item enumerated in

Guidelines II, 6 (5).

(6) It is deemed appropriate from the viewpoints of the

public interest or the protection of investors.


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1. Corporate Continuity and Profitability (Rule 207,

Paragraph 1, Item 1 of the Regulations)

(1) The business plan of corporate group of an initial listing applicant is appropriately drawn

up in light of its business model, business environment, risk factors, etc.;

(Guidelines II 2, (1) )

Requirements of criterion and focus of examination

In examination on the basis of these criteria, JPXR will assess whether the business plan of

applicant which is filed with JPXR has been prepared in due course of process.

In practice, the examiners will gain in-depth understanding of characteristics (strength and

weakness) of business model and profit generating structure of the applicant with reference

to, but not limited to, factors in prior years which gave rise to changes in operating results.

Then they will mainly assess whether the business plan exhaustively reflects various factors

to be reflected in developing businesses going forward (industry environments and status of

peer companies, market size and market prices at the market where the applicant operates,

trend in demands for products and services, trends in raw materials market, etc., status of

major customers, suppliers and other business partners, and status of law and regulations).

At that time, they will also assess whether the plan to generate profit, sales plan,

procurement and production plan, capital investment plan, personnel plan and fundraising

plan are consistent with each other.

In addition, JPXR will determine whether the business plan represents a reasonable plan

which has been reasonably developed through the due process of the applicant on a

company-level, rather than a plan which merely shows internal target goals based on the

sole determination of specific management, departments or divisions.


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(2) The corporate group of an initial listing applicant is reasonably expected to be able to

maintain a stable profit in the future;

(Guidelines II 2 (2) )


For the purpose of examination on the basis of the criteria, JPXR will evaluate whether an

applicant is reasonably expected to recognize stable profit for a certain period of time

following listing in consideration of the business plan of the corporate group.

The reference “a certain period of time” for the purpose of this paragraph basically

represents two years period including application year. However, if it is expected that any

event which is likely to significantly affect the performance of the corporate group may take

place in the third year or after following listing, JPXR will make the assessment including

such event.

For the purpose of this criterion, JPXR will assess the profitability of main business of an

initial listing applicant, so the profit to be examined will, in principle, be an ordinary income.

In evaluating “whether an applicant is reasonably expected to recognize stable profit,” JPXR

will make examination responsive to changes in performance of the corporate group of initial

listing applicant as mentioned in (i) or (ii) below.

(i) Performance, revenue and profit improve on a stable basis

When the performance, revenue and profit of the corporate group of initial listing applicant

improves on a stable basis, JPXR will evaluate whether the business plan has been

developed appropriately (no examination of any points other than those referred to in

Guidelines II, 2 (1) will be made).

However, if the amount of profit of the corporate group of initial listing applicant is small,

JPXR will assess the basis for continuous recognition of profit following listing. In practice,

JPXR will evaluate the profit and loss break even point and basis for continuously clearing

the point, as well as the stability of segments which have consistently recognized profit in

excess of costs and expenses incurred by the corporate group as a whole.


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(ii) Performance declines as revenue and profit are decreasing

When the performance of the corporate group of initial listing applicant declines as its

revenue and profit are decreases, JPXR will examine the basis for continuously recognizing

profit after listing. In practice, JPXR will evaluate the profit and loss break even point and

basis for continuously clearing the point, as well as the stability of segments which have

consistently recognized profit in excess of costs and expenses incurred by the corporate

group as a whole.

In the meantime, if the amount of profit is small, the corporate group of initial listing applicant

is highly likely to incur ordinary loss after listing. So JPXR will more strictly evaluate the

basis for continuously recognizing profit. When it is difficult to evaluate the basis , JPXR may

assess the bottom of operating results on the basis of historical experiences during the

application period.

When profit and loss significantly fluctuates due to special events or reasons, JPXR will

conduct the evaluation including consideration of such events.


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(3) Management activities (meaning business activities, and investment activities and

financial activities; the same shall apply hereinafter) of the corporate group of an initial

listing applicant are recognized 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 are in a state

enumerated in the following (a) and (b):

(a) Business activities are able to be conducted stably and continuously in light of

purchases, production and sales, actual results of transactions with customers and

suppliers, characteristics and demand trends for manufactured products and services,

and the state of performance of any other business (excluding the viewpoint of the

structure of the corporate group); and

(b) The structure of the corporate group is no serious obstacle to continuous business

activities;

(Guidelines II 2 (3) )

Note: For example, like a Chinese company subject to the restrictions on foreign

investments which lists its stock on a foreign stock exchange, if there is some

special structure between an applicant and the Chinese company belonging to its

corporate group, JPXR will make the examination, focusing on points in (b) above.


While the criteria with respect to (1) and (2) above represent those for examining prospectus

for performance mainly characterized by profit and loss, as well as cash flows, the

examination on the basis of criteria in (3) above will focus on actual status of corporate

management including the evaluation as to whether the management activities of the

corporate group of applicant will be carried out stably after listing. For the status of

subsidiary, etc., JPXR will make the examination in consideration of significance of its effect

on the corporate group.

The following outlines how JPXR examines these issues.

First, JPXR will assess the nature and status of business activities of the corporate group of

applicant, represented by procurement, production and sales (in this paragraph,

manufacturing industry is referred to as an example; naturally items to be examined will

differ, depending on the category and lines of business).


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For procurement, the examination point is that the applicant can procure necessary items of

relevant quality and volume in a timely manner.

For production, the examination point is that the applicant has in place organizations and

systems where it can produce products in quantity which may not hamper continuous sales

activities and in quality which should not impair the confidence of customers in products.

When the applicant outsources a part of production activities, JPXR will naturally evaluate

whether the applicant has selected a good outsourced entity.

With respect to sales, the examination point is that the relationship with major customers

has been well maintained or there are no ailing companies in customers. If the business

relationship with a customer is deteriorating, JPXR will more closely examine how the

curtailment or termination of business with the customer will affect the corporate group of

applicant or how it can compensate for losses arising from such situation. JPXR will also

assess the existence of any factors which significantly impede the continuous operations of

business after listing.

Procurement, production and sales activities should not be carried out in isolation, but

should be carried out as a whole in a consistent and aligned manner.

For the purpose of examination of these issues, the conditions of and competition within the

industry where the corporate group of applicant operates are also considered to be material.

Therefore, JPXR will examine the business environments surrounding the corporate group

and whether the marketability of products are not declining, as well as the products of the

applicant group are characterized such that they may continue to evoke relevant demands.

Even when the market in which the applicant operates is expanding, if its market share

declines, JPXR will assess the factors which giving rise to such decline, future prospectus

and how the applicant actually addresses such situations.

The following are also regarded as examination points.

Development policies for business offices and current status

In cases where the applicant carries out business represented by operation of several shops,

a key point in this case is that the applicant will be able to continuously open shops on the

basis of the development of shop opening policies and the satisfaction of requirements for

shop opening.


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Status of contracts which are significant in terms of management

JPXR will examine the existence of material contracts for the business management,

including franchise contract and royalty contract, and whether such contracts are certain to

be maintained and renewed.

Legal disputes, litigation cases and breach of laws and regulations, etc.

JPXR will assess whether a legal case will not impair the reputation of products, etc. and

whether there is any case which adversely affects business activities.

Risk management

JPXR will assess whether the applicant has in place systems to ensure the continuation of

business and recovery in the event of occurrence of any accident or disaster.

b. Investment activities such as capital investment and business investment, etc. of the

corporate group of an initial listing applicant do not hinder continuous management

activities in light of the trend and future outlook, etc. of the state of investment;

c. Financial activities such as fundraising, etc. of the corporate group of an initial listing

applicant do not hinder continuous management activities in light of the trend and future

outlook, etc. of the state of financial affairs



In examining the continuation of management activities of the corporate group, points relate

to the status of investment activities and financial activities, underlying the continuity of

business activities.

For investment activities, JPXR will assess whether the applicant has appropriately

developed investment plan for capital expenditures and investments in research and

development activities which are required to maintain competit ive power in business and

address future expansion of business, as well as whether the applicant has made sufficient

and necessary consideration of cash flow plan and investment recovery plan in making

investment in a new business.

With respect to financial activities, JPXR will assess the availability and prospectus for

necessary funds to realize business expansion and business expansion on the basis of the

financial conditions of the corporate group of the applicant.


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In addition, when the borrowing is expected to continue to increase because of capital

expenditures going forward, JPXR will assess whether financial conditions which

significantly affect the continuation of business are unlikely to deteriorate significantly on the

basis of trends in the industry, business relationship between the applicant and banks, and

fundraising plan including capital increase through public offering after listing.

In addition when the applicant increases its capital concurrent with initial listing, JPXR will

also assess the nature of the actual investment plan backed by funds raised and the

prospectus for the recovery of such investments.

d. Concerning the matters which become the premise of the main business activities of the

corporate group of an initial listing applicant (meaning permission, authorization, license,

or registration pertaining to main businesses or manufactured goods and commodities or

selling agent agreements or production entrustment agreements; the same shall apply

hereinafter), there are no obstacles to the continuous business activities.



For the purpose of the examination on the basis of this criterion, if the business of the

applicant requires any permit or authorization, etc., JPXR will assess whether the applicant

is in a position to continuously renew such permit or authorization.

The term “the matters which constitute the premise underlying main business activities”

refers to “permission, authorization, license, or registration pertaining to main businesses or

manufactured goods and commodities or sales agent agreements or production entrustment

agreements.”

When a main business of the corporate group relates to industry categories which require

permission, authorization, license or registration of administrative agencies, etc., or largely

depends on selling agent agreement or production entrustment agreement with as specific

business partner, it is expected that the business will not be able to continue in the event

that they are terminated or cancelled.

Therefore, JPXR will assess whether such event leading to cancellation or termination

thereof has not emerged.


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In addition, JPXR requests the applicant to submit the statements which describe the

following and assess the matters which become the premise of main lines of business on

the basis of descriptions therein.

- Matters which constitute the premise underlying the main business activities of the

corporate group of the applicant;

- Effective period of permission, etc. and the validity when it is specified by laws and

regulations or contract;

- Events leading to cancellation or termination of licenses, etc. when they are specified by

laws and regulations, or contracts;

- For the matters which constitute the premise underlying main business activities of the

corporate group of applicant, the statement that no factors which hamper the

continuation thereof have taken place and that any occurrence of such factors would

have significant impact on business activities.

Meanwhile, if there are no matters which constitute the premise underlying the main

business, the applicant is required to disclose the fact.


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2. Soundness of Corporate Management (Rule 207,


For the purpose of the examination on the basis of this criterion, in order to protect investors,

JPXR will assess whether the corporate group of applicant carries out its business on a fair

and faithful basis.

In practice, for the soundness of corporate management, JPXR will assess whether the

corporate group of the applicant meets the following criteria.

(1) The corporate group of an initial listing applicant is recognized not to give or receive

profits wrongfully through a trading act (including indirect trading acts and free supply of

services and its reception; the same shall apply hereinafter) or any other management

activities with relevant parties and other specified entities, in light of the mat ters

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

a. Where a transaction has took place between the corporate group of an initial listing

applicant and its relevant parties (Note 1) or any other specified entities, and such

transaction has rationality of continuing the transaction and reasonability of trading terms

including trading prices; and

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


Note 1: “Relevant party” means relevant parties referenced in represents “related parties”

prescribed in Rule 8, Paragraph 17 of the Financial Statements, etc. Rules.

Note 2: “Other specified entity” refers to any person wh ich is deemed to have a strong

relationship with the corporate group of the applicant in terms of human and

financial resources, though they are not within the scope of related parties


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(hereinafter collectively referred to “related party, etc.”).

Note 3: “Transactional acts” include trading transactions, finance transactions, lease

transactions of real estate, etc., and transactions associated with the use of

industrial properties. They include cases where the corporate group of the

applicant has carried out transactional acts indirectly rather than direct

transactional acts and where the corporate group merely provides services as its

business without charging any proper consideration.


Since transactions with related parties represent a transaction with a person having special

relationship, there is a concern that the applicant is forced to enter into transactions which

are not primarily necessary or the terms and conditions of the transaction may be dis torted.

Therefore such transactions could be alleged to represent transactions for which the

applicant is required to exercise a high degree of caution.

On the other hand, there are cases where it is reasonable to continue transactions after

listing because the applicant finds it difficult to identify an alternative partner as transactions

have continuously been carried out, starting with the time before the preparation of the

listing or as the applicant cannot identify any partner who shows more favorable terms and

conditions of transactions. In such cases JPXR will assess the reasonableness (necessity

for the purpose of its business) of the transactions and appropriateness of the terms and

conditions thereof.

Point for the purpose of this criterion is that even if the terms and conditions of the

transaction are determined to be adequate compared to others, it might be regarded as

undue grant of benefit if the transaction itself lacks in reasonableness (necessity for the

purpose of business)

In addition, even if transaction between the corporate group of applicant and related party,

etc. is carried out under the terms favorable to the corporate group of applicant, the

transaction would be determined to grant undue benefits to the group if the influence of the

group over the related party increases as the group receives benefits associated with the

transaction.

In the examination on the basis of this criterion, one of the determinant factors to decide that


-93-

the transaction is determined to grant undue benefit is that, for example, the management of

the applicant can reasonably explain that the transactions activities can be justified when

considering the benefit of the corporate group of applicant, not individuals, in the first place.

Especially, it might not be questioned whether the transaction was necessary for a company

or its owner as an individual because the ownership and management of the company were

not sharply separated before listing. However, as a listed company has a large number of

general investors, in carrying out any transaction, it is required to satisfy the benefits of

shareholders including general investors by clearly separating the assets of the company

from those of the owner.

In consideration of the above, when any related party transaction occurs at the applicant,

the applicant is required to consider organically whether such transaction is reasonable

(necessity for the business) or the terms and conditions are adequate.

Moreover, JPXR will assess whether the applicant has appropriate recognition on related

party transactions or has in place appropriate check and balance functions so that no

transaction without reasonableness or adequate terms and conditions would take place after

listing even in cases where no related party transactions have been entered into or the

terms and conditions are acknowledged to be adequate.

For any transaction involving the management (e.g., any business acquired or planned

through the efforts of the management in itself, or any project whose necessary matters are

exceptionally determined by the management), any internal check is unlikely to be properly

applied, which may result in some frauds. Therefore, the examiners will assess whether an

appropriate system has been developed and operated where such project will be

considered at a corporate level and appropriate check and balance functions will be applied

properly, and whether or not any transaction involving the management, which was actually

carried out, is an inappropriate one.


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

composition, actual working situation 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 board members, accounting advisors or

executive officers, otherwise, spouses of persons corresponding to these and blood

relatives within the second degree and relatives by affinity take a position as an auditor, a

member of an auditing committee or any other positions corresponding to these, it shall

be deemed to impair the implementation of an effective auditing.



For the purpose of examination on the basis of this criterion, JPXR will assess whether the

status of officers of applicant is not to impair faithful and sufficient execution of duties. This

criterion might be infringed if the decision making of applicant is highly likely to be distorted

because of biased composition of officers of applicant (because family members or relatives

of the management account for a large portion of the Board of Directors) or because of any

decision favorable to a specific interest group, or if a flexible and fair decision in the due

course of ordinary business is highly likely to be impeded, including the decision on the

holding of meeting of the Board of Directors of applicant, as officers of the applicant

concurrently hold positions of directors or officers of another company.

The following outlines how JPXR will assess these issues.

First, since it is assumed that for a company for which family me mbers or relatives of the

management account for a large portion of the Board of Directors, the influence thereof over

the company would be strong, JPXR will assess whether the interest of officers from family

members or relatives of the management would be preferred to that of company as a whole

in consideration of the background for the election thereof and the status of related party

transactions therewith. Especially in case where the family members or relatives of the

management who serve as officers account for the majority of the Board of Directors), JPXR

will more closely examine resolutions made by the Board of Directors as their influence over

the company is strong.

For company auditors or the committee of company auditors, in consideration of their


-95-

functions, it is desirable to avoid the assignment of any family members to such capacities.

Especially in the event that any spouse or blood relative of a second degree of directors,

executive officers or accounting advisors ((including employees of an accounting advisor

who are in charge of accounting advice if the accounting advisor is a corporation) are

appointed to the offices of company auditors or members of the committee of company

auditors, such appointment will be determined to be a self-audit, giving rise to situations

where the effective implementation of the audit would be impaired.

Next, if any officer of the applicants concurrently holds the position of of ficer at another

company, JPXR will assess whether such officers execute their required supervision duties

properly in consideration of attendances at the board meetings of the applicant and for

full-time officers, assess whether the mobility of the execution of their duties have not been

impaired.

If the applicant has any business relationship with such another company, JPXR will assess

in the listing examination whether the applicant has in place any governance system to

exercise checks and balances on any such business relationship, and whether or not the

applicant is forced to make any onerous decisions, in consideration of the status of

procedures for the determination of the terms and conditions of the transaction. If JPXR

affirms the relevant systems and implementation, it may determine that such concurrent

holding of positions could be permitted.

In addition, in cases where an applicant has an parent company, etc. (so called “subsidiary

listing”) and the decisions on management policies or execution of duties are significa ntly

influenced by the parent company, etc. as the total number of officers who concurrently

holds other positions and directors seconded from the parent company, etc. accounts for the

majority of the Board of Directors (in case of a company with committee system, including

each committee) or because of the resolution requirements specified in the Articles of

Incorporation, JPXR will more closely examine this point in order to protect minority

interests.

In considering the status of composition of officers or positions concurrently held, an

applicant is required to appropriately address enhanced efficiency of management,

establishment of corporate ethics and effective checking functions over management, fully

recognizing the importance of corporate governance practices followed by listed companies.

In the context of the soundness of corporate management of the applicant, though in rare


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cases, there are cases where officers and employees of the parent company, etc. may have

made equity investments in the applicant or cases where the applicant has issued any

subscription warrants to the officers and employees of the parent company, etc. In its listing

examination JPXR will carefully address the equity investments by officers and employees

of the parent company, etc. which do not directly relate to the business operation of the

applicant as such investments lack in reasonableness or necessity in conjunction with the

clear ownership of responsibilities or grant of incentives. Though rare, officers or employees

of the parent company, etc. may have made equity contributions to the applicant or the

applicant may have granted some subscription warrants to officers and employees thereof.

Any equity contribution of officers or employees of parent company, etc. to the applicant has

nothing to do with the management of applicant and such transactions may lack in clarified

ownership of management responsibility or reasonableness and necessity for granting

incentives. Thus JPXR will more strictly address these issues in conjunction with the

soundness of business management of applicant.


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► When an applicant has a parent company, etc. (Note)

(3) 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 carried out

independently from such parent company, etc. in light of the matters enumerated in the

following a. to c. or any other matters:



Where an applicant has a parent company, etc. (i.e., in the case of a “subsidiary listing”), the

relationship is assumed to entail potential conflict of interests between the interests of the

parent company and the minority interests of the applicant. In examining a listing application

of this type, i.e., subsidiary listing, JPXR will therefore evaluate whether the applicant’s

independence from the parent company, etc. satisfies the criteria set forth by JPXR on

independence of the applicant, in addition to the criteria enumerated in a. to c. below, in

order to ensure that the rights and benefits of the minority interests of the applicant will not

be impaired.

With respect to a “subsidiary listing,” the parent company, etc. may hold a large percentage

of the voting rights of the applicant after listing. Likewise, some of the directors, officers, etc.

of the parent company, etc. may concurrently hold positions as directors and employees of

the subsidiary. Under these circumstances, the applicant will not be permitted ideally to

make decisions at its discretion. It is not of intrinsic benefit for the governance of a listed

company if a specific parent company, etc. has significant influence over the listed company.

Rather, it would be preferable for an applicant to have its discretion to develop and transform

its operations and management system in consideration of the environment and

characteristics of its business by taking relevant measures to reduce the ratio of equity

investment of the parent company, etc. in the listed company and reduce the number of

directors, officers, etc. who concurrently serve in similar positions in the parent company, etc.

in future.

Meanwhile, the listing of a subsidiary making up an integral part of a parent or listing of a

subsidiary deemed to be a core company (a subsidiary accounting for a large portion of the

enterprise value of a parent company group as a whole) will not, in substance, constitute a

new target for investment. Moreover investors may be concerned that a listed parent


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company intends to acquire dual gains by making a subsidiary with a core role in the

company group list its shares. Thus, the JPXR is certain to address these concerns carefully

when it examines the listing application.

On the other hand, when the applicant has already listed its shares on another financial

instruments exchange, we may not be able to argue that the parent company intends to

obtain dual gains associated with the initial public offering. In this case, the abovementioned

concerns are less pressing. We do, however, consider the circumstances and conditions

under which the new listing on the other financial instruments exchange was made.

Moreover, an applicant may significantly increase its relative contribution to the enterprise

value of a parent company group, either through fluctuations of the parent company’s

performance or through the growth of the applicant itself. In such cases, the JPXR will

decide on listing by comprehensively considering historical performances and future

earnings prospects. The JPXR will not decide the listing based solely on temporary

fluctuations of operating results.

Note: A “parent company” means a parent company of an applicant prescribed in Rule 8,

Paragraph 3 of the Financial Statements, etc. Rules. On the othe r hand, a “parent

company, etc.” means a “parent company” or other affiliated companies or a parent

company of other affiliated companies, as described in Rule 8, Paragraph 17, Item 4

of the same rules; provided, however, that these will not apply to cases where the

applicant is not expected to have a parent company, etc. due to a public offering or

sale effected prior to the listing by the last day of the first business year ending after

the listing.


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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. (excluding

the corporate group of an initial listing applicant; the same shall apply hereinafter.), 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.;



When an applicant was established through a divesture of one business of the parent

company, etc., it is likely that the activities of the applicant merely relate to the performance

of a part of business activities of the parent company and the business activities of the

applicant have been directed by the parent company, etc., whereby the applicant cannot

make any decisions on business activities at its discretion

The applicant may also find it difficult to determine management policies or operation

policies at its discretion which are necessary in continuously and freely carrying out its

businesses because of the management policies of the parent company, etc. on related

companies.

In such cases, earnings which should be returned to the shareholders of the applicant are

likely to be impaired at the discretion of the parent company, etc., and the applicant is

deemed to constitute only a business department of the parent company, etc. Such

companies are not appropriate as an investment choice offered to investors.

Therefore in determining whether or not the applicant constitutes a business department of

the parent company, etc., JPXR will assess the following points and determine that the

applicant has capabilities to carry out its business activities at its discretion, the parent

company, etc. has not impeded free business activities or management judgments of the

applicant and such likelihood is remote in the near future.

- The positions of officers of the applicant concurrently held by those at the corporate

group of the parent company, etc. are unlikely to impede the applicant’s own decisions;

- The ordinary business operations of the applicant have been carried out under the

applicant’s own decisions and they are not necessarily directed by the parent company,

etc.;


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- There are no rules or procedures which require the prior approval of the parent company,

etc. on the decision making of the applicant;

- The applicant has its own capabilities, technologies or know-how to implement the

market research, developments, design and planning for products; and

- The applicant has been carrying out price negotiations, new customer exploration, and

activities to expand sales to existing customers by itself.

Furthermore, if a company which carries out similar businesses of the applicant exists in the

corporate group of the parent company, etc., it is expected that the parent company, etc.

may leverage its controlling position to restrict or coordinate the business activities of the

applicant as the parent company, etc. strives to prefer the earnings of the group as a whole

to those of the applicant. In such cases, in consideration of the positioning of each group

company on the basis of the nature and characteristics of the businesses (operating

segments, customers and distribution channels) (the background for competitions among

group companies, if any), the reasons why the applicant implements management

independent of the parent company, etc. and the nature of business coordination made by

the parent company, etc., JPXR will assess whether the applicant secures sufficient

independence from the parent company, etc. such that it may not be exposed to undue

business coordination of the parent company, etc.

In the event that it is concerned that the applicant constitutes a “business department or

division” of the parent company, etc., and the shareholding ratio of the parent company, etc.

is high, JPXR will assess this point by confirming the intention of the applicant to reduce the

shareholding ratio of the parent company, etc.

<Applicant recognizes sales arising from the parent company, etc.>

When an applicant recognizes sales arising from its parent company, etc., it is assumed that

there would be close relationship between the applicant and the parent company, etc. In

practice, JPXR will assess whether the applicant has not discretionally depended on the

parent company, etc. for the purpose of business by carefully evaluating functions the

applicant plays in the business.

TSE may determine that the applicant constitutes a business department of the parent

company, etc., for example in the following cases:

- The applicant recognizes sales as it provides services for which the parent company, etc.

becomes an end user under the instructions thereof; or

- The applicant recognizes sales as it receives orders from the parent company, etc. on a


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preference basis, rather than making sales efforts by itself

On the other hand, even when the applicant recognizes sales arising from the pa rent

company, etc., JPXR may determine that the applicant does not constitute a business

department or division of the parent company, etc. if the applicant carries out sales activities

to users based on proprietary technologies or know how or the parent etc. merely serves as

a contact in form (providing transaction account) due to the re lationship with the customers.

In addition, though the applicant recognizes sales arising from entities other than the parent

company, etc., JPXR may determine that the applicant constitutes a business department or

division of the parent company, etc. unless the applicant has proprietary technologies or

know how or if it is determined that the applicant totally depends on the parent company, etc.,

for example, where it comprehensively depends on the parent company, etc. for business

activities.

<An applicant is determined to partially constitute a business department>

Even when some of the businesses of applicant are determined to constitute a business

department or division of the parent company, etc., if others are determined not to constitute

a business department or division (the applicant has an independent business) and they

generate relatively large revenue and are expected to maintain its continuity and have

growth potential, JPXR will make examination in comprehensive consideration.

<Lease transaction of real estate>

In the following cases, JPXR will determine whether an applicant constitutes a business

department or division based on a degree of dependence on the parent company, etc. with

respect to each relationship (ratio and amount, etc.) and on materiality of business activities:

- The applicant rents a real estate from the parent company, etc.;

- The applicant has made borrowings from the parent company, etc.;

- The applicant has received financial guarantee of the parent company, etc. with respect

to borrowings or loans from external entities, or

- The applicant has received some secondment from the parent company, etc.

When an applicant made borrowing directly from the parent company, etc. or received

financial guarantee of external loans from the parent company, etc. after the beginning of the

previous year, and if some borrowing or financial guarantee remains outstanding, it is

expected that the applicant has no capability to raise funds by itself. In such cases, JPXR

will carefully assess whether the applicant constitutes a department or division (Note).


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Note: In cases where there is a cash management system (CMS) in the corporate group of

the parent company, etc., if there are a relatively large number of companies which

use its services (borrowers and lenders) and the CMS holds a large value of funds, it is

considered that the CMS has substantively played the same role as financial

institutions. In such cases, if the applicant made borrowing from the CMS, the

applicant’s capability to raise funds may not be questioned, compared to the direct

borrowing from the parent company, etc. Therefore, JPXR will flexibly assess the

conditions of borrowing after the beginning of the previous year when the applicant’s

own capability to raise funds are not questioned as the applicant demonstrates the

capability to borrow funds from external financial institutions.


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b. The corporate group of an initial listing applicant or that of a parent company, etc. does

not coerce or induce transaction which become disadvantageous to such parent

company, etc. or the corporate groups of such initial listing applicant such as transactions

under markedly different terms from those of normal transactions (meaning a current

market price, for example; the same shall apply hereinafter.);



It is likely that transactions between the applicant and the parent company, etc. may be

carried out under the terms and conditions significantly different from those a t arm’s length

as they can more arbitrarily determine the terms and conditions for the transactions

compared to those carried out with third parties.

In such cases, the interests of the shareholders of the applicant or the parent company, etc.

might be impaired. In addition, contrary to the intention of the applicant, if the applicant is

forced by the parent company, etc. to carry out transactions under terms and conditions

significantly different from those at arm’s length, it is considered that the independence

required of listed companies is not assured.

Thus this criterion requires the transaction with the parent company, etc. to be carried out at

the conditions similar to those at arm’s length.

In evaluating the “terms and conditions similar to those at arm’s length,” JPXR will compare

the transactions with others or assess the procedures for determining such terms and

conditions. For example, for sales transactions, JPXR will mainly compare the transaction

terms with those of other transactions. For finance transactions, JPXR will make comparison

with prevailing market interest rate while assessing the guarantee cost in case of financial

guarantee of the parent company, etc. For real estate leases, JPXR will look into the

conditions by comparing the rate with that for adjacent areas or confirming an “official

property appraisal” as appropriate. For the royalties for the use of any brand, comparison

with the “terms and conditions of other companies in the corporate group” or confirmation of

“method to determine royalties for use of brands” will be made. JPXR will also consider

some changes in terms and conditions of transaction in the past.


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c. The state of receiving seconded persons of the corporate group of an initial listing

applicant is recognized not to excessively depend on the parent company, etc. and not to

hinder continuous management activities.




corporate group of the applicant can secure necessary personnel to carry out its business

activities independent of the corporate group of the parent company, etc.

If the corporate group of the applicant has accepted any secondment from the corporate

group of the parent company, etc., JPXR will assess whether the assignments of the

seconded persons have not impeded the independence of management of the applicant’s

corporate group. If the seconded persons are assigned to positions as officers or general

managers who manage departments exposed to the influence of the parent company, etc.,

JPXR will be concerned with such situations from the perspective of independence.

However if such seconded persons are assigned to any department which has nothing to do

with the determination of management policies or transactions with the parent company, etc.,

JPXR may permit such situations in consideration of effect on controlling power.

In addition it is important that the status of secondment from the parent company, etc. does

not affect the corporate continuity of the corporate group of the applicant as the replacement

of the seconded persons is ensured when the secondment contract is terminated. It is likely

that the status of secondment may adversely affect the continuation of the businesses of the

corporate group of the applicant when the businesses highly depends on the special

knowledge or know how of the seconded persons. However, if any replacement of such

seconded persons is available by recruitment outside or elevation of employees inside,

JPXR may conclude that such situations may not adversely affect the continuation of

businesses.


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3. Effectiveness of Corporate Governance and Internal

Management System of an Enterprise (Rule 207,


(1) The system to ensure the appropriate execution of duties of officers is recognized to be

appropriately prepared and 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

is able to effectively implement checks and balances as well as auditing concerning the

execution of work duties of officers of the corporate group of an initial listing applicant. A

listing examination in such a 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; and

b. In the corporate group of an initial listing applicant, checks and balances as well as

auditing are implemented with regard to the execution of work duties of officers for the

purpose of the continuous and efficient management of the corporation. Moreover, such

checks and balances as well as auditing effectively function.



When a company goes public by publicly offering its stocks, the company is required to

ensure and maintain the capability to generate profit, ensure soundness of its management

and to design and implement appropriate disclosure practices. So the company must have

in place appropriate mechanisms for corporate governance practices.

For the purpose of examination on basis of this criterion, JPXR will evaluate whether the

corporate group of applicant has designed appropriate corporate governance systems and

implemented them effectively, mainly focusing on the design of organs and composition of

officers. In practice, JPXR will confirm the background and reasons for the adoption of

current systems and the composition of officers in consideration of basic concept on

corporate governance practices (Note 1).


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Note 1: For the purpose of the examination of the corporate governance systems, the

applicant is requested to submit a “Corporate Governance Report (Draft)” and

JPXR will assess the contents described in the report. For the procedures for the

descriptions in the report, please refer to the TSE website at the section of

“Download Documents to be Submitted by Initial Listing Applicant”.

(http://www.jpx.co.jp/english/equities/listing/cg/01.html).

In addition, with respect to Board of Auditors (,Audit Committee or Audit and Supervisory

Committee) and Independent Directors, given the importance of the roles it plays in terms of

corporate governance, JPXR will assess the nature of daily auditing work and its efforts

through interviews with full-time company auditors and Independent Directors.

Meanwhile corporate governance systems may differ from one entity to another depending

on its size and circumstances surrounding the entity. On the other hand, some organs are

required to be formed to ensure the corporate governance system suitable for publicly

traded companies.

Regulations on “Corporate Code of Conduct” specify the code of conduct with which listed

companies should comply. An applicant company is also required to establish organs and

enact initiatives as provided in Rules 436-2 to 439 of the Regulations. (Notes 2, 3, 4 and 5)

The Code of Corporate Conduct also defines, as one of the matters expected of listed

companies, that "an issuer of listed domestic stocks shall make efforts to secure at least one

(1) independent director (Rule 445-4 of Securities Listing Regulations)." The listing

examination requires listing applicants to clarify the policy on composition of independent

director(s)/auditor(s) (number of independent director(s)/auditor(s), distinction of directors

and auditors and so forth). In cases where listing applicants do not secure any independent

directors, the listing examination also requests the listed company to identify its policy to

secure an independent director(s) and the progress of actions to secure an independent

director(s), as well as to describe the verified progress in the Corporate Governance Repor t.

In particular, in cases (i) where a company submits a new listing application for assignment

to the 1st Section of the Tokyo Stock Exchange, (ii) where there is a parent company, etc.

with a strong relationship with the applicant company, or (iii) where the board is

family-controlled, such applicant is required to specify a plan to secure an independent

director(s). When examination is conducted on an applicant with respect to assignment to

the 1st Section or alteration of markets, the same requirements will be applicable.

Furthermore, in cases where the applicant company already clarified the policy to secure an


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independent director(s) and the progress of actions to secure an independent director(s) in

the preceding listing examination procedure (at the time of new listing), the applicant

company is required to clarify the subsequent progress.

Furthermore, the Corporate Governance Code (hereinafter referred to as the “Code”)

specifies for the requirements of listed companies in the context of “Code of Corporate

Conduct” that listed companies shall respect the "Principles and Spirits of Corporate

Governance for Listed Companies" formulated by the Exchange and make efforts to

enhance their corporate governance.” (Rule 445-3 of the Listing Regulations). In addition,

with respect to items to be complied with by listed companies, the provisions also require

listed companies to state its commitment to implement each principle of the Code or the

reasons if it does not intend to do so in the report over the corporate governance (Rule

436-3 of the Listing Regulations). During the course of listing examination, the examiners

examine the descriptions (the existence of descriptions of reasons why they do not

implement each principle of the Code and existence of descriptions of items requiring

disclosures by each principle of the Code) in the Corporate Governance Report (draft),

submitted at the time of the listing application.

Note 2: Requirements prescribed in Rules 436-2 to 439 of Regulations are as follows:

Rule 436-2: 1. For the protection of general investors, an issuer of listed domestic

stocks must secure at least one independent director/auditor

(meaning an outside director (meaning an entity falling under an

outside director prescribed in Rule 2, Item 15 of the Companies Act

who is an outside director/auditor prescribed in Rule 2, Paragraph 3,

Item 5 of the Ordinance for Enforcement of the Companies Act (the

Ordinance of the Ministry of Justice No. 12 of 2006)) or outside

auditor (meaning an entity falling under an outside auditor

prescribed in Rule 2, Item 16 of the Companies Act who is an

outside director/auditor prescribed in Rule 2, Paragraph 3, Item 5 of

the Ordinance for Enforcement of the Companies Act) who is

unlikely to have conflicts of interest with general investors;

hereinafter the same).

2. JPXR shall specify the necessary items for securing an independent

director(s)/auditor(s) in the Enforcement Rules.

Rule 436-3 An issuer of domestic listed stocks must describe its committment to


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implement various principles of “Corporate Governance Code” as

attached herewith or the reasons if it does not intend to do so in the

report specified in Rule 419. In this case, the scope of various

principles which require the description of “commitment to implement

or the reasons if it does not intend to do so” shall be defined in the

following items according to the section of market on which it is

listed:

(a) Basic principles, principles, and supplemental principles; listed

on the First Section or Second Section:

(b) Basic principles; listed on MOTHERS or JASDAQ

Rule 437: A listed domestic company shall set up a body enumerated in each of the

following items:

(1) A board of directors;

(2) A board of company auditors, an audit and supervisory committee or

committees (meaning a committee specified in Rule 2, Item 12 of the

Companies Act); and

(3) Accounting auditors.

Rule 438: An issuer of a listed domestic stock shall appoint its accounting auditors

as certified public accountants, etc. who carry out audit certification, etc.

of financial statements, etc. or quarterly financial statements, etc.

contained in a securities report or a quarterly report.

Rule 439: A listed domestic company shall decide the development of a system and

structure necessary to ensure that the execution of duties of directors,

executive officers or administration directors of such listed domestic

company as well as the businesses of corporate group comprising the

listed domestic company and its subsidiaries comply with laws and

regulations and the Articles of Incorporation, and any other systems

necessary to ensure the appropriateness of business of the domestic

company (meaning development of a system and structure prescribed in

Rule 362, Paragraph 4, Item 6 of Companies Act or Rule 399-13,

Paragraph 1, Item 1 Sub-item c or Rule 416, Paragraph 1, Item 1,

Sub-item e of the same Act or development of a system and structure

corresponding thereto), as well as appropriately create and operate such

system and structure.


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Note 3: The applicant is required to elect necessary independent directors/auditors

prescribed in Rule 436-2 of the Regulations by the date of listing and submit to

TSE the “Registration Statement of Independent directors/auditors” with the

description of the status of election of independent directors/auditors. The

registration statement will be available for public inspection. (Rule 436-2 of the

Rules).

Note 4: Independent directors/auditors prescribed in Rule 436-2 of the Regulations must be

elected from outside directors or outside auditors who are unlikely to give rise to any

conflict of interest with general shareholders. When any one of the independence

criteria enumerated in a to d below (Guidelines III 5, (3) 2 relating to the listing

management, etc.) is met, the registration as an independent officer will not be

allowed. So if the applicant is otherwise concerned with the satisfaction of these

criteria, the applicant is encouraged to consult JPXR beforehand via the lead

underwriters.

a. Any entity which makes the company a major trading partner or executives of

the entity, or major trading partner of the company or executives of the trading

partner;

b. Consultant, accounting, or legal professionals who receive a large amount of

cash or other properties from the company, in addition to the remunerations for

officers (the persons who receive such properties meet the definition of

association such as union, the persons who belong to the association);

c. Any person who recently meets a to c above;

(a) Person mentioned in a or b above;

(b) Executives of the parent company of the company (including directors who

are not executives, and including company auditors if any outside auditor

is designated as an independent officer; or

(c) Executives of brother company of the company;

d. his/her relatives of any person mentioned in (a) to (f) below (excluding any

entity which is not important):

(a) Person mentioned in a or b above;

(b) Accounting advisor of the company (limited to the case where the outside

auditor is designated as an independent officer; including employees of an

accounting advisor who are in charge of accounting advice if the

accounting advisor is a corporation; the same shall apply hereinafter);


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(c) Executives of the subsidiary of the company (including directors or

accounting advisors who are not executives if an outside auditor is

designated as an independent officer);

(d) Executives of the parent of the company (including directors who are not

executives and including company auditors if an outside auditor is

designated as an independent officer);

(e) Executives of the brother company of the company; or

(f) Any person who has recently been the person in (b) or (c) above or an

executive of the company (any director who is not an executive if an

outside auditor is designated as an independent officer)

Note 5: The descriptions concerning independent directors/auditors must also be included in

the “Corporate Governance Report.” (Rule 211, Paragraph 4, Item 6 of the Rules).


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(2) The internal management system is deemed to be appropriately developed and

operated so that an initial listing applicant and its corporate group carry out effective

management activities in light of the matters enumerated in the following a. and b. and

other matters:

a. A necessary managerial and administrative system (including various internal ru les; the

same shall apply hereinafter) is developed and operated appropriately to secure

efficiency of management activities and internal check-and balance 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 prepared

and operated appropriately;



For the purpose of the examination on the basis of this criterion, JPXR will assess whether

the corporate group of the applicant has sufficiently designed and implemented

management organization such that the corporate group as a listed company could

appropriately and consistently perform its management activities, as well as whether the

group has developed and taken appropriate measures to prevent incidents, fraud and errors

while carrying out efficient management activities.


The focus points of the examination on the basis of these criteria relate to the status of

implementation of internal management over the management control organizations,

development of various internal rules, accounting practices, budget control and internal

audit, etc.

First, for the management control organizations and design and implementation of internal

regulations, JPXR will evaluate whether the requirements of various internal rules, etc., and

practical method and status of management control are appropriate in conjunction with the

lines and types of business of the corporate group of the applicant.

The point is that the applicant has appropriately designed and implemented systems in

terms of organizations and regulations. Practically, for procurements, the applicant has in

place systems to reduce or stabilize procurement costs, procedures to maintain assets such


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as raw materials at an adequate level. For sales, the applicant can appropriately assess the

management conditions of customers, manage trades receivable from customers and

manage assets such as products at an adequate level. The examination also includes the

assessment as to whether the applicant has in place organizations and regulations which

enable the applicant to implement relevant check and balance functions in order to prevent

frauds or errors.

In addition, JPXR will evaluate the implementation thereof based on the flow chart for

accounting works.

Moreover, for the status of budget control, JPXR will evaluate whether the applicant has

developed consolidated and separate budgets on an organically and reasonable basis.

In evaluating this issue, the point is that various budgets have been prepared for appropriate

period and unit (distinction of annual, half-year, and quarterly, segments by lines of business,

business divisions and products handled), in consideration of actual conditions of corporate

group of applicant. JPXR will also evaluate whether such budgets are of quality such that

they could be published for investors after listing.

For the budget control, JPXR will evaluate whether the applicant appropriately analyzes the

differences between budgets and actual results on a consolidated and separate basis, and

has in place systems to address any impediments to timely disclosures and whether

budgets are useful for effective judgments of management or reflected in subsequent

business activities or budget compilation.

Furthermore, JPXR will assess whether the internal management system to check the

status of organizational operations and the compliance with regulations has been

appropriately implemented in consideration of the size, etc. of the applicant. In this respect

TSE will consider that the applicant has developed the system to be implemented on a fa ir

and independent basis. If the applicant has special organizations for the internal

management, TSE will evaluate whether the special organizations do not belong to any

specific departments. When the applicant has no special organizations for internal

management and has assigned staff members responsible for internal management, JPXR

will consider that the internal management over the department such staff members work for

has been implemented such that it does not constitute any self-audit practices.

On the other hand, when the internal management practices are outsourced to any third


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party, it is considered that the fairness and independence thereof have been ensured. In

such cases, JPXR will assess whether the applicant does not leave all the decisions to the

outsourcer and is proactively involved in the internal management practices as the president

is fully aware of the importance of such internal management practices. For example, the

applicant is expected to carry out major works including the development and revision of the

audit plan and contents. However in cases where the applicant may have to

comprehensively outsource the internal management practices including such works due to

the know how the outsourcer has or due to limited resources of the applicant, the applicant

is required to be principally involved in the internal management practices such that highly

effective internal audits can be implemented by proactively communicating the status of the

company, the lines of businesses and any identified issues to the outsourcer in an

appropriate manner.


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(3) Necessary personnel are deemed to be secured in order to carry out stable and

continuous execution of management activities of the corporate group of an initial listing

applicant and to maintain its appropriate internal management system;



For the purpose of the examination on the basis of the above criteria, JPXR will assess

whether the group can employ necessary personnel to carry out its business activities on its

own.


First, JPXR will assess whether the applicant has employed necessary personnel to operate

businesses on the basis of recent changes in employees (status of employment through

recruitment of new employees and retirement). In this case, if a large number of employees

have retired due to their own reasons, JPXR will assess the background and reasons for the

retirement of so many employees and determine whether such retirement would impede

business operations going forward.

An additional focus point of the examination is whether the corporate group of the applicant

has assigned personnel necessary to ensure the sufficient implementation of check and

balance functions. When employees concurrently hold several positions across the

company or in several capacities in silos across different functions in a department, JPXR

will assess whether holding of such several positions may impede the effective check and

balance practices.

For example, in the following cases, JPXR may not approve the listing as they give rise to

concerns with the business operations from the perspective of internal check and balance

practices.

- The representative director, etc. concurrently holds the position of general manager for a

specific department or division and necessary check and balance functions do not

operate effectively;

- As the representative director, etc. is concurrently responsible for several departments

or division, the execution of duties primarily performed by the representative director, etc.

has been impeded.


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Next, if the applicant accepts any seconded persons from external organizations, JPXR will

confirm the reasons why the applicant accepts such secondment, and assess whether such

secondment would be accepted voluntarily in accordance with human resource policies.

Voluntary third parties including a company which seconds employees to the applicant (for

example, parent company, etc. of the applicant or large customers or suppliers, financial

institutions) may dispatch seconded persons to the applicant at its own discretion with a

view to controlling the corporate group of the applicant. In such cases JPXR may carefully

evaluate whether the applicant performs its business operations independently on the basis

of the number of such seconded persons and positions they hold.

In the meantime, when officers and employees of applicant comprise many seconded

persons, JPXR will mainly evaluate whether the applicant may easily substitute such officers

and employees with other people from the perspective of corporate continuity.

The examination also includes the assessment of the following issues.

► Status of labor union

The operation of applicant has not been impeded because of labor disputes with labor

unions.

► Employee education and training

When some operation of business requires special qualification or special knowledge and

skills, the applicant has in place education and training systems to foster competent

personnel.


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

adaptable to its actual condition, and a necessary accounting system is deemed to be

developed and operated appropriately; and




applicant has appropriately performed routine practices including accounting treatment

which constitutes the basis for the appropriate preparation of disclosure package and

whether the applicant has in place accounting organizations to make appropriate accounting

treatment.


The examination for this purpose would be carried out mainly by using flow charts.

First, JPXR will evaluate whether the applicant has implemented accounting treatment in

accordance with accounting standards or procedures included in its accounting regulations,

etc. While checking some samples from accounting books, if it is found out that actual

practices deviate from the regulations, JPXR staff visit the applicant to reiterate the similar

assessments and proceeds with the examination with reference to views of applicant’

accounting auditors.

In addition, JPXR will confirm that accounting standards are responsive to actual conditions

of applicant and that the application thereof is not arbitrary.

For accounting organizations, JPXR will evaluate whether relevant check and balance

functions work properly as the accounting department and financial department are

appropriately separated, and whether the accounting practices do not excessively depend

on experiences and skills of certain individuals. In addition, in case of a company with a

committee of accounting advisors, JPXR will have interviews with certain accounting

advisors, as appropriate, in order to ensure that the design and operation of accounting

organization does not excessively depend on them.

Meanwhile, the applicant must prepare itself to address the internal management reporting


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system over financial reporting applied prospectively from the listing. In consideration of the

size, the lines of business and the timing of the applicant, the applicant is required to

develop preparation plans suitable for the applicant and establish systems to submit the

internal management reports effective from listing.


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(5) It is deemed 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 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.




corporate group of the applicant has in place systems to ensure the compliance practices

(abiding by laws and regulations) in order to perform its management activities.

JPXR will first confirm the laws and regulations related to the management activities of the

corporate group of the applicant and the administrative instructions issued by competent

ministries and agencies. Then JPXR will evaluate that the items subject to the internal audit

and items audited by the company auditors have properly included the items required by

laws and regulations.

Meanwhile, if the applicant committed a breach of laws and regulations in the past,

according to the seriousness JPXR will carefully evaluate the status of remedies of legal

defects associated with such breach and the design and implementation of systems to

prevent any reiteration of such event.(Note)

Note; JPXR formulated “Principles for Preventing Corporate Scandals” that are a set of

principles-based guidelines that encourage each listed company to take creative

approaches in implementing each principle and to establish effective measures that reflect

the company's individual situation, and “Principles for Responding to Corporate Scandals”

as a guiding principle to inform listed companies the behavior that they should take when

corporate scandals are happened. These principals show a set of response- and

conduct-related principles that listed companies are expected to follow when addressing

scandals. The principles are intended to help listed companies facing problems restore their

credibility quickly and recover their corporate value steadily. Unlike laws, regulations, and

stock exchange rules, these Principles do not bind all listed companies to specific

constraints. However, there might be an opportunity that these principals will be beneficial.

Please be noted that both Principals are published on the guidebook as an appendix.


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4. Fairness of Disclosures of Corporate Information, etc.

(Rule 207, Paragraph 1, Item 4 of the Regulations)

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

manage corporate information including facts which will has a material effect on

management and to disclose it in a timely and appropriate manner to investors.

Moreover, its system for the preemptive prevention of insider trading is deemed to be

developed and operated appropriately.




an applicant can, in a timely and appropriate manner, disclose company information that

may significantly affect investment decisions of investors after listing, as well as whether the

applicant has systems in place for appropriately managing information until it is disclosed in

order to prevent any insider trading, information dissemination, and trade recommendation

practices (hereinafter “insider trading, etc.”) .


For the purpose of this criterion, the key points of the examination relate to the management

of monthly budgets and actual results. JPXR will evaluate how soon the applicant could

accurately grasp the operating results.

For the management on a monthly basis, methods and their degree of precision may vary

depending on lines and sizes of businesses and their sizes of the corporate group of the

applicant. At least, the applicant is required to develop systems where it can appropriately

identify the need to revise any announced performance forecast and it can appropriately

determine what revisions should be made, if any.

In its Securities Listing Regulations, JPXR requires that the applicant must fully recognize

that timely and accurate disclosures of company information to investors would lay down the

foundation for the sound financial instruments exchanges and the applicant strives to


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perform operations with integrity by making thorough disclosures of accurate and fair

company information from the perspective of investors. Thus, JPXR will evaluate whether

the applicant has in place systems to comply with the rules on timely disclosures including

preliminary release of earnings after listing and address other demands.

Next, with respect to the prevention of insider trading, etc., JPX-R will assess the following

issues:

- Whether the applicant has adopted regulations on the management of insider

information or prevention of insider trading;

- Whether the requirements of such regulations are appropriate in the context of laws and

regulations;

- Whether the applicant has provided or expects to provide sufficient education and

training to officers and employees in terms of the prevention of insider trading, etc. and

is committed to such continuous advocacy practices after listing; and,

- Whether officers and persons charged with the prevention of insider trading, etc . or with

information control are sufficiently aware of the significance of regulations on insider

trading, etc.

Furthermore, if the applicant has already listed its stock on another financial instruments

exchange, JPXR will also assess whether the applicant has in place appropriate systems to

check the trading of its own shares by persons related to the applicant at the time of

pre-notification of such trading.

The cases of accusation and requirements of payment of penalties and fines associated

with some breaches of laws and regulations such as insider trading, etc. by related persons

including officers and employees of the applicant have recently increased. Any acts in the

breach of laws and regulations such as insider trading, etc. by an officer or employee will

significantly impair the reputation of the applicant and reduce confidence in the financial

instruments markets as whole. As such, the applicant is encouraged to pay further attention

to the prevention of these incidents.

JPXR will also assess the degree of security related to the publication of corporate

information via website when it is made before the scheduled timing.


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(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, etc., and contain the following items enumerated in the following a. and b.

and other matters:

a. The financial position and financial results of an initial listing applicant and its corporate

group, and matters which may have a significant effect on investment decisions of

investors with respect to significant matters, etc. concerning officers, major shareholders,

affiliated companies, etc.; and

b. Items 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 underlying the main business activities of

the corporate group of an initial listing applicant;

(b) Where the validity period of permission and authorization, etc. and any other time limit is

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 in laws and regulations or contract, etc., such event; and

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

which are the premises of the 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




the applicant has fairly prepared disclosure documents on which investors base their

investment decision in accordance with relevant laws and regulations, and other rules

(Cabinet Office Ordinance, etc.) and whether the descriptions in the disclosure documents

reflect the actual conditions of the applicant in a faithful and understandable manner, such

that they would not mislead investors.


For the purpose of the examination in this section, JPXR will make assessment mainly on

the basis of “Securities Report for Initial Listing Applicant (Part I).”


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First, JPXR will evaluate whether Part I documents have appropriately been prepared in

accordance with laws and regulations, and other rules and whether there are any

differences in descriptions or presentation methods from those of the documents prepared

by other peer companies. If any errors are acknowledged to have been made in the

descriptions, the applicant is required to correct such errors. The applicant will be ineligible

for listing if the errors are significant, errors were intentionally made by the applicant or the

procedures for correcting errors in or preparing the disclosure documents of the applicant

are highly unlikely to be improved. When the form of some descriptions is different from that

of other peer companies, JPXR may request the applicant to make them more

understandable from the perspective of comparability with others through the consultation

with accounting auditors of applicant..

The applicant is required to describe the fo llowing at the sections of “Nature of business” or

“Business risks, etc.” in “Securities Report for Initial Listing Applicant (Part I).”

- When there are some matters constituting premises underlying business activities of the

corporate group of the applicant (e.g., permission, authorization, license or registration,

selling agent agreements or production entrustment agreements in relation to main

businesses or products), their descriptions;

- Effective period of permission, etc. and the validity when it is specified by laws and

regulations or contracts;

- Events leading to cancellation or termination of licenses, etc. when they are specified by

laws and regulations, or contracts;

- Statement that no events giving rise to significant adverse effect on the assumptions of

corporate continuity have taken place, or

- Statement that the occurrence of such events would have significant adverse effect on

the business activities.

JPX-R then confirms that the descriptions included in the Disclosure materials are clearly

understandable in the context of the business activities of the corporate group of the listing

applicant and in no way mislead the readers. Disclosure materials are intended for use by a

variety of investors for the purpose of investment decision. As such, it would be

inappropriate to provide any descriptions that may be difficult to understand at a glance due

the use of unduly abstract expressions or technical terminology or ambiguous meanings left

open to a reader’s interpretation. If JPX-R finds such a description, it will request the

applicant to amend the description during the examination process. Furthermore, JPX-R

may request the applicant to have disclosure systems in place to avoid such descriptions, if

appropriate.


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When an applicant has a parent company, etc., it is likely that the applicant will be influenced

by the parent company through the business relationship with it in various ways after listing.

Thus in addition to information on the corporate profile of the applicant, information on the

parent company, etc. would be useful for the investment decisions made by investors who

invest in the applicant. Thus, the applicant is required to describe the business relationships

with the parent company, etc. according to the degree of materiality of influence over the

applicant at the sections of “Nature of business” or “Business risks, etc.” in “Securities

Report for Initial Listing Applicant (Part I).” In actual examination JPXR will assess whether

the descriptions therein concerning the following issues are appropriately included:

- With respect to business relationships, the nature, amount, terms and conditions thereof

and the policy for determining such terms and conditions;

- In case of concurrent holding of positions, names and positions of officers who

concurrently hold other positions and the reasons for such concurrent holding,

- In cases of acceptance of secondment, the number of seconded persons, their positions

in the applicant and notion concerning the stable employment of employees in order to

ensure stable business operations.

Meanwhile, if there is any company in the corporate group of the parent company, etc. which

carries out businesses similar to those carried out by the applicant, JPXR will assess the

descriptions of the roles and position of the applicant in the corporate group of the parent

company, etc.

Naturally it is important that the applicant actively prepares disclosure documents in depth

and JPXR will assess such point during the course of examination.


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

disclosure on the actual state of the corporate group of the initial listing applicant by

carrying out a trading act with its relevant party or any other specified entity or adjustment

of the share ownership ratios, etc.; and



no transactions with or equity contributions to any company under the patronage of the

corporate group have taken place such that the company information of the applicant (i.e.,

the descriptions in disclosures of corporate profile of the applicant) has been intentionally

distorted.


First, no matter when unusual descriptions are detected with respect to various transactions

during the business activities of the applicant or anomalies in entries in lines items on

financial statements are recognized, JPXR will further examine the details. If any

transactions have apparently been conducted only to make the financial statements of the

applicant look better, the applicant would not meet this criterion.

With respect to coordination of equity contributions, JPXR will first evaluate the equity

composition of the corporate group of the applicant. In this case, when 100% contribution is

not made by the group, or there are any investors in the applicant other than the group,

JPXR will check the background or reasons for such contribution by any entity other than the

group. If the result reveals that the reason for the contribution is not clear and the

contribution is made only to circumvent the consolidation requirements for the applicant,

JPXR may require the applicant to improve the equity composition of the group so that the

conditions of the corporate group of the applicant may be disclosed appropriately.


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► When an applicant has a parent company, etc.

(4) Where an initial listing applicant has a parent company, etc. (excluding where it will

cease to have a parent company, etc. by the end date of a business year which ends first

after listing), any one of the following a. or b. shall be met on the condition that disclosure

of such parent company, etc. is valid:

a. A stock, etc. issued by a parent company, etc. of an initial listing applicant (where there

are a number of parent companies, etc., it means a company which is deemed to have

the greatest effect on the initial listing applicant, and it means one o f the parent

companies, where the effect is deemed to be the same; the same shall apply hereinafter

in a and b.) is listed on a domestic financial instruments exchange (including 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 conspicuously lack investor

protection); and

b. An initial listing applicant can appropriately grasp company information such as facts

concerning the parent company, etc. which has a material effect on its management

(excluding a parent company, etc. which falls under the preceding a.), 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.



It is likely that the applicant will be influenced by the parent company through the business

relationship with it in various ways after listing. Thus in addition to the information of

corporate profile of the applicant, information on parent company, etc. would be useful for

investment decisions made by investors who invest in the applicant.

This criterion requires that the applicant be in a position to disclose information of the parent

company, etc. in the listing of the applicant.


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The parent company, etc. to which this criterion applies refers to companies which are

acknowledged to have the most significant influence over the applicant. If the degree of

influence is identical among such companies, one of them could be identified as the parent

company.

In determining the company which exercises the most significant influence over the

applicant, the determination will be based on the positions of the applicant and parent

companies in the corporate group, and relationships between the applicant and parent

companies in terms of equity contributions, financing, personnel, technologies and

transactions.

► Matters related to controlling shareholders and financial information of the non-listed

parent company

An applicant who has a parent company, controlling shareholders (excluding parent

companies) and other related companies is required to submit the “Matters related to

controlling shareholders.” (Note 1)

When the applicant has a parent company, etc., which is a non-listed company, the applicant

is required to submit the documents describing the financial information related to the

immediately preceding settlement of accounts of the parent company for the business year

or half-year accounting period (Note 2) or consolidated accounting period or half -year

consolidated accounting period (Note 2) (hereinafter referred to as the “financial information

of non-listed parent company, etc.” in addition to “Matters related to controlling

shareholders” at the time of listing application (Note 3).

However, if it is likely that the applicant will not have any controlling shareholders or parent

companies at the end of the business year first coming after the listing, the applicant is not

required to submit any of them.

Note 1: If any change in descriptions takes place during the listing examination, the

applicant is requested to update the contents and re-submit them.

Note 2: When the parent company, etc. is an entity which files quarterly financial statements,

the half-year period represents the period totaling relevant quarterly periods.


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Note 3: When a non-listed parent company, etc. is an entity which files quarterly financial

statements, and if the earnings information of the parent company, etc. is updated

during the examination period, the applicant is required to re-submit the financial

information of a non-listed parent company, etc.


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5. Other Matters Deemed Necessary by the Exchange from

the Viewpoint of the Public Interest or the Protection of

Investors (Rule 207, Paragraph 1, Item 5 of the Securities

Listing Regulation)

(1) The contents of the rights of shareholders and the state of their exercise are deemed

appropriate from the viewpoints of the public interest or the protection of investors, due to

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

a. The contents of shareholder rights and exercise thereof 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 each item of Rule 440 of the

Regulations;

(Guidelines III 6, (1) )


If an applicant has issued shares of class stock other than common shares for which listing

application is filed, it is assumed that some classes of shares may significantly restrict the

rights of equity holders of common shares or the exercise thereof, JPXR will carefully

examine the nature of such shares of class stock and any expected effect thereof on the

rights of equity holders of common shares and the status of disclosures thereof.

With respect to the adoption of any takeover defense measures, JPXR will assess the

following issues.


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1) Rights held by shareholders and the status of exercise thereof

When an applicant has adopted any takeover defense measure, the applicant shall ensure

that the measure has been undertaken by fully assuring its adequacy in consideration of

legitimacy and corporate value standards (takeover defense measure which does not

preclude any takeover leading to enhanced corporate value, but avoid any takeover

initiatives to impair the corporate value). In addition, the rights of shareholders and their

exercise should not be unduly restricted.

The following acts may be deemed to be included in acts which unduly restrict the rights of

shareholders and the exercise thereof, so any company performing such an act shall not be

qualified for a listed company.

► Introduction of rights plan issued at unduly low prices

Introduction of rights plans which may allocate any subscription warrants with an

exercise price significantly lower than the market prices of the stock at the

introduction of the plan (since such subscription warrants are usually allocated to

shareholders at the time of launch of takeover defense measures, this will exclude the

cases where the subscription warrants are tentatively allocated to certain types of

persons at the time of introduction of the takeover defense measures).

If any rights plan issued at unduly lower prices are actually effected, any shareholders who

acquire shares after the allocation date of subscription warrants may suffer significant

damages from the dilution of shares, irrespective of whether the shareholders are the

acquirer or not. In cases where the measure is not actually enacted, the expectation of the

measure to be effected may lead to significantly unstable price formation of shares. Thus the

introduction of rights plan with subscription warrants issued at unduly low prices are treated

as acts to unduly restrict the rights of shareholders and their exercise as such a plan gives

rise to significantly unstable price formation of shares and significant ly impairs the asset

rights of shareholders. Thus any company which has adopted such a rights plan shall not be

qualified to become a listed company.

On the other hand, with respect to trust rights plan, the subscription warrants are originally

issued to a trust bank and the subscription warrants are delivered to shareholders for the

first time when an acquirer emerges and the predetermined conditions for the takeover

defense measure to be enacted are satisfied. As a result, those who become shareholders


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after the issue of subscription warrants can equally receive the subscription warrants when

the takeover defense measure is enacted. The introduction of rights plans ensuring the

issue of stock acquisition plans at the market prices may not be included in any act to unduly

restrict the rights of shareholders and their exercise as there are no differences between the

takeover defense measure under such rights plan and the takeover defense measure such

as pre-warning defense measures or defense measures whose conditions are resolved by

the board, which do not issue any subscription warrants at the time of introduction in that the

subscription warrants are not issued at unduly lower prices.

► Introduction of dead hand type rights plan

Introduction of dead hand type rights plan which represents the rights plan where it

cannot be abolished or discontinued even if the majority of the board members are

replaced

So-called dead hand type takeover defense measures are defined as takeover defense

measures in conflict with the enterprise value criteria as it does not realize even proposed

takeover to enhance enterprise value.

In addition the shares of the company which has introduced such takeover defense

measures are under conditions where the exercise of the rights of shareholders to replace

the management in effect has been unduly restricted. Thus such restriction will be included

in acts to unduly restrict the rights of shareholders and their exercise. Hence any company

which has introduced any dead hand type rights plan shall not be qualified for a listed

company.

► Issue of class stocks with veto rights

Resolutions or decisions on the issue of shares of class stock with veto rights

requiring the resolution at the class meeting of shareholders on the appointment or

removal of the majority of the board members and other significant matters (excluding

cases where TSE acknowledges that the interests of shareholders and other

investors are unlikely to be impaired).

* When a subsidiary which performs major lines of business of the applicant which is

a holding company issues any class stocks with veto rights (Article 108, Paragraph 1,

Item 8 of Companies Act) or shares of class stock with appointment rights of directors

(article 108, Paragraph 1, Item 9 of Companies Act) to any person other than the

applicant as the allocated party, and if TSE deems that the issuance of such shares of


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class stock may constitute any method which makes the realization of the acquisition

of the applicant difficult, it is interpreted that the applicant issues shares of class stock

with veto rights which require the resolutions at the class meeting of shareholders on

significant matters.

The issuance of shares of class stock with veto rights requiring the resolutions at the class

meeting of shareholders on the appointment and removal of the majority of the board

members and other significant matters may unduly restrict important rights of shareholders

concerning the appointment or removal of directors. Thus such issuance is included in acts

to unduly restrict the nature of rights of shareholders and their exercise. As a result any

company which issues class stocks with veto rights shall not be qualified for a listed

company, in principle.

However, if TSE deems that the interest of shareholders and other investors are very

unlikely to be impaired in consideration of the objective of business of the company, the

objective of issuance of shares of class stock of stock with veto rights, attributes of the

allocated parties and the nature of rights thereof and other conditions, the issuance may

exceptionally be permitted. This may include cases where a privatized company issues

shares of class stock with veto rights to the central government as an allocated party such

that the business activities of the company does not significantly diverge from the policy

objectives of the country.

In addition if the applicant is a holding company, the issuance by its subsidiary of any class

stocks with veto rights or class stocks with appointment rights of directors to any party other

than the applicant may be included in acts to unduly restrict the nature of rights of

shareholders and their exercise.


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2) Covenants to the introduction of takeover defense measures

When the applicant has adopted a takeover defense measure, the applicant is required to

comply with the maters mentioned in each item of Rule 440 of the Securities Listing

Regulations, in addition to the fact that the nature of rights of shareholders and their

exercise have not been unduly restricted.

► Sufficient disclosures (Rule 440, Item 1 of the Regulations)

The listed company shall make Necessary and sufficient timely disclosure concerning

takeover defense measures;

In disclosing takeover defense measures on a timely basis, the applicant is required to

provide information which could constitute sufficient basis for the judgment of shareholders

concerning agreement or disagreement with the takeover defense measure and the

investment decisions of investors.

► Transparency (Rule 440, Item 2 of the Regulations)

Conditions of implementation and abolishment of takeover defense measures shall not

depend on arbitrary decisions by the management;

If conditions to enact or abolish takeover defense measures excessively depend on the

judgment of the management, the enactment or abolishment of the measure may be

deemed to be arbitrarily decided by the management as the decision process lacks

transparency. This is inappropriate from the perspective of corporate value and also does

not provide sufficient information for the investment decisions of investors, thereby forcing

investors to trade amidst uncertain circumstances surrounding the trends of the company.

Thus, it is required that the conditions for the exercise or abolishment of takeover defense

measures should not be determined excessively depending on arbitrary judgment of the

management.

III Listing Examinat ion (Relating to Rule 207 of the Regulations)

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► Effect on the secondary market (Rule 440, Item 3 of the Regulations)

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; and

It is required that the nature of takeover defense measures will not significantly destabilize

the stock price formation or reduce the value of shares held by investors.

► Respect for shareholders’ rights (Rule 440, Item 4 of the Regulations)

Takeover defense measures shall give consideration to shareholders’ rights and their

exercise

Takeover defense measures may take various forms. They include the method to change

the structure of voting rights of shareholders including acquirer or method to impair property

rights other than voting rights. Thus the applicant has to consider and respect the rights of

shareholders and their exercises in introducing any takeover defense measures.


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3) Other considerations in conjunction with the introduction of takeover defense

measures

Other considerations when the applicant introduces takeover defense measures are as

follows:

► Considerations for the purpose of disclosures

The applicant is encouraged to make detailed disclosures of the nature of takeover defense

measures by press releases or posting on the applicant’s website. The applicant is

requested to concisely describe the objective of the introduction of takeover defense

measures and the outline of the scheme in “Part I” documents and “Corporate Governance

Report”. (The applicant is concurrently required to mention the URL of its website where the

details of takeover defense measure are disclosed)

The applicant is required to disclose the following matters in the press release and on the

website of the applicant.

- Purpose of the introduction of takeover defense measures;

- Nature of scheme;

- Procedures when an acquirer emerges; and

- Effect of such emergence on shareholders and investors

* For the nature of the scheme, the applicant needs to describe which entity decides to

enact or abolish the takeover defense measure and the basis for determination in details, as

well as the innovative efforts to enhance the reasonableness of the takeover defense

measures (e.g., provisions for periodic review of resolutions on the introduction at the

general shareholders’ meeting, the development of objective conditions to discon tinue the

measures when all the shares are acquired in cash and retired, the establishment of

committee with emphasis placed on the judgment of independent outside officers, and

sunset provisions (provisions to review the nature and necessity of takeover defense

measures at the general shareholders’ meeting) and the criteria for the appointment and

removal of directors and the term of their offices) in an understandable manner.

* The title of disclosure of takeover defense measures must include the term “takeover

defense measure.”


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► Considerations for each type of takeover defense measures

In adopting takeover defense measures, the applicant must consider the following issues for

each type of takeover defense measures.

a. Rights plan

- Collective intention of shareholders

The design and adoption of the structure to reflect the intension of shareholders (not

intentions of individual shareholders, but the collective intention of shareholders expressed

through the resolution at the general shareholders’ meeting) in determining to enact or

abolish the takeover defense measures are very important for the purpose of appropriate

implementation of takeover defense measures.

Thus the applicant evaluates whether the applicant may encounter difficulties in controlling

the majority of the directors at one general shareholders’ meeting by assessing the criter ia

for resolutions on the appointment and removal of directors at the general shareholders’

meeting, in addition to whether the rights plan constitutes any dead hand type takeover

defense measure.

- Framework for decision to enact takeover defense measures

The decision to enact takeover defense measures must not lack transparency as it depends

on arbitrary judgment of the management. The fairness and neutrality of the judgment of the

entity making substantive decisions to enact or abolish rights plan (includ ing independent

committees when the board of directors make such decisions based on the

recommendations of the independent committee, etc.) constitute very important information

for investors. Thus TSE will assess whether the matters including the independence of the

decision making entity from the management and its technical competence (including the

involvement of experts to compensate for the insufficient knowledge on enterprise value or

authority to carry out independent research) as well as its responsibility to the company (e.g.,

the composition of directors, company auditors and outside academic specialists at

respective committee) have sufficiently been disclosed.

When the fairness and neutrality of the decision making entity cannot be sufficiently

demonstrated by the above, JPXR will assess whether objective conditions to enact and

abolish takeover defense measures or the criteria for such decisions have been disclosed.

- Effect of takeover defense measures in the secondary markets


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Any takeover defense measure is required not to include any factors which may give rise to

unexpected damage to investors such that it significantly destabilizes the price formation of

stocks.

When the rights plan is decided to be enacted, but if it is likely that the enacted rights plan

would be discontinued even after the shareholders who receive the a llocation of shares are

determined, the price formation after the allocated shareholders are determined might be

destabilized. In consideration of the objective of rights plan to realize equal negotiation with

the acquirer, the possible discontinuation of takeover attempt after the decision to enact the

measure or possible discontinuation which can be agreed by both parties as higher

purchase conditions are indicated might be significantly meaningful since such

discontinuation enhances corporate value and shareholders’ interests. Thus JPXR will

evaluate whether such possibility has been disclosed sufficiently.

JPXR will also assess whether there are any other factors inherent in the scheme, which

may destabilize price formation.

b. Pre-warning (development of rule on large purchase)

With respect to so-called pre-warning type takeover defense measures, the applicant will

decide rules to be abided by the acquirer (rules specifying the provision of information on the

acquirer or its procedures) at its discretion and may require a prospective acquirer to comply

with them.

In disclosing this type of takeover defense measure, the applicant is required to disclose the

contents of the rules in an understandable manner, thus contributing to the decision of

shareholders and investors on the reasonableness of the rules.

Actual rules must address the entity responsible for the implementation of rules, the

procedures for the contents of information to be submitted and the submission thereof, the

company’s response when the prospective acquirer complies with the rules on large

purchase or when they do not comply. JPXR will also assess whether the contents of the

rules are described in an understandable manner and the explanation of the

reasonableness of the rules has been included (as to whether the rules do not require the

excessive information when shareholders and investors consider them, the applicant’s

evaluation period might be excessively prolonged, or countermeasures against the breach

of rules might be prohibitive).


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When a takeover defense measure adopts pre-warning characterized by the rules on large

purchase and if the applicant is likely to enact any takeover defense measure equivalent to

rights plan (i.e., allocation of subscription warrants under the conditions that they are

allocated to any parties other than the prospective acquirer) in future, the applicant is

required to state the facts and disclose the matters mentioned in a above.

c. Issuance of class stocks, etc.

When the issuance of shares of class stock or subscription warrants may likely restrict the

voting rights of shareholders or impair the property rights of shareholders, JPXR will assess

whether the rights of shareholders are sufficiently respected.

Definition of Terms

Term Definition

Acquisition Act to acquire the number of shares which may have influence

over the company

Takeover defense

measure

Measures implemented by a joint stock company to make the

realization of acquisition of the company difficult by issuing new

shares or subscription warrants not with a view to financing or

satisfying business purposes, some measures implemented by

the management before the acquisition attempt is commenced

by any party who is not favorable to the company

Introduction

Deciding actual contents of takeover defense measures as the

company resolved at the board meeting to issue new shares or

subscription warrants as a takeover defense measure

Enactment Make the realization of takeover difficult by implementing the

contents of takeover defense measures

Abolishment (of takeover

defense measure)

Discontinuing the takeover defense measures implemented as

the company retire new issues or subscription warrants issued

for the purpose of takeover defense measures

Rights plan

A kind of takeover defense measure where subscription

warrants are allocated under the conditions that the rights are

allocated to shareholders other than the acquirer, who may

exercise the rights


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Note 1: They have the same meaning as defined in “Guidelines Concerning Takeover

Defensive Measures for Securing and Ensuring Corporate Value and the Common

Interests of Shareholders” (Corporate Value Protection Guidelines) (Ministry of

Economy, Trade and Industry, Ministry of Justice), except for the definition of a

rights plan.

Note2: “Takeover defense measure” defined above refers to the takeover defense measures

implemented during the ordinary course of business.

(2) The corporate group of an initial listing applicant does not have an ongoing lawsuit or

dispute, etc. which may have a material effect on management activities and business

results;



For the purpose of the examination on the basis of this criterion, JPXR will assess the

existence of any legal action or dispute which may potentially have significant adverse

influence of business activities or operating results.

If the corporate group of the applicant has an actual active or pending legal case or dispute,

which may potentially have a significantly adverse effect on management activities or

operating results, the applicant is not deemed to be an appropriate investment choice

offered to investors. Thus, JPXR will evaluate the nature of the legal case or dispute and its

effect on operating results, etc.


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

internal system to prevent criminal and extremist elements from being involved in

management activities, and make efforts to prevent such involvement, and their actual

state is deemed to be appropriate from the viewpoint of the public interest or the

protection of investors;



If any anti-social organization including organized criminal organizations or a group of

persons equivalent to them (hereinafter “anti-social force”) is involved in the management

activities of the corporate group of the applicant, the applicant is deemed to be not qualified

for the listing.

The involvement in this context is not limited to the cases where the anti-social force is

directly involved in the management activities of the corporate group of the applicant. This

includes cases where they are alleged to be involved, in effect, in the management activities,

for example when a group company, officers, those equivalent to officers, major

shareholders and major trading partners of the applicant (hereinafter referred to as the

“applicant group company or related person”) represent an anti-social force, when the

applicant group company and related persons cooperates or contributes to the survival and

operation of an anti-social force by providing financing, or when a applicant group company

and related persons intentionally maintains contact with an anti-social force. In such cases

the applicant is not qualified for listing.

JPXR will assess any involvement of anti-social force in the management activities on the

basis of “Confirmation statement showing that the applicant has no ties with any anti-social

force” (hereinafter referred to as the “Confirmation statement”) prepared by the applicant.

The form of Confirmation statement explicitly provides for the scope and items to which

relevant responses are automatically required by the applicant. However, this does not

mean that any items out of the scope of Confirmation statement will not be subject to the

examination and JPXR may additionally assess any items out of the scope in consideration

of the degree of implications thereof.

In order to prevent any involvement of anti-social force in the management activities, the

applicant is required to develop and provide systems necessary to preclude any organized

criminal organizations, etc. by itself. For that purpose, the applicant must regularly monitor


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the circumstances of the applicant group company and related persons and the conditions

under which the management activities are carried out and implement due process when

establishing a new business relationship. In designing and implementing such systems the

applicant is encouraged to do so with reference to “Guideline as to How Companies Prevent

Damage from Anti-Social Forces” (Cabinet Meeting on Anti-Crime Measures on June 19,

2007).

For the purpose of the examination of the above item, JPXR will assess the system of the

corporate group of the applicant to preclude anti-social forces, given the above notion and

determine whether the nature of system is appropriate (whether there is no involvement in

management activities of the corporate group of the applicant) from the perspective of public

interest or investors protection.

Recently it is alleged that some anti-social forces which strive to be involved in the corporate

group of an applicant have emerged utilizing a connection with any person having a close

relationship with any organized anti-social forces or cooperating in its activities. Thus cases

where any person concerned with such a relationship is involved in the corporate group of

the applicant shall be subject to the examination of JPXR.


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(4) When domestic stocks pertaining to initial listing application are stocks with no voting

rights (limited to cases where there are no types of stocks other than the domestic

stocks for which the listing application is made) or stocks with less voting

rights(meaning those enumerated in Item 9-2, Sub-item b of Rule 205 of the

Regulations), all of the following a. to h. shall be met;



Share classes of stock with voting rights can be utilized to maintain the controlling right of a

company with less percentage of equity contributions than usual cases and such shares are

likely to distort corporate governance. Therefore, they may not always be desirable.

However, free design of shares of class stock is permitted by laws and fundraising using

such shares of class stock have actually been effected. Furthermore, they would provide a

variety of investment choices to investors. So JPXR has allowed shares of class stock with

less voting rights, etc. (*) which respect the rights of shareholders to be listed on it.

Meanwhile, in order to ensure the continued sound use of the schemes for class stocks

with voting rights, JPXR will carefully determine the listing of each class stock in

comprehensive consideration of individual incidents.

(*) This means class stocks with fewer voting rights and those with no voting rights.

In this section, given that the listing system for shares of class stock with less voting rights,

etc. is different from the listing system for common shares in terms of actual exa mination

standards and other issues, in this section, we first outline the categories of shares of class

stock with less voting rights, etc. which are eligible for listing and formal requirements

followed by the method to decide the section where listing is effected, then provide

explanation concerning actual criteria (a to f above) and frequently asked questions and

answers (Class Stock Q&A) in terms of overall listing system for shares of class stock with

less voting rights, etc.


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(1) Shares of class stock with voting rights eligible for listing

TSE has limited the listing of shares of class stock in conjunction with understandability of

investors or for the purpose of investor protection.

For the time being, in order to avoid confusion arising from misunderstanding class of listed

stock, TSE will not allow an identical company to list several classes of shares with voting

rights (both of common shares and non-voting shares could be listed concurrently).

(Reference) Classes of shares with voting rights eligible for listing

Listed

company

Non-listed company

Listing markets Single listing

Listing concurrent

with common

shares

Shares with less voting rights

× ○ × the 1st and 2nd

sections, Mothers, JASDAQ (Note 2)

Shares with more voting rights

× × ×

Non-voting shares (Note 1)

○ (Note 2)

○ ○

(Note 2)

Note 1: Non-voting shares subject to the listing system for shares of class stock with voting

rights represent participating preference shares or non-voting shares with

preference dividends (of shares of class stock having senior feature of profit

distributions, participating preference shares represent shares for which the

shareholders thereof may also receive dividends from residual distributable value

together with common shareholders after receiving preference dividends).

Meanwhile, JPXR will examine non-participating preference shares of non-voting

shares in consideration of listing system for preference shares as prescribed in Part

III of the Securities Listing Regulations.

Note 2: For concurrently listing common shares with non-voting shares and listing

non-voting shares of a listed company, JPXR will conduct listing examination in

accordance with Guidelines II, 6.(5).

Note 3: With respect to the category of markets, when a company has listed both common

shares and non-voting shares concurrently, shares of class stock with voting rights


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are assigned to the same market as the common shares. When a company only lists

class stock with voting rights, the market section will be decided on the basis of

criteria applied to listing of common shares.

(2) Formal requirements for class stock with less voting rights, etc.

Formal requirements for shares of class stock with less voting rights, etc. are, in principle,

similar to those for listing examination of common stock (see “II Formal Requirements”).

They require each stock for which listing application is filed to meet relevant requirements.

Meanwhile, since a criterion for market capitalization relates to formal requirements related

to companies, the market capitalization will be determined by aggregating the market

capitalization of each stock for which listing application is filed (if there is another stock for

which listing application is filed concurrently, including the market capitalization of such other

stock) and the market capitalization of other stocks issued by the applicant (limited to those

listed or continuously traded on a financial instruments exchange in Japan and in foreign

countries).

(3) Category of market for shares of class stock with less voting rights, etc.

Formal requirements for market category of shares of class stock with less voting rights, etc.

(alteration of market, assignment to the 1st section) will be similar to those for common

stock.

(4) Nature of listing examination for class stock with less voting rights, etc.

For the purpose of examination of class stock with less voting rights, etc. the listing will be

determined in the public interest or for the protection of investors, in addition to the

requirements of substantive examination standards for listing of common stock, in

accordance with the items mentioned in a to h below.


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a. It is deemed necessary to ensure a situation where a specified entity can continue to

be involved in management by holding stocks with more voting rights (meaning

stocks with voting rights and stocks with more voting rights (i.e., stocks with voting

rights other than those with less voting rights; the same shall apply hereinafter) from

the perspective of the common interest of shareholders, and it is also deemed that

the scheme is appropriate based on such need and does not give rise to any undue

benefits to holders of stocks with more voting rights. In this case, the determination of

whether the scheme is appropriate or not shall be made on the basis of such need by

examining the items mentioned in (a) to (c) below;

(Guidelines II 6.(4) )


For the purpose of this criterion, JPXR will examine whether the use of stocks with more

voting rights is necessary from the perspective of the common interest of shareholders

(need) and whether the scheme for the shares of class stock with voting rights is deemed to

be appropriate on the basis of the need to use stocks with more voting rights, etc.

(appropriateness).

With respect to the need, JPXR will examine whether it is necessary to ensure a situation

where a specified entity may continue to be involved in management by using stocks with

more voting rights, etc. from the perspective of the common interest of shareholders. In

practice, JPXR will assess whether the continuous involvement of the entity with the ability

to have certain knowledge and skills that is essential to achieve the business plan may be in

the common interest of shareholders or it is difficult to collect the voting rights of specific

shareholders. In addition, JPXR will assess whether the management’s ability to have

certain knowledge and skills is necessary to achieve the business plan on the basis of the

following items (*)

(*) Examples of issuance and listing of several shares of class stocks with voting rights

typically include cases where the person in management holding stocks with more voting

rights is the inventor of the technology and founder of the company, and these requirements

are developed based on these cases.

- How is the person involved in and influence business development, R&D,

recruitment, etc.?

- Is the basis for the need practically explainable in light of the record of the person


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and actual business performance of the applicant?

- Will the need go beyond the current period and remain relevant in the future?

- In addition to the person, do the Board of Directors, Board of Company Auditors

and the company as a whole appropriately recognize the need?

Meanwhile, the examination does not automatically preclude other needs and if such

other needs are deemed relevant from other perspectives, JPXR will examine such

needs. JPXR does not anticipate that the need will arise solely for a reason such as the

stability of a family-managed company being deemed necessary from the perspective of

the common interest of shareholders.

In addition, for the purpose of examination of the need, JPXR will assess the reasons

why the collection of voting rights for specified shareholders would be difficult in the

case of common shares. In practice, JPXR will examine whether the fund raising would

be required for the execution of the business plan, and may lead to a dilution of the

voting rights. A threshold for the future dilution of voting rights may include cases where

in consideration of fund raising, the shareholding ratio of shareholders of shares of

stocks with more voting rights, etc. will be below 50%, which is necessary to stably elect

board members. Even in the case of low fund raising needs, JPXR will consider that the

need has existed if the shareholding ratio of holders of stocks with more voting rights,

etc. is below 50% at the time of listing. In the case of strong fund raising needs and an

expected dilution of voting rights, JPXR does not anticipate the existence of the need,

for example when the likelihood of the execution of business plan is uncertain, where

holders of stocks with more voting rights, etc. may underwrite each capital increase or

the main nature of the investment plan relates to future M&A activities.

For appropriateness, JPXR shall confirm that the scheme for the stocks with voting

rights may not provide undue benefits to holders of stocks with more voting rights and

that the scheme is appropriate in light of the need to use stocks with more voting rights,

etc. In practice, JPXR will determine the need on the basis of the items mentioned in (a)

to (c) below and other facts and circumstances.

(a) When the need no longer exists, the scheme for non-voting shares or for shares with

less voting rights can be expected to be dissolved.

(Guidelines II 6. (4) )


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For the purpose of this criterion, the applicant is required to adopt measures to prevent

the scheme for non-voting shares or for less voting rights from being continuously

applied on an unconditional basis, if the need to use the scheme of shares with more

voting rights, etc. ceases to exist.

If the need for the scheme is for the purpose of allowing the continued involvement of a

particular person in management, JPXR will assess that the scheme is dissolved when

the person retires from the board and ceases to be involved in the management of the

company. In practice, the applicant is expected to carry out procedures for confirming

the intent of shareholders to continue the scheme, in addition to the measures to

dissolve the scheme when the person retires from the board. If the applicant has

procedures to confirm shareholders ’ intent with respect to the continuation of the

scheme, the applicant is required to also develop such procedures to regularly confirm

shareholders’ intent after the need for the scheme ceases to exist. It is deemed to be

appropriate to include the descriptions thereof in the Articles of Incorporation, etc.

If a particular corporation holds shares with more voting rights, etc., JPXR will also

assess whether the scheme allows the corporation to continue to hold them on an

unconditional basis when the need ceases to exist.

(b) It is required to include in the Articles of Incorporation to the effect that where a state

of controlling a company with an extremely small ratio of contribution, a scheme of

shares without voting rights or less voting rights is expected to be dissolved;


For the purpose of this criterion, an applicant is required to have designed and implemented

measures to prevent a state where the controlling company has an extremely small

contribution ratio.

Practically, the enactment of breakthrough provisions (scheme where if a person who holds

a certain level of shares emerges, the mechanism for class stock with voting rights would be

dissolved) or sunset provisions (when certain conditions are satisfied, a measure to d issolve

the scheme) could be considered.

An applicant should consider the criteria triggering breakthrough provisions or sunset

provisions in consideration of the need to use the scheme of class stock with voting rights or


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shares with more voting rights, and the state of controlling shareholders.

In addition, the applicant is required to appropriately include breakthrough provisions and

sunset provisions in the Articles of Incorporation, etc.

(c) In cases where domestic stocks, etc. pertaining to the initial listing application are

stocks with less voting rights, the provision that when stocks with more voting rights

(i.e., the meaning stocks with voting rights other than those with less voting rights;

the same shall apply hereinafter) are transferred, they will in principle be converted to

stocks with less voting rights shall be appropriately included in the Articles of

Incorporation, etc.


Investors in stocks with less voting rights are assumed to have done so on the basis that

a particular person in management holds unlisted stocks with more voting rights.

Therefore, the Articles of Incorporation, etc. is required to appropriately state that when

stocks with more voting rights, etc. are transferred and the shareholders thereof change,

in principle, stocks with more voting rights held by the person shall promptly be

converted to stocks with less voting rights (listed stocks).


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b It is deemed that the main purpose of using stocks with more voting rights is other

than to preserve the positions of the board members of the initial listing applicant or a

takeover defense measure.



JPXR anticipates that the use of stocks with more voting rights, etc. is generally necessary

from the perspective of the common interest of shareholders. If an applicant indicates a

purpose for the use of stocks with more voting rights that differs from the perspective of the

need, JPXR will not question such purpose.

However, the applicant may use stocks with more voting rights, etc. as a means to maintain

the state of a controlling company with smaller than usual ratio of contribution, which may

act as a takeover defense measure. So if the applicant has adopted the scheme of stocks

with more voting rights, etc. in order to preserve the positions of the board members or as a

takeover defense measure, TSE will not permit the listing.

Therefore, if the applicant states a different purpose together with the need, JPXR will

assess during the examination whether such purpose lack reasonableness such as lacking

actual grounds.


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c It is acknowledged that the purpose, need and scheme of the use of stocks with more

voting rights, etc. have been appropriately described in any document related to the

disclosure of corporate information in the initial listing application.



When there are stocks with more voting rights, etc., since the purpose, need and scheme

thereof constitute significant factors for investment decisions, appropriate disclosure is

required.

JPXR will assess whether disclosure concerning the purpose of the use of stocks with more

voting rights, etc. as well as the need for the continuous involvement of a particular person in

the management is necessary from the perspective of the common interest of shareholders

(the need), have been made in a manner that facilitates understanding by investors. Though

JPXR anticipates that the use of stocks with more voting rights will be necessary from the

perspective of common interests of shareholders, in such cases the description of the

purpose of the use may overlap with that for the need. The applicant is recommended to

include the practical descriptions of the purpose of use as well as the need in “Risks

Associated with Business, etc.” or “Distributions of Ownership of Shares” in Part I, Securities

Report for the Initial Listing Application or “Shares to be Newly Issued” in the Securities

Registration Statement.

JPXR will examine whether, for the scheme, the nature of each class stock has been

disclosed in an exhaustive and appropriate manner, including the dissolution provisions

pertaining to breakthrough provisions or sunset provisions. Descriptions should be

included in “Risks Associated with Business, etc.” or “Distributions of Ownership of Shares”

in Part I, Securities Report for the Initial Listing Application or “Shares to be Newly Issued” in

the Securities Registration Statement.


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d When a shareholder holding stocks with more voting rights, etc. is not a member of

Board of Directors, etc., the shareholder must meet the requirements mentioned in

(a) and (b) below.



This criterion is required to be met when there are holders of stocks with more voting rights,

etc. who are not board members, etc.

For a typical example of listing through the issuance of class stock with voting rights, JPXR

considers cases where representative director and president or directors who are

co-founders hold stocks with more voting rights. However, a person who is not in such

positions may hold stocks with more voting rights, etc. and additional requirements apply to

such cases. In practice, JPXR will assess the cases by examining the items mentioned in (a)

and (b) below.

(a) The purpose and policy of the exercise of voting rights by holders of stocks with

more voting rights, etc. are not deemed to be clearly inappropriate in consideration of

the need thereof, and they are appropriately described in documents related to the

disclosure of corporate information in the initial listing application form.


In cases where shareholders holding stocks with more voting rights are not board

members, etc., such shareholders with interests different from those of directors may

maintain a controlling stake in the company with a small shareholding ratio. Therefore,

JPXR will examine whether the exercise of voting rights by shareholders pertaining to

the stocks with more voting rights, etc. will be made in accordance with the need thereof.

In practice, JPXR will assess for what purposes and in accordance with which policy the

shareholders holding stocks with more voting rights, etc. may exercise their voting rights,

and also assess the relationship between the purposes and policies, and the need of

use of stocks with more voting rights, etc. JPXR will assess from the perspective that

they will not provide undue benefits to holders of stocks with more voting rights, etc.

In addition, JPXR will examine that the purposes and policies of the exercise of voting


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rights by holders of stocks with more voting rights, etc. are appropriately disclosed in a

manner facilitating understanding by investors. Descriptions should be included in

“Risks Associated with Business, etc.” or “Distributions of Ownership of Shares” in Part I,

Securities Report for the Initial Listing Application.

(b) Corporate group of the initial listing applicant has no business, human resource or

transactional relationship with the corporate groups of shareholders holding stocks

with more voting rights, etc. (limited to cases of parent companies, etc. of the initial

listing applicant)


The use of stocks, etc. with a large number of voting rights by corporations (including

parent companies, etc.) may lead to some difficulties in achieving or maintaining the

prescribed objectives because of future possible changes in management policies or

the composition of large shareholders, etc. Therefore, the class stock scheme would

result in more uncertain governance practice relative to the use of natural persons.

These issues inherently prevail in case of the use of stocks, etc. with a large number of

voting rights.

Furthermore, compared to the typical listing of subsidiaries, the listing of a subsidiary

that is using stocks, etc. with a large number of voting rights by the parent company, etc.

raises more concerns over a conflict of interest, where the corporate governance is

likely to be more impaired. Therefore, it would be difficult to assess that the use of class

stocks would achieve benefits common to shareholders. In principle, such use would

not be permitted.

However, in particular cases where the use would contribute to benefits common to

shareholders, the uses of class stocks might be allowed.

In consideration of the above, this criterion is required to be met in the event that the

shareholder of stocks with a large number of voting rights is a parent company (i.e., in

case of “subsidiary listing”); and, in the examination for the listing of a subsidiary, TSE

requires that the listing application comply with the requirements of Guideline II 3, (3) for

the purpose of ensuring independence of the subsidiary.

Typically, the management of a parent company, etc. is required to fulfill its stewardship

in order to increase the profitability of the parent company, etc. As such, compared to

the control held by individual shareholders, a conflict of interest would be more likely to

take place in such a situation. Therefore, this criterion requires the strict independence

III List ing Examination (Relating to Rule 207 of the Regulations)

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of the subsidiary from the parent. If the use of stocks, etc. with a large number of voting

rights is made for the purpose of listing the subsidiary, more control would be acquired

and maintained by smaller investment in equity compared to the case where the use of

stocks, etc. with a large number of voting rights is not applied. Significant imbalance

between equity investments and control may take place. Therefore, such situations

certainly impair the benefits of minority interests of the listing applicant. As a result, this

criterion places more weight on the aspect of independence of the applicant relative to

typical listing of a subsidiary.

In light of the above, the criterion requires that:

- The nature of the business of the applicant does not interact with that of the parent,

etc.;

- There are no concurrent holdings by employees of the parent, etc. of the executive

positions of the applicant or no secondment from the parent, etc.; and,

- The applicant has no business relationship with the parent, etc.


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e. Where conflicts of interest arise between shareholders of different classes, protection

measures are deemed to be able to be taken so that shareholders of a domestic stock,

etc. pertaining to such initial listing application do not unreasonably suffer damage;



When an applicant issues class stock with voting rights, such issuance requires the

resolution at the class shareholders’ meeting in accordance with Article 322, Paragraph 1 of

the Companies Act as it is feared that a conflict of interest among shareholders of different

class of stock may take place with respect to some matters which may have significant

impact on the nature of their rights.

However, the applicant may provide in its Articles of Incorporation that no reso lution at the

class shareholders’ meeting will be required (Article 332, Paragraphs 2 and 3 of the

Companies Act). In such a case, the applicant is required to undertake any measures to

prevent the interests of holders of stocks with less voting rights from being damaged for the

purpose of shareholders of shares of class stocks with less voting rights, etc..

The applicant is required to undertake necessary measures in consideration of the following

issues, though actual measures may vary depending on the conditions of the company or

class of stock like cases where a listed company additionally list class stock with voting

rights or cases where a non-listed company only lists class stock with voting rights.

- When some changes in proportionate rights arising from share consolidation and split or

gratis allotment of shares or subscription warrants take place, the applicant takes

measures to treat each of class shareholders equally by providing in the Articles of

Incorporation that a share split is effected for each class of shares on a same class and

ratio.

- When any reorganization of a company may take place where the issuer of class stock

with voting rights would become an extinguished company, such reorganization may

develop requirements that consideration delivered to each class of shareholders could

be freely determined in the merger contract such that the interests of class shareholders

might be damaged. For example, in order to prevent the interests of shareholders with

less voting rights, etc. from being damaged, the applicant may set special conditions for

the acquisition of stocks with more voting rights, etc. that if the reorganization is

authorized at the general meeting of shareholders, all the stocks with more voting rights,


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etc. would be converted to stocks with less voting rights, etc. or does not primarily

include the provision in the Articles of Incorporation that no resolution at the class

shareholders’ meeting is required.

III Listing Examination (Relating to Rule 207 of the Regulat ions)

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f. Where the issuer of a 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 same

(a) to (c) and said issuer on behalf of a third party and those between such issuer and the

third party, where an entity enumerated in the same (a) to (c) has a material effect on said

issuer concerning such transactions), protection measures for minority shareholders are

deemed to be expected to be able to be taken:

(a) A parent company;

(b) A controlling shareholder (excluding a parent company) and his/her close relatives; and

(c) The company referenced in the preceding (b) that holds the majority of the voting rights,

etc. and a subsidiary of such company, etc.;



A company which uses stocks with more voting rights, etc. may create and maintain the

company with less percentage of equity contributions.

Therefore in order to prevent any damages represented by the conflict of interests for any

transactions between controlling shareholders and the company, in case of any transactions

between the controlling shareholders and the company, the company is required to be in a

position to undertake necessary measures for the protection of minority interests through the

discussion of adequacy of transactions with independent directors or committee and through

consultation with holders of stocks with less voting rights, etc. as appropriate.

Even if an applicant does not have any controlling shareholder at the time of listing applicant,

in order to protect the minority interests in case of transactions expected to be carried out

with controlling shareholders after listing, the applicant is required to submit the “statement

that if the applicant will have any controlling shareholder after listing, the applicant is

committed to undertake any measures to protect minority interests no matter when any

transaction with the controlling shareholders will take place” at the time of initial listing

application.

Meanwhile, since JPXR requires all the companies listing stocks with less voting rights, etc.


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to include in the Corporate Governance Report its commitment to measures to prevent

transactions between controlling shareholders and the company from being carried out at

the arbitrary discretion of management. For companies which list class stock with voting

rights, JPXR will also require them to include the disclosures thereof in the corporate

governance report.

► What is a controlling shareholder?

Controlling shareholders refer to major shareholders who account for the major ity of the

voting rights of applicant when combining voting rights of the parent company prescribed in

Article 8, Paragraph 3 of the Financial Statements, etc. Rules or the voting rights held on the

account of the applicant with voting rights held by a person mentioned in either (1) or (2)

below:

(1) Close family members of the major shareholders (family member within one degree of

consanguinity)

(2) Such major shareholders and the company, etc. (this refers to company, designated

corporation, association and other similar entities) for which the person mentioned in (1)

above holds the majority of voting rights on its account and its subsidiary.


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g. Where a domestic stock, etc. pertaining to such initial listing application has preferential

contents concerning dividends from retained earnings, estimated profits for two (2) years

after the end date of the business year immediately prior to the business year including

the listing application date and a distributable amount as of the end date of the business

year immediately prior to the business year involving the listing application date are

deemed to be good, and it is expected that the issuer of such domestic stock, etc. will

account for profits sufficient to carry out dividends from retained earnings pertaining to

such domestic stock, etc., in principle.



When it is provided that preference dividends are delivered to stocks with less voting rights,

etc., JPXR will examine whether the applicant can practically recognize profit to the extent

that such preference dividends can be practically distributed. During the usual course of

examination, JPXR will assess the profitability of an applicant, but in these cases, more

improved expected profit should be incorporated in the plan to generate profit.

In addition, when no preference dividends are paid to stocks with less vot ing rights, etc., the

development of mechanism to revive voting rights until the preference dividends are paid

would be desirable. Currently, the listing examination requires that the voting rights would be

revived unless preference dividends are paid for two years or more.

h. Benefits of shareholders and investors are deemed to be highly unlikely to be infringed.



JPXR will comprehensively evaluate the scheme for stocks with less voting rights, etc. with

focus on whether the scheme respects the rights of holders of stocks with less voting rights,

etc. or those having no voting rights in consideration of the issuance purpose or corporate

governance practices, in addition to the matters mentioned in a to g above


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<Frequently Asked Questions and Answers Concerning Listing System for Class

Stock with Voting Rights>

Q1: What are the characteristics of non-voting shares?

A1: Non-voting shares represent shares whose voting rights are restricted in terms of

material issues including the election and removal of directors.

Q2: How are shares with more voting rights and less voting rights defined?

A2: Shares with less voting rights represent shares whose holders have higher value of

rights to claim dividend of surplus associated with the number of shares which entitle

the holder to exercise one voting right on material matters such as election or removal

of directors at the general shareholders’ meeting or higher value of right to receive

other economic benefits than holders of other classes of shares. That is, the holders of

shares with less voting rights refer to those who have less voting rights for economic

benefits (factors for share price formation) they are entitled to receive, so the shares

with less voting rights means shares granting less voting rights for their equity

contribution.

In practice, in case of shares with more voting rights, the trading unit which entitles

the holder to exercise voting rights would be comprised of 50 shares while the

shares with less voting rights are comprised of 100 shares.

Stocks with more voting rights representmean stocks with voting rights other than

those with less voting rights.

Q3: Are we to be permitted to list class stock with voting rights which requires that the ratio

of voting rights should be below a certain level as conditions for the exercise of voting

rights (voting right restriction plan)?

A3: With respect to voting right restriction plan, some have argued that it would constitute

a breach of shareholder equality principle (Article 109, Paragraph 1 of the Companies

Act) or discretional grant of different type of voting rights to individual shareholders.

Furthermore in conjunction with the treatment of cases where the number of shares of

class stock which are restricted on the matters for which the voting rights could be

exercised accounts for a half or more of all the issued shares outstanding (relating to


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Article 115 of the Companies Act), TSE will not currently permit such shares to be

listed.

Q4: In order to prevent prices of share of non-voting stock from remaining sluggish, we

have designed voting rights so that economic benefits arising therefrom would always

be high in terms of dividends or residual asset rights. In such cases are we permitted

to list the stock?

A4: It would desirable that you will provide for equal treatment among different classes of

stock in terms of issues other than the nature of rights and preference dividends in

order for investors to gain easy understanding thereof.

Moreover, some cases may emerge where the prices of non-voting shares are

significantly higher than those of common shares as economic benefits associated

with non-voting shares are made larger in terms of dividends. In such cases the

control of the company may be attained with substantively less equity contributions.

Potential departure from Article 115 of the Companies Act may arise the applicant is

required to carefully address such situations.

Q5: When a company lists non-voting stock, Article 115 of the Companies Act requires

that the number of shares of non-voting stock to be issued should account for below

a half of the number of issued shares outstanding. For example, even when an

issuer holds a relatively large number of common shares as shares of treasury stock,

is the issuer allowed to list its stock by issuing shares of non-voting stock which

account for less than a half of the issued shares outstanding?

A5: When you list non-voting stock, you need to avoid any situations which constitute a

departure of Article 115 of the Companies Act (limiting the issuance of shares of

non-voting stock to a half of the issued shares outstanding).

Q6: When we go private through MBO or EBO, can we list our stock by introducing class

stock with voting rights?

A6: If a company which has listed its common stock goes private through MBO or EBO

and applies for listing by adopting the scheme for class stock with voting rights, JPXR

will carefully assess the situation, taking into account the soundness of the objective

of use of market, in order to protect investors.


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For interpretation for the application for re-listing of a company which has gone

private through MBO, please refer to the last section of this chapter.

Q7: Will the need from the perspective of the common interest of shareholders be

deemed to exist even for companies with no particular business record, such as

those that have just started R&D?

A7: As the listing of stocks with less voting rights may give rise to certain

disadvantages such as restrictions on the transfer of controlling rights or a

corporate governance bias, the basis for the need from the perspective of the

common interest of shareholders must be provided by clearly describing the

record of the person in management and the business record of the applicant.

Therefore, since it may be challenging for companies with no particular business

record to explain the basis for the need, JPXR does not assume that the use of

stocks with more voting rights would be needed from the perspective of the

common interest of shareholders.

Q8: For the need from the perspective of the common interest of shareholders, will it

deemed to exist in cases where there will be a shareholder that is property

preservation firms or where there is a family that holds stocks with more voting

rights?

A8: JPXR does not assume that there will be the need for collecting the voting rights

of the family owners based solely on the reason that stable management is in the

common interest of shareholders.

Q9: Are there any quantitative thresholds for enacting any breakthrough provisions?

A9: There are no specified quantitative thresholds for enacting the breakthrough

provisions.

In consideration of the objective of Article 115 of the Companies Act (limiting the

issuance of shares of non-voting stock to a half of the issued shares outstanding),

JPXR may encourage the applicant to set the percentage less than 75% of the issued

shares outstanding for the purpose of the thresholds for enacting the breakthrough

provisions in cases where the class shareholders are determined to be further

protected in consideration of the nature of the scheme of class stock with voting rights,


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the need for the use of stocks with more voting rights, etc. or the purpose of

introduction of class stock with voting rights, or the status of controlling shareholders,

though 75% as a percentage of issued shares outstanding are sometimes set as a

threshold.

Q10: It is required to have a provision stating that a transfer of shares with more voting

rights will, in principle, require them to be converted to those with less voting rights.

Are there any cases where it is determined that though some changes in shares with

more voting rights take place, no conversion is required as such shareholders are not

included in the transfer? What are actual circumstances which constitute such

situations?

A10: For transfers, which may not be needed, of stocks with more voting rights to new

shareholders, there must be a provision stating that stocks with more voting units

should be converted to those with less voting rights.

Therefore, with respect to cases where shares with more voting rights held by certain

shareholders are transferred to other shareholders who have already held shares with

more voting rights, there are some cases where the conditions for the conversion may

not be required as the need continues to be deemed to exist.

In the meantime, in cases where a company preserving property holds shares with

more voting rights, when shareholders of the company change, beneficial holders of

shares with more voting rights may change without any transfer implemented. In such

cases, the applicant is required to carefully address the situations as it is likely that

such changes may contradict the conditions precedent to the investments in class

stock.

Q11: Are no conversion conditions to be required when a transfer, etc. of shares with

more voting rights takes place on the basis of inheritance?

A11: It is extremely where an exception to transfer provisions is permitted on the basis of

inheritance. JPXR will carefully evaluate situations after confirming the

reasonableness for the exception.

However, it may be acknowledged that no conversion provisions are required when

the applicant has designed and implemented any scheme for not impairing the interest


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of class stock shareholders and the scheme for class stock with voting rights is

determined to respect the rights of such shareholders.

Q12: When a company has listed shares with less voting rights, the company is required

to set forth the provisions requiring the conversion to shares with less voting rights

when a transfer of shares with more voting rights takes place. What measures

should be undertaken when a non-listed company lists shares of non-voting stock

separately?

A12: Even in case where a non-listed company lists shares of no voting stock separately,

the transfer of non-listed shares of common stock, resulting in changes in controls

usually contradicts the conditions precedent to the investments in no voting shares

and departs from the purpose of the introduction of class stock scheme. Therefore,

the applicant is required to take steps in advance in full consideration of

shareholders of no voting shares. For example, such steps may include the grant of

rights to acquire shares to non-voting shares which may grant common shares for a

consideration.

Q13: In case where a company retains a vast amount of reserve and it would be highly

unlikely to face difficulties in continuously paying any dividends on a long term

basis, is the company required to develop any mechanism where voting rights

revive if preference dividends are not paid for two years?

A13: Notwithstanding the provisions for preference dividends, non-payment of preference

dividends may impair the rights of holders of stocks with less voting rights, etc. So it

is required to protect holders of stocks with less voting rights, etc. by reviving voting

rights unless preference dividends are paid despite sufficient reserves. Therefore,

the applicant is required to develop a mechanism where voting rights would be

revived if no preference dividends are paid for two years.

In the meantime, JPXR will require the applicant to fully discuss the reasons for the

need or raising funds using class stock when the applicant has sufficient surplus

enough to pay preference dividends.

Q14: For an initial listing, are the holders of stocks with more voting rights, etc.

allowed to make a secondary distribution?


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A14: JPXR assumes that the applicant uses the stocks with more voting rights, etc. in

order for a specified entity to continue to be involved in the management by

collecting voting rights for specified shareholders. However, the secondary

distribution of holders of stocks with more voting rights would reduce the voting

rights ratio and it would not be consistent with the need of such use. On the other

hand, JPXR believes that the secondary distribution at the time of initial listing

would be implemented in order to strike a balance among obtaining founder

gains, individual financial needs, funds required to be raised by the applicant at

the time of initial listing and ensuring liquidity after listing.

Therefore, JPXR would not automatically deny disapprove the secondary

distribution of shareholders of stocks with more voting rights, but would assess

whether the purpose of secondary distribution is significantly unreasonable

based on the need of the use of stocks with more voting rights, etc.

Q15: When a company is considering the listing of voting right class stock, what issues

should the company consider in practices?

A15: When you are considering the listing of voting right class stock, you are encouraged

to consult JPXR in advance through the lead underwriter.

Q16: Is it possible for a company to alter the scheme for voting right class stock after

listing thereof?

A16: There is likelihood that any event resulting in the delisting of the voting right class

stock may arise when a company alters the scheme for class stocks after listing or

does not comply with covenants to be followed.


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(5) Other – it is deemed appropriate from the viewpoints of the public interest or the

protection of investors.

(Guidelines II 6, (6)


When the purposes or lines of business of an applicant conflicts the public interest and good

moral, it is not appropriate to offer the applicant as an investment choice.

In addition, JPXR will assess any matters which are considered to be necessary in order to

contribute to public interest and to protect investors. For example, JPXR will assess the

following:

► When a company in the process of rehabilitation files an application for the listing, JPXR

will assess whether covenants under the rehabilitation plan would not impose any

constraints on the rights of shareholders specified in the plan and whether the design

and implementation of the management control organization would not give rise to any

problems for the purpose of the investor protection.

► When a company who has gone private through MBO (management buy-out)

transactions intends to apply for re-listing of its stock, JPXR will carefully examine the

appropriateness of purchase prices at the MBO or adequacy of disclosures, the

reasonableness of MBO (purpose of going private), and the progress of the plan to be

realized through the MBO.

► An applicant is appropriately required to carry out actions as a new participant in

financial instruments exchange such that they contribute to the sound development of

the exchange. Thus, if the applicant as a whole carries out any actions in contravention

of the Financial Instruments Exchange Act, the applicant is determined to be

inappropriate for an investment choice.

► In cases where a company that has gone private through a management buy-out

(MBO) files an application for re-listing, JPX-R will examine the re-listing application

from the following perspectives and apply them to the re-listing examination.

[Thought on re-listing after an MBO]

An MBO (management buy-out) represents a transaction where the management of a listed

company purchases shares from a company’s shareholders and thereby makes the


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company go private. By definition, an MBO makes a company that has completed its roles

as a listed company exit from the market. From another perspective, an MBO enhances

the enterprise value of a company by flexibly improving the management. On another level,

it provides shareholders with a valuable opportunity to obtain a premium over the shares

they hold.

As such, an MBO has played an important role in sustaining an active capital market, and a

large number of MBO transactions have been effected in Japan.

Some of the MBO transactions aimed to enhance enterprise value by the improvement of

management may be implemented with a view to making an exit for the purpose of re-listing

from the beginning. In such a case, an MBO is presumably implemented as a part of a

re-listing transaction.

On the other hand, an MBO generally differs from a TBO, in that an MBO gives a rise to

conflict of interest between the shareholders and the manager that the shareholders have

entrusted with management activities, and that an MBO puts the manager in a more

favorable position than shareholders in terms of access to information. The manager

implementing an MBO transaction is therefore required to ensure the adequacy of allocation

of premium and the reasonableness of the implementation of the MBO by applying fair

procedures.

In cases where a company that has been delisted through an MBO is re -listed, the

differences between the plan at the time of the MBO and the progress after the MBO are

presumably clear. As such, the relevance between the MBO and re-listing would be

questioned or the adequacy of the premium allocation and reasonableness of the

implementation of the MBO would also be questioned.

In cases where a company that was delisted through the implementation of an MBO in the

past files a re-listing application, in light of the above , JPX-R will conduct an additional

listing examination separately on the investors’ protection practices in order to maintain

confidence in the market, in addition to typical examination procedures,

[Perspective of the listing examination]

1) Relevance between an MBO and re-listing

- An MBO and re-listing represent separate transactions, and strong relevance

between them may not always be observed.

For the purpose of a listing examination, JPX-R will examine the identity and continuity of

parties involved in the MBO and re-listing (management, shareholders) and the length of

time from the MBO to the re-listing.


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2) Adequacy of premium allocation and reasonableness of the implementation of an

MBO

- It would be impracticable to primarily and objectively test the adequacy of the

premium allocation and reasonableness of the implementation of an MBO. In cases where

the procedures on which investors base their decisions have been fairly applied and the

MBO has been effected, a majority of shareholders can be assumed to have been

persuaded to enter into transactions. As such, it is unlikely that JPX-R would question the

adequacy of the premium allocation and reasonableness of the implementation of the MBO

For the purpose of a listing examination, JPX-R will examine the compliance with MBO

guidelines as a part of MBO procedures.

- Even if there is any difference between the plan at the time of the MBO and the

progress after the MBO at the time of re-listing, when a reasonable explanation of reasons

for such difference is given, it is unlikely that JPX-R would question the adequacy of the

premium allocation and reasonableness of the implementation of the MBO.

For the purpose of listing examination, JPX-R will assess whether the explanation of the

difference is given sufficiently and persuasively.

[Application to listing examination]

For the purpose of listing examination, JPX-R will make an assessment based on the

perspectives of 1) and 2) above and examine whether the relevance between the MBO and

re-listing isn’t high and whether the adequacy of the premium allocation and reasonableness

of the implementation of MBO are low.

Then, in light of the system for corporate governance practices and the explanation and

disclosure of facts and circumstances with regard to the re-listing, JPX-R will

comprehensively determine the approval of the re-listing.

IV Listing Examination Q&A

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This Q&A addresses practical items to be confirmed with respect to “III Checklists for

Mothers Listing.”

1. Corporate Continuity and Profitability

(1) Items for which Profit Level is Assessed

Q1: In principle, we use ordinary income when we assess the level of profitability. Though

ordinary income is recognized, how does JPXR treat the situations where those other

than ordinary income incur losses?

A1: For the purpose of examination for profitability, JPXR will, in principle, assess the

profitability of main businesses of initial listing applicant.

Therefore, when the applicant recognizes ordinary income by compensating for

operating losses by non-operating income which does not directly arise from main

businesses, including dividend income, JPXR does not determine that the applicant

has stably generated profits. On the other hand, for example, in case of wholesale

businesses where ordinary income is recognized by compensating for operating loss

by non-operating revenue, JPXR may determine that the applicant will stably

generate profit despite operating loss as its business model thereof indicates that

non-operating revenue is constantly recognized as discount of costs for procurement

occurs every year.

In addition, though an applicant recognizes ordinary income, if some extraordinary

losses are expected to be recognized because of the abolishment of some shops

every year or continuous payments of compensation for damages related to legal

cases, JPXR may make examination in consideration of effect of such operating

losses.


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(2) Profit Level after Listing

Q2: Formal requirements provide that an applicant is required to recognize the total

ordinary income of ¥500 million or more for the last two years. For the purpose of

examination, how does JPXR assess the situations where the total ordinary income is

below ¥500 million for the two year period including application year?

A2: The criterion for the profitability primarily requires that “it is reasonably expected that

the applicant can stably recognize profit after listing.” Therefore, in cases where the

total profit for two financial years including the recent business year is below ¥500,000,

if JPXR determines that the matters described in the “Requirements of criterion and

focus of examination” are satisfied during the course of examination, the applicant

could meet the criterion.

(3) Confirmation of Progress of Performance during the Period in which the

Application is Filed

Q3: Does this criterion mean that JPXR would not examine the progress of performance

during the periods related to that in which the application is filed, except for the

assessment of whether the performance has bottomed out?

A3: In principle, JPXR will not evaluate the actual progress of performance during the

period in which the application is filed.

However, JPXR will assess the progress of operating results in order to evaluate the

control over budgeting. In practice, JPXR will request the applicant to discuss the

systems in place to analyze the departure of actual results from the budgets, and

approaches to revise if any revision of future performance forecast is necessary and

the timing thereof by using actual data during interviews, etc. with JPXR.


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(4) Application of “Accounting Standards for Accounting Changes and Correction

of Errors”

Q4: We retrospectively applied new accounting policies with reference to the “Accounting

Standards for Accounting Changes and Correction of Errors” and as a result, prior

operating results significantly deteriorated compared to those before the application.

Please outline the points which JPXR considers for the purpose of examination.

A4: For the purpose of the examination on the basis of the criterion “Corporate Continuity

and Profitability,” JPXR will assess the profitability of main businesses of the applicant

as to “whether an applicant is reasonably expected to recognize stable profit for a

certain period of time following listing.”

Therefore, in the event that prior operating results significantly deteriorate as a result

of retrospective application of accounting changes, such factors alone would not affect

the listing examination.

(5) Recognition of Losses for the Previous Year and Application Year

Q5: There is a requirement that “the corporate group of an initial listing applicant is

reasonably expected to be able to maintain a stable profit for a certain time of period

after listing (in principle, two business years including application year.” Does this

mean that any listing would not be permitted in the event that the applicant

recognizes any ordinary loss for the previous year and application year?

A5: In principle, JPXR will confirm that the operating results in ordinary income on a full

year basis for the period in which the listing application is filed. However, in

consideration of characteristics of business model of the applicant, if JPXR is

assured that the performance for the year following the annual period in which the

listing application would result in an ordinary income on a full year basis as some

months of the listing application year shows ordinary income though recognizing a

loss on a full year basis, JPXR may exceptionally determine that the applicant meets

the requirements of the criterion.


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(6) In cases where a large amount of goodwill or borrowings has been

recognized

Q6: In the event a large amount of goodwill has been recognized from the acquisition, etc.

of a business or company, how would it be judged for the purpose of examination?

A6: In cases where a large amount of goodwill is recognized, the profit will significantly

decrease if some or all of goodwill recognized is impaired after the listing. If the

amount of goodwill exceeds the net assets, the total amount of liabilities may exceed

that of assets. These circumstances will significantly affect the going concern

assumption of the business. In such a case, JPX-R will examine the

reasonableness of the business plan and conditions of the testing of goodwill for

impairment and comprehensively assess whether the listing should be approved.

An applicant is required to appropriately include descriptions of such matters in the

section “”Risks, etc. associated with business” ” included in “Part I.”

Q7: When a large amount of borrowings is recognized as a result of a leveraged buy-out

(LBO), how would it be judged for the purpose of examination?

A7: In cases where a large amount of borrowings is recognized as a result of a transaction,

including, but not limited to, the implementation of an LBO, the borrowings are likely

to have a significant effect on the going concern assumption of the business when

the applicant delays the payment after the listing or is not able to pay the debts

depending on the Financing as the applicant fails to comply with financial covenants

and is required to pay a debt fully at one time. In such a case, JPX-R will, for example,

examine the following points and comprehensively determine whether the listing

should be approved:

- Whether negative pledge or financial covenants are provided. If so, the likelihood of

incompliance therewith

- Whether the borrowings have been properly paid or payment s are expected to

properly continue (*)

* JPX-R will, for example, examine whether the amount of borrowings and payment

schedule for the borrowings have been reasonably established based on the

business model or industry trend or cash flow conditions, or whether the payments

have been stably made based on a payment schedule so established.

In addition, in cases where any provisions which significantly restrict the freedom of


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management of a listed company have been provided under loan agreements, etc.

entered into between an applicant and a lender such that the approval of the lender is

required in advance for any amendment to a significant provision in Articles of

Incorporation or issuance of securities, the applicant will be required to modify the

agreement or remove any related provisions.

An applicant is required to appropriately include descriptions of such matters in the

section “Risk Information pertaining to Business” included in “Part I.”


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2. Soundness of Corporate Management

(1) Transactions with Related Parties

Q8: When some sales or real estate related transactions have been entered into between

the applicant and any related party, how does JPXR evaluate such transactions for the

purpose of the examination?

A8: In case of existence of any transactions with related parties, JPXR will evaluate the

reasonableness of transactions (necessity for business), adequacy of transactional

terms and conditions, and fairness of disclosures of transactions. If any

inappropriateness is identified, JPXR will more carefully perform the examination. For

example, the following are identified as inappropriate cases.

(Cases where the reasonableness of transactions (necessity for business) is not

recognized)

- The applicant leases property from a related party not within its business plan and

operating strategy (e.g., in case of retail businesses, lease of shop consistently

making losses)

- The applicant has entered into some transactions via a related party, but the

reasonableness of involvement of the related party (necessity for business) is not

recognized.

- The applicant has entered into financial transactions in a large amount.

(Cases where the adequacy of transactional terms and conditions is not recognized)

- The applicant has provided a related party the free rent of vacant spaces in the

building owned by the applicant for the purpose of individual business.

- When the applicant sells a corporate property to a related party, the applicant sold

the property at a significantly low price despite the large difference between the

market value and the book value (market value is significantly below the book

value).

- In commencing or renewing transactions, the applicant has not implemented

sufficient research into the adequacy of transactional terms and conditions such as

comparison of various quotations (in case of operational transactions) and lease


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terms of similar properties (lease transactions of real estate).

(Cases where the fairness of disclosures is not sufficient)

- Despite the fact that the applicant has leased a property from a related party, the

applicant tried to circumvent the disclosure thereof by entering into the lease with the

real estate broker.

When an event does not constitute an operational transaction, it is feared that the

event gives rise to the provision of undue benefits via other management activities

consistent with cases below and JPXR will carefully examine these issues.

- A company is deemed to have purchased a vast amount of artistic Rules such as

paintings to satisfy individual hobbies or preferences of officers of the company.

- It is deemed that properties purchased by the company (including real estate,

company car, boat, airplane, golf course membership, etc.) have been used for

personal purposes of specified officers, etc. of the company.

Q9: We have paid advisor fees to related parties by entering into an agreement with them.

How will JPXR evaluate these cases?

A9: The important point is that transactions with related parties should be truly justified

when considering the interest of the company first.

In cases where a related party is requested to serve as an advisor (needed for the

purpose of business), JPX-R will examine the reasonableness of the request in

consideration of the roles expected of the advisor and actual performance of those

roles. As a result, an applicant is required to terminate any transaction for which

reasonable explanations are not given sufficiently.

JPX-R will then examine whether the advisor fee would be adequate based on the

roles expected of the advisor or the actual performance of those roles by confirming

the method and basis for determining the advisor fee and its absolute amount (*). As a

result, an applicant is required to revise the advisor fee for any transaction that has not

been reasonably explained.

For the execution of an advisor agreement or the determination of an advisor fee, the

details should preferably be determined through a consultation involving independent


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directors rather than the decision of some management personnel.

In addition, even if a request to a related party to serve as an advisor (need for the

purpose of business) or the adequacy of an advisory fee can be reasonably explained

for the purpose of a listing examination, the necessity of executing the advisory

agreement or the roles required of the advisor would change in response to the

evolving circumstances of the applicant or related party entering into the advisory

agreement. Therefore, the applicant is required to have a mechanism in place to

review and address such a change on a timely basis.

(*) One of the thresholds is to compare the compensations of directors, etc. required to

fulfill legal responsibilities with the compensations of advisors. In cases where a

director holds a position of advisor after retirement, it would be useful to compare the

compensation as a director with the current compensation as an advisor.

Q10: Systems to check and balance the related party transactions are required to be

established. How will JPXR make examinations in relation to these issues?

A10: A degree of such systems to be designed and implemented may differ depending on

policies for related party transactions, existence of related party transactions and

status of related parties, etc. JPXR will comprehensively evaluate these issues by

assessing the method to identify, consider and follow up related party transactions.

For example, when the applicant has developed policies to permit some related party

transactions and related party transactions have practically taken place, the applicant

is encouraged to have addressed the following issues.

The applicant can identify related party transactions before the commencement

thereof.

In commencing any related party transaction, the applicant has in place the systems to

evaluate the reasonableness and adequacy of transactional terms and conditions,

including the resolutions at or report to the Board of Directors, and requirements for

the examination by independent directors/auditors or company auditors.

The applicant has in place the systems to periodically evaluate the reasonableness

and adequacy of transactional terms and conditions as related party transactions are

evaluated at the meeting of Boards of Directors for closing accounts and audi ted by

company auditors.


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The applicant has required the mechanism for these transactions to be consistently

implemented after listing by virtue of requirements of regulations or manuals

(Regulations on the Board of Directors, Regulations on the Board o f Company

auditors, Regulations on Request for Approval, Compliance Regulations and other

manuals) and other measures.

On the other hand, if an actual (or expected) related party transaction takes place as a

part of activities of general consumers or constitutes a transaction with a major

shareholder (who is not a parent company, etc.) and similar transactions have been

entered into with many other companies, subsequent assessment mentioned in Q8

would be sufficient.

This is illustrated in the context of the implications associated with related party

transactions. So, if JPXR can confirm any check and balance systems in terms of

related party transactions, they would not give rise to any problems in this respect.

The applicant is encouraged to design and implement the systems in consideration of

actual status of the applicant.

Q11: We have developed company policies which would not permit any related party

transactions. Under these circumstances, do we have to design and implement

such mechanism?

A11: A company has developed policies which would not permit any related party

transactions, no such transactions have actually been entered into and it is highly

unlikely that such transactions would take place on the basis of status of related

parties, etc. In such cases, if the company consistently applies the procedures which

have been implemented to review the items to be described in the Securities Report

(subsequent procedures including separate inquiry to officers, confirmation of related

parties against the list of trading partners), such consistent application would not give

rise to any problem in this respect. However, there is possibility that a related party

transaction may consequentially prove to have taken place. In such cases, the

company is required to appropriately follow up the transactions by reporting them to

the Board of Directors or having them examined by company auditors.

(2) Transactions involving the management


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Q12: If there is any transaction involving the management, how do the examiners

assess the transaction? Reference to “any business acquired or planned

through the efforts of the management in itself, or any project whose necessary

matters are exceptionally determined by the management” is made in this.

What transactions do they actually refer to?

A12: The examiners will not consider any transaction involving the management itself

during the course of their assessment. However, appropriate check and balance

functions are unlikely to internally apply to such transaction. As such, the transaction

may result in some frauds. Therefore, the examiners will assess whether an

appropriate system has been developed and operated where such project will be

considered at the corporate level and appropriate check and balance functions will be

applied properly, and whether or not any transaction involving the management, which

was actually carried out, is an inappropriate one. If such assessment highlights that

there is any inappropriate element in the transaction, the examiners will carefully

examine the listing application. Any transaction which took place in the last two

years and during the period for the application is expected will be subject to the

assessment. Projects which may meet the reference to “any business acquired or

planned through the efforts of the management in itself, or any project whose

necessary matters are exceptionally determined by the management” may include the

following:

- Transactions: the management discover customers through its own relationship,

negotiate the terms and conditions and finally succeed in the acquisition;

- Transactions: the management specifically develop the plan for the operation of shop

or outlet and the plan is implemented;

- Transactions, where general managers or those in similar position usually perform

any procedures for the credit grant or conclusion of agreement and decide on them,

the management will exceptionally make such decision;

- Transactions: where the request for approval regarding the grant of credit or

conclusion of the agreement is dissented and rejected before the request is submitted

to the management, the request is exceptionally submitted to the management, who is

finally approves it; or

- Transactions: Though they are not entered into by the company in normal cases, the

company enters into the transactions as the management is involved.

(3) Agreement with Shareholders

Q13: We have entered into agreements with large shareholders which require the


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pre-approval with respect to material items (large capital investments) or which

grant the right to appoint officers. How will JPXR evaluate these examinations?

A13 The existence of any agreement which grants special rights to specific shareholders

is highly expected to impair the rights of other shareholders, and the applicant is

required to terminate the contract before the listing application, in principle.

(4) Handling of Core Subsidiary

Q14: What basis does JPXR apply in evaluating whether “a subsidiary substantially

constitutes an integral part of the parent company?"

A14: For example, JPXR will evaluate this issue on the basis of similarities of business

domain of the parent company and the applicant or effects generated by synergies

arising from the business relationship between the parent and the applicant. In such

cases, in cases where, though the business model adopted by the applicant differs

from that of the parent company, the applicant is determined to play an important role

to realize the business model of the parent company, JPXR is likely to determine that

the applicant substantially constitutes an integral part of the parent company.

(5) Shareholding of the Parent Company as a Percentage of the Total

Shareholders’ Equity

Q15: There is a requirement that “JPXR will assess this point by confirming the intention

of the applicant to reduce the shareholding ratio of the parent company, etc.” In

practice, what points will JPXR examine?

A15: When it is concerned that the applicant constitutes a department or division of the

parent company and the applicant must be consolidated by the parent because its

shareholding ratio is high, it is determined that the probability that the decision making

of the applicant would be affected by the parent company. This would give rise to a

problem in that the likelihood that the business activities of the applicant would be

restricted or influenced by the parent company would be higher. Accordingly, JPXR

will evaluate whether a degree of influences of the parent company over the

management decisions of applicant would be mitigated as the applicant expects to

reduce the shareholding ratio of the parent company or eliminate concurrent holding of

positions at the parent company.


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(6) Competition Arising from the Performance of Similar Businesses

Q16: When there are companies in the corporate group of the parent company, etc. which

performs businesses similar to those carried out by us, how does JPXR evaluate

such situations for the purpose of the examination?

A16: It may be assumed that the parent company, etc. leverages its controlling power to

restrict or coordinate the business activities of the applicant. JPXR will assess

whether the applicant ensures sufficient independence from the parent company, etc.

such that the applicant would not be exposed to undue business coordination of the

parent company, etc. in consideration of the reasons for the occurrence of competition

between the parent company, etc. and the applicant, the reasons for performing

businesses independent of the parent company, etc., the nature of business

coordination and management of subsidiaries of the parent, and the possibility of

impeding the independence of the applicant in the future.

In addition, when the boundaries of products and sales regions have clearly been

defined between the applicant and the companies performing businesses similar to

those of the applicant, JPXR may determine that it is unlikely that the businesses of

the applicant would be restricted or coordinated in future.

In the meantime, when any competition with the applicant has already occurred, JPXR

may require the applicant to disclose the situations by asking the notion underlying the

competition in order to protect the minority interests through interviews with

independent directors/auditors.


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Q17: There is a requirement that “JPXR will assess whether the applicant ensures

sufficient independence from the parent company, etc. such that the applicant

would not be exposed to undue business coordination of the parent company, etc.

in consideration of the reasons for the occurrence of competition with the parent

company, etc. and the applicant, the reasons for performing businesses

independent of the parent company, etc. and the nature of business coordination.”

In practice, which cases would give rise to problems in this context?

A17: Incidents identified as examples of cases where independence may be endangered

as the business activities of the applicant are restricted or coordinated by the

parent company, etc. would include the following cases:

- It is determined that the applicant is forced by the parent company, etc. to

manage a loss making shop in the area where the applicant competes with the

parent company, etc.

- The sales of new products of the applicant are restricted or the timing of launch is

changed at the sole discretion of the parent company, etc.

- Though the applicant receives orders which the parent company, etc. cannot

handle, many of such orders are not profitable or the parent company, etc.

generates undue profit;

- Managers for the business of departments or divisions which compete with the

parent company, etc. are seconded from the parent company, etc.


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(7) Real Estate Transactions with the Parent Company, etc.

Q18: With respect to the lease of property from the parent company, etc., it is stated that

“JPXR will determine whether an applicant constitutes a business department or

division based on the degree of dependence on the parent company, etc. with

respect to each relationship (ratio and amount, etc.) and on the materiality of

business activities.” How will JPXR assess the dependence or materiality of

business activities for the purpose of the examination?

A18: For example, if the applicant is a company which has developed its business by

operating businesses in a large number of areas nationwide and has leased property

for each area from the parent company, etc., it is likely that a degree of dependence

on the parent company, etc. is low.

However, if the property leased from the parent company, etc. at a specific area is

much more material for the purpose of the business than those leased at other areas,

JPXR will more carefully evaluate the lease transaction.

(8) Acceptance of Secondment from the Parent Company, etc.

Q19: There is a requirement that “If the seconded persons are assigned to positions of

officers or general managers who manage departments exposed to the influence of

the parent company, etc., JPXR will be concerned with such situations from the

perspective of independence. How does JPXR define officers or general managers

who manage departments exposed to the influence of the parent company, etc.?

A19: If seconded persons from the parent company, etc. are assigned to positions of

officers, etc. who manage sales departments of the applicant which has

recognized a vast amount of sales from the parent company, etc., the seconded

persons and the parent company, etc. may mutually determine the selling prices or

transaction amounts of the applicant. In such cases, they would be highly likely to

be regarded as officers or general managers having influence over the applicant.

The same would apply to cases where the seconded persons are assigned to

positions of officers, etc. who manage departments or divisions which may have

significant influence over the decision making for the management of the applicant,

including the management planning department.


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3. Effectiveness of Corporate Governance and Internal

Management System of an Enterprise

(1) Board of Directors

Q20: The attendance of outsider directors at the meetings of the Board of Directors is

infrequent. How will JPXR evaluate such situation for the purpose of the

examination?

A20: Attendance at the meetings of the Board of Directors where directors participate in

the decision making of material matters for the business and receive necessary report

is considered to be important duties of directors. Thus if attendance of some directors

at the board meetings is infrequent, it is determined that the governance of the

applicant has not functioned well. JPXR will more carefully evaluate such situation.

(2) Company Auditors

Q21: We currently do not have a board of auditors. When is the latest date by which we

must establish a board of auditors?

A21: In the "Code of Corporate Conduct" of the Securities Listing Regulations,

establishing a board of auditors is set forth under “Matters To Be Observed”. Therefore,

the applicant needs to set up a board of auditors, however, there is no set date to do

so. However, the applicant would be subject to a substantive examination which

confirms whether the board of auditors is functioning properly. As such, it would be

desirable for an applicant to apply after providing a certain operational period for the

board of auditors.

(3) Independent Directors/Auditors

Q22: When is the latest date by which we must elect independent directors/auditors?

A22: Independent directors/auditors must be elected by listing date. Thus JPXR will

check the status of election of independent directors/auditors during the process of


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examination.

Q23: It is required that outside directors or auditors who would be registered as

independent directors/auditors should be persons who will not give rise to any

conflict of interest with general shareholders. What should we consider in choosing

persons who would be registered as independent directors/auditors?

A23: In choosing persons who would be registered as independent directors/auditors, it is

required in principle that they do not meet any one of the events mentioned in

Guidelines III 5, (3) 2. Corporate Governance Report

For considerations in electing independent directors/auditors, please refer to the

section “Practical Considerations in Electing Independent Officer” in the “Company

Information Timely Disclosure Guidebook” issued by TSE. The information is also

posted on TSE’s website.

(http://www.jpx.co.jp/equities/listing/ind-executive/index.html)

When you are concerned with the satisfaction of requirements for independent

directors/auditors in filing the listing application, please consult JPXR in advance via

the lead underwriter.

Q24: We have no candidates for independent directors because we have not found

anyone qualified. For the purpose of examination, how will JPXR assess the

situation?

A24: JPXR will not treat the situation as non-conformance in the course of the

examination even though the applicant does not secure any independent directors.

However, in cases where the applicant does not secure any independent directors, the

listing examination also requests the listed company to describe its policy to secure an

independent director(s) and check the progress of actions to secure an independent

director(s), as well as to describe such progress in the Corporate Governance Report.

Q25: The Corporate Governance Code requires that “A listed company should elect at

least two or more independent outside directors” (Principle 4-8). If we do not elect

two or more independent outside directors by the listing, how does it affect the

listing examination?


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A25: The Corporate Governance Code does not necessarily require a listed company to

elect two or more independent outside directors. Under the approach of “Comply or

Explain,” the listed company may be given an option not to implement the election by

describing the reasons for not electing them. Non-election of two or more independent

outside directors by the time of listing does not constitute the non-compliance with

requirements for the listing examination. However, unless the listing company elect at

least two or more independent outside directors, it is required to explain the reasons

for not doing so in the Corporate Governance Report..

IV Listing Examinat ion Q&A

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(4) Company with Board of Directors

Q26: We are considering listing of our stock in the form of pure holding company. Among

companies under the patronage of our company, there is a company which has not

formed the Board of Directors as it has only one director. Do we have to turn the

company into a company with board of directors?

A26: It is not automatically required from the formal requirements that all the companies

under patronage of a holding company should be companies with board of directors.

JPXR will evaluate these situations on a case-by-case basis in consideration of the

existence of reasonable reasons for not establishing the board of directors, on the

basis of sizes of the company, positioning in the corporate group and the background

for the foundation of the company.

(5) Request for Approval and Decisions

Q27: If there are many incidents where transactions have been commenced before the

requests for the approval of transactions are submitted and decisions are made,

how does JPXR judge these situations?

A27: For the purpose of the examination, it is required from the perspective of a fair

internal management system that requests for approval are appropriately prepared in

accordance with regulations on work duties and appropriate decisions are made. Such

incidents may give rise to concerns with the effectiveness of the request for approval

and the decisions on the basis thereof. They are not determined to meet the

requirements and JPXR will more carefully assess the situations.


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(6) Budget Control

Q28: For the last several years, actual results have constantly deviated from budgets.

How does JPXR judge these situations?

A28: In cases of constant deviation of actual results from budgets, it is likely that there

would be some problems in terms of the budget development system (*).JPXR will

examine the budget development process (e.g., consistency among budget systems

such as profit and loss budget and capital investment plan, etc., analysis of external

environments and coordination with other departments and divisions), in depth.

When budget control has not been reasonably implemented at company level as

some problems have arisen with respect to the development process, JPXR will

more carefully assess these situations.

* In cases where actual results are constantly below budgets, it is assumed that the

feasible realization of budgets have not sufficiently discussed during the process of

budget development and budgets have been prepared only expecting the desired

performance to be reflected in the operating activities.

(7) Acceptance of Secondment

Q29: Managers (general managers or authorized to make necessary decisions)

responsible for significant departments (financial department or sales departments

which carry out transactions with important customers) are seconded from external

entities (financial institutions or large customers or suppliers?

A29: When managers responsible for important departments or divisions are seconded

from other entities, JPXR will assess whether such secondment has not been

forced (i.e., proprietary business management systems have not been impeded)

and whether the replacement will readily be available by recruiting relevant

persons or elevating internal staff members to such positions. When JPXR

determines that the applicant could address such situations by applying these

approaches, JPXR may positively assess them for the purpose of the examination.


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(8) Departure of Practices from Relevant Regulations

Q30: There are cases where though a company has adopted shipment basis as the

standards for recognizing sales, in actual practices, the shipment date has not

been clearly identified or revenue arising from the sales has been recognized at the

time of acceptance. How will JPXR assess these cases?

A30: For the purpose of the examination, JPXR will evaluate that accounting standards

are appropriately developed and included in the company level regulations and the

practices are implemented according to them. With respect to the cases in question,

since there is departure of practices form regulations (inconsistency between the

practices and the regulations), it is mandated that the applicant promptly addresses

such departure by improving the requirements of regulations or improving practices.

When the improvement is not readily available or there are significant errors which

require the retrospective restatement of financial statements due to historical errors,

JPXR will more carefully assess such situations.

(9) Labor Relationship

Q31: We have been recommended to correct some issues identified by a competent labor

standards supervision office the previous year. How will JPXR judge these cases?

A31: For the purpose of the examination, JPXR will assess whether the applicant has in

place effective systems to ensure the compliance with laws and regulations or has not

committed material breach of laws and regulations. With respect to cases where the

applicant is recommended to correct some deficiencies, it is assumed that there are

some defects or weakness in internal systems to ensure the compliance with the laws

and regulations concerning labor affairs at that time. JPXR will evaluate the nature of

corrective recommendations and how the applicant addressed such

recommendations at company level, and how the applicant has improved the systems

to prevent the reoccurrence of such incidents. JPXR will then make judgment on the

basis of such evaluation.

Thus, historical corrective recommendations would not necessarily affect the

evaluation immediately for the purpose of the examination.


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(10) Other Considerations for the Management Control

Q32: When a company outsources some aspects of management control functions

(general affairs department or finance and accounting department), does JPXR

find any problems in outsourcing it to a third party?

A32: In order to enhance the efficiency of managerial resources in the context of

performance of administrative works, an increasing number of companies have

now entrusted some works (so-called outsourcing) to third parties.

The outsourcing practices used to be applied for simple works such as payroll

calculation for the reduction of usual costs, but now circumstances have changed

such that they are applied to more strategic situations with a view to intensively

investing resources in the establishment of core competence (investing resources

into strong and important business areas while utilizing outside resources for other

areas).

For the purpose of the listing examination, JPXR would not immediately question

the existence of outsourcing practices. However, the applicant is required to

develop the system to ensure the accuracy and confidentiality of the information in

using outsourcing and to analyze the information from the outsourcer and disclose

it at the responsibility of the officer responsible for information management officer

of the applicant.

The applicant is required to assess the impact of and address the situations where

the applicant will no longer be able to outsource works to the outsourcer with which

the applicant has entered into an outsourcing agreement.

In consideration of materiality of outsourced works, the applicant is required to

describe the nature of outsourced works in Section “Risks Associated with

Businesses” of “Part I” documents

The assessment of whether the outsourced businesses are fairly managed may

vary depending on the lines of business and organizational structures of the

applicant and outsourced works. So if the applicant considers the use of

outsourcing, the applicant is encouraged to consult the lead underwriter or audit

firm.

The following highlight the considerations in making any outsourcing:

a. The applicant is principally responsible for the outsourced works.

No matter what works are outsourced, the applicant is eventually responsible for

the final decision to direct the business of the applicant including the decision


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making and strategy developments.

It is naturally assumed that the applicant is able to understand and analyze the

contents of outsourced works and data obtained from the outsourcer. The

applicant is also required to regularly assess the contents of the works

performed by the outsourcer at its discretion,

b. Appropriate disclosures

In case where the applicant outsources a part of works closely associated with

statutory disclosures or timely disclosures of preliminary releases of earnings,

the applicant should ensure the systems where such outsourcing would not

impede any timely and appropriate disclosures.

c. Regulations on insider trading

In the event that the outsourcer may have access to information such as that

associated with the operating results before the announcement publicly, the

applicant is required to undertake necessary measures to prevent leak of

information, including the conclusion of non-disclosure agreement.

d. Selection of appropriate outsourcer

The applicant is required to select reliable and experienced outsourcers such

that the works outsourced to the outsourcer would be implemented and

consistent. Also the applicant is to ensure the systems where an alternative

outsourcer is available or the applicant can handle the outsourced works in the

event that the applicant will be unable to request works to the outsourcer with

which the applicant has entered into the outsourcing agreement.


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4. Appropriateness of Disclosure of Corporate Profile, Risk

Information, etc.

(1) Revision of Future Forecast Information Including Performance Forecast

Q33: For the purpose of the examination, how do we have to address cases where we

need to revise future performance forecast information including earnings forecast

announced in order to ensure fair disclosures?

A33: Listed companies are required to disclose company information fairly and promptly.

Thus no matter when future forecast information including earnings forecast needs

to be revised, they shall disclose such revision promptly. For the purpose of the

examination, in order to confirm that the applicant has developed appropriate

disclosure systems, JPXR will assess the design and implementation of the intern

systems for timely disclosures and disclosure flow when some items required to be

disclosed arise.

In addition, for any company which lists its stock on another financial instruments

exchange, JPXR will assess the historical status of disclosures. For example,

though a company has resolved at the Board of Directors to revise future forecast

information, the company has not immediately disclosed the revision. Since it is

determined that the company has not satisfied the requirements for the fairness of

timely disclosure, JPXR will more carefully assess the situation for the purpose of

the examination.


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(2) Amendment to Disclosed Materials and Data

Q34: If we made some amendments to disclosed data in securities report, etc. in the past,

how will JPXR assess such amendments for the purpose of the examination?

A34: When the applicant makes amendments to securities report, etc., JPXR will assess

the conformity with the examination standards in consideration of factors leading to

the amendments and the approaches to address such factors, in addition to

particular amendments, the timing of amendments, the detection of items to be

amended and the frequency of such amendments. JPXR will more carefully asses

such amendments no matter when such amendments have taken place several

times including the amendments in application year and no improvements to the

disclosure system are perceived.

(3) Contents of descriptions included in the disclosure materials

Q35: What cases would be regarded as misleading with respect to the contents of

descriptions included in the disclosure materials in Securities Report for Initial

Listing Application (Part I)?

A35: The following cases may be considered misleading. The contents of descriptions

included in the disclosure materials need to be tailored to faithfully represent the

substance of the applicant.

- Cases where, for any business the applicant develops or is expected to develop

going forward, the applicant describes the nature of business by using terms that

relate to areas currently attracting strong investor interest, which would not have

much relevance to the area of such business.

- Cases where a business that is still at an early stage is described as one of the

applicant’s key businesses, or where an applicant describes a business that is still

only in the planning stages as a business that has already been developed.

(4) Acts which Distort the Disclosure of Actual Conditions

Q36: What cases are considered to distort the disclosures of actual conditions in

transactional acts?

A36: If sales are significantly increasing at the time approaching the year end, i.e., so


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called “coercive selling” is concerned, or analysis of goods and products sold or

customers is not clear, we may concern with the occurrence of so called “round trip

transactions,” or “fictitious transactions.”

In such cases, the financial statements of the applicant will not faithfully reflect the

actual conditions and present information quite different from what should have

been disclosed. Since they mislead investors, and in addition the applicant is likely

to be penalized because of breach of laws and regulations including false statement,

JPXR will more carefully assess these situations.


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5. Other Matters Deemed Necessary by the Exchange from

the Viewpoint of the Public Interest or the Protection of

Investors

(1) Change in shareholders before the listing

Q37: In cases where a change in shareholders takes place before a listing, what aspects

does JPX-R confirm for the purpose of the listing examination?

A37: In cases where any change in shareholders takes place before a listing, JPX-R

confirms the attributes of each shareholder, the reasons why the change has taken

place, and the scheme to transfer the shares and determining the share prices

before and after the Change. If, for example, JPX-R is concerned with the share

transfers at an unreasonable price or repeated changes in large shareholders,

JPX-R will confirm the circumstances on the assumption that some specific persons

may have unduly benefited from the transfers. In light of this, JPX-R will assess

whether the transfers will adversely affect general shareholders after the listing.

An applicant is required to include appropriate descriptions of share transfers in the

section “Risk Information pertaining to Business” included in “Part I.”

6. Others

(1) Internal management Report over Financial Reporting

Q38: How will JPXR assess the approach to address internal management report system

over financial reporting?

A38: When stock issued by the applicant is listed on another financial instruments

exchange in Japan, it is required that (i) the internal management report for the

business year which ends during the recent one year contains the statement that

“assessment results will be refrained from being expresses,” and (b) the internal


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management audit report for the business year which ends during the recent one

year contains the statement that “no opinion will be expressed.” (*) During the due

course of examination, JPXR will evaluate the assessment system of internal

management or matters identified as those required to be addressed during the

assessment process.

(*) This shall not apply to cases where the audit certificate is exempted over the

period for which the applicant is allowed to elect to apply the exemption from the

audit certificate over the internal control report.

On the other hand, for other non-listed companies, JPXR will evaluate the status of

preparation therefor during the process of examination.

(2) Reusability of Flow Chart

Q39: May we reuse the flow charts developed for the internal management report system

in order to present “flow chart” required to be described in “Part II” documents?

A39: The applicant may reuse the flow charts developed for the internal management

report system. However, the scope of flow charts required by “Part II” documents

may differ from such reused flow charts, so some insufficient portion may have to be

prepared separately.

V Receipt or Transfer of Stocks, etc. Before Listing and Allotment, etc. of Offered Stocks through Third Party Allotment

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V Receipt or Transfer of Stocks, etc. Before

Listing and Allotment, etc. of Offered Stocks

through Third Party Allotment

When a non-listed company not listed on another financial instruments exchange in Japan

files a direct application for listing on TSE, for the purpose of ensuring the fairness of going

public, TSE requires such a non-listed applicant to meet the requirement of Items 1 and 2

below. The objective of these requirements is to prevent a specified entity from obtaining a

substantial income on a short-time basis through the allotment of offered stocks through a

third party allotment or allotment of subscription warrants as stock option issued by the

applicant in a period in which the realization of listing of stock is highly probable.

This section explains such requirements in detail.

<Scope of application>

These regulations shall apply to all applicants except for those which meet any one of the

items below:

(1) Issuers of a domestic stock, etc. listed on any other domestic financial instruments

exchange

(2) Initial listing applicants to whom the provisions for technical listing apply;

(3) Issuers of domestic stocks, etc. that are listed or continuously traded on a foreign

financial instruments exchange, etc.;

(4) Initial listing applicants who are a company to succeed to the business of a listed

company, an issuer of stocks, etc. listed on any other financial instruments exchange in

Japan, or an issuer of domestic stocks, etc. that are listed or continuously traded on a

foreign financial instruments exchange, etc. upon a shareholder -directed spin-off such

entity (see Note 1 below) and make initial listing application prior to said

shareholder-directed spin-off.

(Note 1) This shall be limited to cases in which the business succeeded from such entity

becomes the principal business of the initial listing applicant. Applicant who

takes over any business divested by a listed company, issuer of stock


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certificates, etc. listed on another financial instruments exchange in Japan or

issuer of Japanese stock certificates listed or continuously traded on a foreign

financial instruments exchange, and who files an initial listing application before

the divesture (limited to cases where the applicant principally carries out the

business)

(Rule 217 of the Regulations, Rule 231 of the Rules)


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1. Receipt or Transfer of Shares, etc. before Listing

(1) Descriptions Concerning the Status of Changes in Shares

before Listing

When special related parties, etc. (Note 1) receive or transfer shares or subscription

warrants issued by an applicant (including the exercise of subscription warrants; hereinafter

referred to as the “changes in shares, etc.”) between the following date of two years ago

corresponding to the end of the previous year (Note 2) and the date preceding the listing day,

an applicant shall describe the status of changes in shares, etc. in a document TSE deems

appropriate (Note 3); provided that this will not apply to cases where shares issued by the

applicant are those assigned to Green Sheet by Japanese Securities Dealers Association.

(Rule 253 of the Rules)

Note 1: A “special related party” represents persons enumerated below:

1) A special related party of an applicant (special related party prescribed in Article 1, Item

31 (i) of the Cabinet Order Relating to the Implementation of Disclosures);

2) Ten (10) largest shareholders who hold the largest number of stocks of the applicant

(excluding the employee share ownership plan of the applicant);;

3) Company based on human relations (company based on human relations prescribed in

Article 1, Item 31 (iii) of the Cabinet Order Relating to the Implementation of Disclosures)

or capital relationship (company having capital relationship prescribed in Article 1, Item

31 (iii) ) with an applicant; or

4) Financial instruments business operator, etc. and officer thereof, company based on

human relations prescribed in Article 1, Item 31 (iii) of the Cabinet Order Relat ing to the

Implementation of Disclosures or company having capital relationship (company based

on capital relations prescribed in Article 1, Item 31 (iii) ) therewith.

Note 2: For example, if the end of the previous year is March 31, such date is April 1 of two

years ago.

(Rule 253, Paragraph 1 of the Rules)


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Note 3: Documents TSE deems appropriate refer to “Part I” documents and the applicant

should consider to include the basis for price calculation, described in conformity

with Exhibit 7 "Description of the Basis for Price Calculation," in the "Public

Information on Stocks - Item 1: Changes in Ownership of Stocks, etc. by Special

Related Parties, etc." section of the "Securities Report for Initial Listing Application

(Part 1)"


(2) Retention, etc. of the Record of Changes in Ownership of

Stocks, etc. Before Listing

The applicant shall retain the record about the description of the changes in ownership of

stocks, etc. for a period of five (5) years from the listing day.

The applicant shall respond to request for submission made by TSE as necessary with

respect to the record. In cases where an applicant refuses to respond to the request for

submission TSE may publicize the corporate name of such applicant and the fact tha t the

initial listing

applicant refuses to respond to such request for submission.

In cases where TSE determined, based on the examination of the record, that the

description of the changes in ownership of stocks, etc. provided pursuant to the provisions

of the preceding rule was clearly inaccurate, TSE may publicize the corporate name of the

applicant and the managing trading participant concerned and the fact that said description

has been determined to be inaccurate.



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2. Allotment of Offered Stocks by Third Party Allotment, etc.

Before Listing

(1) Regulations on Allotment of Offered Stocks by Third-Party

Allotment, etc.

a. In cases where the applicant carried out an allotment of offered stocks by third -party

allotment, etc. after one (1) year before the end of the previous year (Note 1) (they refer

to offered stocks prescribed in Article 199, Paragraph 1 of the Companies Act and equity

contribution through preferred offer prescribed in Preferred Equity Contribution Act) ,

such applicant shall execute a written assurance with the allotted persons that allotted

persons shall, as a general rule, continue to hold the stocks allotted to them, they will

report to TSE on inquiries concerning the ownership thereof and make the documents

and the contents thereof available for the public inspection, and implement other acts

required by TSE. When the applicant does not submit the copy of statement, TSE may

not accept the listing applicant or may revoke the acceptance of the listing application.

Whether such allotment has been effected will be determined based on the payment

date for the offered stocks or the end of payment period (Note 2)


Note 1: The third party allotment, etc. relates to a public offering in relation represents any

method other than methods to make public offering public offer, shareholder

allotment or preferred equity contribution effected by the method where a securities

company distributes to general investors shares publicly offered which relate to

shares of stock assigned by the Japan Securities Dealers Association to the Green

Sheet.

Note 2: (1) Cases where an applicant absorbs and merges another company, (2) any stocks

issued when turning another company into a fully owned subsidiary through stock

swap, or (3) stocks issued when an applicant is established by stock transfer, do

not meet the definition of “allotment of offered stocks by third party allotment.

However concerning the another company in (1) and (2) above or a company to

which stocks are transferred in (3) above, TSE may require a written assurance

concerning continuous holding of stocks of the applicant in consideration of the


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meaning of rules to prevent short time profit from being gained a specified entity, if

the applicant carries out the allotment of offered stocks by third party allotment after

the date of one year ago corresponding to the last day of the previous year.

(a) The reference to “they continue to hold offered stocks, report to TSE on inquiries

concerning the ownership thereof and make the documents and the contents thereof

available for the public inspection, and implement other acts required by TSE” at (a)

above” means the following:


(i) Continuous Holding

Allotted persons shall, as a general rule, continue to hold the stocks allotted to them (Note 1)

since the day on which the stocks are allotted until the day on which six (6) months have

passed since the listing day (Note 2). In this case, if allotted persons acquire new stocks or

subscription warrants as a result of stock split, gratis allotment of shares, or gratis allotment

of subscription warrants with respect to the allotted stocks, or conversion of the allotted

stocks to another class of stocks or subscription warrants, they shall cont inue to hold such

newly acquired stocks or subscription warrants (Note 3) until the same day.

(Note 1) This shall be the following rule and Rule 260 referred to as the "allotted stocks"

hereinafter in this rule.

(Note 2) If one (1) year has not passed since the payment date or the ending date of the

payment period pertaining to the allotted stocks as of such day, until the day on

which one year has passed since the payment date or the ending date of the

payment period pertaining to the allotted stocks.

(Note 3) This shall be referred to as the "newly acquired stocks, etc. pertaining to the allotted

stocks" hereinafter in this sub-section.

Note: “Conversion” means a transaction where with respect to shares, a company acquires

shares issued by the company and at the same time delivers other shares or

subscription warrants in exchange for such acquisition while with respect to

subscription warrants, a company acquires subscription warrants issued by the

company and at the same time delivers other shares or subscription warrants in

exchange for the acquisition.

(Rule 255, Paragraph 1, Item 1 of the Rules).


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(ii) Report to the Applicant when Transferring the Allotted Stocks

An allotted person intending to transfer the allotted stocks or newly acquired stocks, etc.

pertaining to the allotted stocks shall notify the initial listing applicant of the intended transfer

in advance in writing and report the result of the actual transfer to the initial listing applicant

after the fact.

(Rule 255, Paragraph 1, Item 2 of the Rules)

(iii) Submission of Report to TSE when Transferring the Allotted Stocks

In cases where an allotted person transferred the allotted stocks or newly acquired stocks,

etc. pertaining to the allotted stocks, the initial listing applicant shall submit to the Exchange

a document containing the name and address of the transferor and the transferee, the

number of stocks transferred, the date of transfer, the transfer price, the reason for transfer,

and other necessary matters at the time of initial listing application, if such transfer was

executed before the initial listing application day, or immediately after such transfer, if such

transfer was executed on or after the initial listing application day


(iv) Report by Applicant to TSE in Response to Inquiry of TSE about Ownership Status

In cases where the Exchange makes an inquiry about the ownership status of the allotted

stocks or newly acquired stocks, etc. pertaining to the allotted stocks as the Exchange

deems it necessary, the initial listing applicant shall report the ownership status of the

allotted stocks or newly acquired stocks, etc. pertaining to the allotted stocks to the

Exchange without delay after confirming, as necessary, the ownership status of the allotte d

stocks or newly acquired stocks, etc. pertaining to the allotted stocks with the allotted

person.


(v) Report by Allotted Person to Applicant in Response to Inquiry on Ownership Status

An allotted person who received from the initial listing applicant a request for confirmation

concerning the ownership status of the allotted stocks or newly acquired stocks, etc.

pertaining to the allotted stocks pursuant to the provisions of the preceding item shall report

such ownership status to the initial listing applicant immediately.



-201-

(vi) Agreement with Availability for Public Inspection

An allotted person shall agree that matters enumerated in each of the preceding items and

the result of transfer of the allotted stocks or newly acquired stocks, etc. pertaining to the

allotted stocks, if applicable, will be available for public inspection.


(vii) Other matters deemed necessary by the Exchange.


(b) Timing of Submission of Documents Certifying Assurance

(i) Where the initial listing applicant carried out an allotment of offered stocks

prescribed in the preceding paragraph before the initial listing application day:

The initial listing applicant shall submit the document on the initial l isting application

day.

(ii) Where the initial listing applicant carried out an allotment of offered stocks

prescribed in the preceding paragraph on or after the initial listing appl ication day:

The initial listing applicant shall submit the document without delay after said

allotment; provided, however, that the date of submission shall be no later than the

day immediately preceding the day on which the Exchange approves the listing.


Documents certifying the assurance (assurance document) shall be prepared with reference

to the form in “A Documents to Be Submitted Pertaining to Initial Listing Application.”

assurance

b. In cases where a person who received an allotment of offered stocks by third-party

allotment, etc. does not actually hold the allotted stocks or newly acquired stocks, etc.

pertaining to the allotted stocks based on the assurance prescribed in a. of the

preceding rule, the Exchange shall either refuse to accept or cancel the acceptance of

the related initial listing application.


However, this provision shall not apply if the conditions prescribed in either of the following


-202-

items are met and it is deemed appropriate that the person does not hold them.


(a) Where the allotted person transfers the allotted stocks or newly acquired stocks, etc.

pertaining to the allotted stocks due to significant difficulty in its business operations.


(b) Where it is deemed unavoidable in light of socially accepted norms.


c. In case where a person who received an allotment of offered stocks by third-party

allotment, etc. transfers said offered stocks during the period prescribed in Paragraph 1

of the preceding rule, the initial listing applicant shall submit to the Exchange a

document containing necessary matters at the time of initial listing application, if the

transfer of such allotted stocks by third-party allotment, etc. or newly acquired stocks,

etc. pertaining to such allotted stocks was executed before the initial listing application

day, or immediately after such transfer, if such transfer was executed on or a fter the

initial listing application day, and agree that such document will be made available for

public inspection by the Exchange.


d. In cases where the Exchange makes an inquiry about the ownership status of offered

stocks by a person who received an allotment of offered stocks by third-party allotment,

etc., the initial listing applicant shall report the ownership status of the offered stocks to

the Exchange without delay after confirming, as necessary, the ownership status of the

allotted stocks or newly acquired stocks, etc. pertaining to the a llotted stocks with the

allotted person.


An initial listing applicant shall be subject to the provisions of the preceding two paragraphs

for a period specified in the assurance even after it becomes a listed company.



-203-

Q1: Is any disposal of treasury stocks through third party allotment during the period to

which relevant reactions apply, to be subject to the assurance pertaining to the

continuous holding?

A1: Considering that the Companies Act requires that the procedures for the disposal of

treasury shares shall be subject to the procedures similar to those of issuance of

new shares, the disposal of treasury shares during the restriction period shall be

subject to the assurance related to continuous holding.

Meanwhile, a similar treatment applies to the disposal of subscription warrants for

treasury shares through third party allotment which is deemed to have the same

effect as the allotment of subscription warrants for shares publicly offered.

Q2: What is the final day when an actual allotment of offered stocks is made before

listing?

A2: TSE requires the applicant to submit to TSE the assurance statement related to the

allotment of such shares publicly offered by the date preceding the listing approval

date under the Rules in order to assess the satisfaction of disclosure requirements

for “Part I” documents, the status of disclosures and whether the assurance for the

continuous holding has been entered into. Therefore, the applicant cannot practically

effect the allotment for which the assurance is entered into after the date of listing

approval. The same treatment shall apply to the allotment, etc. of subscription

warrants for shares offered through third party allotment before listing.

Meanwhile, the listing approval date refers to the date when TSE approves the listing

and externally announces such approval.


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Q3: What is the treatment for shares acquired associated with the allotted shares when

any stock split, gratis allotment of stocks, gratis allotment of subscription warrants

rights or conversion to another class of stocks are made with respect to any

allotted stocks the required period for continuous holding?

A3: When any share split, gratis allotment of shares, gratis allotment for subscription

warrants or conversion to another class of shares are made with respect to any

allotted shares during the required period for continuous holding, shares acquired

associated with such transactions shall be subject to the assurance for continuous

holding. Therefore, unless the applicant describe the continuous holding of the

shares acquired associated with such allotment in the assurance statement, please

keep in mind that the listing application would not be accepted.

The continuous holding period for shares acquired associated with such allotment

represents the continuous holding period for the initially allotted shares.

Q4: When can the applicant and the allotted person appropriately enter into an assurance

statement in writing?

A4: As any person who receives the allotment of shares offered through third party

allotment is, in principle, required to hold them from the date of the allotment of such

allotted shares until the date when six months pass from listing (if one year has not

passed from the payment date or the end of payment period for the allotted shares as

of the date, until the date when one year passes from such date or end of period), the

applicant is, in principle, required to enter into the assurance statement to the effect

before the payment date or the end of payment period for the allotted shares.

Consistent with the above, when the applicant effects the allotment of subscription

warrants, the assurance must, in principle, be entered into before the allotment date

as the obligation to hold them continuously takes effect on the allotment date.


-205-

Transfer and Continuous Holding of Allotted Shares

Cases where “it is deemed unavoidable in light of socially accepted norms” as prescribed in

Rule 256, Paragraph 1, Item 2 of the Rules include, but not limited to, the following (similar

treatment will apply to shares, etc. acquired associated with allotted shares).

Meanwhile, Rule 258, Paragraph 1, Item 2 will apply mutatis mutandis to cases where the

allotment of subscription warrants has been effected through third party allotment.

1. Holders are substantively identical before and after changes in allotted shares.

[Example 1] When a 100% owned new venture capital is established and the investment

business is transferred to the venture capital;

[Example 2] Business is transferred when a 100% owned subsidiary is established when a

company becomes a holding company

<Conditions>

► A person who has received the allotment of shares publicly offered continues to hold

them during the restriction period

► For allotted shares transferred, a person who has received the allotment has

undertaken to continuously hold them until the date when six months pass after listing

(if one year has not passed from the payment date or the end of payment period for the

allotted shares as of the said date, the person is required to hold the shares until the

one year period passes from the payment date or the end of payment period for the

allotted shares).

► Transfer price is the same as the price at the time of allotment.

<Documents to be examined>

► Assurance statement for continuous holding

► Statement certifying the provisions of contract for transfer price of al lotted shares

2. The changes in shares allotted through transfer represent only formal changes

where no changes in holders would take place

[Example 1] Transfer of allotted shares associated with withdrawal of employees from the

employees share ownership plan


-206-

<Conditions>








allotted shares).

► The reasons for the withdrawal relate to the retirement of employees.


Assurance statement for continuous holding

[Example 2] Shares public offered are formally transferred to trust banks, etc. to contribute

shares publicly offered, allotted through third party allotment to retirement

benefits trust in order to compensate for unfunded portion of the employee

pension fund

<Conditions>








allotted shares).

► Revenue arising from the trust will only appropriated to the payment of contributions to

the employee pension fund.

► In conjunction of the rights of shareholders, such shares are considered as if Company

A substantively held them in that the disposition, repayment and exercise of voting

rights attached thereto would be effected under the instruction of Company A.


Assurance statement for continuous holding


-207-

3. Some unavoidable events are acknowledged such that no assurance to

continuously hold the allotted shares would be made at the time of allotment of

shares publicly offered.

[Example] For publicly offered shares allotted through third party allotment in the past, the

obligation to continuously hold them would subsequently arise as the timing of

expected public offering has been accelerated.

<Conditions>



► Assurance to continuously hold them is entered into promptly after the decision to

accelerate the timing of public offering.


► Assurance statement for continuous holding

► Statement with joint signatures of the applicant and the person who has received the

allotment certifying that no transfer of allotted shares has been made. However, When

the Articles of Incorporation of the applicant provide for the restrictions on the transfer of

allotted shares or when the person who receives the allotment does hold any

certificates because of dematerialization of stock certificates, a statement would be

accepted if the applicant could confirm by the statement that no transfer of the allotted

shares has been made.

Reference: Overview of allotment of shares publicly offered and regulations on continuous

holding

Free period

End of the applicationyear

Six months after thelisting date

201X+2.5.31

Period available for the allotment of shares publicly offered through private placement

Continuous holding period (Note 1) (Note 2) (Note 3)

201X+1.3.31

Beginning of the previous year End of the previous yearListing

applicationdate

Day precedingthe listing

approval dateListing date

201X+1.12.1201X.4.1(~201X.3.31)

Note 1: This will apply to shares publicly offered which are allotted through third party

allotment (including shares, etc. acquired associated with the allotted shares)

effected after the day following the date of one year ago corresponding to the end of


-208-

the previous year.

Note 2: When one year has not passed from the payment date or the end of payment period

for the allotted shares as of the said date, the period until the one year period

passes from the payment date or the end of payment period for the allotted shares

will be the continuous holding period.

Note 3: Continuous holding period for the shares, etc. acquired associated with the allotted

shares represents the continuous holding period for the initially allotted shares.

(2) Regulations on Allotment and Holding of Offered Subscription

Warrants by Third Party Allotment, etc.

For the allotment of offered subscription warrants by third party allotment (excluding

“subscription warrants as stock option as described in “(3) Regulations on Allotment and

Holding of Subscription Warrants as Stock Option) after the day following the date of one

year ago corresponding to the end of the previous year (including the allotment of offered

subscription warrants which may have the same effect as the allotment of subscription

warrants), the regulations similar to those on the allotment of offered stocks by third party

allotment would apply thereto (hereinafter stock acquisition rights publicly offered which are

allotted through private placement are referred to as the “allotted subscription warrants”).

The determination of whether the applicant carried out an allotment of offered subscription

warrants shall be made using the allotment date as the base date.



-209-

Q1: Are we to be able to list our stock while offered subscription warrants rights have been

allotted?

A1: Listing would be possible while subscription warrants publicly offered have been

allotted.

Meanwhile, TSE has developed listing system for convertible bonds with subscription

warrants. However, an applicant is not allowed to list convertible bonds with

subscription warrants concurrent with listing of stock. In order to ensure fair price

formation and protect investors, a non-listed company is required to avoid concurrent

listing of two or more types of stock on the initial listing date. Therefore, the listing of

convertible bonds with subscription warrants must be effected after some time passes

since the day following the determination of initial price for initially listed stock. The

“some time passes since the day following the determination of initial price for initially

listed stock” will be decided in consideration of period required for thorough

dissemination of the price to investors and for the preparation of securities companies

Q2: If some allotted subscription warrants are converted to another class of stocks, etc. or

the warrants are exercised during the continuous holding period, is the continuous

holding period to be altered with respect to stocks and subscription warrants

acquired through the conversion or exercise and split-up or gratis allotment

associated with the stocks, and stocks or subscription warrants acquired associated

with gratis allotment of stocks or gratis allotment of subscription warrants (herein

after referred to as the “newly acquired stocks, etc. pertaining to allotted subscription

warrants”)?

A2: When some allotted subscription warrants are converted to another class of shares or

the rights are exercised during the continuous holding period, the shares, etc.

acquired associated with allotted subscription warrants require the assurance to

continuously hold them. The continuous holding period for the shares, etc. acquired

associated with allotted subscription warrants will relate to the continuous holding

period for initial allotted subscription warrants and there will be no change in the

continuous holding period.


-210-

Q3: If some offered subscription warrants allotted during the free period (before the date

preceding the date of one year ago corresponding to the end of the previous year)

are converted to another class of stocks or the warrants are exercised, do we have to

enter into any assurance to continue to hold the newly acquired stocks, etc.

pertaining to allotted subscription warrants?

A3: Even when some publicly offered subscription warrants allotted during the free period

are converted to another class of shares or the rights are exercised on or after the

date preceding the date of one year ago corresponding to the end of the previous

year, no assurance of continuous holding is required.

Reference: Overview of allotment of subscription warrants publicly offered and regulations

on continuous holding

Free period

201X+2.5.31

Six months after thelisting date

Period available for the allotment of shares offered through private placement

Continuous holding period (Note 1) (Note 2) (Note 3)

Beginning of the previousyear

End of the previous yearListing

applicationdate


approval dateListing date

End of theapplication year

(~201X.3.31) 201X.4.1 201X+1.3.31 201X+1.12.1

Note 1: This will apply to offered subscription warrants which are allotted by third party

allotment (including newly acquired stocks, etc. pertaining to allotted subscription

warrants) effected after the day following the date of one year ago corresponding to

the end of the previous year.

Note 2: The date when six months have passed since the listing date falls within the period

for which one year has not passed since the end of the previous year, the

continuous holding period will be the period until one year passes from the allotment

date of allotted stock acquisition rights.

Note 3: Continuous holding period for the newly acquired stocks, etc. pertaining to allotted

subscription warrants relates to the continuous holding period for the initially allotted

subscription warrants.


-211-

(3) Regulations on Allotment and Holding of Subscription Warrants

as Stock Option

a. Subscription warrants as stock option relate to those subscription warrants allotted by

the applicant to its officers or employees (Note 1) as part of their compensation (Note 2)

(limited to those allotted after the day following the date of one year ago corresponding

to the previous year), which meet the requirements of (a) and (b) below:

Note 1: “Officers and employees” refer to (1) officers and employees of the applicant, and

(2) officers and employees of a subsidiary of the applicant. For the purpose of this

paragraph, officers include an share ownership plan of directors and auditors,

directors, accounting advisors ((including employees of an accounting advisor who

are in charge of accounting advice if the accounting advisor is a corporation),

company auditors, and executive officers (including governor, auditor, and a person

who can be regarded as equivalent thereto company auditor. Those cooperating to

the applicant, such as legal advisors, accountants, advisors, or university professors,

and others before the employment of the applicant do not constitute any “officer or

employee.” And contract employees do not also constitute any “officer or employee”

in principle.

Note 2: The allotment thereof for the purpose of compensation includes cases where the

applicant grants the amount equivalent to the value of issuance prices of

subscription warrants to officers or employees and allots subscription warrants to

them in exchange for their consideration, and other cases where they are allotted

in exchange for their consideration.

The determination of whether the applicant carried out an allotment of offered

subscription warrants shall be made using the allotment date as the base date.

The determination of whether the applicant carr ied out an allotment of offered

subscription warrants shall be made using the allotment date as the base date.


(a) The applicant has entered into a written assurance in writing with officers and

employees who received the allotment of subscription warrants as stock option with

respect to continuous holding of the subscription warrants, the report on ownership to

TSE at the time of transfer and at the request of TSE concerning the ownership and

with respect to other matters as TSE deems necessary including availability for the

public inspection.


-212-

Other matters deemed necessary by TSE are following:

(i) Continuous Holding

Allotted persons shall, as a general rule, continue to hold the subscription warrants to which

the provisions of this rule apply (see Note 6 below) since the day on which the allotment was

made until either the day immediately preceding the listing day or the day on which the

subscription warrants are exercised, whichever is earlier.

(ii) Report to the Applicant when Transferring the Allotted Subscription Warrants

In cases where an allotted person transferred subscription warrants allotted as

compensation or newly acquired stocks, etc. pertaining to the allotted subscription warrants,

the initial listing applicant shall submit to TSE a document containing the name and address

of the transferor and the transferee, the number of stocks transferred, the date of transfer,

the transfer price, the reason for transfer, and other necessary matters at the time of initial

listing application, if such transfer was executed before the initial listing application day, or

immediately after such transfer, if such transfer was executed on or after the initial listing

application day

(iii) Report by Applicant to TSE in Response to Inquiry of TSE about Ownership Status

In cases where the Exchange makes an inquiry about the ownership status of the

subscription warrants allotted as compensation or newly acquired stocks, etc. pertaining to

the allotted subscription warrants as TSE deems it necessary, the initial listing applicant

shall report the ownership status of the subscription warrants allotted as compensation or

newly acquired stocks, etc. pertaining to the allotted subscription warrants to the Exchange

without delay after confirming, as necessary, the ownership status of the subscription

warrants allotted as compensation or newly acquired stocks, etc. pertaining to the allotted

subscription warrants with the allotted person.

(iv) Report to Applicant by Allotted Person in Response to Inquiry by TSE about

Ownership Status

An allotted person who received from the initial listing applicant a request for confirmation

concerning the ownership status of the subscription warrants allotted as compensation or


-213-

newly acquired stocks, etc. pertaining to the allotted subscription warrants pursuant to the

provisions of Sub-item (iii) shall report such ownership status to the initial listing applicant

immediately.

(v) Agreement with Availability for Public Inspection

When a person who has received the allotment of subscription warrants as stock option

transfers them, the person will agree that the contents of the transfer will be made available

for the public inspection.

(vi) Other matters deemed necessary by the Exchange

(b) Submission of Documents Deemed Necessary by TSE in Accordance with TSE’s

Regulations and Rules

(i) Documents to be submitted

- Documents Certifying Assurance Pertaining to Continuous Holding

Documents certifying the assurance (assurance document) shall be prepared with

reference to the form in “A Documents to Be Submitted Pertaining to Initial Listing

Application.”

- Document certifying the relevant resolution of the board of directors (including a

decision made by an executive officer in case of a company with committees) that

contains matters related to the allotment of subscription warrants, including the fact that

the subscription warrants are allotted by the applicant and intended to be acquired by its

officers or employees, etc.; and

(Rule 259, Paragraph 1, item 2b of the Rules)

- Document certifying that a contract is concluded between the applicant and its officers

or employees, etc. who have received an allotment of subscription warrants by the

applicant, in which said officers or employees, etc. assure that they will, as a general

rule, not transfer such subscription warrants or that the applicant imposes restriction on

transfer of such subscription warrants.

(Rule 259, Paragraph 1, Item 2c of the Rules)


-214-

(ii) Timing of submission

- Where the applicant carried out an allotment of subscription warrants as stock option

before the initial listing application day:

The applicant shall submit the document on the initial listing application day

- Where the applicant carried out an allotment of subscription warrants as stock option on

or after the initial listing application day:

The applicant shall submit the document without delay after said allotment; provided,

however, that the date of submission shall be no later than the day immediately

preceding the day on which TSE approves the listing.


b. Refuse to Accept Listing Application or Cancellation of Acceptance

In cases where a person who received an allotment of subscription warrants as stock

option does not actually hold them based on the assurance (excluding cases TSE

deems appropriate (Note) ), TSE shall either refuse to accept or cancel the acceptance

of the related initial listing application.

(Note) They refer to cases in which after the person who had owned subscription warrants

based on the assurance transferred the subscription warrants with respect to which

the assurance was given, the applicant cancelled the subscription warrants pertaining

to such transfer promptly in accordance with an appropriate procedure and such

subscription warrants have not been exercised.

(Rule 259, Paragraph 1)

c. Regulations on Stocks, etc. Acquired Through Exercise, etc. of Subscription

Warrants as Stock Options

In cases where an applicant carried out a delivery of stocks or subscription warrants

due to exercise or conversion of the subscription warrants prescribed in the preceding

rule during a period from one (1) year before the end of the previous year to the day

immediately preceding the listing day (limited to those pertaining to the subscription

warrants allotted after one (1) year before the end of the previous year), the applicant

shall execute a written assurance concerning said stock or subscription warrants with

the entity who received the delivery with respect to the matters enumerated in each of

the following items:

(Rule 260 of the Regulations)


-215-

(a) Documents to be Submitted and Timing of Submission

(i) In cases where the applicant has allotted the shares arising from the exercise or

conversion of subscription warrants as stock option or delivered subscription warrants

before the listing application date:

The following documents should be submitted on the listing application day.

- Documents Certifying Assurance Pertaining to Continuous Holding (Note)

- Document certifying the relevant resolution of the board of directors (including a

decision made by an executive officer in case of a company with committees)

that contains matters related to the allotment of subscription warrants; and

- Document certifying the provisions of contract concluded between the applicant

and the person who receives the subscription warrants in accordance with the

relevant resolution of the general meeting of shareholders and the board of

directors above

(ii) In cases where the applicant has allotted the shares arising from the exercise or

conversion of subscription warrants as stock option or delivered subscription warrants

after the listing application date:

The applicant shall submit said documents without delay after said delivery of stocks or

subscription warrants; provided, however, that the date of submission shall be no later

than the day immediately preceding the listing day.

- Documents Certifying Assurance Pertaining to Continuous Holding (Note)

Note: When the applicant submitted the “Documents Certifying Assurance Pertaining

to Continuous Holding” mentioned in a. (b) i above on the listing application date,

no submission is required.


(b) Refuse to Accept Listing Application or Cancellation of Acceptance

In the event that the applicant fails to submit the document specified in (a) above, TSE

shall either refuse to accept or cancel the acceptance of the related initia l listing

application.



-216-

In cases where an entity who received a delivery of stocks or subscription warrants does

not actually hold the stocks or subscription warrants based on the assurance, TSE shall

either refuse to accept or cancel the acceptance of the related initial listing application.

However, this provision shall not apply if the conditions prescribed in either of the

following items are met and it is deemed appropriate that the entity does not hold them:

- Where the entity who received said delivery transfers stocks or subscription

warrants delivered as a result of exercise or conversion of the subscription

warrants to which the provisions of Rule 259, Paragraph 1 apply or stocks or

subscription warrants acquired through stock split, gratis allotment of shares,

gratis allotment of subscription warrants, etc. pertaining to such stocks due to

significant difficulty in its business operations; and

- Where it is deemed unavoidable in light of socially accepted norms.

In cases where the person who has received the allotment of subscription warrants as stock

option transfers the stocks, etc. acquired pertaining to the subscription warrants as stock

option, the applicant shall submit to TSE and agree with the availability thereof for the public

inspection.

Also, when an applicant receives an inquiry about the ownership status of stocks, etc.

acquired pertaining to subscription warrants from TSE, the applicant confirms the ownership

status of stocks, etc. acquired pertaining to the subscription warrants with the allotted

person, as appropriate and report the ownership status thereof to TSE.


Reference: Overview of ownership of subscription warrants as stock option and regulations

on continuous holding

Free period

Period available for the allotment of stock acquisition rights as stock options

201X+1.12.1

Continuous holding period (Note 1) (Note 2)

Beginning of the previousyear

End of the previous yearListing

applicationdate


approval date

Day precedingthe listing date

Listing date

(~201X.3.31) 201X.4.1 201X+1.3.31

Note 1: This will apply to subscription warrants as stock option which the applicant allotted

after the day following the date of one year ago corresponding to the end of the


-217-

previous year (including shares, etc. acquired associated with the subscription

warrants as stock option).

Note 2: The continuous holding period will be the period between the day preceding the

listing date and the allotment date.

(4) Descriptions of the Status of Offered Allotment of Shares, etc.

by Third Party Allotment

a. Descriptions of the status of allotment of offered stocks, etc., by third party allotment

In cases where the initial listing applicant carried out an allotment of offered stocks or

subscription warrants by third-party allotment, etc. during a period (hereinafter referred to as

“allotment of offered stocks, etc.”) from two (2) years before the end of the previous year to

the day immediately preceding the listing day, the initial listing applicant shall describe the

status of such allotment of offered stocks, etc. by third-party allotment, etc. in "Securities

Report for Initial Listing Application (Part I)" prescribed in Rule 204, Paragraph 1, Item 4 or

Rule 219, Paragraph 1, Item 2. However, this provision shall not apply if the domestic stocks,

etc. issued by the initial listing applicant are Green Sheet securities designated by the Japan

Securities Dealers Association.


Meanwhile, the initial listing applicant shall include the basis for price calculation, described

in conformity with Exhibit 7 "Description of the Basis for Price Calculation," in the "Public

Information on Stocks - Item 2: Overview of Allotment of Stocks by Third-Party Allotment,

etc." section of the "Securities Report for Initial Listing Application (Part 1)" prescribed in the

preceding paragraph.


b. Retention, etc. of the Record of Allotment Status of Offered Stocks, etc. by Third Party

Allotment

The initial listing applicant shall retain the description of the Status of Allotment of Offered

Stocks, etc. by Third-Party allotment, etc. provided pursuant to the provisions of the

preceding rule for a period of five (5) years from the listing day. In this case, the managing

trading participant shall confirm that the initial listing applicant has appropriately

implemented an administrative organization that enables the initial listing applicant to grasp


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and retain such record.

The initial listing applicant shall respond to request for submission made by the Exchange

as necessary with respect to the record.

In cases where an initial listing applicant refuses to respond to the request for submission,

the Exchange may publicize the corporate name of such initial listing applicant and the fact

that the initial listing applicant refuses to respond to such request for submission.

In addition, in cases where the Exchange determined, based on the examination of the

record submitted, that the description of the changes in ownership of stocks, etc. provided

pursuant to the provisions of the preceding rule was clearly inaccurate, the Exchange may

publicize the corporate name of the initial listing applicant and the managing trading

participant concerned and the fact that said description has been determined to be

inaccurate.


VI Public Offering or Secondary Offering before Listing

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VI Public Offering or Secondary Offering before

Listing

Public Offering or Secondary Offering before Listing

(1) Submission of Scheduled Plan for Public Offering or

Secondary Offering

In cases where an initial listing applicant makes a public offering, etc. before listing, the

initial listing applicant and the principal underwriting trading participant of the public offering,

etc. before listing shall submit a of "Scheduled Plan of Public Offering or Secondary

Distribution" without any delay after the listing application.

Note: A principal underwriting trading participant refers to a trading participant of TSE which

is a financial instruments company or foreign financial instruments company entering

into principal underwriting agreement for public offering, etc. before listing. If a

trading participant of TSE does not enter into a principal underwriting agreement for

public offering, etc., TSE deems a trading participant entering into an agreement for

handling offering or secondary distribution for public offering before listing to be a

principal underwriting trading participant.


(2) Procedures for Public Offering, etc. Before Listing

In cases where an applicant makes a public offering, etc. before listing, the applicant and the

principal underwriting trading participant shall perform either of the procedures enumerated

in each of the following items:

(1) Book-building (research on the demand status of investors relating to public offering, etc.

before listing, carried out in accordance with the Rules); or

(2) Public offering, etc. through competitive bidding (public offering, etc, before listing on a

competitive bidding basis in accordance with the Rules).



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(3) Determination of Offering Price

a. Conducting a Book-building

The applicant and the principal underwriting trading participant comprehensively consider

the risks and demand forecast arising from the fluctuations of share prices during the period

until the listing date on the basis of the status of investor demand grasped through the

book-building and determine the prices of public offering, etc. before listing (hereinafter

referred to as the “offering price”).


The following outlines the practical procedures for book building.

Item Descriptions

Establishment of

Guidelines

(Rule 242 of the

Rules)

・For the purpose of appropriately grasping the status of investor

demand pertaining to public offering (Note), etc. before listing, the

principal underwriting trading participant shall establish guidelines

concerning the method of book-building and conduct a

book-building based on the guidelines.

・The principal underwriting trading participant shall publicize the

guidelines prescribed in the preceding paragraph in a written

document in a manner deemed appropriate by TSE and notify TSE

of the contents of the guidelines.

Determination of

the Tentatively Set

Price Range for the

Offering Price

(Rule 243 of the

Rules)

・In conducting a book-building, the initial listing applicant and the

principal underwriting trading participant shall determine the

tentatively set price range for the offering price (Note) based on a

comprehensive consideration of materials and opinions that are

relevant to the determination of the offering price including financial

condition and operating results of the initial listing applicant and

opinion of entities with expertise and experience related to

investment in securities.

(Note) It means the price range, etc. presented to investors in

conducting a survey on the status of investor demand.


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・ In cases where the initial listing applicant and the principal

underwriting trading participant determined a tentatively set price

range for the offering price pursuant to the provisions of the

preceding paragraph, the principal underwriting trading participant

shall immediately publicize the tentatively set price range and the

reasons, etc. for the determination of such price range in a written

document in a manner deemed appropriate by TSE and shall

submit a copy of the written document to TSE.

Retention, etc. of

the Record of the

Survey on the

Status of Demand

(Rule 245 of the

Rules)

・The principal underwriting trading participant shall retain the record

of the status of demand grasped by a book-building pertaining to a

public offering, etc. before listing for a period of five (5) years from

the ending date of the subscription period for the public offering, etc.

before listing.

・The trading participant who is the principal underwriting trading

participant among others shall retain the record of the result of

aggregation of all the status of demand grasped by a book-building

pertaining to a public offering, etc. before listing for a period of five

(5) years from the ending date of the subscription period for the

public offering, etc. before listing.

・The principal underwriting trading participant shall respond to

request for submission made by or inspection conducted by TSE as

necessary with respect to the record.

Note: The principal underwriting trading participant shall not include in the status of demand

to be grasped by a book-building the demand enumerated in each of the following

items and other demand that is clearly expected not to be eligible for receiving

allocation in a public offering, etc. before listing:

(1) Demand that is clearly not attributable to the investor ’s own account; and

(2) Demand that represents the redundant portion where demand attributable to

single investor’s account is double-counted.



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b. Execution of Competitive Bidding

The initial listing applicant and the principal underwriting trading participant who make a

public offering, etc. through competitive bidding shall determine the offering price in

comprehensive consideration of risks arising from the fluctuation of stock market prices

during the period until the listing day and demand forecast, etc. based on the average

winning prices in competitive bidding and other status of execution of competitive bidding.


c. Publication, etc. of Offering Price

In cases where the initial listing applicant and the principal underwriting trading participant

determined an offering price, they shall immediately publicize the offering price and the

reasons, etc. for the price determination in a written document in a manner deemed

appropriate by TSE and shall submit a copy of the written document to TSE.


(4) Allocation Pertaining to Public Offering, etc. Before Listing

For the purpose of conducting allocation pertaining to a public offering, etc. before listing in a

just manner for many and unspecified entities, the principal underwriting trading participant

shall establish guidelines for allocation method, restriction on allocation, etc. and carry out

allocation based on the guidelines.

The principal underwriting trading participant shall publicize the guidelines prescribed in the

preceding paragraph in a written document in a manner deemed appropriate by TSE and,

where deemed necessary by TSE, notify it of the contents of the guidelines.



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(5) Submission of Notice of Execution of Public Offering or

Secondary Offering, etc.

The principal underwriting trading participant shall submit a "Notice of Execution of Public

Offering or Secondary Offering" predetermined by TSE stating that the determination of the

offering price and allocation pertaining to the public offering, etc. befo re listing was

conducted appropriately to TSE after the expiration of the subscription period for the public

offering, etc. before listing within, as a general rule, three (3) days (Note) from the ending

date of the subscription period for the public offer ing, etc. before listing, and notify the initial

listing applicant of the result of said public offering, etc. before listing.

(Note) This shall exclude holidays.

If there are two (2) or more principal underwriting trading participants, the "Notice of

Execution of Public Offering or Secondary Offering" prescribed in the preceding paragraph

may be submitted to the Exchange by only one trading participant representing the group of

said principal underwriting trading participants.

The "Notice of Execution of Public Offering or Secondary Offering" and the document

submitted to the Exchange shall be prepared based on entities to whom the calculation is

substantially attributable regardless of the actual name of the account.

With respect to a public offering, etc. before listing, the principal underwriting trading

participant shall retain a record containing such information as the address and name of the

entity who acquired the stocks pertaining to said public offering, etc. before listing and the

number of stocks acquired for a period of five (5) years from the ending date of the

subscription period for said public offering, etc. before listing, and shall respond to request

for submission made by or inspection conducted by the Exchange as necessary with

respect to such record.



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(6) Other

a. Handling of Conclusion of Principal Underwriting Contract, etc. by a Non-trading

Participant Financial Instruments Firm, etc.

In cases where a non-trading participant financial instruments firm or a foreign securities

broker concludes a principal underwriting contract, etc. with respect to a public offering, etc.

before listing, for the purpose of ensuring the fairness of the public offering, etc. before

listing, the initial listing applicant shall conclude a contact, with the non-trading participant

financial instruments firm or the foreign securities broker, that consists of terms deemed

necessary by the Exchange with respect to the compliance with the intent of this section. In

this case, with respect to the conclusion of such contract, the initial listing applicant who

concluded such contract shall submit to the Exchange a copy of a document certifying the

contract concluded between the initial listing applicant and the non-trading participant

financial instruments firm or the foreign securities broker.


b. Public Offering, etc. Before Listing in Cases Where Multiple Initial Listing

Applications Are Made Simultaneously

With respect to a public offering, etc. before listing made by an initial listing applicant who

made multiple initial listing applications with TSE and with any other financial instruments

exchange in Japan simultaneously, if a non-trading participant financial instruments firm that

is a member or a trading participant of such other financial instruments exchange

concludes a principal underwriting contract, etc., the initial listing applicant shall conclude a

contract, with the non-trading participant financial instruments firm, that obligates the

financial instruments firm to provide documents about said public offering, etc. before listing

that are deemed necessary by TSE to the principal underwriting trading participant and

other duties. In this case, the applicant who concluded such contract with a non-trading

participant financial instruments firm shall submit to TSE a copy of a document certifying

such contract.



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c. Designation, etc. of Financial Instruments Exchange Pertaining to Public Offering,

etc. Before Listing

Before Listing An applicant who made multiple initial listing applications with TSE and with

any other financial instruments exchange in Japan simultaneously and the principal

underwriting trading participant shall designate one of the financial instruments exchanges

in Japan with which the multiple initial listing applications were made simultaneously as the

financial instruments exchange that is mainly responsible for handling administrative work

related to public offering, etc. before listing and notify TSE of the designation


d. Measures Against Inappropriate Public Offering, etc. Before Listing

In cases where the Exchange determines that a public offering, etc. before listing has not

been made appropriately based on the result of the public offering, etc. before listing, TSE

may cancel the acceptance of the initial listing application or take any other necessary

measures.


VII Handling of Corporate Reorganization Event

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When a business transferred to an applicant through a corporate reorganization by means

of a merger, company split, receipt of business, etc. constitutes a main business of the

applicant or an applicant becomes a holding company through stock swap or stock transfer,

etc., TSE requires the applicant to include relevant descriptions concerning the corporate

reorganization as required by “a Handling of Corporate Reorganization, etc.” so that the

corporate reorganization would not hinder the listing application of the applicant and TSE

could effect listing examination on the basis of actual depictions of financial position and

management results.

In addition, when an applicant effects a merger or company split -up, or turns another

company into its subsidiary or its subsidiary into non-subsidiary, or receives or transfers a

business, such transaction may give rise to significant influence over the financial position or

management results of the applicant. In such cases, comparison of financial positions and

management results of the applicant before and after such transactions would be difficult.

So TSE requires the applicant to submit the documents mentioned in “b. Documents

Required to be Submitted When Significant Influence (note) Arises,” and makes them

available for the public inspection.

Note: “Significant influence” relates to cases where any of the total assets, amount of net

assets, sales, operating income, ordinary income and current income before tax will be

affected by 50% or more. In practice, for actual calculation method, please refer to

“Appendix 1 Significant Influence in Relation to Merger of the initial Listing Applicant”

of the “Enforcement Rules for the Securities Listing Regulations.”

The following illustrates matters to be examined in a way different from ordinary

examinations due to the occurrence of a corporate reorganization event.


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a. Handling of corporate reorganization for the purpose of examination

1. Merger

“False statement oradverse opinion,

etc.”

For the period before the merger within the periods subject to the examination, the examination applies tothe financial statements of the principal entity for respective business year and respective consolidatedbusiness year ended within the periods subject to the examination and the securities report in which thefinancial statements are described or to which they are referred (Rule 212, 7(5) of the Rules).

Documentsto be

submitted,etc.

Documents to besubmitted

Financial statements, etc. of all the entities involved in the merger for respective business years andrespective consolidated accounting years ended within the periods subject to the examination

Audit opinion, etc. Required (limited to principal entity of the merger)

Availability for thepublic inspection

Required

Handling forthe purpose

ofexamination

“Number of years ofcontinuousoperations”

The number of years of continuous operations could be determined by adding the number of years ofoperations of the principal entity of merger (Note 2) (Rule 212, 4(2) of the Rules)

“Amount of profit”For the amount of profits before business years in which the application is filed, the examination applies tothe amount of profit determined on the basis of consolidated income statements, etc. of principal entity ofmerger (Note 3) (Rule 212, 6 (9) of the Rules)

“Market capitalization”The sales mentioned in the sentence following “provided that” may use the descriptions concerning theamount of profit above, and the term “amount of profit determined based on” is reworded to “amount ofprofit stated (Rule 212, 6 (9) of the Rules).

“Amount of net assets” -

The examination applies to the amount ofprofit determined on the basis of quarterlyconsolidated balance sheet or consolidatedbalance sheet of the principal entity of merger(Rule 212, 5 (1) of the Rules, Rule 212, 5 (6) 2of the Rules)

Timing of merger (Note 1)The year before the previous

yearThe previous year Application year

The year before theprevious year

The previous year

Surviving company

Extinguished company

Application year

Note 1: The merger event includes the cases of merger effected by a subsidiary of the

applicant and excludes the cases of merger between the applicant and its subsidiary

or among subsidiaries of the applicant.

Note 2: The principal entity of the merger represents the company with the largest size of the

entities involved in the merger (when an initial listing applicant or a subsidiary of a

listed company effects a merger, companies involved in the merger and initial


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listing applicant or the listed company), irrespective of a surviving company and

extinguished company. Meanwhile, the size of entity will be determined on the

basis of total assets, net assets, sales and profit (Rule 2, 3 (3) of the Rules).3:

Note 3: For the periods during which the applicant is not required to prepare consolidated

income statements, etc., the examination applies to the income statement.

Note 4: When a merger is effected for the recent two years or after the beginning of the

application year and if the entity without substance becomes a surviving company

in the merger, the descriptions included in “Securities Report for Initial Listing

Application (Part I)” must also include relevant descriptions concerning all the

dissolved companies in the merger.


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2. Becoming a Holding Company


For the amount of profits before business years before becoming the holding company, theexamination applies to the amount of profit determined on the basis of consolidated incomestatements, etc. of a subsidiary (Note 4) (in case where there are several subsidiaries, theamount of profit determined on the basis of the income statement combining all the incomestatements of such subsidiaries) for respective consolidated accounting year. (Rule 212, 6 (10)of the Rules)

The sales mentioned in the sentence following “provided that” may use the descriptionsconcerning the amount of profit above, and the term “amount of profit determined based on” isreworded to “amount of profit stated (Rule 212, 6 (10) of the Rules).

Audit opinion, etc. Required (Note 6)

Availability for publicinspection

Required

<Where there are several subsidiaries as of becoming the holding company>Income statement combining the consolidated income statements of several subsidiaries forthe periods before the applicant became a holding company, and the balance sheet combiningconsolidated balance sheets thereof (Rule 204, 1(13) of the Rules)


The number of years of continuous operations could be determined by adding the number ofyears of major operations of the controlled entity (principal entity) of the holding company(Rule 212, 4(2) of the Rules)


ofexamination

Application year

“Amount of profit”

The examination applies to the amount of netassets determined on the basis ofconsolidated balance sheet of the subsidiary(in case where there are several subsidiaries(Note 5), the amount of net assetsdetermined on the basis of the incomestatement combining all the incomestatements of such subsidiaries) (Rule 212, 5(7) of the Rules) (Note 5)

For the period before becoming the holding company, the examination applies to the financialstatements of the subsidiary (Note 4) (in case where there are several subsidiaries, includingthe statements concerning the combined financial information of such subsidiaries) forrespective business year and respective consolidated business year ended within the periodssubject to the examination and the securities report in which the financial statements aredescribed or to which they are referred (Rule 212, 7(3) of the Rules).


The previousyear

Application year

Applicant A

Subsidiary C

Timing of becoming a holdingcompany

(Notes 1, 2 and 3)

“Market capitalization”


etc.”

Subsidiary B (principal entity)

Documentsto be

submitted,etc.



The previous year

Ａ

ＣＢ

Ａ

ＣＢ

Ａ

ＣＢ


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Note 1: For the purpose of this section, the holding company represents a Japanese

company or any equivalent entity TSE deems appropriate as a holding company of

the holding companies prescribed in Article 9, Paragraph 4, Item 1 of the Act on

Prohibition of Private Monopolization and Maintenance of Fair Trade (Law No. 54

of 1947).

Note 2: This excludes cases where an applicant becomes a holding company as it causes

another company to receive its business or transfers its business to another

company.

Note 3: In cases where the initial listing applicant became a holding company within the last

two (2) years or on or after the beginning of the business year to which the initial

listing application day pertains, the contents of "Securities Report for Initial Listing

Application (Part I)" pertaining to the periods before the merger shall include

matters concerning all the dissolution companies in the merger. (Rule 204, 1 (4) d

of the Rules)

Note 4: It is limited to subsidiaries as of the date when the applicant becomes a holding

company.

Note 5: When an applicant becomes a holding company after the beginning of the

quarterly accounting period in which the listing application is filed, the examination

applies to the amount equivalent to the net assets determined on the basis of the

quarterly consolidated balance sheet of its subsidiary (when the applicant does not

submit any quarterly report for initial listing applicant or its , the consolidated

balance sheet included in “Securities Report for Initial Listing Application”; when

the subsidiary is not required to prepare consolidated financial statements, its

quarterly balance sheet).

Note 6: An audit report based on audit conducted in compliance with generally accepted

auditing standards or a report prepared for the purpose of stating opinions on

combined financial information based on Exhibit 3 "Standard for Statement of

Opinions on Documents Concerning Combined Financial Information" or other

procedures that are deemed reasonable. (Rule 209, (2) of the Rules)


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3. Stock Swap

The previous year Application year


The examination applies to the amount of netassets determined on the basis of quarterlyconsolidated balance sheet or consolidatedbalance sheet of principal companies involvedin the stock swap. (Rule 212, 5 (1) of the Rules,Rule 212, 5 (6) 2)

Timing of stock swap(Note 1)


Handlingfor the

purpose ofexamination

“Amount of profit”For the amount of profits before the stock swap, the examination applies to the amount of profitdetermined on the basis of consolidated income statements, etc. of main stock swap companies(Note 3). (Rule 212, 6 (9) 2 of the Rules)

“Market capitalization”The sales mentioned in the sentence following “provided that” may use the descriptionsconcerning the amount of profit above, and the term “amount of profit determined based on” isreworded to “amount of profit stated (Rule 212, 6 (9) of the Rules)


etc.”

For the period before the stock swap within the periods subject to the examination, theexamination applies to the financial statements of the principal companies of stock swap forrespective business year and respective consolidated business year ended within the periodssubject to the examination and the securities report in which the financial statements aredescribed or to which they are referred (Rule 212, 7(5) of the Rules).


The previousyear

Application year

Parent: A

Subsidiary: B

Documentsto be

submitted,etc.

Financial statements, etc. of all the parties involved in the stock swap for respective businessyears and respective consolidated accounting years ended during the periods subject to theexamination

Audit opinion, etc. Required (limited to principal companies involved in the stock swap)

“Availability for thepublic inspection”

Required


Ｂ

Ａ

Ｂ

Ａ

Ｂ

Ａ

Note 1: The stock swap event includes the cases of stock swap by a subsidiary of the

applicant and excludes the cases of stock swap between the applicant and its

subsidiary or among subsidiaries of the applicant.

Note 2: "Main stock swap company" means the company concerned with the largest

business scale among companies involved in a stock swap (if a subsidiary of an


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initial listing applicant is a party to a stock swap, a party to the stock swap

(excluding subsidiaries of the initial listing applicant) and the initial listing applicant).

In this case, "business scale" shall be determined in consideration of such factors

as the amounts of total assets, net assets, sales, profits, etc. (Rule 2, 3 (3) -2 of the

Rules).

Note 3: For the periods during which the applicant is not required to prepare consolidated

income statements, etc., the examination applies to the income statement.


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4. Company Split-up, Receipt of Business


ofexamination

Documentsto be

submitted,etc.

The year beforethe previous year

The previousyear

Application year

Receiving company (applicant)

Timing of company split-up and transferof business

Business taken over or receivedthrough a company split-up



Required

For the period before the takeover or receipt of business, the examination applies to theamount of profit described in the documents related to financial statements concerningbusiness which the applicant takes over or receives. (Rule 212, 6 (11) of the Rules)

“Number of years ofcontinuous operations”

“Amount of profit”

(The recent two year period includes the period before the takeover or receipt)Financial statements, etc. of such another company for the period before the takeover orreceipt (Rule 204, 1 (15) and (17) )

“False statement or adverseopinion, etc.”

-

Copy of documents prescribed in Article 794,Paragraph 1 or Article 806, Paragraph 1 of theCompanies Act concerning the divesture ofbusiness

-

The examination applies to activities relatedto major businesses at the time of split-upand the number of years of operations at thelisted company could be added (Rule 212, 4(1) of the Rules, Rule 212, 4(3) of the Rules)

Note 1

“Amount of netassets”


“Distribution ofownership of

shares”

(The recent two year period includes the period before the takeover or receipt)Documents relating to financial statements concerning a business taken over or receivedfrom another company during the recent two years (Note 2). (Rule 204, 1 (14) and (16) )

The number of years of continuous operations could be determined by adding the number ofyears of operations of the other companies involved in business taken over or receivedthrough a company split-up (Rule 212, 4(3) of the Rules)

Required (Notes 3 and 4)

For the period before the takeover or receipt of business, the examination applies to thefinancial statements of the other company for the periods subject to the examination and thesecurities report in which the financial statements are described or to which they arereferred (Rule 212, 7(5) of the Rules).

The sales mentioned in the sentence following “provided that” may use the descriptionsconcerning the amount of profit above, and the term “amount of profit” is reworded to“amount of sales (Rule 212, 6 (11) of the Rules).

The examination applies to the distribution ofownership of the applicant shares as of thelisting date.

-

Documents to be submitted

Audit opinion, etc.

Availability for the publicinspection

-

The examination applies to the amount of netassets described in the documents related tofinancial statements concerning businesstaken over or received from a listing company.(Rule 212, 5 (8) of the Rules)

“Market capitalization”


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Note 1: This is cases where the applicant is the company which receives the business of a

listed company through a divesture of business and the listing application is filed

before the divesture. For the amount of net assets, it is the same as above. *

The criteria for “Amount of profit”, “Market capitalization” and “False statement or

adverse opinion” are the same as the above.

Note 2: This refers to so-called departmental financial information.

Note 3: This refers to an audit report based on the audit in accordance with the generally

accepted auditing principles or “report to express opinion on departmental

financial information” in accordance with Appendix 4 “Standards for Expression of

Opinion on Documents Relating to Financial Statements Concerning Business

Received Through Company Split-up” or Appendix 5 “Standards for Expression of

Opinion on Documents Relating to Financial Statements Concerning Department

to Be Taken over or Received” of the Enforcement Rules for the Securities Listing

Regulations. (Rule 209, (3) and (5) of the Rules)

Note 4: This refers to audit reports based on the audit in compliance with the requirements

of Article 193-2 of Financial Instruments Exchange Act.


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b. Documents required to be submitted when a significant effect is given

Timing of corporatereorganization

Documentsto be

submitted,etc.

Merger (Note 1)

Audit opinion, etc. Required

Availability for thepublic inspection

Required

Turning anothercompany into a

subsidiary or turninga subsidiary into a

non-subsidiary


Outline documents of merged companies, etc. for the purpose of the initial listingapplication (Rule 204, 1(19)a of the Rules)

Financial statements, etc. for the consolidated business immediately preceding themerger (Rule 229-3, 1 (2) a – (a) of the Rules)

“Outline Statement Concerning Changes in Subsidiaries for Initial Listing Application”designated by TSE which describes the overview of the changes in the status ofsubsidiaries as another company is turned to be a subsidiary or a subsidiary is turnedto be a non-subsidiary and the reasons thereof (Rule 204, 1(19)c of the Rules)

Financial statements, etc. of the subsidiary for the period immediately preceding theyear in which another company is turned to be a subsidiary or a subsidiary is turned tobe a non-subsidiary (Rule 204, 1(4)c(b) of the Rules)

“Outline Statement Concerning Changes in Subsidiaries for Initial Listing Application”designated by TSE which describes the overview of the businesses to be taken overthrough the divesture of business and the reasons thereof (Rule 204, 1 (19) b – (b) ofthe Rules)

Documents related to financial statements in relation to departments or divisionssubject to the takeover or receipt (Rule 204, 1 (19) d – (a) of the Rules)

“Outline Statement Concerning Receipt (Takeover) for Initial Listing Application”designated by TSE which describes the businesses subject to the takeover or receiptor their overview, the reasons and consideration therefor (Rule 204, 1 (19) d- (b) of theRules)

Company split-up,takeover or receipt

of business(Notes 2 and 3)

Documents related to financial statements in relation to business to be taken overthrough a divesture of business (limited to those for the year immediately precedingthe divesture (Rule 204, 1 (19) b – (a) of the Rules)

Note 1: This includes the cases where a subsidiary of the applicant carries out merger and

excludes the cases of merger between the applicant and its subsidiary or among

subsidiaries of the applicant.

Note 2: This includes the cases where a subsidiary of the applicant carries out divesture and

excludes the cases of divesture between the applicant and its subsidiary or among

subsidiaries of the applicant.

Note 3: This includes the cases where a subsidiary of the applicant receives or transfers a

business and excludes the cases of receipt or transfer between the applicant and

its subsidiary or among subsidiaries of the applicant.

Note 4: In any case, when TSE deems necessary, these requirements will apply to any

dissolved company through a merger with the initial listing applicant as if the

dissolved company were an initial listing applicant.

VIII Assignment to the First Section

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1. Steps to be Taken Before Assignment to the First Section

(1) Assignment to the 1st Section

When a 2nd

section company applies for alteration to the 1st

Section and TSE determines

that the application conforms with the requirements of listing criteria after making the

examination according to the Securities Listing Regulations and Guidelines Concerning

Listing Examination, etc., TSE will assign the company to the 1st

Section.

In addition, in accordance with exceptions to the Securities Listing Regulations (see below),

TSE will allow an initial listing company which applies for listing on the 1st Section and a

Mothers company which applies for alteration to the 1st Section, to list its stock on the 1

st

Section when and if the company meets the Formal Requirements prescribed in Rule 205 of

the Securities Listing Regulations (see “II Formal Requirements”) and satisfies the criteria

mentioned below.

The requirements for the number of shareholders, the number of tradable shares and the

market capitalization are satisfied, and the distribution of ownership of shares is recognized

to be sufficient (conformity with Rule 210, Paragraph 1 of the Securities Listing Regulations)

By the time of listing, the number of shareholders is expected to reach 2,200 or more, the

number of tradable shares is expected to reach at least 20,000 units and is expected to

reach at least 35% of the total number of shares of the stock, etc.. In addition, the market

capitalization as of the listing day is expected to reach at least ¥25,000 million.

In case of direct listing, market capitalization represents the value derived by multiplying the

public offering and secondary offering price (in case of no public offering or secondar y

offering, value determined by formula TSE deems appropriate) by the number of listed

shares. In case of market capitalization determined with reference to another market, it

represents the value derived by multiplying the lowest price of closing prices (when public

offering or secondary offering is effected at the time of listing, the lower of the prices for

public offering and secondary offering, and the lowest price of the closing prices on another

market for one month retrospectively from the determination of such public offering and

secondary offering prices) during one month retrospectively from the previous day

preceding the day when TSE approves the listing by the number of shares expected at the


-237-

time of listing.

(2) Timing of Assignment to the 1st Section and the schedule

thereof

a. Timing of Assignment

If public offering or secondary offering, etc. (including sales with the number constrained)

are expected to be effected on assignment to the 1st section, then assignment to the 1

st

section will be made in three or four weeks after the approval date of assignment to the 1st

section (the date when TSE approves assignment to the 1st

section). If no public offering or

secondary offering are expected, then the assignment date will be a day of one week after

the assignment approval date (when the day is a holiday, the assignment date will be

deferred to the following business day. If, due to a holiday, the day after one week falls on

the second to fourth business day counting from the assignment date, then said approval

date shall be the fifth business day counting from the assignment date); provided that as of

the date assignment date to the 1st section, one year or more have passed. In addition,

assignment to the 1st section cannot be conducted if the immediately preceding fiscal year is

the year of listing.

b. Schedule

Consistent with ordinary application required for listing examination, an application for

assignment to the 1st section will be made by filing necessary documents associated with

assignment application with TSE after the completion of a regular general shareholders’

meeting for the previous year (the assignment application date may be determined by

consulting the lead underwriter in advance). As with a listing application, a preliminary

application would be possible for the assignment application.

As with listing examination, the lead underwriter present an assignment schedule and JPXR

will in turn propose an examination schedule from the assignment application to the

approval thereof, which may take three months. If a period below three years has passed

from the initial listing and no substantive changes have taken place with respect to

organizational structure and lines of business of the applicant, such examination period may

be shortened to two months.

The procedures and questions at the time of acceptance of application for assignment to the

1st

section will be the same as those for the listing application. Meanwhile, with respect to

the reference to “a period less than three years has passed from the initial listing and no

substantive changes have taken place with respect to organizational structure and lines of

business of the applicant,” JPXR will mainly focus on asking any events that take place after


-238-

the initial listing.

Note 1: Standardized examination period is three months. However depending on the

elapse of period after listing, changes in organizational structure and lines of

business after listing, and moreover the size of the applicant, busy seasons and

ordinary course of business, the period available for the preparation of responses

and the number of interviews can be coordinated. As a result of coordination, the

examination period as a whole might be modified. In addition, the examination

period will be determined assuming that no issues to be specifically addressed

would arise during the examination. Thus, it might be extended if any unexpected

issue is found during the examination or new facts concerning the applicant are

discovered including news of other media such as press or provision of information

from external parties.

Note 2: When topics for examination are diversified, and the number of items to be

examined is expected to be large, JPXR may request the applicant to take a period

of more than three months for examination.

Note 3: If the applicant has any matters to be coordinated with respect to the schedule

including the matters in Note 1 and Note 2 above, please consult JPXR beforehand

through the lead underwriter after consulting it.


-239-

[Model schedule from listing application entry for assignment to the 1st

section to listing

approval]

<First part>

1 Wed 1 Sat

2 Thu 2 Sun

3 Fri 3 Mon

4 Sat 4 Tue

5 Sun 5 Wed

6 Mon 6 Thu

7 Tue 7 Fri

8 Wed 8 Sat

9 Thu 9 Sun

10 Fri 10 Mon

11 Sat 11 Tue

12 Sun 12 Wed

13 Mon 13 Thu

14 Tue 14 Fri

15 Wed 15 Sat

16 Thu 16 Sun

17 Fri 17 Mon

18 Sat 18 Tue

19 Sun 19 Wed

20 Mon 20 Thu

21 Tue 21 Fri

22 Wed 22 Sat

23 Thu 23 Sun

24 Fri 24 Mon

25 Sat 25 Tue

26 Sun 26 Wed

27 Mon 27 Thu

28 Tue 28 Fri

29 Wed 29 Sat

30 Thu 30 Sun

31 Fri




First interview






At

six

bu

sin

ess d

ay

s in

terv

al

At

se

ve

n b

usin

ess d

ay

s in

terv

al

Ap

pro

xim

ate

lytw

o w

ee

ks

At

two

bu

sin

ess d

ay

s in

terv

al


-240-

<Second part>

1 Mon 1 Thu

2 Tue 2 Fri

3 Wed 3 Sat

4 Thu 4 Sun

5 Fri 5 Mon

6 Sat 6 Tue

7 Sun 7 Wed

8 Mon 8 Thu

9 Tue 9 Fri

10 Wed 10 Sat

11 Thu 11 Sun

12 Fri 12 Mon

13 Sat 13 Tue

14 Sun 14 Wed

15 Mon 15 Thu

16 Tue 16 Fri

17 Wed 17 Sat

18 Thu 18 Sun

19 Fri 19 Mon

20 Sat 20 Tue

21 Sun 21 Wed

22 Mon 22 Thu

23 Tue 23 Fri

24 Wed 24 Sat

25 Thu 25 Sun

26 Fri 26 Mon

27 Sat 27 Tue

28 Sun 28 Wed

29 Mon 29 Thu

30 Tue 30 Fri

31 Wed

Two months after month X Three months after month X

Third interview

Physical inspection

Second interview



Various interview


Listing approval

At

se

ve

n b

usin

ess d

ay

s in

terv

al

At

twe

lve

bu

sin

ess d

ay

s in

terv

al

Note1: There are cases where the presentation by the president takes place from various

interviews to approval of assignment to the 1st

section.


-241-

Three years have not passed since the initial listing and there have been no

significant changes in organizational structure and lines of business of the company

which files the application for assignment.

<First part>

1 Wed 1 Sat

2 Thu 2 Sun

3 Fri 3 Mon

4 Sat 4 Tue

5 Sun 5 Wed

6 Mon 6 Thu

7 Tue 7 Fri

8 Wed 8 Sat

9 Thu 9 Sun

10 Fri 10 Mon

11 Sat 11 Tue

12 Sun 12 Wed

13 Mon 13 Thu

14 Tue 14 Fri

15 Wed 15 Sat

16 Thu 16 Sun

17 Fri 17 Mon

18 Sat 18 Tue

19 Sun 19 Wed

20 Mon 20 Thu

21 Tue 21 Fri

22 Wed 22 Sat

23 Thu 23 Sun

24 Fri 24 Mon

25 Sat 25 Tue

26 Sun 26 Wed

27 Mon 27 Thu

28 Tue 28 Fri

29 Wed 29 Sat

30 Thu 30 Sun

31 Fri





First interview






At

six

bu

sin

ess d

ay

s in

terv

al

At

se

ve

n b

usin

ess d

ay

s in

terv

al

Ap

pro

xim

ate

lytw

o w

ee

ks

At

two

bu

sin

ess d

ay

s in

terv

al


-242-

<Second part>

1 Mon

2 Tue

3 Wed

4 Thu

5 Fri

6 Sat

7 Sun

8 Mon

9 Tue

10 Wed

11 Thu

12 Fri

13 Sat

14 Sun

15 Mon

16 Tue

17 Wed

18 Thu

19 Fri

20 Sat

21 Sun

22 Mon

23 Tue

24 Wed

25 Thu

26 Fri

27 Sat

28 Sun

29 Mon

30 Tue

Two months after month X


Second interview

Listing approval

At

ten

bu

sin

ess d

ay

s in

terv

al

Note1: There are cases where various interviews are taken place.


-243-

2. Criteria for Assignment to the 1st Section

List of Formal Requirements for Assignment to the 1st

Section

Item Requirement

1. Number of Shareholders

(by the time of assignment) 2,200 or more

2. Tradable shares

(by the time of assignment)

a. The number of tradable shares: 20,000 units or

more

b. Market capitalization of tradable shares: ¥2,000

million or more

c. The number of tradable shares (as a percentage

of the total number of shares of listed stock, etc.):

35% or more

3. Trading Volume


The average monthly trading volume for each of the

last three months and three months preceding such

last three months be at least 200 units

4. Market Capitalization

(by the time of assignment) ¥4,000 million or more

5. Amount of net assets



(net assets on a separate basis are not negative)

6. Amount of profits or market

capitalization

(Profits represent ordinary

income on a consolidated basis

while the market capitalization

represents the value by the

time of assignment)

The following a. or b. must be satisfied.

a. The total amount of profits in the last two years

shall be at least ¥ 500 million or more;

b. The value of sales for the recent one year is

¥10,000 million or more and the market

capitalization is expected to reach at least ¥50,000

million.


-244-

7. False statement or adverse

opinion, etc.

a. No false statement is made in the securities

reports, etc. for each of business years ended during

the last five years

b. The audit opinions on financial statements, etc. for

each business years ended during the last five years

c. The applicant shall not meet (a) or (b) below:

(a) The internal management report for the business

year which ends during the recent one year

contains the statement that “assessment results

will be refrained from being expresses.”

(b) The internal management audit report for the

business year which ends during the recent one

year contains the statement that “no opinion will

be expressed.”

8. Share unit

(by the time of assignment) The Share Unit shall be expected to be 100 shares.


-245-

List of Eligibility Requirements for Assignment to the 1st

Section

Item Requirement

Corporate continuity and profitability

An applicant has carried out its business in a

continuous manner and developed a

revenue base to generate stable profit.

Soundness of company management The applicant has been performing its

business fairly and faithfully.

Effectiveness of corporate governance and

internal management system

Corporate governance and internal

management systems have been designed

and operated appropriately in consideration

of its size and the level of maturity.

Appropriateness of disclosures of relevant

corporate profile, risk information, etc.

The applicant is able to appropriately make

the disclosures of corporate profile.

Other matters as TSE deems necessary

from the perspectives of public interest and

investor protection

-

The following discusses each criterion:

(１) Number of Shareholders

The number of shareholders (this represents the number of persons who hold the shares

more comprising one trading unit or more (Note 1)) is expected to reach at least 2,200 by

the time of listing (Note 2).



one share.

Note 2: When Depository Receipts (DRs) representing the rights, etc. attached to stock

certificates are issued, shareholders who hold DRs representing rights attached to

the number of shares comprising one trading unit or more can be included in the

number of shareholders.


-246-

(２) Number of Tradable Shares

For tradable shares, the applicant is required to meet the requirements from (1) to (3) below:

a. Number of Tradable Shares

The number of tradable shares (Note) is expected to equal or exceed the number of share

units by the time of listing.

Note: For the calculation of the number of tradable shares, please refer to “II Formal

Requirements 2. Tradable Shares.”

b. Market Capitalization of Tradable Shares

Market capitalization of tradable shares is expected to reach at least ¥2,000 million by the

time of listing.

Calculation of the market capitalization of tradable shares

The market capitalization is determined by multiplying the number of tradable shares. The

following share prices are used for the purpose of the calculation.

<Public offering or secondary offering is effected>

If public offering or secondary offering is effected for assignment to the 1st section, expected

offering price (Note 1)” or “the lowest price of the said stock, etc. observed during the period

one month prior to two days before the day on which the TSE approves listing of the stock is

used shares for the period of one month before two days prior to the date when the listing is

approved (Note 2)” is used, whichever is lower.”

<Public offering or secondary offering is note effected>

If public offering or secondary offering is not effected for assignment to the 1st

section, the

“lowest market price of shares for the period of one month before two days preceding the

date when the listing is approved” will be used.

Note 1: The day prior to two days before the day on which the TSE approves the listing is



day of a week.


-247-





c. The Number of Tradable Shares as a Percentage of Total Shares of Listed Stock

Certificates

The number of tradable shares expects to be 35% or more of the total number of shares of

stock, etc. pertaining to the listing.

- Calculation of tradable shares as a percentage of shares of the total number of shares of

stock, etc.

The number is calculated by dividing the number of tradable shares by the number of shares

pertaining to the assignment application.

Note: The number of shares pertaining to the listing application means the total number of

shares of stock, etc. on the listing date. It is determined adding or deducting expected

changes in the number of shares by the time of listing to or from the total number of

shares of stock, etc. as of the latest record date.

<Increase in the number of shareholders and tradable shares – public offering or secondary

offering before assignment to the 1st

section>

The criterion for the number of shareholders and tradable shares is expected to be met on

the listing date, rather than the condition required to be satisfied at the time of listing

application. The examination on the basis of this criterion will be made according to the

requirements concerning the “increase in the number of shareholders and tradable shares:

public offering or secondary offering before listing” pertaining to “II Formal Requirements.” ”


-248-

(３) Trading Volume

The average monthly trading volume for each of the last three months and three (3) months

preceding such recent three months (Note 1) on TSE be at least 200 units (where an

applicant adopts the number of shares per Share Unit, one unit means the number of shares,

and if the applicant does not adopt any number, one unit refers to one share.).

Note 1: The six month period before the end of the last month which includes the application

date for assignment to the 1st

section are classified into the “first three months” and

the “second three months.” Then the total trading volume of each three months

period will be divided by the number of months.

<Examples> When the application date for assignment to the 1st

section is July 1:

Last three months (second three months): April to June

Three months preceding the second three months (first second months): January to

March

Meanwhile, in determining the average monthly trading volume for the purpose of

filing an application for the assignment to the 1st section on or after July 16, 2013,

the applicant may add the trading volume on respective market of Osaka Securities

Exchange (excluding JASDAQ) to the trading volume of TSE market for the

corresponding period.

Note 2: When a listed company decreases the number of shares per Share Unit during the

period which is used for the determination of trading volume, for the period before

the change, the trading volume as required in this criterion will be determined by

using the number of share units before the change while the trading volume after the

change will be determined by using the number after the change.

<Example> Way of calculating the monthly average trading volume for the “ last three

months” when a company which has changed the number of share per Share Unit

from 1,000 shares to 100 shares applied for assignment in July

Trading volume for the last three months

Trading volume from April 1 to April 30 (1,000 shares per Share Unit) 200,0000

shares = 200 share units


-249-

Trading volume from May 1 to June 30 (100 shares per Share Unit) 100,000 shares

= 1,000 share units

Average monthly trading volume: 1,200 share units / 3 months = 400 share units

Thus the average monthly trading volume meets the criterion.

Note 3: The trading volume includes the trading volume on off-auction trading (ToSTNeT

trading) and off-auction distribution.

Note 4: Trading volume can be checked by applying trading volume check tool at

https://www.arrowgate.jp/fw/dfw/tselcp/sebxportal/tsehome

https://www.arrowgate.jp/fw/dfw/tselcp/sebxportal/tsehome


-250-

(４) Market Capitalization

It is required that the market capitalization on the date of assignment to the 1st

section is

expected to reach at least ¥ 4,000 million.

Calculation method of market capitalization


number of shares of listed stock certificates expected at the time of assignment to the 1st

section by the share price, to the market capitalization related to all other shares issued by

the applicant (limited to those listed or continuously traded on another financial instruments

exchange in Japan or foreign countries). For the purpose of determination of market

capitalization, the following prices are to be used as share prices.


If public offering or secondary offering is effected for assignment to the 1st section, “expected




approved (Note 2)” is used, whichever is lower.”

<Public offering or secondary offering is not effected>


section, the






day of a week.




off-trading session prices, off-market prices or the lowest prices during the trading

session are not viewed as the lowest price.


-251-

(５) Amount of Net Assets

It is required that the net assets of an applicant are expected to reach at least ¥1,000 million

by the date of assignment to the 1st section. JPXR will examine the following “values of net

assets on the date of assignment to the 1st

section.”

When an applicant files a “quarterly report for initial listing application” or a copy thereof for

the period after the beginning of fiscal year in which assignment to the 1st section is made,

TSE will examine the amount of net assets at the end of immediately preceding quarterly

period (Note 1) described in the recent “quarterly report for initial listing application.” When

the applicant does not prepare any consolidated quarterly financial statements, JPXR will

examine the values on the quarterly balance sheet (on a separate basis). In addition it is

required that the amount of net assets determined on the basis of quarterly balance sheet

(on a separate basis) (Note 2) should not be negative.

In cases other than a. above, JPXR will examine the amount of net assets as of the end of

the previous year described in the recent “Securities Report.” (Note 3). When the applicant

does not prepare any consolidated financial statements, JPXR will examine the values on

the balance sheet (on a separate basis). In addition it is required that the amount of net

assets determined on the basis of balance sheets (on a separate basis) (Note 4) should not

be negative.




submit to TSE the “Statement of Net Assets” in the form required by JPXR including the

descriptions of the “amount of net assets as of the end of immediately preceding quarterly

period or the previous year,” “expected cash inflows arising from public offering” and

“amount of net assets subject to the examination.”


warrants and non-controlling interests stated in the section of Net Assets form the

total amount determined by adding reserves, etc., prescribed in Article 60, Paragraph

1 of the Quarterly Consolidated Financial Statements, etc. Rules to the section of Net

Assets in a quarterly consolidated balance sheet prepared under the same rules.


-252-

Note 2: This value represent the value determined by deducting the values of subscription

warrants stated in the section of Net Assets form the total amount determined by






total amount determined by adding reserves, etc. prescr ibed in Article 45-2,





adding reserves, etc. prescribed in article 54-3, Paragraph 1 of the Financial




of net assets determined on the basis of quarterly consolidated balance sheet or

consolidated balance sheet.

Treatment of “amount of profit” and “amount of net assets” according to the adoption of



provided under the accounting standards for retirement benefits, and the exceptions could

apply to the examination for assignment to the 1st

section (Rules 705 and 717 of the Rules).


-253-

(６) Amount of Profit or Market Capitalization

An applicant is required to meet either a. or b. below.

The total amount of profits for the last two years is expected to reach at least ¥500 million

(hereinafter referred to as the “profit criterion”)

The sales for the last one year is ¥ 10,000 million or more and the market capitalization on

the listing day is expected to reach at least ¥50,000 million (hereinafter referred to as the

“market capitalization criterion”).

<Application of Profit Criterion>

(Reproduced)

The total amount of profits (Note 1) for the last two years (Note 2) is expected to at least

¥500 million (hereinafter referred to as the “profit criterion”)

In the context of this criterion, the amount of profit determined (Note 3) based on the

consolidated income statement or consolidated statement of profit and loss and

comprehensive income (hereinafter referred to as the “consolidated income statement, etc.”)

will be subjected to the examination (if there is any period subject to the examination where

no consolidated financial statements have been prepared, the amount of profit (Note 4)

determined on the income statement (on a separate basis) would be subjected to the

examination).


by adding or deducting the amount presented according to Rule 65, Paragraph 3 of the



according to Rule 61 of the same rules (in case of separate income statement, it represents

ordinary income or ordinary loss presented according to Rule 95 of the same rules) (Note 5).


example, If the amounts of profit for the two years stands at a loss of ¥500 million

and income of 1,000 million, respectively, the amount of profit for the recent two

years would stand at an income of ¥500 million (¥500 million loss － ¥1,000

million income).


-254-

Note 2: The “recent” fiscal year starts from the end of the previous year (when application

date of assignment to the 1st

section is within one month from the end of the

immediately preceding year, the last day of the previous year of the immediately

preceding year).

For example, for a company where the previous year ends March 31, 2018, the

“recent two years” would be two years from April 1, 2016 through March 31, 2018

whereas “recent two years” would be two years from April 1, 2015 through March 31,

2017 when application date of assignment to the 1st

section is in April 2018.

Note 3: If a company voluntarily applies IFRS, the amount of profit should be equivalent to

the amount of profit determined based on the consolidated income statement.

Note 4: For example, if the year which ends March 31, 2018 is the previous year, for the

purpose of calculating the profit for the year before the previous year (the year

which ended March 31, 2017), the “consolidated financial statements or separate

financial statements for the year which ended March 31, 2017” included in the

Securities Registration Statement or Securities Report submitted in the past will be

used, rather than the “consolidated financial statements or separate financial

statements for the year which ended March 31, 2018” included in the Securities

Report for the year which ended March 31, 2018.






► Treatment of “amount of profit” and “amount of net assets” as accounting for




apply to examination for assignment to the 1st





-255-


market capitalization for the companies to which REVIC has decided to provide

rehabilitation support (Note 1) (Rules 707 of the Regulations and Rule 719 of the Rules).

- Companies eligible for the exceptions

Note 1: Support decision prescribed in Article 25, Paragraph 4 of the Act Concerning

Regional Economy Vitalization Corporation of Japan (REVIC) (Law No. 63 of

2009).

Note 2: The exceptional treatment excludes any company for which the support decision is

subsequently revoked after REVIC decided to provide support or the decision to

acquire any debts of the company is not made (this decision refers to the decision

to acquire debts as prescribed in Article 31, Paragraph 1 of the Act Concerning

Regional Economy Vitalization Corporation of Japan).

- Conditions for application

The exceptions are provided when stock issued by a supported company is delisted on TSE

after REVIC has decided to provide support, and if the company files an initial listing

application for the stock by making the business year commencing within five years from the

date when REVIC announces the decision to acquire the debts of the company as the

previous year.

- Contents

In filing an initial listing application, the “amount of profit or market capitalization” should

meet either a. or b. below:

b. The amount of profit for the recent one year stands at ¥400 million or more.

c. The sales for the recent one year are ¥10,000 million or more and the market



(Reproduced)

b. The sales for the last one year is ¥ 10,000 million or more and the market capitalization on

the listing day is expected to reach at least ¥50,000 million (hereinafter referred to as the

“market capitalization criterion”)


-256-




statements).






Note 3: In the event that the amount of sales may be affected by the audit opinion of audit

firm or certified public accountants, the amount of sales adjusted based on such


adjustment to the sales is made as a result of change to accounting standards

made by appropriate reasons.

► Calculation method of market capitalization

For the calculation method of market capitalization, please refer to “II Formal Requirements

3 Market Capitalization.”


-257-

(７) False Statement or Adverse Opinion, etc.

It is required that 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 for the quarterly periods in each business year and quarterly

consolidated financial statements for the quarterly consolidated periods in each

consolidated accounting year, which ended during the last five years.

In principle, it is required that 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., and an "unqualified opinion" or an“opinion to the effect that interim financial statements,

etc. present useful information,”or “unqualified conclusion.” in the quarterly review report

attached to the quarterly financial statements for the quarterly accounting period in the

business year and for the quarterly consolidated accounting period for the consolidated

accounting year mentioned above.

Meanwhile, if additional information is included in the audit report that there is a serious

doubt on a corporate continuity though an audit opinion represents an “unqualified opinion,”

for the purpose of examination, an applicant is required to eliminate any serious event, etc.

giving rise to any concern with a corporate continuity, as represented by the elimination of

the additional information on a corporate continuity in the quarterly review report, etc. during

so-called the business year as Rule 309 of the Securities Listing Regulations requires that a

corporate continuity should be examined.

In addition, it is required that for the “ internal management over financial reporting,” the

statement that “the assessment results cannot be expressed” is not included in the internal

management report for the business year which ends during the recent one year and the

statement that “the expression of opinion is refrained” is not included in the internal

management audit report.

Note 1: Business year, consolidated accounting year, quarterly accounting period or

quarterly consolidated accounting period for which no audit of CPAs or audit firm

has been provided on these financial statements and quarterly financial statements,


-258-

etc. will be excluded from the said periods.

Note 2: Though the statement that “expression of opinion is refrained” is included in the

audit report or quarterly review report, if such statement is made due to any event

beyond the control of the applicant including natural disasters, the applicant may file

the application.

Note 3: Even if “adverse opinion” or the statement that “the expression of opinion is

refrained” is included in the audit report or quarterly review report for the accounting

periods other than the previous year or consolidated accounting year on the basis of

concern with the “corporate continuity,” the application would be possible. However,

in such cases, JPXR will examine the background and reasons for including such

opinion or statement.

Note 4: When an applicant or its subsidiary effects a merger (excluding a merger between

the applicant and its subsidiary or among its subsidiaries) during the period subject

to the examination, with respect to any period before the merger during the period

subject to the examination, the financial statements, etc. of the merger company for

each business year which ends during the period and the securities report which

includes or makes cross reference with the financial statements for each accounting

year or consolidated accounting year which ends during the period will be subject to

the examination.

Note 5: The criteria for the audit report on the internal control attached to the Internal Control

Report will not be applied to cases where the audit certificate is exempted for the

period during which the applicant may elect the exemption from the audit certificate.


-259-

(８) Share Unit

The Share Unit shall be expected to be 100 shares at the time of assignment.

In practice, at the time of assignment, JPXR will check the existence of a Share Unit system

and the number of shares comprising one Share Unit based on the provisions of the Articles

of Incorporation and other internal rules and regulations. If, at the time of assignment, the

number of shares comprising one Share Unit is not 100 shares, TSE will require the

applicant to adopt or change to a Share Unit system in which the number of shares

comprising one Share Unit is 100 shares (Note).

Note: The applicant is required to amend documents associated with the assignment

application including the Articles of Incorporation and other internal rules and

regulations, its certificate of registered items and submit them during the period for

the examination for assignment.


-260-

3. Details of Examination for Assignment to the 1st Section

For the purpose of assignment to the 1st section, JPXR will make necessary examination on

the basis of whether the applicant meets each item as explained in “2. Criteria for

Assignment to the 1st

Section”

Especially for the purpose of the examination of items required to meet the substantive

criteria (hereinafter referred to as the “1st Section Assignment Examination”), JPXR will

mainly examine matters described in the “Securities Report” and “Response Statement for

the 1st Section Assignment Examination” and assess the conformity with the criteria through

the interviews with the company for which the 1st

Section Assignment Examination is made.

For the purpose of the examination of the matters subject to the 1st

Section Assignment

Examination will be made from the same perspective as the initial listing examination

according to “III Listing Examination.” So please refer to the chapter.

In cases where there are no significant changes in lines of business, corporate governance

practices or internal management system, etc., in consideration of such circumstances,

JPXR will mainly focus its examination on the historical experiences of disclosures of

corporate profile since listing (Guidelines IV, 1)

IX Alteration of Markets

-261-


1. Steps to be Taken Before Alteration of Markets

(1) Alteration of Markets

As illustrated below, alteration of listing is available among the main board (the 1st

section

and the 2nd

section), Mothers and JASDAQ (Standard and Growth) on the TSE market.

This section addresses the examination for the alteration application from Mothers or

JASDAQ to the 1st

and 2nd

sections, as follows:


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(2) Timing of Alteration and Procedures

a. Timing of Alteration

The alteration date will be the alteration approval date after two to four weeks following

public offering or secondary offering, if any, (including limited distribution) for the purpose of

alteration. Unless public offering or secondary offering are not to be made, the alteration

date would be the day after one week from the alteration approval date (if the is a holiday, it

would be deferred to the next day. If, due to a holiday, the day after one week falls on the

second to fourth business day counting from the assignment date, then said alteration date

shall be the fifth business day counting from the assignment date). However, alteration to

the 1st

section from Mothers requires that, at the time of alteration, one year or more has

passed since listing; while for the alteration from JASDAQ, 6 months or more should pass

since the listing at the time of alteration. In addition, the assignment to the 1st section cannot

be conducted when the immediately preceding fiscal year is the year of new listing.

b. Procedures for Alteration

Consistent with ordinary application for listing, an alteration application will be made by filing

necessary documents associated with alteration application with TSE after the completion of

a regular general shareholders’ meeting for the previous year (the alteration application date

may be determined by consulting the lead underwriter). As with a listing application, a

preliminary application would be possible for the alteration application.

As with the listing application, the lead underwriter present the alteration schedule and

JPXR will in turn propose the examination schedule from the alteration application to the

approval thereof, which may take three months. If a period less than three years has passed

from the listing and no substantive changes have taken place with respect to organizational

structure and lines of business of an alteration applicant, such examination period may be

shortened to two months.

Note 1: Standardized examination period is three months. However depending on the

elapse of period after listing, changes in organizational structure and lines of

business after listing, and moreover the size of the applicant, busy seasons and

ordinary course of business, the period available for the preparation of responses

and the number of interviews can be coordinated. As a result of coordination, the

examination period as a whole might be modified.


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Note 2: When topics for the examination are diversified, the number of items to be examined

is expected to be large, JPXR may request the applicant to take a period of more

than three months for examination.

Note 3: If an applicant wishes to modify the examination schedule including the cases above

at notes 1 and 2, please consult JPXR after fully consulting the lead underwriter.


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[Model schedule from listing application entry for alteration of markets approval]

<First part>

1 Wed 1 Sat

2 Thu 2 Sun

3 Fri 3 Mon

4 Sat 4 Tue

5 Sun 5 Wed

6 Mon 6 Thu

7 Tue 7 Fri

8 Wed 8 Sat

9 Thu 9 Sun

10 Fri 10 Mon

11 Sat 11 Tue

12 Sun 12 Wed

13 Mon 13 Thu

14 Tue 14 Fri

15 Wed 15 Sat

16 Thu 16 Sun

17 Fri 17 Mon

18 Sat 18 Tue

19 Sun 19 Wed

20 Mon 20 Thu

21 Tue 21 Fri

22 Wed 22 Sat

23 Thu 23 Sun

24 Fri 24 Mon

25 Sat 25 Tue

26 Sun 26 Wed

27 Mon 27 Thu

28 Tue 28 Fri

29 Wed 29 Sat

30 Thu 30 Sun

31 Fri





First interview






At

six

bu

sin

ess d

ay

s in

terv

al

At

se

ve

n b

usin

ess d

ay

s in

terv

al

Ap

pro

xim

ate

lytw

o w

ee

ks

At

two

bu

sin

ess d

ay

s in

terv

al


-265-

<Second part>

1 Mon 1 Thu

2 Tue 2 Fri

3 Wed 3 Sat

4 Thu 4 Sun

5 Fri 5 Mon

6 Sat 6 Tue

7 Sun 7 Wed

8 Mon 8 Thu

9 Tue 9 Fri

10 Wed 10 Sat

11 Thu 11 Sun

12 Fri 12 Mon

13 Sat 13 Tue

14 Sun 14 Wed

15 Mon 15 Thu

16 Tue 16 Fri

17 Wed 17 Sat

18 Thu 18 Sun

19 Fri 19 Mon

20 Sat 20 Tue

21 Sun 21 Wed

22 Mon 22 Thu

23 Tue 23 Fri

24 Wed 24 Sat

25 Thu 25 Sun

26 Fri 26 Mon

27 Sat 27 Tue

28 Sun 28 Wed

29 Mon 29 Thu

30 Tue 30 Fri

31 Wed


Listing approval


Various interview

Second interview


Third interview

Physical inspection

Two months after month X Three months after month X

At

se

ve

n b

usin

ess d

ay

s in

terv

al

At

twe

lve

bu

sin

ess d

ay

s in

terv

al

Note1: There are cases where the presentation by the president takes place from various

interviews to approval of assignment to the other market.

Note2: Please be noted that a letter of recommendation by an under writer should be

submitted 3 business days before approval of assignment to the other market.


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Three years have not passed since the initial listing and there have been no

significant changes in organizational structure and lines of business of the company

which files the application for alteration.

<First part>

1 Wed 1 Sat

2 Thu 2 Sun

3 Fri 3 Mon

4 Sat 4 Tue

5 Sun 5 Wed

6 Mon 6 Thu

7 Tue 7 Fri

8 Wed 8 Sat

9 Thu 9 Sun

10 Fri 10 Mon

11 Sat 11 Tue

12 Sun 12 Wed

13 Mon 13 Thu

14 Tue 14 Fri

15 Wed 15 Sat

16 Thu 16 Sun

17 Fri 17 Mon

18 Sat 18 Tue

19 Sun 19 Wed

20 Mon 20 Thu

21 Tue 21 Fri

22 Wed 22 Sat

23 Thu 23 Sun

24 Fri 24 Mon

25 Sat 25 Tue

26 Sun 26 Wed

27 Mon 27 Thu

28 Tue 28 Fri

29 Wed 29 Sat

30 Thu 30 Sun

31 Fri





First interview






At

six

bu

sin

ess d

ay

s in

terv

al

At

se

ve

n b

usin

ess d

ay

s in

terv

al

Ap

pro

xim

ate

lytw

o w

ee

ks

At

two

bu

sin

ess d

ay

s in

terv

al


-267-

<Second part>

1 Mon

2 Tue

3 Wed

4 Thu

5 Fri

6 Sat

7 Sun

8 Mon

9 Tue

10 Wed

11 Thu

12 Fri

13 Sat

14 Sun

15 Mon

16 Tue

17 Wed

18 Thu

19 Fri

20 Sat

21 Sun

22 Mon

23 Tue

24 Wed

25 Thu

26 Fri

27 Sat

28 Sun

29 Mon

30 Tue

Listing approval


Second interview

Two months after month X

At

ten

bu

sin

ess d

ay

s in

terv

al

Note1: There are cases where various interviews are taken place.


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2. Criteria for Alteration of Markets

List of Formal Requirements for Alteration of Markets

The following summarizes the formal requirements for the alteration from Mothers.

Item From Mothers

to the 2nd

section

From Mothers to the 1st

section

On the basis of

market capitalization

On the basis of

sales amount

1) Number of

shareholders (by the

time of requirements)

800 or more 2,200 or more

2) Tradable shares (by

the time of

requirements)

a. Number of tradable

shares:

4,000 units or more

a. Number of tradable shares:

20,000 units or more

b. Market capitalization

of tradable shares:


b. Market capitalization of tradable shares:


c. Number of tradable

shares:

30% or more as a

percentage of listed

shares

c. Number of tradable shares:

35% or more of the total number of share

of stock, etc.

3) Trading volume －－

The average monthly

trading volume for

each of the last three

months and three

months preceding

such recent three

months be at least

200 trading units


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4) Market

Capitalization

(by the time of

requirements)

¥2,000 million or more ¥ 25,000 million

or more ¥4,000 million or more

5) Number of

consecutive years of

conducting business

An applicant has established its Board of Directors and continued its

operation for three years or more.

6) Amount of net

assets (by the time of

requirements)

¥1,000 million or more (it must not be negative on a separate

basis)

7) Amount of profit or


(for the amount of

profit, consolidated

ordinary income, and

for the market

capitalization, the value

expected by the time

of requirements)

Either of a. or b. below is met.

a. The amount of profit for the last two years is ¥500 million or

more.

b. The sales for the recent one year is ¥10,000million or more and

the market capitalization is expected to be ¥50,000 million or

more.


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8) False statement or

adverse opinion, etc.

a. No false statement is made in the securities

reports, etc. for each of business years which

ends during the last two years

a. No false statements in

Securities Reports for

the year ended during

the last five years are

identified.

b. The audit opinions on financial statements,

etc. for each business years which ended

during the last two years (excluding the

business year ended during the recent one

year) represent an "unqualified opinion" or a

"qualified opinion with exceptions”

c. The audit opinion on financial statements, etc.

for the business year ended during the recent

one year represents “unqualified opinion”, in

principle.

b. An "unqualified

opinion" or a

"qualified opinion with

exceptions” for the

last five years

d. Either of (a) and (b) below is not met. c. Either of (a) and (b)

below is not met.

(a) The internal management report for the business year ended during the

last year contains the statement that “assessment results will be

refrained from being expressed.”

(b) The internal management audit report for the business year ended

during the last year contains the statement that “no opinion will be

expressed.”

9) Establishment of a

shareholder services

agent

Shareholder services have been entrusted to an institution designated by

TSE, or a consent of acceptance of the entrustment of such shareholder

services from the shareholder services agent has been received.

10) Share unit

(by the time of

listing)

The Share Unit shall be expected to be 100 shares

11) Restriction on

transfer of shares

An applicant has imposed no restrictions on the transfer of shares for which

a listing application has been filed or is not expected to impose any

restriction thereon by listing.

12) Handling by the

designated book-entry

Shares of stock for which a listing application is filed has been or expected

to be handled by the designated book-entry transfer institution.


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transfer institution

13) Expected

implementation of

merger, etc.

An applicant does not meet either a or b below

a. The applicant expects to effect a merger, company split-up, turning a

company into a subsidiary or vice versa, or receipt or transfer of

business on or after the listing application date and within the two

years from the end of the previous year, and the applicant ceases to

be a substantive surviving company through such transactions; and

b. The applicant expects to effect a merger in which the applicant will be

dissolved, or share exchange or transfer of shares which turns the

applicant into a wholly owned subsidiary of another company within

two years from the end of the previous year (excluding transactions

expected to be implemented before the listing date)


-272-

The following summarizes the formal requirements for the alteration to the 1st and 2nd

sections from JASDAQ.

Item From JASDAQ to the 2nd

section From JASDAQ to the 1st

section

1) Number of

shareholders (by the

time of listing)

800 or more 2,200 or more

2) Tradable shares (by

the time of listing)


4,000 units or more


20,000 units or more

b. Market capitalization of tradable shares:



30% or more as a percentage of

listed shares


35% of the total number of shares

of stock, etc.

3) Trading volume －

4) Market

Capitalization

(by the time of listing)

¥2,000 million or more ¥ 25,000 million or more

5) Number of

consecutive years of

conducting a business

years

An applicant has established its Board of Directors and continued its

operation for three years or more.

6) Amount of net

assets (by the time of

listing)

¥1,000 million or more (it must not be negative on a separate basis)

7) Amount of profit or


(for the amount of

profit, consolidated

ordinary income, and

for the market

capitalization, the value

expected by the time of

Either of a. or b. below is met.

a. The amount of profit for the last two years is ¥500 million or more.

b. The sales for the last year is ¥10,000million or more and the market

capitalization is expected to be ¥50,000 million or more.


-273-

listing)

8) False statement or

adverse opinion, etc.

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

business years which end during the recent two years.

b. The audit opinions on financial statements, etc. for each business years

which ended during the recent two years (excluding the business year

which ends during the recent one year) represent an "unqualified

opinion" or a "qualified opinion with exceptions”

c. The audit opinion on financial statements, etc. for the business year

which ends during the recent one year represents “unqualified opinion”,

in principle.

d. Either of (a) and (b) below is not met.

(a) The internal management report for the business year ended during

the recent one year contains the statement that “assessment results

will be refrained from being expressed.”

(b) The internal management audit report for the business year ended

during the recent one year contains the statement that “no opinion will

be expressed.”

9) Establishment of a


agent

Shareholder services have been entrusted to an institution designated by

TSE, or a consent of acceptance of the entrustment of such shareholder

services from the shareholder services agent has been received.

10) Restriction on

transfer of shares

An applicant has imposed no restrictions on the transfer of shares for which

a listing application has been filed or is not expected to impose any

restriction thereon by listing.

11) Handling by the

designated book-entry

transfer institution

Shares of stock for which a listing application is filed has been or expected

to be handled by the designated book-entry transfer institution.

12) Expected

implementation of

merger, etc.

An applicant does not meet either a or b below

a. The applicant expects to effect a merger, company split-up, turning a

company into a subsidiary or vice versa, or receipt or transfer of

business on or after the listing application date and within the two

years from the end of the previous year, and the applicant ceases to

be a substantive surviving company through such transactions; and

b. The applicant expects to effect a merger in which the applicant will be

dissolved, or share exchange or transfer of shares which turns the

applicant into a wholly owned subsidiary of another company within


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two years from the end of the previous year (excluding transactions

expected to be implemented before the listing date)

List of Substantive Requirements of Examination Standards

Item Requirements

1. Corporate continuity and

profitability:

An applicant has carried out its business in a continuous manner

and developed a revenue base to generate stable profit.

2. Soundness of company

management The applicant has been performing its business fairly and faithfully.

3. Effectiveness of

corporate governance

and internal

management system

Corporate governance and internal management systems have

been designed and operated appropriately in consideration of its

size and the level of maturity

4. Appropriateness of

disclosures of relevant

corporate profile, risk

information, etc.

The applicant is in a position to appropriately make the disclosures

of corporate profile.

5. Other matters as TSE

deems necessary from

the perspectives of the

public interest and

protection of investors

-

The following discusses each criterion:


-275-

(1) Number of Shareholders

The number of shareholders (this represents the number of persons who hold at least one

share unit (Note 1)) is expected to be 800 or more for the 2nd section and 2,200 or more for

the 1st section by the time of alteration (Note 2).



one share.

Note 2: When Depository Receipts (DRs) representing the rights, etc. attached to stock

certificates are issued, shareholders who hold DRs representing rights attached to

the number of shares comprising one trading unit or more can be included in the

number of shareholders.


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(2) Tradable Shares

Tradable shares are required to meet the criteria in a to c below:

Note: A domestic company that is listed or will list on a foreign financial instruments

exchange would be accepted if it meets any one of the formal requirements of the

market capitalization of tradable shares and the number of tradable shares as a

percentage of total shares of listed stock. For a foreign company that is listed or will

list on a foreign financial instruments exchange, the formal requirements will be

handled in a similar manner. To prevent abuse of these provisions, the applicant shall

be checked, through the substantive examination, on whether it has or is sufficiently

likely to secure adequate liquidity in the foreign financial exchange.

a. Number of tradable shares

For the alteration to the 2nd

section, the number of tradable shares (note) is expected to

reach 4,000 or more by the time of alteration while for the alteration to the 1st

section, 20,000

or more by the time of alteration.

Note: For the determination of the number of tradable shares, please refer to “2 Tradable

Shares at “II Formal Requirements.”

b. Market capitalization of tradable shares

For the purpose of alteration to the 1st

or 2nd

section from Mothers, the market capitalization

of tradable shares as of the date of alteration should stand at ¥1,000 or more if market

capitalization criterion applies while ¥2,000 million or more in case of sales criterion.

On the other hand, the alteration to the 1st

or 2nd

section from JASDAQ requires the

expected amount of market capitalization of tradable shares to be ¥1,000 million or more at

the time of alteration.


If public offering or secondary offering is effected for alteration of markets, expected offering

price (Note 1)” or “the lowest price of the said stock, etc. observed during the period one

month prior to two days before the day on which the JPXR approves listing of the stock is


approved (Note 2)” is used, whichever is lower


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If public offering or secondary offering is not effected for alteration of markets, the “lowest

market price of shares for the period of one month before two days preceding the date when

the listing is approved” will be used.

Note 1: The day prior to two days before the day on which the JPXR approves the listing is



day of a week.





c. Percentage of Tradable Shares

► Determination of percentage of tradable shares

For the purpose of alteration to the 2nd

section, the number of tradable shares is expected to

be 30% or more of the total number of shares of stock, etc. by the time of alteration while for

the alteration to the 1st

section, 35% or more.

The percentage is determined by dividing the number of tradable shares by the number of

shares for which the alteration application is filed (note).

Note. The number of shares for which the alteration application is filed represents the

number of shares of stock, etc. expected at the time of alteration date, and the

number is determined by adding or deducting the number of shares expected to be

issued by the time of alteration, to or from the total number of shares of stock, etc. as

of the last record date.

<Increase in the number of shareholders and tradable shares: public offering or

secondary offering before the alteration>

The criteria for the number of shareholders and tradable shares relate to the requirements

expected to be satisfied at the time of alteration, rather than the requirements at the time of

alteration application. These requirements are interpreted in accordance with the

requirements for the “Increase in the number of shareholders and tradable shares: public

offering or secondary offering before the alteration” pertaining to “II Formal Requirements”


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so please refer to the section.


-279-

(3) Trading Volume

The applicant must comply with the requirements for the purpose of alteration to the 1st

section form Mothers on the basis of trading volume criterion.

(Provided that this will not apply to the cases of alteration to the 2nd

section from Mothers

and JASDAQ, and the alteration to the 1st

section from JASDAQ.

The average monthly trading volume for each of the last three months and three (3) months

preceding such last three months (Note 1) on TSE be at least 200 units (when the number of

shares, and if the applicant does not adopt any number, one unit refers to one share.

Note 1: The six month period before the end of the previous month which includes the

application date for assignment to the 1st section are classified into the “first three

months” and the “second three months.” Then the total trading volume of each

three months period will be divided by the number of months.

<Examples> When the application date for assignment to the 1st

section is July 1:

Recent three months (second three months): April to June

Three months preceding the second three months (first second months): January to

March

Meanwhile, in determining the average monthly trading volume for the purpose of

filing an application for the assignment to the 1st section on or after July 16, 2013,

the applicant may add the trading volume on respective market of Osaka Securities

Exchange (excluding JASDAQ) to the trading volume of TSE market for the

corresponding period.

Note 2: When a listed company decreases the number of shares per Share Unit during the

period which is used for the determination of trading volume, for the period before

the change, the trading volume as required in this criterion will be determined by

using the number of share units before the change while the trading volume after the

change will be determined by using the number after the change.

<Example> Way of calculating the monthly average trading volume for the “ last three

months” when a company which has changed the number of shares per Share Unit

from 1,000 shares to 100 shares applied for alteration in July

Trading volume for the last three months

Trading volume from April 1 to April 30 (1,000 shares per Share Unit) 200,0000


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shares = 200 share units

Trading volume from May 1 to June 30 (100 shares per Share Unit) 100,000 shares

= 1,000 share units

Average monthly trading volume: 1,200 share units / 3 months = 400 share units

Thus the average monthly trading volume meets the criterion.

Note 3: The trading volume includes the trading volume on off-auction trading (ToSTNeT

trading) and off-auction distribution.

Note 4: Trading volume can be checked by applying trading volume check tool at

https://www.arrowgate.jp/fw/dfw/tselcp/webxportal/tsehome

https://www.arrowgate.jp/fw/dfw/tselcp/webxportal/tsehome


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(4) Market Capitalization

It is required that when the market capitalization criterion is used for the alteration, the

market capitalization as of the alteration date should be ¥2,000 million or more for the

alteration to the 2nd

section from Mothers, and ¥25,000 million or more for the purpose of

alteration to the 1st

section. When using the sales criterion, the sales amount should be

¥4,000 million or more for the alteration to the 1st

or 2nd

section.

On the other hand, for the alteration from JASDAQ, the market capitalization as of the

alteration date should be ¥2,000 million or more for the alteration to the 2nd

section, while

¥25,000 million or more for the alteration to the 1st

section.

Calculation method of market capitalization


number of shares of listed stock certificates expected at the time of assignment to the 1st

section by the share price, to the market capitalization related to all other shares issued by

the applicant (limited to those listed or continuously traded on another financial instruments

exchange in Japan or foreign countries). For the purpose of determination of market

capitalization, the following prices are to be used as share prices.


If public offering or secondary offering is effected for assignment to the 1st section, expected




approved (Note 2)” is used, whichever is lower



section, the






day of a week.


-282-




off-trading session prices, off-market prices or the lowest prices during the trading

session are not viewed as the lowest price.

(5) Number of Consecutive Years of Conducting a Business

It is required that an applicant has established a Board of Directors for three years or more

counting from the end of the previous year and has continuously carried out its main

business at the time of listing application for three years or more as of the end of the

previous year.


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(6) Amount of Net Assets

It is required that the net assets of an applicant are expected to reach at least ¥1,000 million

by the date of assignment to the 1st section. JPXR will examine the following “values of net

assets on the date of assignment to the 1st

section.”

When an applicant files a “quarterly report for initial listing application” or a copy thereof for

the period after the beginning of fiscal year in which assignment to the 1st section is made,

TSE will examine the amount of net assets at the end of immediately preceding quarterly

period (Note 1) described in the recent “quarterly report for initial listing application.” When

the applicant does not prepare any consolidated quarterly financial statements, JPXR will

examine the values on the quarterly balance sheet (on a separate basis). In addition it is

required that the amount of net assets determined on the basis of quarterly balance sheet

(on a separate basis) (Note 2) should not be negative.

In cases other than a. above, JPXR will examine the amount of net assets as of the end of

the previous year described in the recent “Securities Report.” (Note 3). When the applicant

does not prepare any consolidated financial statements, JPXR will examine the values on

the balance sheet (on a separate basis). In addition it is required that the amount of net

assets determined on the basis of balance sheets (on a separate basis) (Note 4) should not

be negative.




submit to TSE the “Statement of Net Assets” in the form required by JPXR including the

descriptions of the “amount of net assets as of the end of immediately preceding quarterly

period or the previous year,” “expected cash inflows arising from public offering” and

“amount of net assets subject to the examination.”



total amount determined by adding reserves, etc., prescribed in Article 60, Paragraph

1 of the

Quarterly Consolidated Financial Statements, etc. Rules to the section of Net Assets

in a quarterly consolidated balance sheet prepared under the same rules.


-284-








total amount determined by adding reserves, etc. prescribed in Article 45-2,





adding reserves, etc. prescribed in Article 54-3, Paragraph 1 of the Financial




of net assets determined on the basis of quarterly consolidated balance sheet or

consolidated balance sheet.

Treatment of “amount of profit” and “amount of net assets” according to the adoption of




apply to the examination for assignment to the 1st



-285-

(7) Amount of Profit or Market Capitalization

An applicant is required to meet either a. or b. below.

The total amount of profits for the last two years stands at ¥500 million or more (hereinafter

referred to as the “profit criterion”)

The sales for the recent one year stand at ¥ 10,000 million or more and the market

capitalization on the listing day is expected to be ¥50,000 million or more (hereinafter

referred to as the “market capitalization criterion”).

<Application of profit criterion>

(Reproduced)

The total amount of profits (Note 1) for the last two years (Note 2) stands at ¥500 million or

more (hereinafter referred to as the “profit criterion”)

In the context of this criterion, the amount of profit determined (Note 3) based on the

consolidated income statement or consolidated statement of profit and loss and

comprehensive income (hereinafter referred to as the “consolidated income statement, etc.”)

will be subjected to the examination (if there is any period subject to the examination where

no consolidated financial statements have been prepared, the amount of profit (Note 4)

determined on the income statement (on a separate basis) would be subjected to the

examination).


by adding or deducting the amount presented according to Article 65, Paragraph 3 of the



according to Article 61 of the same rules (in case of separate income statement, it

represents ordinary income or ordinary loss presented according to Rule 95 of the same

rules) (Note 5).


example, If the amounts of profit for the two years stands at a loss of ¥500 million

and income of 1,000 million, respectively, the amount of profit for the recent two

years would stand at an income of ¥500 million (¥500 million loss － ¥1,000

million income).


-286-

Note 2: The “last” fiscal year starts from the end of the previous year. For example, for a

company where the previous year ends March 31, 2018, the “recent two years”

would be two years from April 1, 2016 through March 31, 2018. The same definition

of “recent” will be applied hereinafter.

Note 3: If a company voluntarily applies IFRS, the amount of profit should be equivalent to

the amount of profit determined based on the consolidated income statement.

Note 4: For example, if the year which ends March 31, 2018 is the year immediately

preceding application year, for the purpose of calculating the profit for the previous

year of the previous year (the year which ended March 31, 2017), the “consolidated

financial statements or separate financial statements for the year which ended

March 31, 2017” included in the Securities Registration Statement or Securities

Report submitted in the past will be used, rather than the “consolidated financial

statements or separate financial statements for the year which ended March 31,

2018” included in the Securities Report for the year which ended March 31, 2018.






► Treatment of “amount of profit” and “amount of net assets” as accounting for




apply to examination for assignment to the 1st





market capitalization for the companies to which REVIC has decided to provide

rehabilitation support (Note 1) (Rules 707 of the Regulations and Rule 719 of the Rules).

For details, please refer to “II Formal Requirements 6 Amount of Profit and Market


-287-

Capitalization.”


-288-


(Reproduced)

b. The sales for the recent one year are ¥10,000 million or more and the market


Note 1: For the calculation method of market capitalization, please refer to “II Formal

Requirements 3 Market Capitalization.”




statements).






Note 4: In the event that the amount of sales may be affected by the audit opinion of audit

firm or certified public accountants, the amount of sales adjusted based on such


adjustment to the sales is made as a result of change to accounting standards

made by appropriate reasons.

Note 5: When an applicant is demutualized into a joint stock company and if the period

subject to the examination includes any period before the demutualization, with

respect to the period before the demutualization, the amount equivalent to the

amount of profit determined based on the consolidated income statements for each

consolidated fiscal year of the mutual company and the sales stated in the income

statements for each consolidated fiscal period of the mutual company will be used

for the purpose of the examination.


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(8) False Statement or Adverse opinion, etc.

For the interpretation for “false statement and adverse opinion, etc.” in effecting the

alteration to the 2nd

section from Mothers or JASDAQ, the alteration to the 1st section from

Mothers applying the market capitalization criterion and the alteration to the 1st

section from

JASDAQ, please refer to “(7) False Statement and Adverse Opinion, etc.” at “VIII

Assignment to the First Section. ”

(9) Establishment of a Shareholder Services Agent

Please refer to “8. Establishment of Shareholder Services Agent” at “II Formal

Requirements.”

(10) Shares Unit

The Share Unit shall be expected to be 100 shares at the time of alteration.

In practice, at the time of ateration, JPXR will check the existence of a trading unit system

and the number of shares comprising one trading unit on the basis of the rules prescribed in

the Articles of Incorporation and listing application documents including certificates of

registered items. When the applicant does not adopt any trading unit system or it applies a

trading unit system where the number of shares comprising one trading unit is not 100

shares at the time of alteration, TSE will require the applicant to adopt a trading unit system

or change the number of shares comprising one trading unit (Note).

Note: The applicant is required to amend documents associated with the alteration

application including Articles of Incorporation, a certified copy of the commercial

register, various internal rules and “Part I” documents with respect to the adoption of

shares unit system and submit them during the period for the examination for

assignment.

(11) Restriction on Transfer of Shares

Please refer to “10 Restriction on Transfer of Shares” at “II Formal Requirements.”


-290-

(12) Handling by the Designated Book-Entry Transfer Institution

Please refer to “11 Handling at Designated Book-Entry Transfer Institution” at “II Formal

Requirements.”

(13) Expected Implementation of Merger, etc.

Please refer to “12 Expected Implementation of Merger, etc.” at “II Formal Requirements.”


-291-

3. Nature of Examination for Alteration of Markets

For the examination of the alteration to the 1st

and 2nd

section on the basis of formal

requirements, JPXR will assess whether the applicant meets the requirements of each item

mentioned in “2 Criteria for alteration of Markets”

For the items subject to substantive examination (hereinafter referred to as the “alteration

examination,” JPXR mainly examines the descriptions included in “Securities Report for the

Application for alteration of Market (Part I)” and “Securities Report for the Application for

alteration of Market (Part II) by assessing the satisfaction of the requirements through the

interviews with the applicant.

JPXR will examine the market alteration application in accordance with “III Listing

Examination” in a manner similar to that for initial listing.

Meanwhile when there are no significant changes in line of business, corporate governance

and internal management system, JPXR will mainly focus its examination on the historical

experiences of disclosure of corporate profile as well as continuity and profitability of

business (Guidelines IV 2.).

X Listing Fees

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X Listing Fees

Consumption taxes and local consumption taxes will be levied on various dues and fees

mentioned in this chapter.

1. Listing Examination Fees

Listing examination fees will be charged to an applicant at the time of listing application.

Fees Amount Payment date

Listing

examination fees: ¥4 million

By the end of the month following the

month to which the listing application

date pertains

Note 1: When applicant has an experience of filing a listing application or preliminary

application and the applicant files a listing application within three years counting

from the business year in which the most recent listing application was filed (in case

of a preliminary application, the date on which the listing application described in the

securities preliminary listing application), the fees will be halved.

Note 2: When the applicant files a preliminary application, the preliminary examination fees

at the same amount as the listing fees will be charged to the applicant. When a

preliminary listing application is filed and if the listing application is filed in the

business year described in the preliminary securities listing application, the

applicant needs to pay no listing examination charge.

Travelling expenses incurred when conducting on-site investigations and interviews

at locations far away from Japan, such as in Europe and the US, etc. or other

expenses deemed necessary for the purpose of listing examination, JPXR will

charge amounts equivalent to expenses actually incurred.

X Listing Fees

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2. Initial Listing Fees

An applicant is required to pay initial listing fees and fees of public offering or secondary

offering at the time of initial listing.


Initial

listing fees

First

section ¥ 15 million

By the end of the

month following the

month to which listing

date pertains

Second

section ¥12 million

By the end of the

month following the


date pertains

Fees for public offering

or secondary offering

(1) Fees for public offering of stock

certificates for which the listing

application is filed

Number of shares for which the listing

application is filed x public offering

price x 9/10,000

By the end of the

month following the


date pertains

(2) Fees for secondary offering of

stock certificates for which the

listing application is filed (Note 1)

Number of shares for which secondary

offering are effected (Note 2) x sales

prices x 1/10,000

Note 1: Initial listing fees for the 1st

section represent initial listing fees when the applicant is

listed on the 1st section while initial listing fees for the 2

nd section represent initial

listing fees when the applicant is listed on the 2nd

section.

Note 2: Fees for public offering or secondary offering will be paid for the public offering or

secondary offering of shares for which the initial listing application is filed between

X Listing Fees

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the listing approval date and the listing date.

Note 3: These are limited to cases mentioned in Article 2, Paragraph 4, Item 1 of the Act.

Note 4: The number of shares for which secondary offering is effected includes the number

of over allotted shares. In addition in case of capital increase via third party

placements related to the green shoe option, the “fees for listing of new shares”

reflecting the number of allotted shares at the third party placement capital increase

will be charged (explained below)

Note 5: Amount less than ¥100 arising in the calculation process will be disregarded

(consumption taxes and local consumption taxes will be excluded; the same shall

apply hereinafter).

[Illustrative examples of calculation of fees required for initial listing]

(Conditions precedent)

- Listing on the 2nd

section

- Public offering: 1,000 shares

- Secondary offering (purchase underwritten by the underwriter): 500 shares

- Secondary offering (overallotment): 200 shares

- Prices for public offering or secondary offering: ¥256,000

(Calculation)

Initial listing fees ¥12,000,000

+ fees for public

offering or

secondary

offering

(Public offering)

1,000 shares x ¥256,000 x 9 / 10,000 = ¥230,400

(Secondary offering)

(500 shares + 200 shares = 700 shares) x ¥256,000 x 1/10,000 =

¥17,900 (fraction of less than ¥100 is disregarded)

Total ¥12,248,300

X Listing Fees

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3. Fees to be Paid by Listed Companies

Listed companies will be charged annual fees for maintaining listing, fees for issuance of

new shares, fees for listing of new shares and fees associated with merger, etc. as

mentioned below.

(1) Annual Fees for Maintaining Listing

After listing, a listed company will be required to pay the amount mentioned in the table

below, with the addition of ¥120,000 for the use of TDnet.

Market capitalization 1st

section 2nd

section Payment date

¥5,000 million or below ¥960,000 ¥720,000

By the end of

February and the

end of August

(one-time payment

represents a half of

the amounts

mentioned in the left

column with the use

fees of TDnet)

Over ¥5,000 million

and ¥25,000 million or

below

¥1,680,000 ¥1,440,000


and ¥50,000 million or

below

¥2,400,000 ¥2,160,000

Over 50,000 million

and ¥250,000 million

or below

¥3,120,000 ¥2,880,000


and ¥500,000 million

or below

¥3,840,000 ¥3,600,000

Over ¥500,000 million ¥4,560,000 ¥4,320,000

Note 1: The market capitalization is calculated by applying the closing price on the final day

of the trading session in December each year (if no trading is effected on the trading

session of the day, the closing price at the trading session at the most recent date

when the trading was effected) and the number of listed shares at the end of

December each year.

X Listing Fees

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Note 2: Annual fees for maintaining listing at the time of initial listing year will differ

depending on the month in which the listing is made.

Annual fees for maintaining listing to be paid by the end of February

Month in which an

initial listing is made Annual fees for maintaining listing

August of the

previous year

Amount of one twelfth of annual fees for maintaining listing on the

basis of market capitalization of listing as of listing date with addition

of a half of annual fees for maintaining listing

September of the

previous year

A half of annual fees for maintaining listing

October of the

previous year

Five twelfths of annual fees for maintaining listing

November of the

previous year

Four twelfths of annual fees for maintaining listing

December of the

previous year

Three twelfths of annual fees for maintaining listing

January Two twelfths of annual fees for maintaining listing on the basis of

market capitalization of listing as of listing date

February No payment of annual fees for maintaining listing is required.

X Listing Fees

-297-

Annual fees for maintaining listing to be paid by the end of August

Month in which an

initial listing is made Annual fees for maintaining listing

February Seven twelfths of annual fees for maintaining listing on the basis of


March A half of annual fees for maintaining listing on the basis of market

capitalization of listing as of listing date

April Five twelfths of annual fees for maintaining listing on the basis of


May Four twelfths of annual fees for maintaining listing on the basis of


June Three twelfths of annual fees for maintaining listing on the basis of


July Two twelfths of annual fees for maintaining listing on the basis of


August No payment of annual fees for maintaining listing is required

X Listing Fees

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(2) Fees for Issuance of New Shares, etc. after Listing

If a listing company issues new shares, etc., the amounts mentioned below will be charged.


Stock certificates, etc. (Note 1)

are issued or disposed of

(Note 2)

Paid amount per share x 1/10,000

of the number of shares to be

issued or disposed

By the end of the

month following the

month in which new

shares were issued.

New subscription warrants

(Note 3) are issued where

shares acquired through

subscription warrants become

listed shares

(Issuance price of new subscription

warrants x total number of new

subscription warrants + amounts

paid at the exercise of new

subscription warrants (Note 4) x

number of shares acquired through

new subscription warrants) x

1/10,000

Secondary offering of listed

stock certificates (Note 5)

Number of shares for which

secondary offering are effected x

sales prices x 1/10,000

Note 1: Listed stock certificates, etc. include stock certificates which can be converted to

listed stock certificates (this means the delivery of new stock certificates, etc. in

exchange for the acquisition of shares issued by the company).

Note 2: Disposal is limited to stock certificates publicly offered as prescribed in Article 199,

Paragraph 1 of the Companies Act (in case of foreign companies, securities

equivalent to them). This excludes issuance or disposal of shares through third

party placement arising from the exercise of rights to acquire offered shares from

the issuer or holder of the offered shares, which are granted to the prime financial

instruments underwriter who implements an overallotment in relation to the initial

listing in entering into a prime underwriting contract.

Note 3: Subscription warrants are limited to those offered according to Article 238,

Paragraph 1 of the Companies Act and free allocation of subscription warrants

prescribed in Article 277 of the same act.

Note 4: “Payment amount associated with the exercise of subscription warrants” represents

X Listing Fees

-299-

the value of assets contributed in exercising of subscription warrants (the same

shall apply hereinafter).

Note 5: They are limited to the sales which meet Article 2, Paragraph 4, Item 1 of the Act.

X Listing Fees

-300-

(3) Fees for Listing of Shares of New Stock

Fees mentioned below will be required for listing of shares, etc. newly issued by a listed

company.


Fees for listing of

new shares

Issuance price per one share (Note 1)

x the number of shares of newly issued

stock certificates (Note2) x 8/100,000

End of the month following

the month in which listing of

new shares is effected

Note 1: When listing is effected for shares newly issued through the conversion of shares

where shares can be converted to another class of shares, the calculation is made

with reference to issuance price per share as the “issuance price per share” in the

table.

In listing new shares issued through the exercise of subscription warrants, the

calculation is made with reference to the amount equivalent to the price per share

determined using the formula below as the issuance price per share.

[Issuance price of each stock acquisition right x total number of subscription

warrants / payment amount related to the exercise of subscription warrants x the

number of shares whose rights are exercised]

In addition, in listing shares issued at the time of acquisition by a company of

subscription warrants with special conditions, the calculation is made with reference

to the amount equivalent to the price per share calculated as follows as the

issuance price per share.

[Issuance price of each stock acquisition right x total number of subscription

warrants (if subscription warrants represent those attached to bonds with

subscription warrants, the total of the amount for subscription warrants and the

amount for bond portion of the bonds with subscription warrants)]

Note2: New shares to be listed by virtue of Rule 303 of the Regulations shall be excluded.

Note 3: In listing new shares issued through the conversion of shares which can be

converted to another class of shares, the payment date is separately determined

where new share issues through the exercise of subscription warrants are listed or

new issues issued concurrently at the time of acquisition of subscription warrants

with acquisition rights are listed.

X Listing Fees

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(4) Fees for Merger, etc.

If a listed company effects a merger and acquisition (merger, divesture or share exchange),

the fees mentioned below shall be paid.


Fees for merger,

etc.

(Number of shares issued at the time

of merger + number of shares of

treasury stock to be delivered) x

closing price of the shares (Note 1) at

the trading session where the merger

takes effect (Note 2) x 2/10,000

End of the month following

the month in which the

merger takes effect

Note 1: If no trading is effected in the trading session of the day when the merger, etc. takes

effect, this refers to the closing price at the trading session first effected after the day

when the merger, etc. takes effect.

Note 2: It refers to the date when merger, divesture or share exchange takes effect (the

same shall apply hereinafter).

Note3: The maximum fees for the merger, etc. will be ¥10 million.

X Listing Fees

-302-

4. Fees for Assignment to the 1st Section and Alteration of

Markets

(1) Assignment to the 1st section

When the application for alteration to the 1st

section from the 2nd

section is filed, the fees for

the examination of the assignment to the 1st

section will be charged.


Examination fees for

assignment to the first

section

¥4 million

By the end of the month

following the month in which

the listing application is filed

Fees for the assignment to

the 1st

section －－

Note: When the applicant files a preliminary application, the preliminary examination fees at

the same amount as the examination fees for the assignment to the 1st section will be

charged to the applicant. When a preliminary application is filed and if the preliminary

1st

section assignment application is filed in the business year described in the

preliminary 1st section assignment application, the applicant needs to pay no 1

st

section assignment fees.

X Listing Fees

-303-

(2) Alteration to the 2nd or 1st section from Mothers

When the application for alteration to the 2nd

or 1st

section from Mothers is filed, the fees for

the alteration examination will be charged.



Alteration ¥4 million




Fees for Alteration

Initial listing fees － (¥1

million + Fees for public

offering or secondary offering

at the time of listing on

Mothers)



alteration is made

Note 1: When the applicant files a preliminary application, the preliminary examina tion fees

at the same amount as the alteration examination fees will be charged to the

applicant. When a preliminary application is filed and if the preliminary alteration

application is filed in the business year described in the preliminary alteration

application, the applicant needs to pay no alteration fees.

Note 2: For any company listed on Mothers by application filed before April 1, 2003,

notwithstanding the above, the amount determined as follows will be the alteration

fees.

“Initial listing fees (¥15 million in case of listing on the 1st

section concurrent with the

alteration and ¥12 million in case of listing on the 2nd

section concurrent with the

alteration)－listing fees paid at the time of listing on Mothers (¥1 million + offering

price per share for the public offering at the time of listing on Mothers x the number

of shares publicly offered x 9/10,000 (up to ¥20 million) )－listing fees paid at the

listing of new stock (offering price per share x the number of shares of newly listed

stock x 9/10,000)”

X Listing Fees

-304-

(3) Alteration to the 2nd or 1st section from JASDAQ



Alteration ¥4 million




Fees for Alteration Initial listing fees －¥6 million



alteration is made

Note : When the applicant files a preliminary application, the preliminary examination fees at

the same amount as the alteration examination fees will be charged to the applicant.

When a preliminary application is filed and if the preliminary alteration application is

filed in the business year described in the preliminary alteration application, the

applicant needs to pay no alteration fees.

XI IPO Center (Support Given to Prospective Issuers)

-305-

XI IPO Center (Support Given to Prospective

Issuers)

1. Assistance Activities through Visits to Individual

Companies and Consultation

TSE staff will directly visit any company considering to list its stock and present the overall

picture of and procedures for listing.

The TSE New Listing Department will provide consultation at every stage of preparation for

listing, ranging from the evaluation of listing to actual preparation for listing. Please feel free

to contact us in any case where you do not understand what you should start with in

considering listing or you wish to directly hear from TSE on listing though you have started

some preparatory works.

2. Seminars for Prospective Issuers

TSE holds various seminars for companies which consider listing or are preparing

themselves for listing at any location in Japan. These seminars will outline the listing system

and preparation for listing and views and opinions of companies which succeeded in listing

will be informed.

3. Mail Magazine

“IPO Center Mail Magazine” will provide information on seminars and other events given by

TSE, as well as Q&A on listing examination and explanation of the system on a weekly

basis.

Please feel free to send any message to the address below as TSE responds to any

XI IPO Center (Support Given to Prospective Issuers)

-306-

questions concerning initial listing, including listing system such as listing examination and

actual preparation for listing.

IPO Center, New Listing, Tokyo Stock Exchange, Inc.

[email protected]

mailto:[email protected]


-307-

A Documents, etc. to be Filed for Initial Listing

Application (Japanese Stocks)

List of Documents, etc. to be Filed for Initial Listing


The documents to be filed for the purpose of application are described below in

“Documents to be Filed for Initial Listing Application. They must be filed at the time of the

initial listing application or in a manner otherwise specified by the filing requirements.

When and if a preliminary application is submitted, the “documents for the purpose of

preliminary application” (to be specified later) need to be filed on the date of the preliminary

application. The remaining documents to be filed should be filed at the official application

date after the completion of the regular general shareholders’ meeting. For any docume nt

filed as a draft or whose descriptions have been changed after the preliminary filing, new

and official documents must be filed on the date of the official application.

(1) Documents, etc. to be Filed for Initial Listing Application

(Japanese Stocks)

(Considerations)

(1) When an applicant prepares application documents, the applicant shall file the

documents in the form of electromagnetic records, in principle, except for those that

TSE deems necessary to be filed in written form. In addition, at the time of application

acceptance, the list of materials filed shall be submitted as a hard copy with the

signature and seal of the representative of the applicant placed at the beginning.

(2) When an applicant files “Part I” documents, quarterly financial statements, etc. in the

form of electromagnetic records, the audit report, quarterly review report, etc. shall be

included in the electronic data and submitted also in written form (except for companies

making consistent disclosures).


-308-

(3) The column heading "Number" in the table “Documents, etc. to be filed” shown below

only applies to cases where hard copies are to be submitted. For application documents

that are to be submitted as electromagnetic records, only one copy is required to be

submitted, for example, even if "2" is indicated in the table.

(4) The written Articles of Incorporation need to be filed as electromagnetic records by

the listing application date. Later, on the listing date, the applicant should register

the Articles of Incorporation via TDnet. For the corporate governance report, the

applicant is required to submit a draft version on the listing application date and a

finalized version by the listing approval date as electromagnetic records, and then

to register the report via TDnet on the listing date.


-309-

(Marks and legend)

※

Must be submitted in the form designated by TSE for the form, please refer to: “Forms

of Documents to be Filed for Initial Listing Application”(Japanese only)

◎ Underwriter (lead underwriter) is required to submit

(Copy) A copy of the original will be submitted

◆ Documents to be submitted for the preliminary application

◇ Though submitted at the time of preliminary application, draft or non-finalized version

would be accepted.

■ Documents required to be filed as hard copies by all the applicants


Rules: Enforcement Rules for the Securities Listing Regulations



-310-

Time Documents Remarks Number Basis

Documents required to be filed by all the applicants

Listing

application

date

Security initial listing

application form※◆■

Preliminary

application form for

initial listing of

securities ※

One Rule 204① of the

Regulations

Same as

above

Minutes of the board of

directors meeting for

authorizing the initial listing

application (copy)

One copy Rule 204①(1) of the

Rules

Same as

above

A certified copy of the

commercial register of the

initial listing applicant

◆■

One Rule 204①(2) of the

Rules

Same as

above

Articles of incorporation◆ Hardcopy One

Rule 204①(3) of the

Rules

Same as

above

Securities report for initial

listing application (Part I)◇

Audit report attached (for

public inspection) ■

In cases of

companies making

continuous

disclosures,

financial

statements and

consolidated

financial

statements for the

previous year of the

previous year, with

audit report

attached.

Two

Rule 204② of the

Regulations

Rule 204 ①(4)b of

the Rules

Same as

above


listing application (Part II)◇

Two

Rule 204② of the

Regulations

Same as Written confirmation certifying One Rule 204①(6) of the


-311-

above that the applicant has no ties

to any anti-social forces※◆■

Rules

Same as

above

Written confirmation※◎◆■

One

Rule 204①(7)b of

the Rules

Same as

above

A document describing

matters which were given

particular attention or were the

focus of confirmation in the

course of public guidance and

underwriting examination◎◇

One Rule 204①(7)c of

the Rules

Same as

above

Minutes of a general

shareholders meeting or the

board of directors during the

period from the first day of the

business year containing the

initial listing application day

(copy)

Submission at

every meeting after

the listing

application date

However, when

such document has

been already

submitted through

the Electronic

Disclosure for

Investors' NETwork

(EDINET), it is not

required to be

submitted.

One ,

respectively

Rule 206(1) of the

Rules

Same as

above

Summary audit report◇■ For each

consolidated

accounting year

which ends during

the recent two

years One

Rule 204⑦ of the

Regulations

The most recent

audit summary

must accompany

the statements

Rule 208②(3) of the

Rules


-312-

required by Rule

208②(3) of the

Rules which

describes the

assessment of

CPAs or audit firm

on the company

organization,

accounting

regulation and

other systems’

design and

implementation .

Same as

above

Written oath concerning

application for initial listing※

◆■


Regulations

Same as

above

Quarterly report (balance

sheet) for period ending the

most recent quarter◆

Not required when

financial

statements (stand

alone) is include in

the “Quarterly

Report for Initial

Listing Application.”

One Rule 206(9)-2 of the

Rules

As a quarter period

ends during the

examination period,

it must be

submitted every

end of a quarterly

period.

However, when

such document has

been already

submitted through

the Electronic

Disclosure for


-313-

Investors' NETwork

(EDINET), it is not

required to be

submitted.

Same as

above

Book of rules (copy)◆ Including

regulations on

handling of

shareholder

services (copy)

One Rule 204①(10) of

the Rules

Same as

above

A copy of notice of general

shareholders’ meeting for the

business year ending within

the latest year and attached

documents◇


the Rules

Same as

above

Written documents stating the

matters of the assumption of

the principal business

activities◆

One Rule 204①(12)

Same as

above

Table of distribution status of

stocks※◇

Not required when

the criteria for the

number of

shareholders or the

number of publicly

traded shares are

expected to be met

through public

offering or

secondary offering

or limited

distribution of

shares before

listing


the Rules

Same as

above

Document certifying the

establishment of a

shareholder services agent

One copy Rule 204①(23) of

the Rules


-314-

(copy)◆

Same as

above

Consolidated financial

statements for the recent five

years (copy)◇

Limited to cases

where securities

reports have been

prepared for the

recent five years

(including

consolidated

financial

statements when

securities reports

have not been

prepared but

consolidated

financial

statements have

been prepared).

Periods described

in “Securities

Report for Initial

Listing Application

(“Part I”

documents”) will be

excluded. However,

submission is not

required when

submission is made

electronically (via

EDINET)

One

Part II

Procedures for

Description XI(3)

Same as

above


statements for the last five

years and in case of

non-preparation of financial

statements, accounts and

attached schedule for the

business year(copy)

Part II

Procedures for

Description XI(4)


-315-

Same as

above

Minutes of the meetings of the

board of directors for the last

two years (copy)◆

One copy

Part II

Procedures for

Description XI(5)

Same as

above

Minutes of board of auditors

(audit committee) meeting for

the business year ending

within the latest year (copy)◆

One copy

Part II

Procedures for

Description XI(6)

Same as

above

Materials related to the board

of the statutory auditors (audit

committee) for the recent one

year and application year

(copy)◆

Vouchers in

relation to IV.4.c

One copy

Procedures for

Description XI(7)

Same as

above

Materials related to internal

management for the recent

one year and application year

(copy)◆

Vouchers in

relation to IV.3.d One copy

Part II

Procedures for

Description XI(8)

Same as

above

Corporate tax return and

breakdown of the item of

accounts attached thereto for

the last two years(copy)◆

Applicant and

subsidiaries to be

described One copy

Part II

Procedures for

Description XI(9)

Same as

above

Monthly performance

management data for each

month of the fiscal year in

which the listing application is

filed (copy)◆

One copy

Part II

Procedures for

Description XI(10)

Same as

above

Annual budget plan and

mid-term management plan

and a series of internal data

used for the preparation

thereof for the fiscal year in

which the listing application is

filed (copy)◆

Vouchers in

relation to flow in

VII 1.(1) and (2)

One copy

Part II

Procedures for

Description XI(11)

Same as

above

Contract which is important for

management (copy)◆ One copy

Part II

Procedures for


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Description XI(12)

Same as

above

Catalogs and pamphlets for

products, goods and services,

etc.◆

One

Part II

Procedures for

Description XI(13)

Same as

above

Independent director /auditor

notification(draft)※◆ One

Part II

Procedures for

Description XI(14)

Same as

above

Draft Corporate Governance

Report※◆ One

Part II

Procedures for

Description XI(15)

Same as

above

Documented materials to

address the descriptions

included in the “Management

Conditions of Timely

Disclosure Materials, etc.” at

Part II, Procedures for

Description IV 5.(1)d (e.g.,

internal regulations, manuals,

etc.)◆

One

Part II

Procedures for

Description XI(16)

Same as

above

Work flow ◇

One

Part II

Procedures for

Description XI(17)

Same as

above

Agreement of e-learning◆■ One -

By listing

approval

Written recommendation※◎

■ One

Rule 204①(7)a of

the Rules

Same as

above

Written confirmation regarding

compliance with exchange

rules and regulations※■

One Rule 204 ⑪(1) of

the Regulations

Same as

above

Statement of confirmation

concerning the fairness of the

securities report of initial

listing application (part I) and

the fairness of quarterly report

One Rule 204 ⑪(2) of

the Regulations


-317-

for Initial listing application■

Same as

above

Report concerning corporate

governance※

Submission by

listing approval

date and

registration via

TDnet on the listing

date

One Rule 204⑫(1) of the

Regulations

Same as

above

Format of listing agreement※

■

One

Rule 203① of the

Regulations

Same as

above


listing application (part I)

One


Rules

Same as

above

Quarterly report for Initial

listing application

Quarterly Report

during application

year. However,

when such

document has been

already submitted

through the

Electronic

Disclosure for

Investors' NETwork

(EDINET), it is not

required to be

submitted.

One Rule 210①(3)of the

Rules

Same as

above

Computation document for


One

Rule 205 (2) b of the

Regulations

Rule 205 (3) of the

Regulations

Rule 205 (6)b of the

Regulations

Listing date

Articles of incorporation Registration via

TDnet on the listing

date

One Rule 210 ①(1) of

the Rules

Same as Independent director/auditor One Rule 436-2,


-318-

above notification※ Paragraph 1 of the

Rules

Formal Requirements for “Amount of net assets” will be met through public offering

By listing

approval

Computation document for net

assets※ One

Rule 212⑤(12)of the

Rules

When financial statements or consolidated financial statements for the year preceding the previous

year have not been included in the Securities Registration Statement and Securities Report and

Rule 212⑥ (16) of the Enforcement Rules for the Securities Listing Regulations applies.

Listing

application

date

Financial statements or

consolidated financial

statements to which

accounting standards for the

previous year of the previous

year applied or other

documents which TSE deems

appropriate as those

equivalent to such statements

◆

Accompanying

audit report or

statement

expressing opinion

on financial values,

etc. of CPAs or

audit firm■

One

Rule 204①(4) g of

the Rules

Rule 212⑥(16) of

the Rules

When an applicant is a company with nominating committee, etc. / audit and supervisory committee

Listing

application

date

Minutes of each committee

(nominating committee, etc.

/ audit and supervisory )and

statement concerning

decisions of executives (copy)

Excluding those

concerning routine

business

One each Rule 206(1) of the

Rules

At every holding

after the listing

application date

However, when

such document has

been already

submitted through

the Electronic

Disclosure for

Investors' NETwork

(EDINET), it is not

required to be


-319-

submitted.

Same as

above

【For audit and supervisory

committee】


contents of the resolutions at

the board of directors

prescribed by article 416,

paragraph 4 of companies act

(matters delegated to

executives for the decisions

on businesses)


the Rules

Same as

above

【For nominating committee,

etc.】


contents of the resolutions at

the board of directors

prescribed by article 13 of

399, paragraph 5 of

companies act (matters

delegated to executives for

the decisions on businesses)

One Rule 204①2 of (27)

of the Rules


-320-

When there is a consolidated subsidiary which has a degree of influence of 20% or more of

influence over the group for the previous year.

Listing

application

date

Financial statements of the

consolidated subsidiary for the

last five years (including


statements when it has

prepared them) (copy)

Copy of securities

report, if any

One copy

Part II

Procedures for

Description XI(1)

When securities reports, etc. for the recent three years and application year have been amended

(submission of amended registration statement, amended shelf registration statement or amended

report)

Listing

application

date

A revision notice, registration

statement of issuing revision

or revision statement (copy)

Excluding amended

report attached to

“Section II

Information” of

“Securities Report

for Initial Listing (art

I)”

One each

II Part Attached data

Procedures for

Description Ⅺ(2)

When accounting for “net assets” is applied when accounting for retirement benefits is adopted.

Listing

application

date

Document stating the amount

of net assets and the process

of such calculation when the

accounting standards for


◇■

One Rule 705 of the

Regulations

When material facts, etc., arise for the purpose of management

Immediately

after

occurrence

Report on the event

One

Rule 206(2) of the

Rules


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When an applicant has controlling shareholders

Listing

application

date

A document describing the

matters relating to a

controlling shareholder, etc.◇

When there are

some changes

during the

examination period,

the statement

should be updated

and then

re-submitted.


the Rules

When an applicant has a non-listed parent company, etc.

Listing

application

date

Written statement of

assurance of parent

company's timely disclosure,

etc.

One

Guidelines II 5(4)b

Same as

above

Financial information of

non-listed parent company,

etc.◇

When a non-listed

parent company,

etc. prepares

quarterly financial

statements and if

financial

information is

amended during

the examination

period, it must be

updated and

re-submitted.


the Rules

When an applicant resolved at the Board of Directors to acquire shares of its treasury stock on or

after the beginning of application year (resolutions prescribed by Article 156, Paragraph 1 of

Companies Act (including cases where Article 165, Paragraph 3 of the same act applies by

rewording) )

Listing

application

date or

without any

delay after

Minutes of general

shareholders’ meeting or the

Board of Directors meeting

concerning the acquisition of

shares of treasury stock

In cases of

company with

committee system,

including

statements


Rules


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resolutions (copy) concerning the

decisions of

executives

When a resolution to acquire shares of treasury stock is made on or after the beginning of

business year in which the listing application is filed (resolutions by Article 199, Paragraph 1 of the

Companies Act or resolutions by Article 795, Paragraph 1 of the Companies Act where shares of

treasury stock are delivered in exchange of money, etc. as prescribed by Article 749, Paragraph 1,

Item 2, Article 758, Item 4 or Article 768, Paragraph 1, Item of the Companies Act (where no

resolutions are required by Article 796, Paragraph 1 or Paragraph 3 of the Companies Act,

resolutions of the Board of Directors concerning the merger and acquisition agreement,

acquisition and divesture agreement or stock swap agreement) )

Listing

application

date or

without any

delay after

resolutions

Minutes of general

shareholders’ meeting or the

Board of Directors meeting

concerning the disposal of

shares of treasury stock

(copy)

In cases of

company with

committee system,

including

statements

concerning the

decisions of

executives


Rules

When a resolution to retire shares of treasury stock is made on or after the beginning of application

year (resolution by Article 178, Paragraph 2 of Companies Act)

Listing

application

date or

without any

delay after

resolutions

Minutes of the Board of

Directors meeting concerning

the cancellation of shares of

treasury stock (copy)

In cases of

company with

committee system,

including

statements

concerning the

decisions of

executives


Rules

When an initial listing application is made for stock of a stock corporation formed after

reorganization of mutual company

Date of listing

application

Notice for convocation of

general member meetings or

general representative

meetings of the business year

One copy Rule 204①(26) a of

the Rules


-323-

ended in the most recent year

(copy)

Same as above

Documentary proof of the

resolution of the general

member meeting or general

representative meeting on

reorganization from a mutual

company to a stock

corporation and the Articles of

Incorporation of the stock

corporation

One copy Rule 204①(26) a of

the Rules

Same as above

Document prescribed in

Article 87, Paragraph 1 of the

Insurance Business Act (copy)

One copy Rule 204①(26) c of

the Rules

When TSE deems that the structure of the corporate group for an initial listing application is

peculiar.

Without delay

after listing

application

Report describing risk

information pertaining to the

structure of the corporate

group

One copy Rule 204○12(2) of the

Rules


-324-

Documents to be submitted in relation to third party allotment or grant of stock

options, etc.

Submission

time Documents to be submitted Remarks Number Basis

When a direct listed company has effected the allotment of offered shares and subscription warrants

through third party allotment (limited to the allotment on or after the following date of one year ago

corresponding to the end of the previous year; excluding subscription warrants granted as stock options)

Listing

application

date (if it is on

or after the

listing

application

date, without

any delay)

Written statement of assurance

(concerning continuous

holding) (copy)

One copy


Rules


Rules

When a person who received the allotment transfers the allotted shares or subscription warrants

Listing

application

date (if it is on

or after the

listing

application

date, without

any delay)

Notification of transfer of newly

acquired stocks thorough

third-party

allotment, etc. and the allotted

subscription warrants

One


Rules


Rules

When there are subscription warrants to be granted as stock options (limited to those which are

allotted on or after the following date of one year ago corresponding to the end of the previous

year)

Listing

application

date (if it is on

or after the

listing

application

date, without



holding) (copy)

One copy Rule 259①(2)a of the

Rules


-325-

any delay)

Same as

above

Minutes of Board of Directors

meeting concerning the

allotment of subscription

warrants, etc. (copy)

In cases of

company with

committee system,

including

statements

concerning the

decisions of

executives

One copy Rule 259①(2)b of the

Rules

Same as

above

Document certifying that a

contract not allowing

Transfer nor restriction on

transfer of such subscription

warrants.

One Rule 259①(2)c of the

Rules

When shares or subscription warrants are delivered associated with the exercise or conversion of

subscription warrants as stock options (limited to those allotted on or after the following date of

one year ago corresponding to the end of the previous year)

► Shares or subscription warrants are delivered before the listing application date

Listing

application

date



holding) (copy)

One copy Rule 260②(1) of the

Rules

Same as

above

Minutes of general

shareholders’ meeting

authorizing the allotment of

subscription warrants and the

Board of Directors’ meeting

authorizing said allotment

(copy)

In cases of

company with

committee system,

including

statements

concerning the

decisions of

executives

One each Rule 260③(1)of the

Rules

Same as

above

Document certifying the terms

of the contract concerning the

allotment of subscription

warrants

One Rule 260③(2) of the

Rules

► When shares or subscription warrants are delivered associated with the exercise or


-326-

conversion thereof on or after the listing application date

After

acquisition of

shares



holding) (copy)

One copy Rule 260②(2)of the

Rules


-327-

Documents to be submitted in relation to public offering and secondary offering,

determination of offering prices, etc.

(However, when any of the documents listed below has been already submitted through the

Electronic Disclosure for Investors' NETwork (EDINET), it is not required to be submitted.)

Submission time Documents to be submitted Remarks Number Basis

When public offering and secondary offering for securities are effected (common to other markets

and directly listed stock)

Without delay

after listing

application

Scheduled plan of public


※◎■

One Rule 232①of the

Rules

Immediately

after submitting

to the

Director-General

of Financial

Bureau, etc.

Securities registration

statement and attached

documents (copy)

Including

amendments

Two Rule 206(3)a of the

Rules

Same as above

Notice of effectiveness of the

securities registration

statement (copy)

One copy Rule 206(3)b of the

Rules

Same as above Securities notification and

attached documents (copy)

Including statement

notifying changes

Two

copies

Rule 206(3)c of the

Rules

By the second

business day

following the

end of

application

period

(excluding a

holiday)

Notice of execution of public


※◎■


Rules


-328-

When book building is made by a non-listed company which effects public offering or secondary

offering in listing

By listing

approval

Guidelines of allocation

pertaining to a public offering,

etc. before

listing◎

Limited to prime

trading participants

which has not

submitted

One Rule 235② of the

Rules

Same as above

Application form for the

entrustment of administrative

work related to forming

syndicate◎■

Limited to prime

trading participants

with whom no

contract has been

entered into;

forwarded by TSE

One Rule 236 ② of the

Rules

Immediately

after decision

Notice of the determination of

offering prices and the

reasons, etc.

Press release


Rules

Same as above Guidelines concerning the

method of book-building◎

One

Rule 242 ② of the

Rules

Same as above

Notice of the tentatively set

price range and the reasons,

etc.

Press release


Rules

When a non-trading participant or foreign securities firm enters into prime underwriting agreement

Immediately

after agreement

conclusion

Contract (copy)

One copy Rule 238 of the

Rules

When a company is a non-listed company which effects public offering and secondary offering in

listing and effects an auction

Listing

application date

List of special interest parties One

Rule 204①(20)a of

the Rules

Same as above

List of subsidiaries and

affiliated companies and list of

officers of the

these companies

One Rule 204①(20)b of

the Rules


-329-

Same as above List of employees

One Rule 204①(20)c of

the Rules

By listing

approval

Guidelines of allocation

pertaining to a public offering,

etc. before listing◎

Limited to

non-submitted

prime trading

participants


Rules

Same as above

Contract for the entrustment

of administrative work related

to competitive bidding◎■


Rules

Immediately

after decision

Notice of offering price and

secondary offer price after

bidding

Press release


Rules

Same as above

Document describing

calculated comparable price

of similar companies

One Rule 246②(3) of the

Rules

Same as above Notice of minimum bid price Press release

One Rule 246②(4) of the

Rules

Within two

business days

following the

notice date of

bid award

Successful bidder registry◎


Rules

When a company listed on another market which effects public offering and secondary offering in

listing

Immediately

after decision


offering price and secondary

offer price

Press release

One -

When another exchange listed company effects off-session distribution in listing

Without delay

after listing

application

A schedule of distribution with

a quantitative limit※◎■

One Rule 212①(6)b(a) of

the Rules


-330-

By two business

days following

the distribution

date (excluding

holiday)

Table of distribution of stocks,

etc. Subsequent to distribution

with a quantitative limit※◎■

One Rule 212①(6)b(c) of

the Rules

When a non-listed company does not effect public offering and secondary offering in

listing

By two days

before listing

Report for secondary market

reference rate◎

One -

Same as above

Report for the prices of shares

whose selling is agreed to be

outsourced◎

One -

Immediately

after decision

Materials regarding the

valuation of domestic stocks,

etc. pertaining to the initial

listing application※


Rules

When a non-listed company does not effect public offering, etc., TSE requests the lead trading

participant to obtain consent, etc. of shareholders for their outsourcing the sales of shares to the

lead trading participant

By listing

approval

Confirmation statement of the

number of shares whose

selling is agreed to be

outsourced◎

One -


-331-

Other data to be submitted

(However, when any of the documents listed below has been already submitted through the

Electronic Disclosure for Investors' NETwork (EDINET), it is not required to be submitted. )

Submission

time Documents to be submitted Remarks Number Basis

When an applicant effects or withdraws public offering of securities or shelf registration of sales of

securing during the period between the beginning date of application year and the listing date, or

effects public offering or secondary offering through the shelf registration.

Immediately

after effecting

Shelf registration statement,

attached document and

reference document (copy)

Including

amendments

Two

copies

each

Rule 206(4)a of the

Rules

Same as

above

Notice of effectiveness of shelf

registration (copy)

One copy

Rule 206(4)b of the

Rules

Same as

above

Shelf registration supplements,

attached document and

reference document (copy)

Two

copies

each

Rule 206(4)c of the

Rules

Same as

above

Shelf registration prospectus

(including preliminary

prospectus) and shelf

registration supplements

prospectus (copy)

Two

copies

each

-

Same as

above

Registration for withdrawal of

shelf-registration (copy)

Two

copies

Rule 206(4)d of the

Rules

The following documents are filed to the Director-General of Finance Bureau between the

beginning of application year and the listing date.

Immediately

after filing

Securities report (copy) and

attached document

Including

amendments

Two

copies

Rule 206(5)a of the

Rules

Same as

above

Interim report (copy) Including

amendments

Two

copies

Rule 206(5)b of the

Rules

Same as

above

Quarterly financial

statements(copy)

Including

amendments

Two

copies

Rule 206(5)c of the

Rules


-332-

Same as

above

Extraordinary report (copy) Including

amendments

Two

copies

Rule 206(5)d of the

Rules

Same as

above

Report on purchase of own

stocks (copy)

Including

amendments

Two

copies

Rule 206(5)e of the

Rules

Same as

above

Tender offer notification (copy) Including

amendments

Two

copies

Rule 206(5)f of the

Rules

Same as

above

Written withdrawal

thereof(copy) / written

cancellation thereof

Two

copies

Rule 206(5)f of the

Rules

Same as

above


amendments

Two

copies

Rule 206(5)f of the

Rules

Same as

above

Subject company’s position

statement pertaining to a

tender offer(copy)

Including

amendments Two

copies

Rule 206(5)g of the

Rules

Same as

above

Report on possession of a

large volume of shares and

report of change pertaining to a

report on possession of large

volume

(copy)

Including

amendments

Two

copies

Rule 206(5)h of the

Rules

Same as

above

Internal management report

(copy)

Including

amendments

Two

copies

Rule 206(5)i of the

Rules

When an applicant receives the sending of following documents concerning securities issued by

the applicant

Immediately

after

receiving


amendments One copy Rule 206(6)a of the

Rules

Same as

above

Written withdrawal

thereof(copy) / written

cancellation thereof (copy)

One copy Rule 206(6)a of the

Rules

Same as

above


amendments One copy

Rule 206(6)a of the

Rules


-333-

Same as

above

Report on possession of a

large volume of shares and

report of change pertaining to a

report on possession of large

volume

(copy)

Including respective

amendments

One copy Rule 206(6)b of the

Rules

Same as

above

Subject company’s position

statement pertaining to a

tender offer(copy)

Including

amendments One copy Rule 206(7) of the

Rules

When the listing date is after the elapse of three months following the beginning of application year

Without delay

Quarterly report for initial listing

application

Report relating to

the first quarter of

application year,

with quarterly

review attached.■

Two Rule 206(9)a of the

Rules

When the listing date is after the elapse of six months following the beginning of application year

Without delay


application

Report relating to

the first and second

quarters of

application year,

with quarterly

review attached..

■

Two Rule 206(9)a and b of

the Rules

When the listing date is after the elapse of nine months following the beginning of application year

Without delay


application

Report relating to

the first, second

and third quarters of

application year,

with quarterly

review attached. ■

Two Rule 206(9)a, b and c

of the Rules


-334-

(2) Securities Report for Initial Listing

1) Types of securities reports for initial listing application

As outlined in “List of Documents to be filed for Initial Listing Application,” the Securities

Report for an Initial Listing Application is made up of Part I documents, Part II documents,

and quarterly reports.

When an applicant submits a Securities Report for Initial Listing Application (Part I

documents and quarterly reports) for initial listing application, TSE will examine whether the

reports accurately describe the corporate profile, lines of business, and financial data in a

manner readily understandable to investors, and whether the reports are prepared properly

in accordance with the Cabinet Office Ordinance Concerning Implementation of Disclosures

for the purpose of listing examination. The Securities Report for Initial Listing Application

(Part I documents and quarterly reports for initial listing application) will be made available

for public inspection after listing approval is granted.

On the other hand, the Securities Report for Initial Listing Application (Part II documents) will

be used to verify the contents described in Part I documents and to gain an understanding of

the lines of business and the status of the internal organizations, etc. of the applicant. They

are not the main materials for the listing examination. Unlike the Part I documents, the Part II

documents are treated as data for the examination and will not be made available for pub lic

inspection after listing.

2) Forms of Securities Reports for Initial Listing Application (Part I documents)

The applicant is required to file the Securities Report for Initial Listing Application (Part I

documents) in the following forms in accordance with the Securities Listing Regulations and

the Enforcement Rules for the Securities Listing Regulations.

A continuous disclosure company filing an application also needs to attach financial

statements, consolidated financial statements, and audit reports (Rule 204, Paragraph 1,

Item 4b-2 of the Rules).


-335-

Paragraph No.

of Part I

documents

Forms required by relevant provisions of the Cabinet Office Ordinance

Concerning Implementation of Disclosures (Note 1)

1. Person who has already submitted securities reports consistently for one year or more as of the

listing application date (Note 2) (Note 3)

Part I From under Item 2-2 (additional information)

Part II From under Item 2-2 (Part 4) (embedded information)

Part III From under Item 2 (Part 4) (special information)

Part IV From under Item 2-4 (Part 4) (information on stock public offering)

2. Person who has listed its stock on another exchange and has already submitted securities

reports consistently for one year or more (Note 2) (Note 3)

Part I From under Item 2-2 (Part 3) (additional information)

Part II From under Item 2-2 (Part 4) (embedded information)

Part III From under Item 2-2 (Part 4) (special information)

3. Person who has listed its stock on another exchange, but has not met the requirements of the

preceding two items (Note 3) (Note 4)

Part I From under Item 2 (Part 2) (company information)

Part II From under Item 3 (Part 2) (information on guarantee company of filing

company)

Part III From under Item 2 (Part 4) (special information)

4. Person who has not met the requirements of 1. to 3. above (Note 4)

Part I From under Item 2-4 (Part 2) (company information)

Part II From under Item 3 (Part 2) (information on guarantee company of filing

company)

Part III From under Item 2-4 (Part 3) (special information)

Part IV From under Item 2-4 (Part 4) (information on stock public offering)

Note 1: “Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc.” (MOF Ordinance

No. 5 of 1973)

Note 2: A “Person who has already submitted securities reports consistently for one year or

more” is any person who has not submitted a securities report to TSE for the

previous year but has submitted securities reports to another exchange where the

person’s stock is listed and has made continuous disclosures for one year or more.

Note 3: In the case of any of 1, 2 and 3, it can be shortened to financial statements of tow

business years from five business years in special information as in the case of the


-336-

IPO.

Note 4: When the balance sheet date of the immediately preceding quarterly period as of

the listing application date differs from that as of the listing approval date , drafted

descriptions in Part I documents to be submitted on the listing application date will

be accepted (descriptions of the items will be sufficient).

3) Considerations in preparing Securities Report for Initial Listing Application (Part II

documents)

The Securities Report for Initial Listing Application (Part II documents) must be prepared in

accordance with the “Procedures for Descriptions in the Securities Report for Initial Listing

Application (Part II documents).” Note, however, that for some ca tegories of business, it may

be unsuitable to align the descriptions to the forms required by the Procedures. When this is

so, an applicant may modify the forms at its discretion.

In the meantime, since the examiners will gain an understanding of the lines of business by

reading the Securities Report for Initial Listing Application (Part II documents), the applicant

is encouraged to describe the strengths and weaknesses of the company as thoroughly as

possible to help the examiners carry out their examination smoothly. Thorough descriptions

will give the examiners a detailed understanding of the applicant at an early stage. This will

shorten the time frame required for the examination and improve the overall efficiency of the

examination process.


-337-

Guide to Completing the Securities Report for Initial Listing

Application (Part II)

Introduction

The company applying for initial listing (hereinafter referred to as the “Applicant”)

is required to submit a Securities Report for Initial Listing Application (hereinafter

referred to as “Part II”) as part of the examination materials to assess the line of

business and other relevant matters of the Applicant. Part II should clearly indicate

the necessary matters in an understandable manner that reflects the nature of the

Applicant.

Points to Note when Completing the Report

(1) Part II should include the name of the Applicant and should be addressed to the

President and CEO of Tokyo Stock Exchange, Inc. (“TSE”).

(2) This Guide has been developed mainly for applicants operating in commercial and

industrial sectors, and those in other sectors will also be recommended to

appropriately complete the Securities Report for Initial Listing Application with

reference to this Guide. If the Applicant has voluntarily applied the IFRS, said

Applicant may be allowed to provide IFRS-compliant information rather than the

information specified in this Guide.

(3) If the Applicant believes that more useful and understandable information about the

nature of the Applicant could be provided by developing any format other than that

specified in this Guide, or if it is impractical to complete Part II in accordance with the

requirements in this Guide, the Applicant may be allowed to apply other formats that

more fairly reflect its substance by stating the fact and the reasons therefor.

(4) If there are any items or time frames that are materially difficult to indicate, though

required in this Guide, the Applicant may omit the descriptions thereof by stating the

fact and the reasons therefor.

(5) If some items cannot be classified into a relevant operating segment as specified by

the section where classification into an “Operating segment” is required, and when

such classification is difficult, the Applicant may use an optional classification that

would more faithfully depict the nature of the Applicant. The classification for the

purpose of the management accounting is an example thereof. The sum of the totals


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for each operating segment does not necessarily have to coincide with the totals

included in the consolidated financial statements (meaning, the totals in the financial

statements in cases where no consolidated financial statements are prepared). If the

Applicant operates only a single line of business, and it is materially difficult to clarify

said business, the Application may contain relevant descriptions without any

classifications.

(6) For items whose descriptions are required in the “Applicant and subsidiaries that must

be Indicated” section, the Applicant is encouraged to indicate them by using voluntary

classifications that more faithfully depict the nature of the Applicant group, provided

however, that these are able to enhance the descriptions of the nature of the Applicant

group.

(7) If the Applicant has conducted a merger and a legally extinguished company is clearly

considered to be a de facto surviving company, unless otherwise specified, the

Applicant is required to make descriptions concerning said de facto surviving

company rather than the legally surviving company and state the fact at the beginning

of this section. In this case, the legally surviving company shall be treated as the

merged company.

(8) When the Applicant and subsidiaries have acquired any major business from other

companies through a company split-up, for the period prior to the acquisition, the

Applicant is required to indicate the business conditions of the split-up company under

the operational divisions of the Applicant.

(9) If the main line business of the Corporate Group of the Applicant has materially

changed from the previous as a result of the Applicant and subsidiaries having

conducted a merger, turned a company into its subsidiary or acquired a business, the

Applicant is required to indicate the business conditions of the merged company,

subsidiaries and the operational divisions acquired prior thereto.

(10) If this Guide requires any specific year to be indicated, the Applicant has to use

regular business years with 6 (six) or more months remaining in this report; provided

that even if the remaining period of a year is shorter than 6 months, the Applicant is

also required to include such irregular year in the description, as appropriate.

(11) For values or amounts recorded in Part II, the Applicant is required to use the units

indicated in the “Securities Report for Initial Listing Application (Part I),” i.e., in millions

of yen or thousands of yen, when describing those values or amounts.

(12) If some of the items the Applicant must indicate as required by the Guide overlap, the

Applicant may omit said items by stating the fact.

(13) If it becomes necessary to make any changes or additions to the contents indicated

after Part II has been submitted, the Applicant is required to prepare and immediately


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submit a document in the form of electromagnetic records pertaining to such changes

or additions as an appendix.

(14) When the Applicant submits a document as an appendix to Part II, the Applicant has

to state that the document is an appendix and record the name of the President and

CEO as in (1) above.

(15) If a company that has filed a listing application within the last 1 (one) year files a new

listing application, the company may submit Part II documents that are amendments

to the contents of or new additions to the Part II documents said company had already

submitted, provided that the TSE deems them to be appropriate.

(16) The Applicant is required to submit Part II, the appendix and attachments, in principle,

in the form of electromagnetic records. When the documents are submitted as hard

copies, they should be signed by the representative of the Applicant with the corporate

seal affixed to it, prepared with a table of contents in portrait orientation on A4-size

paper and inserted into a folder or ring binder. To the extent possible, the contents

should be printed on both sides of the paper. The Applicant may freely decide the paper

size of the appendix and attachments.


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Definition of Terms

(1) “Company Group” means a “company, its subsidiaries and affiliated companies” as prescribed in

Article 2, Paragraph 1, and Item 27 of the Securities Listing Regulations.

(2) “Corporate Group” means the “corporate group” prescribed in Article 4, Paragraph 1, and Item 1 of the

Regulations of Consolidated Financial Statements.

(3) “Operating segment” means the “operating segment” prescribed in Paragraph 6 of Accounting

Standards for Disclosures about Segments of an Enterprise and Related Information (ASBJ Statement

No.17).

(4) “Business year to which the application date pertains” means the business year that includes the

listing application date.

(5) “Immediately preceding business year” means the business year immediately preceding the business

year that includes the application date.

(6) “Last … year(s)” shall start dating back up to the last day of the immediately preceding business year.

(7) “Total of net assets” means the sum of all net assets in the consolidated balance sheet prepared in

accordance with the requirements of Regulations on Consolidated Financ ial Statements. “Amount of

net assets” means the amount determined by deducting the values of subscription warrants and

minority interests in the “Net assets” from the total amount determined by adding reserves, etc.,

prescribed in Article 45-2, Paragraph 1 of the Regulations on Consolidated Financial Statements, etc.

to the “Net assets” in a consolidated balance sheet prepared under the same regulations.

(8) “Amount of profit” means to operating profit or operating loss, ordinary income or ordinarily loss,

current net income or loss before income taxes, etc. (current net income or loss before taxes when no

consolidated financial statements are prepared).

(9) “Subsidiaries that must be indicated” means subsidiaries (including companies expected to be turned

into subsidiaries) whose value (prior to the application of consolidation procedures) of either total

assets, net assets, sales and profit in their consolidated financial statements (or financial statements if

no consolidated financial statements are prepared or if preparation of consolidated financial

statements is materially difficult) is 20% or more as a percentage, as determined based on the

following formula, of total assets, net assets, sales and profit in the consolidated financial statements

(or financial statements if no consolidated financial statements are prepared) of the Applicant for the

immediately preceding business year.

Formula

|Value of total assets (net assets, sales or profit) in the consolidated financial statements

of subsidiaries| × 100(%)

| Value of total assets (net assets, sales or profit) in the consolidated financial statements

of the Applicant|

(10) “Directors” means directors, accounting advisors (including employees of an accounting advisor who

are in charge of accounting advice if the accounting advisor is a corporation), company auditors and

executives (including governor, auditor, and a person who can be regarded as equivalent thereto).


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(11) “Persons equivalent to directors” include executive officers, counselors and advisors.

(12) “Persons related to directors, etc.” means directors and persons equivalent to directors, their spouses

and relatives by blood within the second degree of kinship, or companies (including their subsidiaries,

partnerships not taking the form of companies and other entities equivalent to the partnerships) for

which directors and persons equivalent to directors (including their spouses, relatives by blood within

the second degree of kinship and relatives of spouses) hold the majority of their voting rights.

(13) “Owner” means a directors or person equivalent to a director of the Applicant who holds one third or

more of shares of the Applicant (calculated by including the shares held by spouse or relatives by

blood within the second degree of kinship, relatives of spouses and property preservation firms).

(14) “Parent company, etc.” means the parent company prescribed in Article 2, Paragraph 1, Item 3 of the

Securities Listing Regulations, its affiliated company prescribed in Article 8, Paragraph 17, and Item 4

of the Regulations on Financial Statements and the parent company of the affiliated company.


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I. Reasons for Filing Listing Application

The Applicant is required to concretely indicate the reasons for applying for listing (including

the purpose, advantages and background for choosing the current year for the application)

in consideration of the actual conditions and circumstances of the Company Group.

II. Overview of Company Group

1. History

(1) Background for the establishment of Applicant

The Applicant is required to comprehensively indicate the background for reaching the

decision on their establishment, their goals thereof and establishment date. If there are any

founders or persons related thereto in current management of the Applicant, please also

indicate said details (names, kinship, etc.).

Note: “Establishment” above means the de facto foundation of a company. The Applicant is required to

indicate relevant matters, irrespective of the structural composition of the company, whether it is a

personal company, LLC or limited liability company under the old Companies Act. If the Applicant is not

a company with a system of Board of Directors, it is required to disclose the background, the purpose

and date when it last was a company with a system of Board of Directors in footnotes.

(2) Developments at Company Group

The Applicant is required to indicate the developments of the Company Group, including

the following events after the establishment of the Applicant, in an understandable manner

by using, for example, flow charts or tables that chronically present events, such as merger,

new establishments (acquisitions) or liquidations (sales) of subsidiary and affiliated

company/ies, acquisition or transfer of business, capital alliances, stock swaps, company

split-ups, etc. Note, however, that the Applicant is allowed to omit descriptions of events,

such as a merger, that have had an immaterial impact on the Company Group.

(Sample <1>)

Applicant

Tran sf e r of busin e s s, liquida ti o n (date )

Company A

Company B

Merger (date) Subsidiary established (date)

Company B Turne d into a sub si di a ry (date )

(Sample <2>)

Company D

Com p a n y split-u p (date )

Applicant

Note: A vertical flow chart could also be used.


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(3) Merger, company split-up, etc. taking place within the last 5 years

If the Applicant or its consolidated subsidiary (or subsidiary if no consolidated financial

statements are prepared) have carried out any of the acts enumerated in (a) to (e) below

anytime within the last 5 years and such acts have had material effects, the Applicant is

required to provide an overview of the acts as shown in the table below (however, for the

descriptions of a newly established subsidiary or acquired affiliated company in (c) below,

the Applicant is also required to indicate the activities carried out prior to the last 5 years).

Note: With respect to items (a) –(d) below, “material effect” shall mean cases where the percentage of

any of the total assets, net assets, sales or profit equals 10% or more as calculated by using the

formula indicated in “Definition of Terms”(9); and for item (e), cases where the value of shares

acquired (sold) by the other party as a percentage of the value of common shares or net assets,

whichever is larger, is 10% or more or where the number of shares acquired (sold) by the other

party as a percentage of the total number of issued shares outstanding is 5% or more. In th ese

cases, the value or data for the business year immediately preceding the business year when such

acts were carried out should be used in determining whether it has had a “material effect”. However,

the value for the business year immediately preceding the business year to which the listing

application date pertains should be used for a new establishment (acquisition) of a subsidiary and

affiliated company in case of (c) below.

a Merger

Date of merger

Name of merging company

Name of merged company

Line of businesses of merged

company

Purpose of merger

Merging ratio and its basis

Note: For t he date, t he Applicant is required t o st ate t he year and month. The same shall apply t o

(b)-(e) below.

b Company split-up

Date of company split-up

Name of splitting company

Name of established

company or successor

company


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Nature of split-up business

Reason for company split-up

Method of company split-up

Split ratio and its basis

c New establishment (acquisition) or liquidation (sales) of subsidiary and

affiliated company

Date of new establishment,

etc.

Company name

Method of acquisition

(transfer) of shares

Purpose of acquisition

(transfer) of shares

Reason for new establishment

(dissolution) of company

Status of

number of

shares held

Number of

shares

moved

Number of

shares held

after

movement

Acquisition

(transfer)

value

Basis for

acquisition

(transfer)

value)

Notes

i. If a stock swap or stock transfer was made at the time of the new establishment

(acquisition) of a subsidiary and affiliated company, please state the fact in “Method of

acquisition (transfer) of shares”.

ii.The number of shares moved and the number of shares held after movement as a

percentage of the issued shares outstanding should be indicated in “Number of shares

moved” and “Number of shares held after movement.”


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d Acquisition or transfer of business

Date of acquisition (transfer)

Name of company acquiring

(transferring) business

Nature of division acquired

(transferred)

Purpose of acquisition

(transfer)

Acquisition (transfer) value

and settlement method

Basis for Acquisition (transfer)

value

e Capital alliance (settlement of capital alliance)

Date of Capital alliance

(settlement of capital

alliance)

Name of the other party

Method of capital alliance

( s e t t l e me n t o f c a p i t a l

a l l i a n c e )

Purpose of capital alliance

( s e t t l e me n t o f c a p i t a l

a l l i a n c e )

Acquisition (sales) value of

shares

Status of Changes in shares

(number of shares acquired

and number of shares sold)

(4) Developments at businesses within Company Group

The Applicant is required to chronically indicate the developments at businesses within

the Company Group up to the listing application date, including any developments and sales

of main products and goods, when provision of main services commenced, whether there’s

been advancement into new businesses (or exits from existing businesses), development of

production and sales systems, changes in main customers and suppliers, etc.


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However, for any matters that have not had any material effect on the management

activities of the Company Group in the last 5 years, the description thereof may be omitted.

(5) Status of takeover bid transactions in the last 5 years and the business year to which

the application date pertains

If the Applicant has offered a takeover bid for the shares of another company during the

business year to which the application date pertains or has carried it in the last 5 years, or a

takeover bid has been offered for the shares of the Applicant during the business year to

which the application date pertains or in the last 5 years, the Applicant is required to state

the fact and the nature thereof (name of takeover bidder, dates, percentages, etc.).

(6) Status of notes and bills dishonored in the last 10 years

If the Applicant or its consolidated subsidiary has met any of the following a – g below in

the last 10 years, the Applicant is required to indicate the relevant matters (date, event, and

conditions thereafter).

a Note or bill dishonored

b Petition for the commencement of company rehabilitation

c Petition for the commencement of civil rehabilitation

d Application for authorization of business restructuring plan under Act on Special

Measures for Reviving Industrial Vitality

e Application for business restructuring plan under Act on Special Measures for

Industrial Revitalization and Innovation

f Petition for conciliation under the Act on Special Conciliation to Facilitate the

Conciliation of Specified Obligations, etc.

g Private liquidation

h Economic assistance from others (forgiveness of debts by creditors, reduction and

forgiveness of interests, or extension of period for repayment or assumption of

liabilities, repayment, and other financial support by a third party)

2．Regarding the Company Group

(1) Management policies, etc.

The Applicant is required to concretely indicate the management policies, business

development policies and roles and responsibilities of each company in the Company

Group.

(2) Lines of business for each segment, etc.

The Applicant is required to briefly indicate the lines of business by operating segment


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and concretely indicate the business development policies of each segment as shown in

the table below. Furthermore, if multiple companies within a single segment carry out

similar business, please clearly state the differences, roles and responsibilities of those

companies.

Name of operating segment

Lines of businesses

Business development policies

(3) Percentage of equity investment in each company in the Company Group and business

relationship

The Applicant is required to indicate the percentage of equity investment by the Applicant

into each company in the Applicant Company Group at the end of the immediately preceding

business year and its business relationship (transaction value and volume at the end of the

immediately preceding business year) by using bird’s eye view chart. If the use of the chart

is impracticable, the Applicant may separate the description of the percentage of equity

investment from that of business relationships.

(Sample)

The Company

Product Maintenance Product Sales Product Sales

for purchased products (¥789 million)

(¥1,011 million)

(¥56 million)

Manufacturer Services KK Sales KK

Sales A KK

Maintenance of production equipment

(¥12million)

Legend: 1. Percentage of equity investment

2. Business relationship

Product Purchases

(¥1,234 million) 80%

95%

5

%

40% 100%

20

%


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(4) Lines of business of subsidiaries and affiliated companies, etc.

The Applicant is required to indicate the lines of businesses of subsidiaries and affiliated

companies at the end of the immediately preceding business year as shown in the table

below. If the Applicant plans to newly establish or acquire a company that satisfies the

definition of subsidiary or affiliated company of the Applicant, the Applicant is required to

disclose the timeline, purpose, name of said company and other matters that must be

indicated for existing subsidiaries and affiliated companies of the Applicant in footnotes.

Segment Title of business

Name of company

a Lines of business

b Background for

establishment and equity

investment

c Shareholder structural

organization

d Equity investment by

directors and their

equivalents

e Structural organization of

directors and their

equivalents

Notes i Please indicate the title of operating segment in “Segment” and bundle and indicate those

other than those composing the segment as non-consolidated companies at the end of the

section. In describing non-consolidated companies, please state those to which the equity

method of accounting is applied first, and then others. Please indicate said priority in

parentheses ( ) along with the distinctions. If the Applicant has decided or plans to

change segments or consolidated companies or companies to which the equity method

applies at the end of the immediately preceding business year, please disclose the fact in

these notes.

ii If there is any subsidiary or affiliated company belonging to several segments, p lease state

the titles of all the segments in “Name of segment.”

iii In “b Background for establishment and equity investment,” please indicate the date of

equity investment and percentage of equity investment. If the equity investments span over

several times in stages, for those equity investments that result in a company becoming a

subsidiary or vice versa or a company becoming an affiliated company or vice versa, the


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Applicant may state the date of equity investment and the percentage of equity investment

only.

iv In “c Composition of Shareholders”, please indicate the number of shares held and the

percentage of equity investment for the 5 largest shareholders. For an Applicant that is a

large shareholder, please indicate the amount in the balance sheet for the immediately

preceding business year in relation to the number of equity investment units. For large

shareholders other than the Applicant at consolidated companies, please indicate the

relationship with the Company Group and the reasons why such large shareholders made

equity investments in them (excluding cases where it would be difficult to identify the

reasons for the equity investments).

v In “d Equity investment by directors and their equivalents”, when any director or person

equivalent to director of the Applicant or the consolidated subsidiary has made equity

investments, please indicate the names of investors, the number and percentage of shares

invested, the names of their companies and positions (excluding shareholders indicated in

column “c” above).

vi In “e Structural organization of directors and their equivalents”, if any director of the

Applicant has concurrently held a position at a subsidiary or affiliated company, please

indicate the position of such director or employee at the Applicant. If any director or

employee who holds a concurrent position is remunerated in the form of compensation or

bonuses, please indicate the amount thereof, and in cases where any director or person

equivalent to director of the subsidiary or affiliated company received any award or penalty

in the last 10 years, please disclose the nature thereof in these notes.

vii If any material changes to the descriptions (for example, change of any director or persons

equivalent thereto) were made, or are expected to be made after the end of the

immediately preceding business year, please disclose the fact in these notes.


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(5) Performance results of subsidiary and affiliated company for the immediately preceding

business year

Please indicate the performance results of subsidiary and affiliated company as shown in

the table below.

Name of company

(Location of main office) Applicant

Percentage of equity

investment

( ) ( )

Common stock

Number of employees

Balance sheet date

Sales ( ) ( )

Ordinary income ( ) ( )

Current net income ( ) ( )

Total amount of dividends

Dividend payout ratio

Total assets ( ) ( )

Total of net assets ( ) ( )

Busin

ess rela

tionship

Sales to Applicant ( ) ( )

(Transaction details)

Purchase from Applicant ( ) ( )


Other income from

Applicant


Other expenditure to

Applicant


Notes i Please indicate the name of Applicant first in “Name of Company”. Following it, please indicate the

names of other companies in the order they were listed in section (4) above. For the financial values

and amounts for the Applicant, please use the values and amounts from the consolidated financial

statements (excluding the total of dividends and dividend payout ratio). (Please use the amounts from

the financial statements if the company prepares no consolidated financial statements)

ii In “Location of main office,” please indicate the name of the prefecture or country name.

iii In “Percentage of equity investment” please indicate the percentage of equity investment by


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aggregating the percentages of subsidiaries, if any, and indicate the percentage of the subsidiary in

parenthesis ( ).

iv For financial value and amount of each company, please indicate the value and amount for the

immediately preceding business year (When a subsidiary or affiliated company prepares consolidated

financial statements, please use the amounts from the consolidated financial statements, excluding

the total amount of dividends and dividend payout ratio.)

v In the box for financial values or amounts of each company, please indicate the value or amount as a

percentage of each value or amount in the consolidated financial statements (or in the financial

statements if consolidated financial statements are not prepared) in parenthesis ( ) in addition to the

amount in “iv” above.

vi In “Total of net assets”, please indicate the total of net assets in the consolidated balance sheet (the

amounts in the balance sheet if subsidiary and affiliated companies do not prepare consolidated

financial statements).

vii In “Business relationship”, please indicate the transaction value immediately followed by the nature

thereof.

viii In “Sales to Applicant”, please indicate the sales to Applicant as a percentage of the purchase amount

(including expenses for contracting-out) of the Applicant in parenthesis ( ); provided that if the sales

to Applicant does not constitute a purchase by the Applicant, no parenthetical description shall be

made to indicate the fact in these notes.

ix In “Purchase from Applicant”, please indicate the purchase from Applicant as a percentage of sales by

the Applicant in parenthesis ( ); provided that if the purchase from Applicant does not relate to the

sales by Applicant, no parenthetical description shall be made to indicate the fact in these notes.

x For foreign subsidiaries and affiliated companies, please convert all values into Japanese yen and

disclose the foreign exchange rate used to compute the balance sheet data in these notes.

xi If any material changes to assets, liabilities or equities were made, or were expected to be made after

the end of the immediately preceding business year for any company indicated, please disclose the

fact and its nature in these notes.


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(6) Status of investment funds

Please indicate the status of the investment fund (anonymous association, specified

purpose entity, non-incorporated association, investment business limited liability

association and any other equivalent/similar thereto under any foreign act; the same shall

apply hereinafter) in which the Applicant and its Company Group has made investments,

lending or with which the Applicant and its Company Group has been involved, as shown in

the table below.

Name

Date of creation

Maturity

Organizational

structure

Manager

Investors and their

percentages of equity

investment

Investment target

Notes i “Investment fund” can mean anonymous association, specified purpose entity,

non-incorporated association, investment business limited liability association and any

other equivalent/similar thereto, under any foreign act (for this box, the same shall apply

hereinafter).

ii In “Investors” please indicate the name, address and representative in the case of a

corporation, and the name and address in the case of individuals (for addresses in the

case of individuals, the smallest division the Applicant needs to indicate is that of the city,

town, municipality, or village).

iii If the Applicant is an investor in an investment fund and the fund has any investment fund,

please provide an overview of the latter investment fund as shown in the table above.

i

v

For any investment fund subject to any foreign act, please indicate the standing proxy in

Japan (including the address and the name of the representative).

2. Regarding relationship with the parent company, etc.

If any item in (1) – (6) below is met with respect to the parent company, etc., please

indicate the relevant conditions for the immediately preceding business year. In addition, if

there are any material events other than such items that have taken place in the last 5


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years, please indicate those as well.

(1) Conditions of the parent company, etc.

If the Applicant has another company that meets the definition of the parent company,

etc., please indicate the overall conditions of the parent company, etc. (name, time of

investment, percentage of equity investment, distinction as to listing or non-listing,

continuing disclosures, etc.) and the background and reason for having such company.

If any of the items below are met, please indicate the overall conditions and the

background and reason for having such company.

a If the Applicant had a company other than the parent company, etc. that may meet

the definition thereof; or

b If the Applicant had a company that is not a parent company, etc., but has made

15% or more investment as a percentage of the equity investment in the Applicant.

Note: Such company, etc. includes any investment fund. In the case of an investment fund, please

indicate the conditions thereof as shown in the table below.

(Sample for a parent company, etc. that is an investment fund)

Name

Date of creation

Maturity

Organizational

structure

Manager

Investors and their

percentages of equity

investment

Investment target

Notes i “Investment fund” can mean anonymous association, specified purpose entity,

non-incorporated association, investment business limited liability association and any

other equivalent/similar thereto under any foreign act (for this box, the same shall apply

hereinafter).

ii In “Investors” please indicate the name, address and representative in the case of

corporation, and the name and address in the case of individuals (for addresses in the

case of individuals, the smallest division the Applicant needs to indicate is that of the city,

town, municipality, or village).

iii If the Applicant is an investor in an investment fund and the fund has any investment fund,


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please provide an overview of the latter investment fund as shown in the table above.

i

v

For any investment fund subject to any foreign act, please indicate the standing proxy in

Japan (including the address and the name of the representative).

(2) Company Group where the parent company, etc. plays a main role

Please indicate the roles or responsibilities the Company Group of the Applicant have in

the Company Group where the parent company, etc. plays the prominent role. If any

company in the group where the parent company, etc. plays the prominent role carries out

a business similar to that carried out by a company in the Company Group of the Applicant,

please also indicate the differences between them.

(3) Approval by and advance reporting to the parent company, etc.

If there are any items for which the Applicant or consolidated subsidiary is required to

obtain approval from the parent company, etc. or report in advance, please indicate the

nature thereof.

(4) Conditions of positions concurrently held by directors, etc. of the parent company, etc. or

fellow subsidiary, etc.

When any director or person equivalent thereto of the parent company, etc. or fellow

subsidiary, etc. (referring to the fellow subsidiary, etc. prescribed in Paragraph 13 (3) of the

ASBJ Guidance 13 Related Party Disclosures; the same shall apply hereinafter)

concurrently holds the position in the capacity of director or person equivalent thereto at

the Applicant or consolidated subsidiary (including any secondment), please indicate the

details thereof (company name, positions and name, and position at the parent company,

etc.) and the reasons why such position is concurrently held. In addition, if any director or

person equivalent thereto at the parent company, etc. who concurrently serves as a

director or person equivalent thereto at the Applicant or consolidated subsidiary receives

any remuneration or bonus from the Applicant or consolidated subsidiary, please indicate

the amount thereof.

(5) Conditions of secondment from the parent company, etc. or fellow subsidiary, etc.

If the employees of the Applicant or consolidated subsidiary included any person

seconded from the parent company, etc. or fellow subsidiary, etc. (or any employees

seconded to the Applicant or consolidated subsidiary), please indicate the name of the

company offering the secondment (receiving the secondment), the number of seconded

employees for each of company offering or receiving secondment (with positions indicated

in parenthesis ( ) ) and the purposes and reasons for the secondment.


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(6) Financial guarantee by the parent company, etc.

If the Applicant or consolidated subsidiary has been granted any financial guarantee

(including forward financial guarantee or comfort letter from the parent company, etc.) and

other economic support from the parent company, etc., please indicate the nature thereof

(including amounts and reasons).

III. Overview of Businesses

1. Regarding the industry

Please indicate the matters required in (1) and (2) below for each operating segment.

(1) Trends and future prospectus for the industry

Please indicate the size of the market, market conditions, production results, selling

prices, procurement of raw materials, development of alternative products, recent trend

and future prospectus concerning international competitiveness and technological

innovation. If there are any specific characteristics related to each item that should be

indicated, please do so.

(2) The conditions surrounding competitors

Please indicate the conditions surrounding competitors (names of competitors, their

characteristics (characteristics of the products they handle, characteristics of sales and

marketing strategies, etc.), state of the competition, factors differentiating the Applicant

from other competitors, status of new advancement into the market by others). If there is

any statistical data indicating the ranking and the market share, please provide such data

and the sources thereof.


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2. Regarding line of business

Please indicate the items required in (1) – (10) below for each operating segment.

(1) Characteristics of business

Please indicate the characteristics of businesses in general. If there are competitors,

please include the comparisons. Please indicate any matters that may have material effect

on the performance of business activities, if any.

(2) Characteristics of products, goods, and services

Please indicate the characteristics (use, prices, etc.) of products, goods and services for

each of the main or representative items. Please include comparisons with competitors, if

any.

(3) Development policies of operation facilities and their progress, etc.

a Basic policies for the expansion of business bases

Please indicate the basic policies for the expansion of factories, sales offices, shops, etc .

(policies for identifying areas into which the Company Group has expanded in the past and

expects to expand into in the future, as well as the number of business bases). Please

indicate the basic policy for the expansion of distribution and logistics centers in item “c”

below. Please indicate any major developments and changes in the number of business

bases over the last 5 years for each business base. If the Applicant operates a large

number of business bases, these can be categorized by area rather than by each specific

business base.

b Criteria for the expansion of retail locations

If the Applicant has developed specific criteria (market area, sales floor area, performance

of respective retail locations, etc.) for the expansion or discontinuation of retail locations,

please indicate the details of the criteria and concepts underlying the criteria (relationship

between the market area and sales, relationship between the floor area and sales). These

matters must be indicated even for all types of businesses that expand several retail

locations on an annual basis. If the Applicant has not determined the criteria as the

Company Group’s criteria, please indicate the criteria applied by the Applicant and

subsidiaries that must be indicated.

c Expansion policies for distribution and logistics centers

Please indicate the basic policies for the expansion of distribution and logistics centers.

Please also indicate the characteristics of and other relevant information on delivery


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systems and frequency of delivery of products and goods to and from the Company Group.

(4) Status of research and development, etc.

a Research and development system

Please indicate the concrete status of the research and development system, including

personnel. structure, etc.

b Research and development policies

Please indicate the policies for research and development activities. Please indicate all

aspects (objectives of research, main challenges, research results, research and

development systems, etc.) and changes in research and development expenses for the

last 5 years, as well as the factors that gave rise to such changes, such that investors may

be able to understand how research and development activities for new products and

technologies are conducted.

c Protection of intellectual property

Please indicate the Company Group’s view on the protection of intellectual property and

any internal systems in place to avoid infringement of intellectual properties of other

enterprises.

d Conditions of intellectual property rights

Please concretely indicate which, what kinds of, and whether certain patents have been

obtained or are pending, as well as the expiration dates with respect to patents obtained or

pending and industrial property rights of utility model patents, all of which may have

material effects on the sales.

(5) Statutory regulations, summary of administrative guidance and existence of competent

supervisory ministry and agency, etc.

Please indicate the statutory regulations, summary of administrative guidance and

existence of competent supervisory ministry and agency. In addition thereto, please

indicate any regulations that may have material impact on the industry, if any. Please also

indicate regulations applicable to customers and suppliers, which may have material

impact on the management of the Applicant, if any.

(6) Conditions of permits/authorizations, licenses and registration, etc.

Please indicate any permits or authorizations, licenses, registration, administrative

guidance, and other items of similar effects thereto as shown in the table below. Please


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indicate the status of acquisition or application with respect to relevant ISO, ISMS or

privacy marks. Note, however, that you may omit any items that do not have a material

effect on the Applicant’s management activities.

[Segment]

Date of acquisition

Title of permit or

authorization, etc.

Governing authority,

etc.

Description

Valid through

Conditions

constituting breach of

laws and regulations

and main events

deeming revocation

(7) Status about material contracts, etc. for the purpose of management

Please indicate the following as shown in the table below; lease of all or part of main

operations or delegation of the management to other entities, profit sharing agreements

with other entities for operating profit and loss, technological or marketing arrangements

and other agreements, which have material effect on the management results, income, or

financial position.

[Segment]

Date of conclusion

Title

Counterparty

Summary of contracts

Note In the section “Summary of contracts ” please also indicate the period, consideration (rate or

value), etc.

(8) Conditions of purchases

a Market trends for major raw materials, etc. in the last 3 years

Please indicate the changes in, market trends and characteristics of market conditions,


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etc. with the market divided into two categories: raw materials and products. For changes

in the market conditions, please also refer to movements in purchase price changes over

the last 3 years.

b Method, etc. for selecting suppliers

Please indicate the following items pertaining to the purchase of major raw materials and

products. If the Corporate Group has established any purchase requirements, please

indicate those requirements; and if not, please indicate the requirements applied by the

Applicant and subsidiaries that must be indicated.

(a) Selection method of suppliers

(b) Method to determine the terms and conditions of purchase (unit price, volume,

settlement conditions, etc.)

(c) Appropriate level and management method of inventories

(d) Management method of quality control and delivery time, etc.

(e) Specific efforts to reduce purchase costs (or stabilize purchase costs), if any (for the

last 3 years and as scheduled in the future)

c Purchase flow, etc.

For the purchase of major raw materials and products, please illustrate the flow of

purchases thereof by using relevant charts, and include the purchase cost for each

flow-type (incoming and outgoing) as a percentage of the total purchase costs (actual

percentage for the immediately preceding year). If there are any special conventions for

any flow-type or item, or if there are any special reasons attributable to the flow, please

indicate those details in footnotes.


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d Major suppliers in the last 3 years

For major suppliers (top 5 for the immediately preceding year), please indicate the actual

results of the suppliers for the last 3 years as shown in the tables below. If there are

material changes in purchase volumes and values (commencement of transaction,

expansion, reduction or settlement, etc.), please disclose the reasons therefor in footnotes.

[Segment]

(a) Suppliers

Name Lines of

business Location

Name of

representative

Common

stock

Number

of

employe

es

Items to be

purchased

Number of other

suppliers

(b) Transaction value

Name

Value of purchase Outstanding balances

payable

Period Period Period

Period % Period % Period %

Number of other

suppliers:

Total 100 100 100

(c) Terms and conditions of settlement

Name

Terms and conditions of settlement Outstanding balances of

notes and bills payable

Remarks Closing

date

Payment

date

Liquidation

of notes

into cash

Sight of

note or

bill


Number of other


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suppliers

Total

Notes i For other suppliers and terms and conditions of settlement, please indicate the averages or general

terms and conditions in “Total”.

ii For suppliers whose sales to the Applicant account for the majority of total sales of the Applicant,

please indicate the ratio of dependence on the supplier in “Remarks”.

iii If a supplier has a parent company or affiliated company, please state the fact in “Remarks.”

iv If it is possible to indicate the purchase volume, please add a “Purchase volume” field next “Purchase

value” for this purpose.

v An approximation can be used for the number of other suppliers if the exact number is difficult to

ascertain.

e Changes in suppliers in the last 3 years and the business year to which the

application date pertains

If the Applicant has changed major suppliers or the terms and conditions of settlement,

please indicate said fact, details and the reasons therefor.


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f Conditions of major raw materials, etc. in the last 3 years

Please indicate the status of actual purchases of major raw materials and products for

each of the last 3 years in as shown in the table below. If there are any changes therein,

please indicate the reasons therefor.

[Segment]

Period

Item

Period

Opening

balance Purchase Use (sales) volume Closing balance

Amount Amount Amount % Amount

Ma

teri

als

Others

Sub-total 100

Pro

du

cts

Others

Sub-total 100

Total

Period

Item

Period

Purchase Use (sales) volume Closing balance

Amount Amount % Amount

Ma

teri

als

Others

Sub-total 100

Pro

du

cts

Others

Sub-total 100

Total

Period

Item

Period

Purchase Use (sales) volume Closing balance

Amount Amount % Amount


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Ma

teri

als

Others

Sub-total 100

Pro

du

cts

Others

Sub-total 100

Total

Notes i Please indicate any major raw material and product items.

ii If it is possible to indicate the volume, please add a “Volume” field next “Amount” for this purpose


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(9) Conditions of production

a Matters concerning production

Please indicate the following matters in regard to production. If production is particularly

different from that of competitors, please also indicate any unique characteristics thereof.

(1) Characteristics of production in general (production system (personnel, production

capacity, etc.) and whether these are based on already received orders or

projections, etc.

(2) Manufacturing flow chart of major products

Note i Be specific in indicating any processes that involve outsourcing.

ii Please disclose the time required for production in footnotes.

(3) Main characteristics of manufacturing technologies

(4) Development method of production plan and method for managing progress

(5) Indicate concrete details of measures for streamlining production, if any (actual

measures implemented within the last 3 years and future plans).

(6) Cost accounting method used, the reasons therefor and accounts chart

b Actual values of orders received and production for the last 3 years

Please indicate the actual results of orders received (in case of production based on

orders received) and production for each of the last 3 years as shown in the table below. If

there have been any material changes, please disclose the reasons therefor in footnotes.

[Segment]

(a) Changes in the results of orders received

Period

Item

Period

Opening balanced of

orders received

Volume of orders

received

Outstanding balance of

orders received

Amount

Amount Amount

% %

Other

Total 100 100

Period

Item

Period Period

Volume of

orders

received

Outstanding

balance of orders

received

Volume of

orders

received

Outstanding

balance of orders

received


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Amount Amount

Amount Amount

% %

Other

Total 100 100

Notes i Pease indicate major items in “Item”

ii If it is possible to indicate the volume, please add a “Volume” field next “Amount” for this purpose

(b) Changes in the actual production results

Period

Item


Amount Utilizatio

n (%) Amount

Utilizatio

n (%) Amount

Utilizatio

n (%) % % %

Other

Total 100 100 100

Notes i Pease indicate major items in “Item”

ii Please disclose the method for calculating the utilization ratio in these notes. If it is impracticable to

calculate the utilization ratio, said ratio can be omitted.

iii If it is possible to indicate the volume, please add a “Volume” field next “Amount” for this purpose


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c Matters in relation to outsourced production

If the applicant carries out any outsourced production, please indicate the following items.

If the Corporate Group has established any requirements for the outsourced production,

please indicate said requirements; otherwise, please indicate the requirements applied by

the Applicant and subsidiaries that must be indicated.

(a) Basic outsourcing policies

(b) Selection method of outsourcee

(c) Method for determining transaction terms with outsourcee (unit price, terms and

conditions of settlement, whether items are supplied for a fee or free)

(d) Method for managing outsourcee (quality, time of delivery, etc.)

(e) Details of any other considerations (specific measures to reduce costs, etc.)

when outsourcing production, if any

d Major outsourcees in the last 3 years

If the Applicant carries out any outsourced production, please indicate the past

performance of major outsourcees (top five companies for the immediately preceding

business year) for the last 3 years as shown in the table below, listing specific pricing for

outsourcees that provide raw materials for a fee in (a) and (b) and relevant details for those

who provide said materials free of charge in (c) and (d). If there have been any material

changes in the figures, please disclose the reasons therefor in footnotes.

[Segment]

(a) Information on for-a-fee outsourcees

Name of

outsourcee

Lines of

businesses Location

Name of

representativ

e

Commo

n stock

Number

of

employe

es

Outsourced

item and

process

Number of other

outsourcees

(b) Transaction value (for-a-fee outsourcees)

Name of

outsourcee

Value of supply Value of receipt

Remarks Period Period Period Period Period Period

A Documents, etc. to be Filed for Init ial Listing Application (Japanese Stocks)

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Number of other

outsourcees

Total

Notes i

ii

iii

iv

Under “Outsourced item and process ,” please indicate the name of outsourced process in parenthesis

( ) next to the name of the outsourced item.

If outsourcees include the parent company and its related company, please disclose the fact in

“Remarks.”

For “Number of other outsourcees ,” an approximation would suffice if it is difficult to determine the exact

number.

For “Value of supply” and “Value of receipt,” please indicate a monetary value.

(c) Information on free-of-charge outsourcees

Name of

outsourcee

Lines of

businesses Location

Name of

representative

Commo

n stock

Number

of

employee

s

Outsourced

item and

process t

Number of other

outsourcees


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(d) Transaction value (free-of-charge outsourcees)

Name of

outsourcee

Value of work outsourced

Remarks


Number of other

outsourcees

Total 100 100 100

Notes i

ii

iii

Under “Outsourced item and process,” please indicate the name of outsourced process in

parenthesis ( ) next to the name of the outsourced item.

For any outsourcee whose sales account for the majority of the sales of the Applicant for the

immediately preceding year, please indicate the percentage (%) of dependence on the Applicant in

“Remarks.”

If outsourcees include the parent company and its related company, please disclose the fact in

“Remarks.”

iv For “Number of other outsourcees,” an approximation would suffice if it is di fficult to determine the

exact number.

(10) Conditions of sales

a Market trends for major products, goods and services

Please indicate the market trends for, characteristics of and changes in market conditions

for major products, goods and services; provided, however, that if the market trends, etc. are

similar to the industry trends indicated in 1.(1) , the Applicant can omit said market trend

information by indicating the fact. If sales are subject to seasonal changes, please indicate

the concrete nature of said changes. Please also refer to changes in selling prices for the

last 3 years within the context of changes in market conditions.

b Matters in relation to sales

Please indicate the following matters regarding sales. If the Corporate Group has

established any sales requirements, please indicate said requirements; otherwise, please

indicate the requirements applied by the Applicant and subsidiaries that must be indicated.

(a) Details of specific measures applied to increase sales (marketing system, system

to develop the customer base, increases in transaction volume, etc.), if any

(b) Method for deciding the terms and conditions of sales (selling price, settlement

terms, etc.)


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(c) Method for managing receivables (including new accounts)

(d) Appropriate levels and management methods for inventories

c Sales flow, etc.

For major products, goods and services, please illustrate the flow sales thereof by using

relevant chart, and include total sales for each flow-type (actual results for the immediately

preceding business year). If the Applicant exports, products, goods, or services, please

illustrate the relevant flow of exports. If there are any special conventions for any flow-type

or item, or if there are any special reasons attributable to the flow, please indicate those

details in footnotes.


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d Major customers in the last 3 years

For major customers (approximately the top 5 for the immediately preceding business

year), please indicate the actual sales thereto for the last 3 years in the tables below. If

there are any material changes in sales volume and values, please disclose the reasons

therefor in footnotes.

[Segment]

(a) Information about customers

Name of

customer

Lines of

businesses Location

Name of

representativ

e

Commo

n stock

Number of

employees Sales item

Number of other

customers

(b) Transaction value

Name of customer

Sales value Outstanding balance of

receivables



Number of other

customers

Total 100 100 100

(c) Terms and conditions of settlement

Name of customer

Terms and conditions of settlement Outstanding balance of

notes receivable

Remarks Closing

date

Payment

date

Ratio of

notes and

bills to

cash

Site of

note or bill Period Period Period

Number of other


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customer

Total

Notes i For other customers and the terms and conditions of settlement, please indicate the averages or general

terms and conditions in “Total”.

ii If a customer has a parent company or affiliated company, please state the fact in “Remarks”.

iii If it is possible to indicate the sales volume, please add a “Sales volume” field next to “Sales value” for this

purpose.

e Changes in customers in the last 3 years and the business year to which the


If the Applicant has changed major customers or the terms and conditions of settlement in

the last 3 years and the business year to which the application date pertains, please indicate

said fact and the reasons therefor.

f Actual sales by area in the last 3 years

Please indicate the actual sales by area in the last 3 years. If there are any material

changes, please indicate the reasons therefor.

[Segment]

Period

Area


Amount % Amount % Amount %

Domestic

Sub-total

Overseas

Sub-total

Total 100 100 100

Note If there are any material differences between areas in the context of sales method or strategies, please indicate

said differences.

g Actual sales by industry category

Please indicate the actual sales by industry category for the last 3 years as shown in the

table below. If there are any material changes, please disclose the reasons therefor in

footnotes. If classifying sales by industry category does not seem to be useful, you may

indicate actual sales by lines of business.


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[Segment]

Period

Category



Total 100 100 100

h Status of problems and complaints, etc. in the last 3 business years and the year to

which the application date pertains

Please indicate the method for identifying and addressing customer-related problems and

complaints, etc. (“customer-related” encompasses customers, consumers and other

relevant persons). Please categorize the status of occurrences and settlements of the

aforementioned problems and complaints (including recalls and recovery of products, etc.)

based on problem/complaint type for the last 3 years and also indicate the number of

occurrences for each classification.

IV. Regarding Management Systems, etc.

1. Regarding organizational structure

(1) Organizational chart

Please indicate the names of departments and divisions, the positions, titles, names and

number of head personnel for each department or division in the organization of the

Applicant by using a chart (organizational chart), etc. For those who concurrently hold two or

more positions, please indicate so in a manner that makes it easy to identify the status of

their concurrent roles.

(2) Organizational reshuffling in the last 3 years and the business year to which the


If any organizational reshuffling (organizational reform) has been implemented in the last

3 years and the business year to which the application date pertains, please indicate details

and the purpose thereof.

2. Corporate governance, etc.

(1) Management method of subsidiaries and affiliated companies of the Applicant

a Basic policies

Please indicate the basic policies for management involvement in subsidiaries and

A Documents, etc. to be Filed for Initial Listing Applicat ion (Japanese Stocks)

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affiliated companies of the Applicant and their return on profits.

b Department charged with the corporate governance, items to be managed and

management method

If there are any items to be managed and require the approval of the Applicant or that

must be reported thereto, please indicate said fact. If any meeting is held in the Company

Group to discuss management methods, please indicate the name of the meeting and

contents of the discussion.

3. Regarding internal audit

a Basic policies for internal audit of the Company Group

Please indicate the basic policies for internal auditing in consideration of the purpose and

expected effect of the implementation of internal audit tasks.

b Department or division in charge of internal audit tasks at the Applicant and its

subsidiaries, and size of personnel engaged in the internal audit

If the department or division in charge of internal audit tasks is also responsible for other

tasks, please indicate which department carries out the internal audit of said other tasks

and the size of personnel engaged in the auditing.

c Details of internal audit at the Applicant and its subsidiaries

Please indicate the scope of internal audit, details of items subject to auditing, and the

rotation of internal audit functions, etc.

d Procedures for the internal audit at the Applicant

Please indicate a series of procedures from the development of an internal audit plan,

implementation, report to improvements, etc.

e Status of implementation of internal audit at the Applicant for the immediately

preceding business year

Please indicate audit policies, items subject to audit, the schedule, audited departments

and divisions, status of improvements, etc.

f Internal audit plan at the Applicant for the business year to which the application date

pertains.

Please indicate audit policies, items subject to audit, the schedule, audited departments

and divisions.


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g Status of implementation of special audits

If there are any special audits other than those carried out on a regular bas is internal

audit, please indicate the details of such audits (positioning in the context of the overall

internal audit scheme, expected audited events and incidents, etc.). If there are any

incidents for which such special audits have been carried in the last 3 years, please also

indicate them in footnotes.

4. Audits by company auditors

a Segregation of duties for company auditors of the Applicant and its subsidiaries, and

the secretariat for (the board of) auditors.

A company with a committee system is required to indicate the items subject to audit by

replacing the audits of the relevant committee with the audits of the Committee of Company

Auditors.

b Details of the audits by company auditors at the Applicant and its subsidiary

Please indicate the audited items, audit procedures, etc.

c Audit process by company auditors at the Applicant

Please indicate a series of procedures from the development of the internal audit plan,

implementation to the report.

d Conditions of the implementation of audits by company auditors at the Applicant for

the immediately preceding business year.

Please indicate audit policies, audited items, the schedule, audited departments and

divisions, audit method, audit results, etc.

5. Timely disclosure system

(1) Development and implementation conditions of timely disclosure system

a Efforts to develop and improve timely disclosure system

Please indicate the basic policies for timely disclosure and efforts to develop and improve

the timely disclosure system (conditions of development of organization to collect

information and education and training system for timely disclosure). Please indicate the

methods for granting fair and easy access of information to shareholders.

b Conditions of the organization in charge of timely disclosure (the name of

department/division and size of personnel engaged in timely disclosure tasks)


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Please indicate the conditions at the department in charge of timely disclosure (such as

personnel size) and the person in charge of handling information after listing.

c Timely disclosure process

Please indicate the work flow for timely disclosure tasks in an understandable manner by

using a chart. Be sure to indicate the specific procedures for collecting, analyzing and

publishing each type of information, meaning information on decision-making or events and

closed accounts. If the Applicant has any subsidiary or unlisted parent company, etc., please

indicate the timely disclosure procedures applied to the Corporate Group.

d Management conditions of data, etc. pertaining to timely disclosures

Please indicate the measures in place to prevent any person outside the Applicant from

having access to timely disclosure data pertaining to company information after listing or

press releases with similar contents thereto before the expected time of publication of such

data and information (including any system-wide security measures). Please also indicate

the measures taken to thoroughly disseminate information on such measures internally

(including any documents specifying such measures).

(2) Policies for disclosures on expected performance results

Please indicate the basic policies for the disclosure of performance results (types of

values disclosed, consistency with the profit plan, etc.). Please also indicate the method for

identifying discrepancies between actual and expected performance results and the criteria

for assessing whether any revisions to expected performance results are be necessary.

(3) The earnings announcement date after listing and details of efforts to earnings

announcement at an early date

For listed companies, please indicate dates of earnings announcement after listing (in the

last 3 years), and an expected date of earnings announcement for the business year to

which the listing application date pertains (including the publication dates for quarterly and

mid-year earnings announcement), and the details of efforts to earnings announcement. For

unlisted companies, please indicate an expected date of earnings announcement for the

business year to which the listing application date pertains.

(4) Any actions taken in regard to timely disclosure in the last 3 years and the business year

to which the application date pertains

For listed companies, please indicate what actions were taken (including the time and

reasons therefor) by a financial instruments exchange in regard to timely disclosures in the


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last 3 years and the business year to which the application date pertains (including demands

for reports on improvements, etc.) .

6. Regarding securities reports drafting and handling system, etc

(1) Securities report drafting and handling system

Please indicate a series of the work flow process from the preparation through to

confirmation of a securities report and submission by using a chart, etc. in an

understandable manner. If any portion of the drafting or handling tasks for securities reports

is outsourced, please indicate the pertinent details and an overview of the outsourcee.

(2) Conditions of amendments to securities report, etc. in the last 3 years and the business

year to which the application date pertains

If the applicant has prepared securities reports (including securities registration

statements, shelf-registration statements and shelf registration supplements and any

appendixes to or reference documents for said statements, mid-year reports, quarterly

reports and prospectus) and has made some amendments (submission of amended

registration statements, amended shelf-registration statements or amended reports), please

indicate the specific contents of the amendments (date of amendment, amended securities

reports, contents of amendments, background for the identification of items to be amended,

any resulting actions taken in relation to the amendments (demands for payment of

penalties, recommendations, etc.) ).

7. Regarding management system for insider information and preventive measures against

insider trading

(1) Management of material facts, etc. and measures to prevent directors/employees

engaging in insider trading

Please indicate, in detail, the management system of “material facts relating to business”

etc. as prescribed in Article 166, Paragraph 1 of the Financial Instruments Exchange Act

and the measures in place to prevent any director or employee from the engaging in insider

trading (if there is a prohibition term for transactions, please provide an overview of the

system). Please also indicate the status of any seminars and training sessions that have

been held to prevent insider trading in the last one year and the business year to which the

application date pertains.

(2) Status of trading of the Applicant’s shares by directors and those equivalent thereto in

the last 2 years and the business year to which the application date pertains

For listed companies, please indicate the status of trading of the Applicant’s shares by


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directors and those equivalent thereto in the last 2 years and the business year to which the

application date pertains (trading dates, whether they were buying or selling, the number of

shares traded, and prices).

(3) Received heads-ups due to the trading of the Applicant’s shares in the last 3 years and

the business year to which the application date pertains

For listed companies, please indicate the details of heads-ups received from financial

instruments exchanges (including the time and details of regulatory guidance or instruction)

on the trading of the Applicant’s shares in the last 3 years and the business year to which

the application date pertains (including any buy backs of its down shares by the Applicant).

8. Regarding risk management and compliance systems

(1) Risk management and compliance systems

Please indicate the current systems and improvements to risk management and

compliance systems, including information security and personal information protection

policies.

(2) Conditions of violations of laws and regulations in the last 3 years and the business year

to which the application date pertains

Please indicate the details of violations of laws and regulations in the last 3 years and the

business year to which the application date pertains and future measures to address said

violations (the information indicated in IV, 5(3), IV. 10 (7) and VI. 8 can be omitted if indicated

in this section).

(3) Conditions, etc. of development and improvement of system to preclude any anti -social

forces

Please indicate the existence/nonexistence of relationships with any anti-social forces,

basic policies for avoiding such relationships, status of development and improvement of for

systems and specific measures to preclude any anti-social forces (including policies and

criteria for assessing anti-social forces, methods for assessing any anti-social forces

associated with new and existing customers and suppliers, and methods for assessing any

anti-social forces associated with shareholders, directors, and employees).

9. Regarding directors and persons equivalent to directors

(1) Officers and persons equivalent to directors in the last 3 years and the business year to

which the application date pertains

Please indicate the names (with hurigana) and background (date of birth, final education,


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all the career histories before joining the Applicant company, prior and current positions at

the Applicant company, awards and penalties incurred in the last 10 years) of the directors

and persons equivalent thereto in the last 3 years (5 years in the case of the representative

director) and the business year to which the application date pertains. Please also indicate

the following:

- Where a director or person equivalent to a director has joined the Applicant from

another company or organization, etc., the specific background and reasons for the

joining;

- Where a director or person equivalent to a director concurrently holds any position at

another company or organization, etc., the name of said other company and roles at

the other company (concrete details of position, including whether it is a full-time or

part-time position if the director or person holds the position of director at said other

company; and in case of a full-time director the background and reasons for holding a

concurrent position); or

- Where a director or person has retired, the date of retirement, background and reason

for the retirement; provided that since the person retired and it can be difficult to

indicate these items, the Applicant can omit this information by stating the reasons

therefor.

(2) Status of Board of Directors meetings in the last 2 years and the business year to which


Please indicate the status of any Board of Directors meetings held in the last 2 years and

the business year to which the application date pertains as shown in the table below. If the

Applicant has omitted any resolution, for example, by written or electromagnetic means at a

Board of Directors meeting or plans to do so going forward, please indicate the policies and

reasons therefor.

Date of

meeting Action items and issues reported

Date of

disclosure

Attendance of

directors

Note i For existing listed companies, please indicate any resolutions that meet the requirements for “Material

facts concerning business, etc.” specified in Article 166, Paragraph 1 of the Financial Instruments

Exchange Act.

ii Please indicate the fact if the Applicant has made any resolution by written or electronic means.

iii For existing listed companies, please indicate the date of disclosure for the items indicated in “Action


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items and issues reported” in “Date of disclosure.”

iv In “Attendance”, please indicate which directors were in attendance or absent.

(3) Regarding Independent Directors/Auditors

Please indicate the policies in regard to the composition of Independent

Directors/Auditors (number of Independent Directors/Auditors and whether they are

directors or auditors, etc.). Also indicate what concrete plans are in place for appointing an

Independent Director/Auditor who is a director if no Independent Directors/Auditors have

currently been appointed. Indicate the means that allow Independent Directors/Auditors to

exert their expected roles (i.e.: outlets for sharing information with Independent

Directors/Auditors, etc.). Please indicate the policies as to how information about

Independent Directors/Auditors and the independence of Outside Directors/Auditors is

indicated in the convocation notice of the general meeting of shareholders.

(4) Spouses and relatives by blood within second degree of kinship and relatives of a

spouse

If any director or person equivalent thereto is the spouse of or is related by blood within

second degree of kinship or is the relative of a spouse of another director or person

equivalent thereto, a large shareholder (approximately the top 15 shareholders) or an

employee, please indicate the name of the director or person equivalent thereto and their

relationship.

(5) Lines of business of company for which a director or person equivalent thereto

substantially holds the majority of voting rights

Please indicate the lines of business of the company (including its subsidiary) for which a

director or person equivalent thereto (including the spouse and relative by blood within the

second degree of kinship) substantially holds the majority of voting rights as shown in the

table below.

Item Name of director and the like Name of director and the like

Company name Company name Company name Company name

a Composition

of shareholders

b Lines of

business

c Location


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d Composition

of directors

e Number of

employees

f Balance sheet

date

g Total assets

h Sales

i Ordinary

income

j Net income

Not

e

i In “Composition of shareholders,” please indicate the number of shares held, percentage of equity

investment, and any relationship with the director and person equivalent thereto for the top 5 largest

shareholders.

ii Please use and indicate the financial amounts for the immediately preceding year for the financial data

of each company (please indicate the financial data if the company prepares consolidated financial

statements).

iii If any material changes in the contents indicated at the end of the immediately p receding year have

taken place or are expected to take place, please disclose the contents in these notes.


-381-

(6) Conditions of the company, etc. in which the owner has interests

Please indicate the lines of business, etc. of the company for which the owner has

substantially invested in equity, made loans, or assumed the office of director (including its

subsidiary) as shown in the table below.

Item

Name of owner Name of owner

Name of company,

etc.

Name of

company, etc.

Name of

company, etc.

Name of

company, etc.

a

Composition

of

shareholders

b Lines of

business

c Location

d

Composition

of director

e Level of

involvement

f Business

relationship,

etc.

Note i The applicant can omit information for the Applicant, affiliated company and companies indicated in 9.

(5).

ii Please only indicate companies whose equity investment is 5% or more as a percentage of the total

number of issued shares outstanding.

iii In “Composition of shareholders,” please indicate the number of shares held, percentage of equity

investment, and any relationship with the owner for the top 5 largest shareholders.

iv In “Level of involvement,” please provide specific level of the involvement such as the status of equity

investment, loans and assumption of position for the director.

v In “Business relationship, etc.,” please indicate any business relationship, financial relationship , or

personal relationship between the company and the Company Group or director and person

equivalent thereto of the Company Group of the Applicant, if any.

vi If any material changes in the contents indicated at the end of the immediately preceding year have

taken place or are expected to take place, please disclose the contents in these notes.


-382-

vii If it is difficult to indicate the information in Part II, the Applicant can alternatively submit an appendix

by stating the fact.

(7) Details of management contract

If the Applicant or its subsidiary has individually entered into a management contract

(such as contracts concerning success fees) with related parties such as directors, etc. of its

subsidiary and the Applicant, please indicate the details thereof.


-383-

10. Status of Employees

(1) Human resources policies at the Company Group

Please indicate the policies for human resources of the Applicant and its Company Group

from the perspective of recruitment policy and specific recruitment methods, education and

training of personnel, and assignments.

Note: Please indicate any matters specifically highlighted in the context of the use of dispatched

personnel and adoption of performance-based wages, if any.

(2) Conditions of personnel changes of the Corporate Group in the last 3 years

Please indicate personnel changes by operating segment of the Corporate Group in the

last 3 years as shown in the table below.


In Out Moved

No.at the

end

In Out Moved

No.at the

end

In Out Moved

Total at ter m

end

Segm

ent

Admin

Sales

Technical

Operation

s

Total

Segm

ent

Admin

Sales

Technical

Operation

s

Total …

…

…

…

…

…

…

…

…

…

…

…

…

…

Tota

l

Admin

Sales

Technical

Operation

s

Total

Note i The Applicant may modify the format for work function categories to reflect the nature of the

company.

ii If there is any distinction between career-track and non-career track positions, please indicate these

distinctions under each work function category.

iii If there have been any material changes in the number of employees due to regular recruitment and


-384-

other factors, please disclose said increases or decreases in the number of employees (including

the breakdown thereof for each work function category) in these notes.

iv Please collectively disclose the reasons (e.g., reached retirement age, voluntarily quit, etc.) for

leaving the position for those who have left their posts in the last 3 years in these notes.

v Please individually disclose the reasons for leaving the position for each person who left a

management post in the last 3 years.

vi For those personnel whose positions that are difficult to classify into a relevant segment, please

provide any information necessary to distinguish them from other segments , for example, by

specifying a particular segment name, such as “department associated with all

departments/divisions”.

vii If the number of employees at the end of period includes the number of seconded persons from and

to other companies, please indicate the number thereof in parenthesis ( ) in “Total at term end”.

However, if it is difficult to indicate these totals under each segment or work function category, it

would suffice to only indicate a figure in parenthesis ( ) next to the figure in “Total”

viii If the number of dispatched personnel accounts for a material portion of the total number of

employees, please enclose this figure in parenthesis ( ) next to the main total for that section.

ix If it is difficult to indicate totals for “In” “Out” and “Moved”, the Applicant can omit these by disclosing

the fact and reasons in these notes.

x If it is difficult to indicate personnel changes at the Corporate Group for the last 3 years for each

operating segment, the Applicant can indicate these changes for each company that comprises the

Corporate Group (the Applicant and its subsidiary). In this case, for any subsidiary whose number of

employees is below 10% as a percentage of the total number of employees of the Corporate Group

at the end of the immediately preceding year, the Applicant can omit figures for each work function

category and simply indicate the total number of personnel that was moved.

(3) Status of seconded employees

If any of the employees at the Corporate group are seconded employees or dispatched

personnel (including cases where the company carrying out the secondment (or dispatch) is

part of the Corporate Group), please indicate the number of seconded employees received

(respective number for each position), the name of the company offering the secondment (or

dispatching employees), the purpose and reasons for the secondment (or dispatch). (The

applicant can omit this information in II. 3.(5)).

(4) Personnel plan for the next two years

Please indicate the personnel plan for the next two years for each of the operating

segments of the Corporate Group.


-385-

(5) Methods for managing overtime work and work on days off and status of

labor-management agreements

Please indicate the methods for managing overtime work and work on days off (including

worktime record-keeping procedures, whether manager/supervisor approval is required and

how the human resources department handles these matters) and the status of

labor-management agreements (including the provisions of said agreements).

(6) Status of overtime work

If there are any employees who have breached the provisions of Article 36 of Labor Law

(indicate relevant provisions if the employer and employee have entered into any special

agreements) in the context of overtime works for the 6 months prior to the month

immediately preceding the month to which the listing application date pertains, please

indicate the status of overtime works for such employees.

(7) Status of investigations by a labor standards office for the last 3 years and the business

year to which the application date pertains.

Please indicate the status of investigations by the labor standards office concerned with

the Corporate Group for the last 3 years and the business year to which the application date

pertains (date of investigation, details of investigation and existence of guidance or

recommendations on corrective measures, etc.). (If the Applicant finds it difficult to indicate

said information for any company in the Corporate Group, the Applicant can omit this

information by providing the reasons therefor.)

V. Regarding Stocks, etc.

1. Regarding large shareholders

(1) Changes in number of shares held by large shareholders and their shareholding ratios

over the last 3 years

Please indicate the changes in the number of shares held by large shareholders

(approximately the top 15 largest shareholders) at the end of the immediately preceding

year and their shareholding ratios over the last 3 years as shown in the table below.

Period

Name of large shareholder

End of the period

End of the period

End of the period

Number of shares held Shareholding ratio Number of shares held Shareholding ratio Number of shares held Shareholding ratio

Note i Please indicate the background leading up to the equity investment and the shareholder’s description


-386-

(relationship with the Applicant and directors or persons equivalent thereto, etc.) in a separate table.

ii Please indicate the reasons for material changes (to the extent practicable), if any, in a separate table.

iii If the employees’ shareholding association, directors ’ shareholding association and business partners

shareholders' association are not included in large shareholders that must be indicated (approximately the

top 15 largest shareholders), please indicate them separately.

(Sample) Background for equity investment and shareholder description

Name of large

shareholder Description Background for equity investment

(Sample) Reasons for material changes

Period Name of large

shareholder Reasons for changes

(2) Status of lock-up agreements, etc. or shareholders agreements

If the Applicant has entered into, or expects to enter into an agreement or contract for the

transfer of shares of the Applicant (including a lock-up agreement) or operation of the

Applicant (including the selection of candidates for directors, pre-approval of shareholders,

etc.) with large shareholders (approximately the top 15 largest shareholders) as of the end

of the listing application date (in the case of a listed company, the last record date), please

indicate the details thereof (year and month of conclusion, parties to the agreement or

contract, its overview, etc.).

(3) Material contracts such as collateral contracts, etc.

If there are stock loan contracts, collateral contracts, selling back contracts, forward sales,

and other material contracts or arrangements for the shares of the Applicant held by

directors, persons equivalent thereto, the Applicant or affiliated companies, please indicate

the details of such contracts or arrangements (type of contracts, date of conclusion, parties

to contracts, overview of contracts, etc.).

2. Acquisition of treasury stocks

If the Applicant holds treasury stocks (excluding the purchase of the number of shares not

constituting a Share Unit), please indicate the background therefor and policies for keeping

them going forward.


-387-

3. Regarding Shareholding under the name of another person

If a director or person equivalent thereto holds shares under the name of another person, please

indicate the name of such other person, the number of shares held thereby, and the shareholding ratio.

4. Regarding class shares

For class shares issued by the Applicant, please indicate the number of stocks issued,

details (voting rights, rights such as dividend payments of surplus, etc.), date of issuance,

amount of payment, and parties to which the allocation is made.

5. Regarding Distribution of profit of the Applicant after listing

Please indicate the rationale and policy for the distribution of profit of the Applicant

(including interim and quarterly dividends) after the listing (in the case of a listed company,

all applicable distributions to the present). (If there is any policy concerning the level of

dividend payment, please also indicate it.) If the distribution of surplus is subject to a

resolution of the Board of Directors, please indicate the reasons therefor.

VI. Regarding Accounting

1. Regarding schedule of consolidated financial statements for the last 3 years

Please indicate the rationale, policy, and criteria for short- and long-term loans listed in

each of the consolidated financial statements for the balance sheets covering periods

ending in the last 3 years. If there are any material loans, please indicate them for each

consolidated accounting year as shown in the table below. If the Applicant finds it difficult to

indicate the above details for any item or period, the Applicant can omit this information by

stating the reasons therefor.

Name of party to

which the loan

is/was extended

Original

loan

amount


Highest

balance

Lowest

balance

Year-end

balance

Highest

balance

Lowest

balance

Year-end

balance

Highest

balance

Lowest

balance

Year-end

balance

Total

Notes i Please indicate the time and terms for loan extension and the reasons therefor in a separate table.

ii If there are a large number of parties to which loans have been extended, the number of parties,

representative terms and conditions of loans, and the reasons for the loans can be grouped.


-388-

(Sample) Time and terms for loan extension and reasons for the loan

Name of party to

which loan is/was

extended

Date of original

loan extension

Terms and

conditions of

loan

Reasons for the loan extension


-389-

2. Regarding schedule of financial statements for the last 3 years

(1) Schedule of manufacturing costs for the last 3 years

If the Applicant has indicated a schedule of manufacturing costs or a schedule of costs of goods sold in

“Securities Report for Initial Listing Application (Part I)” please indicate the said schedule of manufacturing

costs and the schedule of costs of goods sold for the Applicant and subsidiaries that must be indicated as

shown in the table below.

Period

Line item



1. Materials costs

Opening balance of

inventories

Current purchases

Less: year-end balance of

inventories

Current cost of materials

2. Outsourced processing

costs

Outsourced processing

costs

Cost of parts purchased

Less: costs of materials

supplied with prices

charged

Current outsourced

processing costs

3. Labor costs

……

……

Current labor costs

4. Expenses

……

……

Current expenses

Total of current

manufacturing costs 100 100 100

Opening balance of


-390-

inventories in progress

Less: Closing balance of

inventories in progress

Current manufacturing

costs

Notes i For any subsidiary that must be indicated, if the Applicant finds it difficult to indicate the above details for

each of business years with balance sheets covering periods ending in the last 3 years, the Applicant can

omit this information for the relevant period by stating the reasons therefor.

ii The Applicant can change the format for figures in “2. Outsourced processing costs” as long as it reflects

the nature of accounting processing.

iii Please indicate the applicable statements under “3. Labor cost” and “4. Expenses”.

(2) Schedule of balance sheets for the last 3 years pertaining to the Applicant and

subsidiaries that must be indicated

With respect to balance sheets covering periods ending in the last 3 years for the

Applicant and subsidiaries that must be indicated, please indicate the items that meet the

requirements in the following “a” and “b” as shown in the table below. If the Applicant finds it

difficult to indicate the above details pertaining to periods ending in the last 3 years for a

subsidiary that must be indicated, the Applicant can omit this information for the relevant

period by stating the reasons therefor.

a Schedule of receivables past due

Period

Counterparty Cause Overdue period Amount

Total

Notes i Please indicate the counterparties in descending order by balance for each period.

ii If the number of counterparties is large, the Applicant may indicate approximately the top 10

counterparties in detail and group the others under the total.

b Schedule of payables past due

Please indicate this item in a manner similar to the above “a Schedule of receivables past

due”.

3. Related party transactions, etc. (transactions between the Corporate Group and a


-391-

related party and a subsidiary/affiliated company of the Applicant , a director of affiliated

company, or a large shareholder of the Applicant; the same shall apply hereinafter)

(1) Basic policies for the implementation of related party transactions

Please indicate the basic policies for the implementation of related party transactions

(including any perceptions, understanding, or considerations regarding related party

transactions).

(2) System to ensure the fairness of related party transactions

Please indicate the system in place to identify the existence of related party transactions

and ensure the fairness thereof (including any procedures required for the commencement

of related party transactions, systems to continuously monitor and review existing

transactions with a related party, and other relevant matters).

(3) Regarding related party transactions in the last 2 years and the business year to which


If any related party transactions have taken place in the last 2 years and the business year

to which the application date pertains, please indicate the details thereof as shown in the

table below.

a Transactions details

Typ

e

Name

of

compan

y or

entity

Descriptio

n of

transaction

s

Transaction

value Lin

e

ite

m

Closing

balance

Concrete

terms and

method for

determinin

g said

terms

Remark

s Perio

d

Perio

d

Perio

d

Perio

d

b Overview of related parties

Type

Name of

company

or entity.

Location

or address

Common

stock or

equity

Line of

business

or

occupation

Ratio of

voting

rights, etc.

Relationship

with related

party

Notes i “Related parties ” means those referred to in Article 8, Paragraph 17 of the Ordinance on the

Terminology, Forms, and Preparation Methods of Financial Statements, etc..


-392-

ii Please also indicate any new transaction that has taken place in the business year to which the

application date pertains (including any expected/scheduled transactions).

iii Please indicate all the transactions irrespective of the materiality of the transaction value.

iv Please indicate all of the transactions with subsidiaries and directors of subsidiaries and affiliated

companies. The applicant can omitted this information for transactions that would eliminate as a

result of elimination of intra-company transactions.

v Please indicate all of the transactions with individual large shareholders indicated in “1. Large

shareholders (1)” under “V. Regarding Stocks, etc. 1. Regarding large shareholders (1)”

vi In the case of individuals, please indicate the “occupation” not the “Line of business” and the

“address” not the “location”.

vii If the directors of the Corporate Group receive any fringe benefits (such as leasing of corporate

housing) outside of their remuneration, please indicate the amount incurred by the Corporate

Group.

viii Please provide detailed information under “Concrete terms and method for determining said

terms”, including but not limited to current transaction terms, detailed procedures implemented to

ensure the fairness of transaction terms , and which entities have the right to authorize such

transactions.

ix Under “Remarks”, please state any transactions included in “Securities Report for Initial Listing

Application (Part I)”. If the Applicant has decided to refrain from disclosing any transaction, please

state the reasons therefor in “Remarks”.

x If any person meets the criteria for spouse, relative by blood within the second degree of kinship

and relative of a spouse, please indicate the relationship category in “Remarks”. Alternatively, if

any entity meets the criteria for subsidiary holding the majority of voting rights on the proprietary

account of the Applicant and its subsidiary, please indicate the percentage of holding of voting

rights, etc. in “Remarks”.

xi Please refer to “ASBJ Statement for Related Party Disclosures” and “Guidance on Accounting

Standards for Related Party Disclosures” to determine what other items or information should be

indicated, if any.


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4. Regarding pledged assets

If any assets of the Applicant or its subsidiary are pledged as collateral, please indicate

the details thereof as shown in the table below.

Pledged

asset

accounts

Description

of pledged

asset

Party

pledging

the

assent

Value of

pledged

asset

Secured

debt

accounts

Description

of secured

debt

Value of

secured

debt

Reasons

for

offering

collateral

Note

s

i Please also indicate new collateral offered during the business year to which the application date

pertains.

ii Please indicate all of pledged assets irrespective of their values.

5. Auditor ’s opinions for the last 5 years

Please indicate whether consolidated financial statements for the last 5 years have been

audited by certified public accountants or audit firms. If so, please indicate the names of the

certified public accountants or audit firms and their auditor ’s opinion (for example

“unqualified”) for each of the last 5 years. If a qualified opinion has been expressed for any

consolidated accounting year and business year, please disclose the details of the qualified

opinion in footnotes.

Please indicate whether financial statements for the last 5 years have been audited by a

financial auditor or company auditor (or by an audit committee in the case of a company

committees) according to the provisions for audit prescribed in the Companies Act. If so,

please indicate their auditor ’s opinion (for example “lawful”).

Notes i If the Applicant has changed certified public accountants or audit firms

(including changes of party to an engagement letter and any other pertinent

contract such as an advisory contract for listing application ), please indicate

the reasons for the changes. If the Applicant has changed certified public

accountants or audit firms during the business year to which the application

date pertains, please disclose the fact and the reasons therefor in footnotes.

ii If any additional information paragraphs were furnished in the audit report for

any of the last 5 years, please disclose the fact and the contents thereof.

iii Please disclose the date when the engagement letter under Financial

Instruments Exchange Act or any act similar thereto was entered into for the

first time.


-394-

(Sample)

Period Period Period Period Period

Name of certified public accountant or

audit firm － Name of audit firm

Audit as per

Financial

Instruments

Exchange Act


statements －

Qualified

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion

Financial statements － Qualified

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion

Audit as per

Companies Act

Auditor ’s opinion by

financial auditor

(consolidated financial

statements)

－ Qualified

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion


financial auditor

(financial statements)

－ Qualified

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion

Unqualifi

ed

opinion


company auditor

(audit committee)

Lawful Lawful Lawful Lawful Lawful

Notes i On [date], [name of company being audited; i.e. the Company] agreed to the terms of the

engagement letter with [name of audit firm] in accordance the Financial Instruments

Exchange Act. The audit firm has audited the Company’s consolidated financial statements

and financial statement as of the period ending on [date].

ii The Company has not undergone any audit in accordance with the Companies Act as it did

not qualify as a large company for the period ending on [date].

iii The Company has undergone audits by the audit committee since [date] in accordance with

the Companies Act.

iv The details of the qualified opinion for the year ending on [date] are as follows…. [insert

details here]


-395-

6. Regarding accounting advisor

Please indicate the basic policies and future policies for the establishment of an

accounting advisor system. If the Applicant has already adopted an accounting advisor

system, please indicate the level of dependence on accounting advisors and their level of

involvement in related departments and divisions.

7. Outsourcing

If the Applicant has outsourced accounting work (including outsourcing of only portions

thereof), please indicate the details of said outsourcing, the reasons therefor, and an

overview of outsourcee.

8. Tax investigations by the National Tax Agency and local tax office in the last 3 years

and the business year to which the application date pertains

Please indicate whether there have been any tax investigations by the National Tax

Agency or local tax office on the Corporate Group in the last 3 years and the business year

to which the application date pertains. Also indicate when said investigations occurred, the

type of violation of laws or regulations, the status of administrative instructions or directives,

measures or actions taken to address said violations thereafter, and any other pertinent

information. (If the Applicant finds it difficult to indicate this information for any company in

the Corporate Group, the Applica can omit said information by stating the reasons therefor.)

9. Regarding development and improvement of system to assess and report internal

audits of financial reports

Please indicate the status of development and improvement of the system to assess and

report internal audits of financial reports (including department in charge of these matters,

preparation schedules, current issues to be addressed, etc.). (If a report on internal control

has been submitted, please also indicate the assessment results therein.) If any discrepancy

has been identified through internal auditing in the last 1 year that does not qualify as

“material” but clearly relates to any deficiency or problem, please indicate the details thereof.


-396-

VII. Regarding Budget Control, etc.

1. Regarding budget control

(1) Nature of medium- and long-medium-term profit plans, specific method and

procedures to develop the plan

If the Applicant has developed a medium- and long-term profit plan, please indicate the

details of the plan and concrete methods and procedures for formulating the plan. (The

Applicant is required to indicate information for both the Applicant and Corporate Group; the

same shall apply hereinafter.)

(2) Concrete methods and procedures for formulating annual profit plans

Please indicate concrete methods and procedures carried out when formulating an

annual profit plan. Please also indicate the management and control methods thereof

(procedures, specific items, names of specific management data, etc.)

Note When indicating the concrete methods for formulating an annual profit plan, focus primarily on

what kind of data are used for forecasting the sales constituting the annual profit plan, cost o f

manufacturing, selling and general administrative expenses , and how these are aggregated to

develop the plan.

When indicating the concrete details of the management and control methods for the annual profit

plan, focus primarily on the units used, how often data is compiled, and what kind of data (e.g.,

sales, gross profit or contributing profit, etc.) is taken into account.

(3) Method for revising annual profit plans

Please indicate the concrete details of how the annual profit plan is revised, meaning the

concrete methods and procedures for formulating a revised plan (including methods for

assessing differences between the budget and actual results, as well as criteria for

assessing whether revisions to the annual profit plan are necessary).

2. Regarding policies for procurement of funds and investment thereof, etc.

If the Applicant has established policies that encompass the Corporate Group for the

following items, please indicate said policies. If not, please state the fact and indicate what

policies or procedures have been adopted by the Applicant and subsidiaries that must be

indicated by stating the fact.

(1) Policies and procedures for the procurement of necessary funds, etc.

Please indicate in detail the characteristics of the following items in consideration of the

actual cash flows from operating activities, investment activities, and financial activities.


-397-

a Please indicate the policies for the procurement of required funds by dividing them into

relevant categories such as working capital, capital expenditures for facilities, etc.

b Please indicate the basic policies of the Corporate Group for the procurement of funds

through the issuance of shares, corporate bonds, and corporate bonds with

subscription rights to new shares.

c Please indicate the division responsible for the procurement of funds and its capacity

for procurement (the credit line if available, the amount of assets pledged as collateral,

etc.) in terms of shares, corporate bonds, corporate bonds with warrants, and short-

and long-term borrowings, respectively. If the terms and conditions of borrowing have

recently changed materially, please indicate the details of these changes.

d Please indicate timelines for procurement of funds in consideration of seasonal shifts

to necessary funds.

e Please indicate specific measures taken to increase cash flows from operating

activities, if any.

f Please indicate any other relevant matters, if any.

(2) Basic policies and methods for handling surplus funds

Please indicate in detail the basic policies for handling surplus funds (deposits,

repurchase/resale agreements, stocks, etc.).

(3) Cash management

Please indicate the basic policies and specific methods for cash management.


-398-

VIII. Regarding Financial Results for Recent Years, etc.

1. Regarding consolidated balance sheets and consolidated income statements for the

last 5 years

Please prepare consolidated balance sheets and consolidated income statements that

cover each consolidated accounting year ending anytime within the last 5 years in

accordance with Regulations on Consolidated Financial Statements and present each of

these side-by-side for each consolidated accounting year.

Notes i Please present financial statements for any company that does not prepare consolidated

financial statements or for any business year for which no consolidated financial

statements were made. For any business year when no financial statements were

prepared, please present the balance sheet and income statement with data determined

based on the requirements in “Ordinance on Accounting of Companies”.

ii The Applicant may use multiple pages, but data for the last 3 business years must be

presented side-by-side in a single page (the same shall apply to VIII. 2).

2. Factors giving rise to changes in consolidated profit and loss in the last 5 years

(1) Factors giving rise to changes in sales-related figures. for each of consolidated

accounting year ending within the last 5 years

Please indicate in detail the factors that have given rise to changes (excluding immaterial

changes) in sales-related figures (meaning sales, cost of sales, gross profit, selling and

general administrative expenses, operating income, non-operating revenue, ordinary

income, extraordinary profit, extraordinary loss, current income before tax, etc., income tax,

inhabitant tax and enterprise tax, and current income) in the consolidated financial

statements for each of consolidated accounting year ending anytime within the last 5 years.

Please also indicate the events that triggered or caused said factors.

Notes i Please make reference to financial statements for a company that does not prepare consolidated

financial statements or for a year when no consolidated financial statements were prepared.

The Applicant can omit items for any year for which no financial statements were prepared.

ii Please indicate factors giving rise to changes in selling and general administrative expenses

based on the data determined for each major account. For example, similar items such as

employee salaries and wages, provision for reserves of bonuses, etc. could be combined under

“labor costs”.

iii If there have been any material changes in non-operating revenue and non-operating costs, or

extraordinary profit and extraordinary loss, please indicate the title of major items underlying

such changes and factors giving rise thereto.

iv If the Applicant has carried out a merger, turned a company into subsidiary or acquired a


-399-

business in the last 5 years, and if the effect of such events on the sales and profit as a

percentage of the sales or profit of one or more item is 10% or more, please present the changes

in the profits and losses of the merged company, company that became a subsidiary, or

department that acquired business for each of business year ending within the last 5 years.

Please use relevant charts and indicate in detail the factors that gave rise to changes in the

profits and losses (excluding immaterial ones) and the events that triggered or caused said

factors, provided, however, that if the Applicant finds it difficult to indicate this information, the

Applicant can omit the information by stating the reasons therefor.

(2) Sales by operating segment for each consolidated accounting year ending within the

last 5 years and the factors giving rise to the changes therein

Please indicate the changes in sales and gross profit by operating segment for each

consolidated year ending anytime within the last 5 years and indicate in detail the factors

that have given rise to these changes (excluding immaterial ones). . Please also indicate the

events that triggered or caused said factors.

Notes i Please make reference to financial statements for a company that does not prepare consolidated

financial statements or for a year when no consolidated financial statements were prepared. The

Applicant can omit items for any year for which no financial statements were prepared .

ii In “Sales”, please indicate the percentage of total sales and a year-on-year figure. In “Gross

profit”, indicate the percentage of sales by operating segment and a year-on-year figure.

iii If the Applicant cannot ascertain the gross profit by operating segment, the Applicant can

substitute these figures with pertinent profit figures of the Applicant’s choice, such as profit

figures for management accounting.

iv If the Applicant can ascertain operating income and ordinary income by operating segment,

please also indicate the changes therein and factors that gave rise thereto (excluding immaterial

changes).

3. Factors giving rise to changes in cash flows in the last 5 years

Please indicate the changes in each item in the consolidated cash flow statement (or a cash flow

statement for a company that does not prepare the consolidated cash flow statements or for any business

year for which no consolidated cash flow statement was prepared) for each consolidated accounting year

ending anytime within the last 5 years. Please also indicate in detail the factors that have given rise to the

changes (excluding immaterial changes) events that triggered or caused said factors.


-400-

IX. Regarding Future Prospects

1. Regarding the Corporate Group over the next 2 years

Any Applicant that does not plan to prepare consolidated financial statements for the next

2 years (meaning the business year to which the application date pertains and the following

year) is required to indicate future prospects by using financial statements.

(1) Consolidated profit and loss for the last 1 year and forecasts for the next 2 years

Please indicate the consolidated profit and loss for the last 1 year and forecasts thereof

for the next 2 years.

Notes i Consolidated profit and loss forecasts should include the figures from consolidated financial

statements for sales, cost of sales, gross profit, selling and general administrative expenses,

operating income, non-operating income, non-operating expenses, ordinary income,

extraordinary income, extraordinary loss, current income before taxes, etc., corporate income

tax, inhabitant tax and enterprise tax, profit attributable to minority interests, cu rrent net

income, and net income per share.

ii Please indicate group similar figures for major items under selling and administrative

expenses. For example, employee salaries and wages, provision for reserves of bonuses, etc.

can all be combined as “labor costs”.

(2) Sales-related figures by operating segment in consolidated profit and loss forecasts for

the next 2 years

Please indicate the consolidated profit and loss for the last 1 year, as well as sales and

gross profit by operating segment in consolidated profit and loss forecasts for the next 2

years.

Notes i In “Sales”, please indicate the percentage of total sales and a year-on-year figure. In “Gross

profit”, indicate the percentage of sales by operating segment and a year-on-year figure.

ii If the Applicant cannot ascertain the gross profit by operating segment, the Applicant can

substitute these figures with pertinent profit figures of the Applicant’s choice, such as profit

figures for management accounting.

iii If the Applicant can ascertain operating income and ordinary income by operating segment,

please also indicate the operating income or ordinary income (the same shall apply to (3)

below).

(3) Concrete basis for preparing consolidated and segment-based profit and loss plans

Please indicate the concrete basis upon which consolidated profit and loss plans (sales,

cost of sales, selling and general administrative expenses, non-operating profit and loss,


-401-

etc.) and consolidated profit and loss plans for each segment (sales and gross profit) are

prepared, including all underlying assumptions (market conditions, market size, number of

customers, number of shops and outlets, size of personnel, etc.). Please also indicate or

attach any industry data and forecast indicators that were used as reference in developing

any of the plans.

(4) Consolidated cash flows in the last 1 year and forecasts for the next 2 years

Please indicate consolidated cash flows in the last 1 year and the forecasts thereof for the

next 2 years. Be sure to indicate all major items.

(5) Investment plan for the capital expenditures in the next 2 years

Please indicate in detail the investment plan for capital expenditures on facilities and

equipment in the next 2 years for each operating segment.

(Sample)

Segment

Name of

company,

or

business

function

Location

Description

of facilities

and

equipment

Total

investme

nt

amount

Amount

already

paid

Amount

still

needed

Procur

ement

metho

d

Scheduled payments

amounts

Month and year

of project start

Month and

year of

project

completion

Period

Period

Notes i Label items as “a whole company”, “an indirect department”, or other relevant labels in the event that

these items cannot be classified as segment-based investments.

ii The total investment amount must reflect the amount already procured and that which is still needed.

Indicate these amounts under their respective categories and state how the lacking amount will be

procured under “Procurement method”.


-402-

(6) Consolidated cash flow and investment plans for the next 2 years

Please indicate the consolidated cash flow plan and investment plan for the next 2 years

while fully considering the following items. If the Applicant has developed a basic rationale

and policies specific to each activity (operating activities, investing activities, and financial

activities), please indicate these in this section.

a Operating activities

(a) Relationship between income and cash flow (e.g., relationship between sales and

income from operations)

(b) Material changes in income and expenditure items due to changes in payment terms or

factors giving rise to increases or decreases in monetary profit and loss items

b Investing activities

Correlation between management strategies and investment plans and fund investment

plan, as well as effect on expected investment

c Financial activities

Method to procure lacking funds and redemption plan for borrowing, corporate bonds,

etc.

(7) Matters materially affecting profit and loss, cash flows, or the financial position of the

Company Group

Please indicate the specific details of matters that have or are likely to have a material

effect on profit and loss, cash flows, or the financial position of the Company Group

(mergers, becoming/ceasing to be a subsidiary, acquisition/disposal of other shares,

establishment of a subsidiary or affiliated company, business acquisitions/transfers,

business alliances, etc.).

X. Miscellaneous

(1) Legal disputes and conflicts

Please indicate the background for and details of any incidents that have been settled

within the last 3 years.

If there are currently any pending cases, please indicate the background and details of

said cases, as well as the expected outcome of litigations and their financial impact.

(2) Consulting and advisor contracts

If the Applicant has entered into any consulting and advisor contracts or agreements with

view to receiving instruction on the management for the immediately preceding business

year and the business year to which the listing application date pertains (including those


-403-

currently valid), please indicate the specific details thereof (year and month of conclusion,

counterparty to the contract, title of contract, outline of the contract (period, remuneration,

performance results, etc.) ).

(3) Timeframe and other matters pertaining to the selection of a lead underwriter, etc.

Please indicate the timeframes for approaching and entering into a contract with a

Financial Instruments Business Operator in reference to advisory agreements, etc. (*) that

encompass relevant instructions and advice to be provided by the public offering

underwriting department of the operator ahead of listing application. Please also indicate the

details and reasons for changes if the Applicant has changed the Operator with which the

Applicant concluded advisory contracts, etc. over the last 5 years, along with the main

instructions therefrom and the Applicants responses.

(*) This also applies to cases where substantive advisory services have been provided in absence of

an agreement.

(4) Application for listing on another financial instruments exchange

If the Applicant has filed a listing application with another financial instruments exchange

in the past and was not permitted to list its stock on said exchange, please indicate the

background and reasons therefor.


-404-

XI. Appendix

(1) Copies of financial statements for the last 5 years (including consolidated financial

statements if available) for any consolidated subsidiary whose degree of impact on the

earnings for the immediately preceding year was 20% or more as a percentage of the

total earnings of the Applicant (and a copy of the securities report, if available)

Notes i In this case “degree of impact” means the degree of impact determined by the formula specified in this

guide (Terms of Definitions) (9) in terms of the amounts of total assets, net assets, sales, and profit.

ii If any consolidated subsidiary operates in a foreign country, please submit documents certifying the

year-end foreign exchange rates for each of the last 5 years.

(2) Copies of any amended securities registration statement, etc. and amended shelf

registration statement or amended report, as well as an amendment request form

thereof (excluding amended reports attached to “Part II Embedded information” , which

are not required if already posted on EDINET as statutory disclosure documents) in

cases where the information indicated in “IV Management System 6.(2)

…Amendments to securities report, etc….” has been amended

(3) A copy of consolidated financial statements included in the securities report i f securities

reports have been prepared in the last 5 years (excluding consolidated financial

statements included in the securities report (Part I) , which are not required if already

posted on EDINET as statutory disclosure documents).

Notes i Please submit a copy of the consolidated financial statements , if available, for any period for

which no securities report has been prepared.

ii The consolidated financial statements to be attached shall include the items specified in Articles

13 to15-24 of Regulations on Consolidated Financial Statements.

(4) A copy of financial documents and supplementary schedule thereof for any business

year in the past 5 years when no consolidated financial statements have been prepared

(5) A copy of the minutes of meetings of the Board of Directors for the last 2 years

(6) A copy of the minutes of meetings of the Board of Company Auditors (Audit Committee)

for the last 1 year and the business year to which the application date pertains

(7) Copies of materials and data relating to the Board of Company Auditors (Audit

Committee) for the last 1 year and the business year to which the application date

pertains (data relating to the flow required in IV.4.c)


-405-

(8) Copies of materials and data relating to internal audits for the last 1 year and the

business year to which the application date pertains (data relating to the flow required in

IV.3.d)

(9) Copies of income tax returns and schedule of breakdown by account title attached

thereto for the past 2 years (for the Applicant and subsidiaries that must be indicated)

(10) A copy of the management data of monthly performance results for the business

year to which the application date pertains

(11) Copies of the series of documents used for annual budget plan for the business

year to which the application date pertains, mid-term management plan, and developing

plans (data and inputs relating to the flow indicated in VII.1.(1) and (2) )

(12) Copies of material contracts for management purposes

(13) Catalogues, pamphlets, etc. for products, goods, and services

(14) Draft of registration statement of Independent Directors/Auditors

(15) Draft of corporate governance report

(16) Materials documenting the information required in IV.5.(1)d “d Management

conditions of data, etc. pertaining to timely disclosures (internal regulations, manuals,

etc.)

(17) Work flow

For main products, goods and services, please illustrate the main work flow from the

receipt of orders, procurement, production and delivery to the collection of payment by

using a diagram or chart (flow charts prepared for the internal audit reports section suffice).

The Applicant is free to determine the format of the diagram or chart. If a subsidiary that

must be indicated pertains to the work flow of the Applicant, it can also be illustrated.

(18) Copies of the minutes of the important meetings (the Board of Directors,

Compliance meeting, Crisis committee meeting, etc) for last three meeting before

application of listing.

B Documents, etc. to be Filed for Assignment to the First Section Market Application

-406-

B Documents, etc. to be Filed for Assignment to

the First Section Market Application

List of Documents, etc. to be Filed for Assignment to the

First Section Market Application (Japanese Stocks)

The documents to be filed for the purpose of application are descr ibed below in “Documents

to be Filed for Assignment to the First Section Market Application”. They must be filed at the

time of the Assignment to the First Section Market application or in a manner otherwise

specified by the filing requirements.

(Considerations)


documents in the form of electromagnetic records, in principle, except for those that TSE

deems necessary to be filed in written form. In addition, at the time of application

acceptance, the list of materials filed shall be submitted as a hard copy with the signature

and seal of the representative of the applicant placed at the beginning.


only applies to cases where hard copies are to be submitted. For application documents that

are to be submitted as electromagnetic records, only one copy is required to be submitted,

for example, even if "2" is indicated in the table.

(Marks and legend)

※

Must be submitted in the form designated by TSE for the form, please refer to: “Forms

of Documents to be Filed for Assignment to the First Section Market

Application”(Japanese only)





-407-


would be accepted.






-408-



Assignment

application

date

Application for assignment of a

listed stock to the first section

market※◆■

Preliminary


Assignment of a

Listed Stock, etc. to

the

First Section Market

of securities ※


Regulations

Same as

above

Written oath pertaining to

application for assignment to

the first section market※◆■

One copy Rule 307② of the

Regulations

Same as

above

Table of distribution status of

stocks, etc. concerning the

criteria for assignment of

stocks to the first section

market※◇

For the First

Section Market

Application, when a

listed stock is

expected to meet


number of

shareholders or the

number of tradable

shares through

public or secondary

offering or through

limited distribution,

etc., the document

is not required to be

submitted.

One Rule 309②(1)a of the

Regulations

Same as

above

Securities reports for each

business year ending anytime

within last two

years and documents attached

to the securities report for the

most recent business year ◇

One Rule 309②(1)b of the

Regulations


-409-

Same as

above

Statement of answers

concerning examination for

assignment of stocks to the

first section market

※◇

Two Rule 309②(1)c of the

Regulations

Same as

above

Book of rules (copy)◆ Including

regulations on

handling of

shareholder

services (copy)

One


Regulations

Rule 309②(1)f of the

Regulations

Same as

above

Written documents stating the

matters of the assumption of

the principal business activities

◆

One


Regulations

Rule 309②(1)f of the

Regulations

Same as

above

Written confirmation certifying

that the applicant has no ties to

anti-social forces※◆■

One Rule 309②(1)g of the

Regulations

Same as

above

Written confirmation※◎◆■

One

Rule 309②(1)h of the

Regulations

Same as

above




Not required when

financial statements

(stand alone) is

include in the

“Quarterly Report

for Initial Listing

Application.”

As a quarter period

ends during the

examination period,

its must be

submitted every

end of a quarterly

period.

One

Rule 206①(9)-2 of

the Regulations

Rule 309②(1)i of the

Regulations

By Computation document for One Rule 308(4) of the


-410-

assignment

approval

market capitalization required

to be listed in first section

Regulations

Assignment

application

date


consolidated subsidiary for the

last five years (including


statements when it has

prepared them) (copy)

The documents

shall be required

only if the

consolidated

subsidiary had an

impact of twenty

percent (20%) or

more on earnings

for the recent one

year.

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(1)

Same as

above

Amended registration

statement, amended shelf

registration statement or

amended report for the last five

years and application year

(copy)

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(2)

Same as

above

Consolidated and

unconsolidated financial


years (copy)

Excluding

consolidated and

non-consolidated


included in

securities reports

for each business

year and

consolidated

business year

ended during the

recent two years

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(3)

Same as

above


directors meetings for the last

two years and application year

(copy)

One

Written reply

regarding the

Designation to the

First Section

Procedures for


-411-

Description XI(4)

Same as

above

Minutes of the meetings of the

board of the statutory auditors

(audit committee) for the last

one year and the business year

in which the assignment

application is filed (copy)◆

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(5)

Same as

above

Materials related to audit by the

board of the statutory auditors

(by audit committee) for the

last one year and the business

year in which the assignment


Vouchers in relation

to IV.4.c

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(6)

Same as

above


management for the last one

year and the business year in

which the assignment



to IV.3.d

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(7)

Same as

above



accounts attached thereto for

the last two years(copy)◆

Applicant and

subsidiaries to be

described One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(8)

Same as

above

Monthly performance





One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(9)

Same as

above


mid-term management plan

and a series of internal data

used for the preparation


to flow in VII 1.(1)

and (2) One

Written reply

regarding the

Designation to the

First Section


-412-

thereof for the fiscal year in



Procedures for

Description XI(10

Same as

above

Contract which is important for

management (copy)◆

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(11)


-413-

Same as

above


products, goods and services,

etc.◆ One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(12)

Same as

above

Audit report and quarterly

review report for the last five

years (copy)

One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(13)

Same as

above

Internal management report

within the latest year (copy) One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(14)

Same as

above Work flow ◇ One

Written reply

regarding the

Designation to the

First Section

Procedures for

Description XI(15)

Same as

above

Agreement of e-learning◆■ One -


By

assignment

approval

Computation document for net

assets※ One Rule 308(5) of the

Regulations

In cases where there was a merger in the recent two years (excluding the cases of mergers

between a listed company and its subsidiary (ies) or between or among its subsidiaries)

Assignment

application

Financial statements, etc. of all

the merging companies One

Rule 309②d of the

Regulations


-414-

date (excluding the listed company

and its subsidiaries) for each

business year and accounting

year ending on a day that falls

within such period


-415-


Assignment

application

date


assurance of parent

company's timely disclosure,

etc.

Not required if the

applicant submits it

at the new listing One

Guidelines IV 1

When a public or secondary offering is made for designation to the First Section

Without delay

after

assignment



※◎■

One


Regulations

By the

second

business day

following the

end of

application

period

(excluding

holidays)



※◎■


Regulations

When a non-trading participant or foreign securities firm concludes a principal underwriting

contract, etc.

Without delay

after

assignment

Copy of contract document

One

Rule 212①(6)c of the

Rules, Rule 310①(5)

of the Rules

When a limited distribution is implemented for designation to the First Section

Without delay

after

assignment

A schedule of distribution with

a quantitative limit※◎■ One Rule 310①(6) of the

Regulations

By two

business

days

following the

distribution

date

(excluding

A table of distribution of

stocks, etc. subsequent to

distribution with a quantitative

limit※◎■ One Rule 310①(6) of the

Regulations


-416-

holiday)

When accounting for “net assets” is applied when accounting for retirement benefits is adopted.

Assignment

application

date

Document stating the amount

of net assets and the process

of such calculation when the

accounting standards for


◇■

One Rule 705 of the

Regulations


-417-

In cases where it takes not more than two (2) years from the date when a company became a

holding company to the end of the recent business year

Assignment

application

date


statements of the subsidiary

(limited to an entity that

became a subsidiary on the

date when the holding

company was incorporated)

during the consolidated

business year immediately

before the holding company

was incorporated shall be

attached (in cases where the

company was not an entity

subject to consolidated

financial statements, its

non-consolidated financial

statements shall be attached).

In addition, audit report shall be

attached. ■

If there are several

subsidiaries,

consolidated

statements of

income,

non-consolidated

statements of

income, quarterly

consolidated

statements of

income, or income

statements

combined with

quarterly

statements of

income shall be

attached. In

addition, audit

report shall be

attached.

One Rule 309②(1)e of the

Regulations

C Documents, etc. to be Filed for Alteration of Markets Application

-418-

C Documents, etc. to be Filed for Alteration of

Markets Application

List of Documents, etc. to be Filed for Alteration of Markets


The documents to be filed for the purpose of application are described below in “Documents ,

etc. to be filed for Alteration of Markets Application”. They must be filed at the time of the

alteration application or in a manner otherwise specified by the filing requirements.

(Considerations)


documents in the form of electromagnetic records, in principle, except for those that TSE

deems necessary to be filed in written form. In addition, at the time of application

acceptance, the list of materials filed shall be submitted as a hard copy with the signature

and seal of the representative of the applicant placed at the beginning.


only applies to cases where hard copies are to be submitted. For application documents that

are to be submitted as electromagnetic records, only one copy is required to be submitted,

for example, even if "2" is indicated in the table.

(Marks and legend)

※ Must be submitted in the form designated by TSE for the form, please refer to: “Forms

of Documents to be Filed for Alteration Application”(Japanese only)





would be accepted.


-419-






-420-



Alteration application

date

Securities report for

application for alternation

of a listing market※◆■

In case of preliminary

application,

preliminary


alteration ※

One Rule 312③of the

Regulations

Same as above


directors meeting

concerning the resolution

on alteration (copy)

One

Rule 204①(1) of

the Rules

Rule 313②(1)b

of the Rules

Same as above

Written application for

alternation of a listing

market (part I)◇

Audit report attached

In cases of

companies making

continuous

disclosures, financial

statements and


statements for the

previous year of the

previous year, with

audit report attached.

Two

Rule 312④ of

the Regulations

Rule 204①(4)b-2

of the Rules

Rule 313②(1)a

of the Rules

Rule 313③ of

the Rules

Same as above

Written application for

alternation of a listing

market (part II)◇

Two

Rule 312④ of

the Regulations

Same as above

Written confirmation

certifying that the applicant

has no ties to any

anti-social forces※◆■

One

Rule 204①(6) of

the Rules

Rule 313②(1)b

of the Rules

Same as above Written confirmation※◎◆

■ One

Rule 204①(7)b

of the Rules

Rule 313②(1)b


-421-

of the Rules

Same as above

A document describing

matters which were given

particular attention or were

the focus of confirmation

in the course of public

guidance and underwriting

examination◎◇

One

Rule 204①(7)c of

the Rules

Rule 313②(1)b

of the Rules

Same as above

Book of rules (copy)◆ Including regulations

on handling of


(copy)

One

Rule 204①(10)

of the Rules

Rule 313②(1)b

of the Rules

Same as above

Written documents stating

the matters of the

assumption of the principal

business activities◆

One

Rule 204①(12)

of the Rules

Rule 313②(1)b

of the Rules

Same as above

Table of distribution status

of stocks, etc.※◇

Not required when


number of

shareholders or the

number of publicly

traded shares are

expected to be met

through public

offering or secondary

offering or limited

distribution of shares

before alteration

One

Rule 204①(21)

of the Rules

Rule 313②(1)b

of the Rules

Same as above

Written oath pertaining to

application for alteration of

a listing market※◆■

One Rule 312③ of

the Rules

Same as above




Not required when


(stand alone) is

include in the

One

Rule 206②(9)-2

of the Rules

Rule 313②(1)c of

the Rules


-422-

“Quarterly Report.

As a quarter period

ends during the

examination period,

its must be submitted

every end of a

quarterly period.

However, when such

document has been

already submitted

through the Electronic

Disclosure for

Investors' NETwork

(EDINET), it is not

required to be

submitted.

Same as above

Consolidated and

unconsolidated financial


years (copy)◇

Limited to cases

where securities

reports have been

prepared for the

recent five years

(including


statements when

securities reports

have not been

prepared but


statements have

been prepared).

Periods described in

“Securities Report for

Application for

Alteration of Listing

Market (“Part I”

One

Part II

Procedures for

Description XI(3)


-423-

documents”) will be

excluded.

Same as above


directors meeting for the

last two years and the

business year in which the


One

copy

Part II

Procedures for

Description XI(4)

Same as above

Minutes of board of

auditors (audit committee)

meeting for the business

year ending within the

latest year (copy)◆

One

copy

Part II

Procedures for

Description XI(5)

Same as above

Materials related to the

Board of the Statutory

Auditors (Audit Committee)

for the recent one year and

the business year in which

the alteration application is

filed (copy)◆


to IV.4.c

One

copy

Procedures for

Description XI(6)

Same as above


management for the last

one year and the business

year in which the alteration



to IV.3.d One

copy

Part II

Procedures for

Description XI(7)


-424-

Same as above



accounts attached thereto

for the last two years(copy)

◆

Applicant and

subsidiaries to be

described One

copy

Part II

Procedures for

Description XI(8)

Same as above

Monthly performance



which the alteration


One

copy

Part II

Procedures for

Description XI(9)


-425-

Same as above


mid-term management

plan and a series of internal

data used for the

preparation thereof for the

fiscal year in which the

alteration application is

filed (copy)◆


to flow in VII 1.(1) and

(2)

One

copy

Part II

Procedures for

Description

XI(10)

Same as above

Contract which is important

for management (copy)◆

One

copy

Part II

Procedures for

Description

XI(11)

Same as above


products, goods and

services, etc.◆ One

Part II

Procedures for

Description

XI(12)

Same as above

Audit report and quarterly

review report attached to

the financial statements of

each business year and

consolidated business year

ended during the last five

years (copy)

One

Part II

Procedures for

Description

XI(13)

Same as above

Internal management

report for the business year

ended in the within the

latest year (copy)

One

Part II

Procedures for

Description

XI(14)

Same as above

Work flow ◇

One

Part II

Procedures for

Description

XI(15)

Same as above Agreement of e-learning◆

■ One -

By alteration approval Written recommendation※ One Rule 204①(*) of


-426-

◎■ the Rules(7)a

Rule 313②(1)b

of the Rules

Same as above



One

Rule 205 (2) b of

the Regulations

Rule 205 (3) of

the Regulations

Rule 205 (6) b of

the Regulations


By alteration approval Computation document of

net assets※ One

Rule 212⑤(12)of

the Rules

When there is a consolidated subsidiary which has a degree of influence of 20% or more of

influence over the group for the previous year.


date


consolidated subsidiary for

the recent five years

(including consolidated

financial statements when

it has prepared them)

(copy)

Copy of securities

report, if any

One

copy

Part II

Procedures for

Description XI(1)

When securities reports, etc. for the recent five years and applica tion year have been amended

(submission of amended registration statement, amended shelf registration statement or

amended report)


date

A revision notice,

registration statement of

issuing revision or revision

statement (copy)

Excluding amended

report attached to

“Section II

Information” of

“Securities Report for

Initial Listing (art I)”

One

each

II Part Attached

data

Procedures for

Description Ⅺ(2)



-427-


date


assurance of parent

company's timely

disclosure, etc.

Not required if the

applicant submits it at

the new listing One

Guidelines IV 2


-428-

Documents to be submitted in relation to public offering and secondary offering,

determination of offering prices, etc.

Submission time Documents to be submitted Remarks Number Basis

When a public or secondary offering is implemented for alteration of the markets

Without delay after

alteration



offering※◎■

One Rule 212①(6)of the

Rules

By the second

business day

following the end of

application period

(excluding a holiday)



offering※◎■


Rules

When a non-trading participant or foreign securities firm enters into prime underwriting agreement

Immediately after

agreement

conclusion

Contract (copy)

One copy

Rule 313 of the

Regulations, Rule

212①(6)c of the

Rules

When an off-floor distribution of shares is implemented for alteration of the markets

Without delay after

alteration

A schedule of distribution

with a quantitative limit※◎

■

One Rule 212①(6)b(a) of

the Rules

By two business

days following the

distribution date

(excluding holiday)

Table of distribution of

stocks, etc. subsequent to

distribution with a

quantitative limit※◎■

One Rule 212①(6)b(c) of

the Rules

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